My weekly Law Bytes column (Toronto Star version, homepage version) focuses on wireless number portability, which makes its much-anticipated debut on Wednesday, allowing Canadian consumers to change their cellphone provider without surrendering their current phone number. I note that 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. 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. Possible future moves include reserving spectrum for a new entrant in the forthcoming spectrum auction, eliminating the deceptive system access fee to encourage greater movement in pricing, and considering ways to free the equipment side of the market in light of the lack of transparency involving restrictions on phone-locking and the crippling of features that compete with the providers' own services. 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.