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CRTC Releases New Wireless Code That Should Eliminate Three Year Contracts

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Monday June 03, 2013
The CRTC released its much-anticipated consumer wireless code this morning. While much of the code remains unchanged from an earlier draft proposal, the headline-grabbing change is that the Commission has effectively brought three-year contracts to an end. The issue of contract length was the top issue raised by consumers, who argued that Canadian wireless contracts were longer than most other countries and that they represented a significant barrier to effective competition.

While the incumbent wireless carriers argued that consumers like three-year contracts, the CRTC sided with consumers. Effective December 2, 2013, consumers will be allowed to terminate their wireless contracts after two years with no cancellation fees. The ability to cancel with no further costs should result in two years becoming the standard for a long-term wireless contract. It will be interesting to see how quickly the carriers implement this change as smart consumers may decide to delay signing new contracts unless they are protected by the new wireless code if the carriers insist on retaining early cancellation fees in the final year of a three-year contract until the code takes effect.

The wireless code includes several other notable features.  The CRTC has established mandatory caps on data roaming and data fees to avoid the bill shock that sometimes seems to hit Canadians who unexpectedly run up huge roaming fees. The caps will be set at $100 for data roaming (both national and international) and at $50 for data overage fees. Fees can only exceed these amounts if the consumer expressly consents to it.

The CRTC has also established a mandatory unlocking requirement for devices. Carriers must offer consumers the ability to unlock unsubsidized devices (ie. devices purchased at full price) at any time.  For subsidized devices, carriers can implement a 90-day waiting period.  Note that there is no cap on the cost for unlocking (which currently varies widely), though carriers are required to disclose the cost at the time the contract is signed. The remainder of the code includes return rights that allow for 15-day trials of new devices, plain language requirements, and early cancellation fees (earlier than two years).

The code is a definite improvement over the earlier draft version. At that time, I argued that the draft disappointed since it did little to address the major concerns involving contract length, roaming fees, and device locking. I thought the Commission could have been bolder with mandatory unlocking of phones at no cost, limits on roaming fees, and two year maximum contracts. The final code moves in this direction with the ability to opt-out of contracts at no cost after two years. That will be the most obvious and dramatic change to the Canadian wireless landscape once the code takes effect late this year.

The code also represents a major policy loss for the incumbent carriers. As recently as 2006, wireless protections were viewed as an impossibility.  As consumer frustration mounted, the CWTA established a weak voluntary code in 2009 with no expectation of government enforcement. Yet that did little to stem the tide and once the provinces began establishing their own consumer protection laws for wireless services in 2010, the CWTA called for a single national code and fought to retain three year contracts (the new entrants left the CWTA in part over the issue). The CRTC has obliged with a code that goes beyond the provincial requirements on contract length and undoubtedly beyond what the carriers thought would result when the process started in 2012.
Comments (26)add comment

Tyler McIntyre said:

...
Do you think this will affect phone subsidies?
June 03, 2013

Darryl said:

Not fully unlocked
Pity the unlocking rules only apply to carriers. Sadly Apple, Samsung and other will still be able to lock you into their services, and there is no obligation for them to give you the full control over your smartphones that you paid for. Even for unsubsidized purchases.
June 03, 2013

Hub said:

...
Darryl, you confuse carrier lock with hardware/OS lock.

Apple has actually been the a pioneer in selling carrier unlocked phone to the masse (ie the easiest smartphone to get carrier unlocked)
June 03, 2013

@CalamusandSinew said:

Creative fees.
Cue the Mobile carriers upping their "hardware fee" to cover the cost of early cancellations.
June 03, 2013

jackd said:

calamus
contrary to the lies of certain lobbyists the phone fees are actually higher in many other countries. for example a group recently lied claiming you could get 4 phones in Portugal for the price of 1 in Canada. comparing like phones the initial cost of the phone was twice as high there as here. even more for some phones. free phones and highly subsidized prices only come with long contracts. try actually biting one straight out
June 03, 2013

jackd said:

oops
buying stupid auto correct
June 03, 2013

Albin said:

Maybe a small score for prepaid
in Section J: "A service provider must keep open the accounts of customers with prepaid cards for at least seven calendar days following the expiration of an activated card, at no charge, to give the customer more time to “top up” their account and retain their prepaid balance." That sound like a bit of forgiveness to the sudden flushing of balances that I've experienced.
June 03, 2013

Mike said:

...
I don't think this "code" is going to make one bit of difference to the consumer's bottom line. We'll simply see subsidies on phones reduced. All we're doing is moving closer to a European model and the cell phone bottom line certainly isn't cheaper over there.
June 03, 2013

Hannah said:

One can always dream of the day...
Although often reported, I can attest to my first hand experience of how lucky some other countries are, when it comes to mobile services. I am currently on holiday in France and, before we left home, we ordered 2 Lebara (a French mobile company) SIMs (both free) which were mailed to our home in Canada. We topped each phone up with 5 Euros (good for 30 days). Calls cost 15 cents/minute but Lebara to Lebara calls are free. It also got me 10 Mbytes of data for free for each phone. Not much but it is for free. Lebara uses the Bouyges network and we have had no difficulty with reception or dropped calls.

