April 21, 2022
Ed Rogers must be feeling good about himself. His latest quarterly report shows modest revenue growth combined with reduced content and labour expenditures. The stock price is up. Rogers credits it all to his decision to fire CEO Joe Natale in 2021 and replace him with Tony Staffieri.
There is more good news for Rogers. Federal government approval of his $26 billion merger with Shaw seems much closer now that he has submitted a potential deal to offload Shaw’s Freedom Wireless assets in Ontario, B.C., and Alberta to Xplornet, responding to Liberal ISED Minister François-Philippe Champagne’s ultimatum.
Champagne needs a plausible asset-shedding plan from Rogers in order to navigate the politics of approving the merger. The policy considerations behind the politics are polarized between big telco’s approach to building communications networks through heavy investment in infrastructure versus smaller re-seller telcos who want cheaper wholesale access to big telco networks.
Since 2015 the Liberals have sided with the big telco approach, mainly by supporting or overruling key CRTC decisions on wholesale access in ISP and mobile networks. The politics are tricky for Champagne. That was reinforced last month when Liberal MPs on the Industry parliamentary committee joined Opposition parties to endorse a Report frosty to the Shaw-Rogers merger and big telco in general.
A Rogers deal with Xplornet could be Champagne’s “Get Out of Jail Free” card: it would elevate Xplornet from a small to mid sized telco just as Shaw gets swallowed by Rogers. An interesting blog post from industry analyst Mark Goldberg considers the synergies of combining Xplornet and Freedom Wireless infrastructure and spectrum holdings.
(In addition to Champagne’s authority over the merger, the Competition Bureau also has a veto).
If things are looking up for Rogers, Netflix‘s quarterly report didn’t go quite so well.
The headline was the streaming giant’s engine-stall on global subscriber growth. It’s stock price got slaughtered, dropping 26%. Less noticed was that its earnings are up.
For years Netflix has spent aggressively on content, enjoyed steady subscriber and revenue growth, had few competitors, while losing or barely making money (depending upon how it amortized its content costs). If that was a teenage growth spurt, welcome to middle age.
The release date of Netflix’s quarterly report coincided with two other industry news stories suggesting real change in the streaming industry.
The first was a report in the New York Times that Netflix, Amazon Prime and Disney Plus are increasingly serious about a revenue strategy including commercials (chill goes down the spine of conventional TV broadcasters).
The second was an announcement by Telus that it will retail a bundle of streaming services: Netflix, Apple TV and Discovery Plus for $25 per month (a combination of specialty TV and streaming content).
For MPs debating the Online Streaming Act C-11 the trend is obvious: Canadian television continues to evolve into a hybrid of the old and the new, cable and streaming TV, delivered over big telco’s IPTV infrastructure.
Both C-11 and the Online News Act C-18 remain at second reading in the House of Commons so it may be a few weeks before they get handed off to the Heritage Committee. In the meantime, the policy debate is going strong: The Globe’s Andrew Coyne penned a scathing column on regulating Internet companies. MediaPolicy.ca offered a modest rebuttal.