Appeared in the Toronto Star on March 12, 2007 as Number Portability Only a First Step

Wireless number portability, which will allow Canadian consumers to change their cellphone provider without surrendering their current phone number, makes its much-anticipated debut on Wednesday.  Canadian consumers have been clamouring for number portability for many years, since number lock-in represents a key barrier for consumers anxious to switch providers.

Canada is rightly viewed as a laggard on number portability given that it is well established in many parts of the world.  The United States introduced number portability in 2003 and it is widely available throughout Europe and in parts of Asia.  Despite the experience elsewhere (or perhaps because of it – millions of U.S. consumers switched providers once they could keep their number), Canadian providers seemingly did their best to delay bringing it to Canada.  

The industry warned ominously of new costs that would be passed along to consumers and claimed that the technical implementation would take years.  The federal government accelerated the timetable for wireless number portability in 2005 when it surprised the industry by using the federal budget to ask the Canadian Radio-television and Telecommunications Commission to "move expeditiously to implement wireless number portability." After the industry submitted a lengthy two-year plan, the CRTC launched a public consultation and ordered the providers to get the job done in 18 months.

While wireless number portability removes one lock that the providers have over Canadian consumers, the reality is that there are many more.  First, many consumers are bound by long service contracts – three year contracts are common in the industry – that require full payment for the entire remaining term in the event of cancellation.  Changing providers does not alter this contractual obligation, leaving many consumers facing prohibitively expensive switching costs.

Second, consumers may also find that their phone will only work with their current carrier, therefore necessitating the purchase of a new phone.  Most Canadian phones are "locked" to a particular provider and cannot be easily transferred.

Third, consumers committed to changing providers are likely to be frustrated by the lack of competition in the Canadian marketplace.  A study released last week noted that Canadians pay significantly higher wireless fees, particularly for high-end users, as compared to consumers in the United States.  Moreover, both the U.S. and Canadian market do not compare favourably with European and Asian countries, where wireless penetration is far higher and consumers do not pay for incoming calls.

Emboldened by limited competition, providers have not hesitated to pad their prices by adding the deceptive "system access fee." Contrary to popular belief, the fee, which adds nearly $100 per year to every wireless phone bill (MTS Mobility in Manitoba just increased its system access fee to $107.40 per year), is not a government-mandated charge but rather a slick method of camouflaging higher prices.

In light of these other concerns, Industry Minister Maxime Bernier should view wireless number portability as just the first step toward facilitating a more competitive and consumer-friendly wireless market.  With plans to conduct a spectrum auction next year, reserving spectrum for a new entrant should be viewed as a top priority.   

Moreover, since providers have been reluctant to engage in price competition – the recent flurry of announcements from Bell and Rogers did not offer much in the way of price reductions – the elimination of the system access fee might help spur some price movement.  Providers would still be free to increase prices to reflect the eliminated fee, yet consumer backlash might cause a shift in pricing.

Internet wireless hotspots provide another potential source of competition.  European providers currently offer cellphones that support Internet telephony services such as Skype.  With the proliferation of municipal wifi initiatives, the introduction of similar phones in the Canadian market would instantly alter the competitive environment.  

Since the providers have been unsurprisingly reluctant to embrace wifi, government regulators may need to consider ways to free the equipment side of the market with restrictions on phone-locking and the crippling of features that compete with the providers' own services.  These issues have attracted growing attention in the United States, where some telecommunications experts have begun to call for wireless net neutrality rules.

A logical place to start with wireless net neutrality would be to mandate more transparent disclosure rules.  As Columbia law professor Tim Wu recently recommended, providers should prominently disclose limits on bandwidth usage, whether devices are locked to a single network, and any important limitations placed on wireless features.  

The introduction of wireless number portability is a welcome, albeit long overdue development.  Given the remaining marketplace locks and limitations, however, more is needed to ensure that the option to switch providers is more than just illusory for most Canadians.  

Michael Geist holds the Canada Research Chair in Internet and E-commerce Law at the University of Ottawa, Faculty of Law. He can reached at mgeist@uottawa.ca or online at www.michaelgeist.ca.