What does Bernard Lord say about that?
June 03, 2013

Crockett said:

Lovely piece in NP, couldn't have said it better ...
http://fullcomment.nationalpos...s-service/

Perhaps the RIAA/MPAA/CRIA think that greater restrictions, geolocked access and draconian punishments will enthrall consumers to happily pay more for less too?
June 03, 2013

Darryl said:

@Hub
How did my post express confusion? I am well aware of these two forms of vendor lock-in. I was expressing my frustration that only one of them is being addressed here and nobody seems to care about the other one.

Apple has also been a pioneer in OS lock-in, and as a result I would not go near one of their products with a 10 foot pole. Thank you very much.
June 03, 2013

tommy said:

...
do we still have to pay to unlock our phones even if our contract is up?
June 03, 2013

David said:

Decouple costs of phones and plans
The real solution is to force cell phone companies to decouple phone and phone plan in their sales process. People should not be fooled into thinking the cell companies are subsidizing your cell phone purchase because they are not. They are financing them instead and hiding the financing costs into the 3 year contract. Decoupling this makes the costs clear to the consumer and forces the phone companies to compete on plans and on phones separately and not plan/phone combos which only serve the purpose of locking users into one company.

June 03, 2013

Ramblin' Rose said:

@Albin
The Section J.1 "A service provider must keep open the accounts of customers with prepaid cards for at least seven calendar days following the expiration of an activated card, at no charge, to give the customer more time to “top up” their account and retain their prepaid balance."

On the surface it appears to be good news, for my message currently says my service and prepaid accumulated monies end July 13, 2013, which in reality is call and activate the code on July 12th before midnight. So I look forward to the time after December 2, 2013 and keep my fingers crossed that the cell provider doesn't announce in the meantime that effective December 2, 2013 there will be no carry over of unused minutes and we are announcing fee increases across all durations of prepaid options!
June 03, 2013

Tackl said:

...
What am I missing? I thought I always had the option of a one or two year contract, or to buy my phone outright? If I choose 3 years, it's my choice. Maybe not the choice others would make but it's still my choice. Are phones suddenly going to get cheaper so that two year contracts suddenly get cheaper? Why are these so-called consumer advocates pushing the government to eliminate one of my (our) very popular options? Who actually benefits from this? Are you trying to protect me? Thanks, but let me make my own decisions.
June 03, 2013

Albin said:

@Rose
Hoping that Bell will stay competitive. I've been buying the $100 full year "card" since they initiated it, I think it was to keep up with some of the little providers. It's cheaper and saves watching the calendar so much. Just picked up a cheap Android phone from FShop, a big move for a cheapskate like me.
June 03, 2013

Crockett said:

The biggest load of crap you will read today come from Terrance ...
http://opinion.financialpost.c...-industry/

My response:

Seriously?! Terrance you are so far right you are wrong. The same industry you are lauding now must be satisfied with a cap of $100 for international roaming fees instead of $20,000 they clobbered people with previously. Did it ever really cost Rogers $20K for some kid in Mexico to watch sponge-bob on his dad's cell phone? I think not but hey, that's free market for ya.

When an industry abuses the consumer, regulation is necessary.

Furthermore, 2 years or 3, the cost of the phone is going to be the same over the life of the contract. The phones everyone wanted though somehow being of the three variety. You may pay a little more up front but the overall cost will be the same or less. The real issue though is being locked into a three year contract means you can't leverage features or efficiency of new models or plans. They want to have control of you for as long as possible, that is certainly not choice.
June 04, 2013

Two Cents Worth said:

Roaming caps are lame
The caps on data usage and data roaming probably won't make much of a dent in the carriers' revenues as, I believe, most Canadians are cautious not to exceed their data plans locally and usually flip to airplane mode when roaming outside Canada.

The big roaming saving (data, voice, and SMS) will come when more people unlock their phones before heading south of the border. Canadian carriers will have no choice but to offer roaming packages competitive with US prepaid plans.
June 04, 2013

J. Connor said:

"May your every wish be granted", part 1
My take on the new code, compared to the draft code in February, is that Canadian consumers just got severely shortchanged - and the media and pundits are mindlessly applauding like trained seals.

