The Rogers-Shaw Merger: Implications for Internet Prices in Ontario
On March 15, 2021, Rogers Communications and Shaw Communications announced their plans to merge in a deal valued at $26 billion. After months of negotiations and regulatory reviews, the Canadian government finally approved the merger on March 31, 2022.
This merger is expected to have significant implications for the telecommunications industry in Canada, particularly in Ontario, where the two companies have a strong presence.
How the Rogers-Shaw merger could harm Consumers
This article will examine how the Rogers-Shaw merger will likely impact the price of internet services in Ontario based on available data.
Impact on Competition
One of the primary concerns surrounding the Rogers-Shaw merger is its impact on competition in the telecommunications market. The merger will create a company with a dominant market share in many parts of Ontario, reducing competition and potentially leading to higher internet prices.
This lack of competition is already an issue in many parts of Ontario, where consumers have limited options for choosing an Internet Service Provider (ISP).
According to a Canadian Radio-television and Telecommunications Commission (CRTC) report, nearly 40% of Ontarians need access to high-speed internet services that meet the CRTC's minimum standards of 50 megabits per second download and ten megabits per second upload.
This lack of competition is likely a contributing factor to the province's slow pace of infrastructure development.
Cost of Internet Services in Ontario
The cost of internet services in Ontario is also a concern for many consumers. According to a Canadian Internet Registration Authority (CIRA) report, Ontario's average monthly price of home internet services is $83.11, higher than the national average of $77.69. Additionally, nearly half of Ontarians believe the province's internet services cost needs to be lowered.
Ontario's internet services cost varies widely depending on the provider and location. For example, in Toronto, the average monthly price of home internet services is $87.09, while in Ottawa, it is $80.95. The cost can be significantly higher in smaller communities due to again a lack of competition.
Potential Impact of the Merger on Internet Prices
The Canadian government has included several conditions in its approval of the Rogers-Shaw merger to protect consumers from potential negative impacts on the price of internet services in Ontario. These conditions include measures to ensure the merged company does not abuse its market power and maintain competition in the telecommunications industry.
One of the conditions imposed by the Canadian government is that the merged company must divest some of its assets, including wireless spectrum licenses and wireless network infrastructure, to reduce its market share and prevent it from having too much control over the telecommunications industry.
By divesting some of its assets, the merged company will have less power to influence the prices of internet services and will face more competition from other companies.
The Competition Bureau may also require the merged company to adhere to specific price caps, limiting the amount the company could charge for internet services in Ontario. This measure prevents the combined company from taking advantage of its dominant market position and raising consumer prices.
Additionally, the Canadian government may require the merged company to provide wholesale access to its network to competitors, allowing smaller internet service providers to offer their services to consumers using the merged company's network. This measure is intended to promote competition in the telecommunications industry and ensure consumers have more choices when selecting an internet service provider.
Given the province's lack of competition and high prices, the Rogers-Shaw merger could impact Ontario's internet services cost.
However, the Canadian government has included conditions in its approval of the merger to protect consumers. It remains to be seen how effective these measures will be in mitigating the potential negative impact of the merger on internet prices in Ontario.