Rogers-Shaw merger: how could the $26B deal transform Canadian broadband?

Three years ago, the Canadian government unveiled the Universal Broadband Fund, a $3.225B investment plan designed to provide high-speed Internet for all Canadians. Today, 93.5% of the population is covered and 100% is planned to be reached by 2030. This national connectivity gap hides another long-standing reality of the Canadian broadband market: limited competition that translates into high prices for consumers. Can we expect this situation to change, as Rogers & Shaw, two of Canada's largest telecommunications companies, announced in 2021 a blockbuster merger project valued at $26 billion? Looking at Internet Cable subscribers, the Rogers-Shaw merger would allow the new company to reach a combined market share of almost 60%, representing 4.4M consumers. The rationale behind the biggest deal in Canada’s broadband history also includes a geographic aspect. Shaw boasts more than 2M cable consumers, mostly in the Central and Western provinces, whereas Rogers’ cable assets remain mostly in Ontario, Québec, Newfoundland & Labrador, as well as New Brunswick. The aforementioned concentration of the telecom industry seems obvious when Telus & Bell account for 90% of the DSL subscribers and almost 80% of the FTTx subscribers in the country. Xplore Inc. dominates the Fixed Wireless market and keeps growing stronger thanks to the successive acquisitions of AB North, Swift High Speed, and Detour Wireless in three different provinces. Operators indeed include consolidation as part of their strategy. Major operators have lately been acquiring smaller competitors that have a deep local footprint. Telus bought Altima Telecom and Start.ca, Cogeco acquired Oxio and Videotron took over VMedia and other smaller providers. Acquisitions also helped actors to enhance or offer new access to their consumers as did Bell last year with fiber by buying Ebox. The increasing demand for high-speed internet pushes the operators to ditch traditional accesses and move to fiber. Addressing this problem is an opportunity for broadband operators, who engage in network deployments with support from the Government. Over the past 5 years, the share of FTTx in the operators’ subscribers base increased from 18% to 33%. The most significant example is Telus’s transition from xDSL. The Vancouver-based company almost entirely completed its switch to fiber, with FTTx subscribers representing 98% of its base at the end of 2022, versus 32% in Q4 2018. Rogers and Cogeco, both historic cable operators, started to move in that direction as well. As the final decision for the Rogers-Shaw merge is expected at the end of March 2023, what future awaits independent providers? Besides consolidation, the lack of control of the wholesale rates remains a threat for such actors. In 2021, the CRTC came back on a previous decision to lower wholesale access rates, being the amount paid by independent actors to...

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