Fact: Less than 4 months ago, the draft Wireless Code, that the public was invited to study and comment on, gave consumers the right to cancel a contract at any time and only have to pay what is left of the phone's cost.

In the just-released Code this has been changed to AFTER 2 years. This is a major change. That means that in the last 4 months, the CRTC suckled back up to the big phone companies and watered down the Code to cater to their industry buddies.

Fact: Less than 4 months ago, the draft Wireless Code did not contain any requirement for the cost of the device to be paid off within 2 years (24 months) or less.

Now, all of a sudden, out of nowhere, it does. A case of 'bait-and-switch'.

Fact: We can already get 2-year terms right now, without the Wireless Code. We just have to pay more upfront for the phone and pay more per month to pay off the total cost of the phone.

This is certainly the case in Quebec, and possibly a few other provinces, where consumers were already able to end a contract at any time and just pay the remainder of the phone cost.

In Quebec, and possibly a few other provinces, we currently have the right to pay off the remainder of the cost of the phone over 3 years, with the option of paying it all off at any time we want with no extra fee. The CRTC has just taken away that flexibility and will now force consumers to pay off the phone within a much shorter time. Richer Canadians that upgrade their phones every year or two anyway may not mind, but lower-income Canadians will now have to pay more upfront and more every month.

Case in point:

"Fido, for example, is selling the recently released Samsung Galaxy S4 for $450 on a two-year contract, whereas parent Rogers is offering the same device for $199 on a three-year deal — a price disparity that could highlight what things will look like after Dec. 2." (from "New wireless code could hike smartphone price", http://www.cbc.ca/news/busines...-code.html)

A lower-income consumer might be able to scrape together that $199 upfront and deal with the monthly bills of the 3-year term, but the $450 upfront and higher monthly bills of the 2-year term will likely now put the very same phone out of reach for many of them.

There is also absolutely nothing in this Wireless Code to get the phone companies to lower the monthly cost after 2 years, even though all the remaining installments in the phone cost have been paid by the consumer. That means most consumers will continue to pay the same monthly bill even after they've paid off the full cost of the phone. Given that scenario, why not upgrade to a new phone if the monthly bill facing you will be the same anyway?

So while the CRTC's Wireless Code effectively takes away from consumers the more flexible option of paying for the phone over 3 years if they want or need to, it will also have the effect of pushing consumers into a 2-year buying cycle instead of a 3-year buying cycle - to the benefit and bottom-line of the phone companies, and to the detriment of those that cannot afford to upgrade every 24 months.

Continued ...
June 04, 2013

J. Connor said:

"May your every wish be granted", part 2
Fact: Despite the more competitive and consumer-minded laws in Quebec and a few other provinces, the big phone companies did not pack up and leave. In other words, a market in which consumers can flexibly pay for a phone over 3 years yet leave at any earlier time they want by paying off the phone is one that is still very profitable to the phone companies.

The CRTC should have adopted the regulatory regime that Quebec consumers benefited from, instead of putting a stick into it as they have done.

Fact: In the draft code less than 4 months ago, section A4 read "The Wireless Code is to be interpreted in favour of the consumer and must not be interpreted in a way that prevents a consumer from benefiting from any other federal or provincial law or regulation which is more favourable to the consumer. [Note: This presumes that the Wireless Code will co-exist with provincial consumer legislation.]"

That clause seems to have disappeared in the new Wireless Code. It seems the big phone companies have the CRTC in their pockets. Consumers in Quebec and other provinces lose.

Fact: There is no "subsidy" of a phone. For a $700 phone, you may pay only $100 upfront, but you pay the other $600 in monthly installments. In other words, you always end up paying the full cost of the phone - there is no subsidy. Yet the CRTC and news media mindlessly continue to use the industry's own lobbying/marketing term "subsidy" on their behalf.

The CRTC could have, and should have, changed the draft Code to prohibit the use of the misleading marking term "subsidy", and mandated instead the use of the terms "upfront cost", "deferred cost", and "installment payments".

The term "early cancellation fee" used by the Wireless Code is similarly misleading. It is not an "early cancellation fee" but very simply the remainder of the installment payments due for the device.

Fact: The Wireless Code continues to allow providers to lock phones and to allow providers to set the fees they will charge to unlock the phones.

The CRTC had the opportunity to change the draft Code to prohibit the locking of phones, and they failed. Phone-locking is quite plainly anti-competitive, and also completely unwarranted since the consumer always has to pay for the full cost of the phone before leaving anyway. So while consumers will now have to pay for the full cost of their phones within a much shorter period of time (2/3 the time,) they will still be locked to the same company unless they pay a vendor-determined 'unlocking' fee, or pay up for a new phone.

