Our Beloved Phone Company by Dennis S. Hurd (CC BY-NC-ND 2.0) https://flic.kr/p/8v9Mm9

Our Beloved Phone Company by Dennis S. Hurd (CC BY-NC-ND 2.0) https://flic.kr/p/8v9Mm9

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Why the Wireless Industry Fears Bill Transparency and Bans on Unlocking Fees

The National Post has a story today on a research note written by Maher Yaghi, a telecom analyst, warning about the “regulatory risks” of the CRTC’s review of the wireless code. The article focuses on a single analyst, but there is a long tradition in Canada of the industry saying one thing to the regulator and another to the business community (see, for example, Bell’s position on investing in fibre networks) so the comments likely reflect industry concerns. What regulatory risks might arise from changes to the wireless code?

Yaghi cites two concerns that lay plain why the industry has been fighting potential changes. The issue is not, as some would have you believe, increased regulatory costs. Rather, the fear is that changes would create better informed consumers who would seek cheaper pricing and be freer to take advantage of marketplace competition.

Yaghi says the industry is concerned with “mandated bill segmentation”, which would require providers to separate the monthly service cost from the cost of devices. Once two-year contracts expire and the cost of the device is paid off, consumers would likely want to know why their monthly cost remains largely unchanged. Yaghi notes:

“In our view, bill segmentation would make the different charges more transparent to customers and would likely prompt them to look for cheaper (bring your own device) plans, which could pressure (average revenue per user) growth in the Canadian market.”

Yaghi says there is similar concern about the prospect of banning fees for unlocking phones.  The reason is that removing the fees Рwhich bear little relation to actual cost or purported concerns about fraud Рwould make it easier to switch providers and reduce roaming costs:

“We believe the current policy reduces churn and increases customer stickiness, decreasing competition slightly. It also allows wireless operators to generate profits from international roaming for customers who are travelling.”

The acknowledgement that mandated bill segmentation would lead to better informed consumers able to get more competitive pricing and that unlocking fees reduces the benefits of competition provides the CRTC with validation that the reforms would be pro-consumer and should be implemented with the forthcoming changes to the wireless code.  Indeed, if the CRTC does not include the changes in the code, provincial governments should consider them as they work to update consumer protection laws for the digital marketplace.

 

11 Comments

  1. It’s embarrassing, isn’t it, when an industry insider pulls back the curtain for all to see that the Wizard of Oz is still trying to pull the wool over our eyes.

    In essence, what Maher Yaghi is saying is that the current system of the government tolerating phone companies gouging of its customers should be allowed to continue. Huh? I wonder what color the sky is on the planet where Mr. Yaghi – and the telecom providers – live?

    It’s bad enough that there is little meaningful competition in the mobile phone market without the industry’s profits being protected by CRTC-approved thievery.

  2. Except this isn’t an “industry insider”. It’s a stock analyst who’s calculating the impact of legislation on the industry’s revenues.

    There’s no conflict to say both things:

    a) granular billing has a higher roll-out cost; and

    b) granular billing leads to lower revenues

    Both are true, and there’s no great conspiracy.

    The real question we should be asking is – since when is it in the government’s mandate to reduce service costs for consumers by pulling operating levers?

    Let the marketplace figure it out. Give new licenses. Discount spectrum to increase competition. But why tell networks they can’t bundle devices? Or control their service pricing?

    I own a restaurant, will the state next enter my premise and tell me I should break out goats cheese and cheddar cheese pricing on my burgers for consumer transparency?

    The narrative that transparency must be applied to private industry breaks the definition of *private* industry

    • Corporations should grow by competing favourably. In the absence of effective competition growth can be augmented by exploiting customers. To what extent this happens is roughly correlated with how much of an asshole its leaders are. And carriers… well, enough said.

      Government intervention is the only solution in this market.

    • The first iPhone came out ten years ago. The marketplace has had a decade to “figure it out”, and the end result has been the textbook definition of an oligopoly and some of the highest wireless costs in the world.