I recently came across this quote: "May your every wish be granted -- Ancient Chinese Curse." It looks like Canadian consumers have just been granted a wish so fervently and foolishly made by some.
June 04, 2013

J. Connor said:

Clarification
Some adjustment is needed to what I wrote above:

For "subsidized" devices, consumers can now cancel a "contract" at any time without any "early cancellation fee" apart from paying off the remainder of the deferred cost of the device. This is as it was in the draft code in February. When there is no "subsidized" device involved, the early cancellation fee no longer applies after 24 months. This is an improvement from the draft code.

Changing the draft code to force consumers to pay for the device completely within 24 months was the big mistake that slipped in. The draft code allowed consumers the flexibility to pay the device cost over the course of 3 years WITH the ability to end the contract at any earlier time by simply paying off the remaining device cost.

This huge last-minute mistake by the CRTC needs to be corrected now, because once the flexible and consumer-friendly option of a 3-year payment schedule gets pulled from the Canadian market, it will very likely never come back. The Wireless Code should, in fact, mandate the availability of 3-year plans (again, cancellable at any time with no cancellation fees, just paying off what you still owe on the cost of the device.)
June 05, 2013

David said:

Rip off
For those claiming that there really is no difference between 2 and 3 year contracts because the cell phone company is just 'financing' your phone for you, consider that if you go to Bell Mobility and choose a Galaxy S4 on a three year contract and a $50/mth voice/data plan you are charged $50/month which includes paying the remaining $500 on the cost of the phone (or what should work out to be ~$13/month) If you choose the same phone but pick a no-term contract, all you save is $5.50 a month, that's $198 over the life of a 3 year plan ... so either Bell is giving the 3 year contract holders a 'free' $300, or you, the person who buys their phone out-right, are subsidizing those who pick a 3 year contract.

I would expect in an honest deal that given that the 3 year contract customers are paying $13 a month on their $50 monthly bill, that if I have my own phone I would get the same voice and data plan for $37 a month.
June 06, 2013

Victor said:

...
@Crocket

Your assertion that roaming caps are necessary to protect consumers is dead wrong. You conveniently neglected to acknowledge that the $20k Mexico bill could have been completely avoided if the customer had been with Telus instead of Rogers since Telus had a $200 roaming cap already in place.

Corcoran got it absolutely right. Competition drives innovation and Telus has been taking gobs of market share away from Rogers because of their friendlier approach to customers.

It takes the government years to figure out what is going on before doing anything about it.
June 08, 2013

Cynic said:

...
Yup, the CRTC screwed up big time on this one. Most of what is included in the "new" code has already been done, in one form or another, by many of the carriers. But taking away consumer choice by "forcing" 2 year handset cost recovery is taking a popular choice away from consumers. Again, the CRTC demonstrates that it is simply too slow to be useful or relevant for Canadians.
June 09, 2013

Tombe said:

...
@Hannah

I just got back from a 10 day trip to Paris as well. I tried a SIM for the Bouyges network but found their coverage was quite poor in the 6e and 7e areas where we spent most of our time, in-building coverage was expecially weak. I found that SFR had the best coverage but mostly just had 1G data networking speeds. Orange didn't have as good of coverage as SFR but we did occasionally see some 3G data speeds. SFR tries to make up for their slow data speeds with a fairly extensive WiFi underlay network at cafes - it works, but it's a bit awkward with having to logon to each WiFi site as you go.

We didn't see any LTE speeds from any of the bigger networks.

To be brutally honest, the networks in Paris appear to be at least 2 to 3 years behind Canada's in terms of coverage and data speeds. It was also interesting to see the types of phones the locals were carrying - the majority were still using those antiquated flip phones that we haven't seen around Canada for a few years. Very few people are using smartphones. But I guess it doesn't really make sense to buy a high-end smartphone for mostly 1G/2G networks.
June 09, 2013

Bob said:

No Longer able to suspend accounts
You used to be able to suspend accounts for up to 6 months and beyond by paying $15 a month.....once that suspension ran out or was cancelled you would continue to pay for your service the same number of months as when you suspended it. My son just went to Australia for a year...I thought I could suspend the account for that period....so after 1 year I would have paid $180 for nothing but then been able to continue the contract where it left off - no problem. Now, as of November 17, 2013 I can't do that....I either have to pay the $75 a month until the contract ends or find someone who will pick up the account.....I do have one other option....pay $500 and buy the phone and then cancel the account. That's my only way to avoid paying for one year of non usage - thanks for protecting this consumer.
November 28, 2013

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