      Wireless is no longer a luxury; it’s become a utility, and if you look at the number of low-income people for whom their smartphone is their only means of internet access, it becomes even more important. The government should get no say in the prices at your restaurant, but they damn sure get a say in the price I pay for electricity.

    • It is in the government’s mandate to avoid monopolistic practices and foster competition though. Unlocking fees that prevent a user from using a phone that they own on another network is blatantly monopolistic and should be illegal. Frankly locked phones should be illegal even within the contract period.

      Not telling a consumer that they are no longer paying for a device…less so and this is a case where the customer should be aware that the 2 years is up. At the same time, billing is generally electronic now so claims that a billing breakdown is too costly are just ridiculous. Perhaps if consumers realized that $30 a month is what it takes to pay for that $800 phone they would opt for cheaper phones.

    • The problem is telecom, especially cellular, is a natural monopoly. Spectrum is expensive and very limited, first of all, and secondly it costs a fortune to build a half decent network. Introducing more carriers means more networks that overlap to cover the same area (or at least most of the areas people would want coverage), which isnt as cost effective as having, say, one really good network.

      When WIND was created so were 2 other companies, both got sold to incumbents after failing to collect many customers and offering crappy coverage for a few years.

      So in that regard it isnt the same as restaurants, where anyone with a bit of money can open one if they want and a city can easily support many.

      The government has already tried setting aside spectrum for new entrants. It helped a bit, WIND is a cheaper option (for now, SHAW has already indicated this will change eventually) for those who dont mind paying less but not having as much reliability.

    • Jason Riddell says:

      the restaurant example would ONLY apply if there were ONLY 3-4 chain restaurants per market and every one made the customer BUY the table and would NOT disclose the cost of said table and there were NO grocery stores to buy your OWN FOOD and HAD to eat at one of these chain restaurants

  3. Pingback: Wireless Industry Douchebags | Media Industries

  4. As a $16/month Bell prepaid customer on my third locked phone – two of which sold for $50 and the current ZTE $110 – without ever being interested in a contract, I was under the impression that once a phone is paid off the monthly bill goes down unless the consumer orders another phone. This article indicates differently – if anything that should be the focus of CRTC investigation – whether the bill is “segmented” or not.

    At my last check, Bell would ask $75 to unlock my ZTE so that, for example, I can use a foreign SIM card while traveling. But when I bought my phone – from a third party eBay vendor in Calgary – at the time of sale he added the unlock code, presumably at a profit, for only $10 more. (He said he had to log into Bell’s database to get it, I don’t know what he paid for access.) If a merchant gets Bell’s unlock codes for a few dollars CRTC should be looking into gouging consumers $75 for the very same thing – and for contract customers the full payment for the phone should automatically include unlocking if wanted.

    • unlock codes are cheap to get online and are around 10 dollars each. They are based of the EMEI of the phone and the manufacturer. It is a ripoff that Bell is trying to sell you a 50-75 dollar service to unlock the phone you own after your contract expires.

      When searching for phone replacements 3 years ago we looked at all of the big players the MVNA’s and Eastlink. We decided to go with eastlink, because unlike most of the others the price of the phone was seperated from the cost of the service plan. The phone could be purchased on a 2 year term, payable off at any point and when paid off that portion of your bill would disappear.

      What Bell, Rogers and Telus expect you to do is when your contract expires, re-up with a new plan and a new phone and not hold onto your old phone on the existing plan and “be out of contract”. This is because they want to switch to a new more expansive plan than you had before.

      Hopefully the CRTC will move us over to a situation similar to how the EU works where your phone is completely un-subsidized and your service plan is seperate. Mind you the EU has fixed or limited roaming charges for both voice and data and soon the roaming charges will be eliminated entirely.

  5. The CRTC needs to make a requirement that all OTA broadcasters also be available via internet stream(without a log in subscription).