Text-Message Fight Obscures Real Consumer Costs

Of all the recent controversies involving Canada’s wireless carriers – and there have been many – my weekly technology law column (Toronto Star version, homepage version) argues that the fight over the 15-cent charge for the receipt of text messages must surely rank as the most puzzling. The issue, which generated an enormous amount of attention from politicians, company executives, and consumers, effectively came to a conclusion on Friday after Industry Minister Jim Prentice acknowledged that he was not prepared to intervene.

Scratch below the surface and it is difficult to understand what all the fuss was about. Text messaging has admittedly become an enormously popular form of communication and the new charges feel like an ill-advised cash grab by Bell and Telus. To be fair, however, the charges are also a relatively minor consumer issue given that the overwhelming majority of wireless subscribers are not affected by it.  Moreover, the political reaction reeked of opportunism.  Prentice had endured weeks of criticism from consumer groups across the country over his copyright reform bill and may have been looking for a way to re-make himself as a friend of Canadian consumers by briefly vowing to fight over the issue.

With the saber rattling over text-messaging charges now concluded, the issue should serve as a wake-up call on several festering problems with telecommunications in Canada.
First, the new charges again raise the concerns associated with long-term contracts that grant carriers the right to unilaterally change key provisions and leave consumers with little recourse (the contractual issue is currently the subject of a class action lawsuit).  Sign the three-year contract demanded by many carriers and you are stuck facing huge penalties for early termination.  Other countries have recognized this problem and mandated limits on the term of cell phone contracts. Canadian officials have stayed silent.

Second, Prentice highlighted the inherent unfairness of charging consumers for receipt of text-message spam.  Dig deeper, however, and the real problem lies with the inaction on spam more generally.  Canadians already pay for spam with expensive wireless data rates that do not distinguish between legitimate email and spam.  Canada remains one of the only developed countries to have not introduced anti-spam legislation, an issue that falls squarely within Prentice’s mandate.

Third, the new charge is part of a broader problem within the Canadian marketplace where in the face of limited competition, consumers pay more, but get less.  The Canadian Radio-television and Telecommunications Commission has been mandated to move toward a market-oriented approach for telecommunications, ensuring that there will be no broad ranging regulation of the wireless marketplace any time soon. In the absence of robust competition, many consumers have been left to wonder whether some form of regulation is needed. The same questions were recently raised in Europe, with the European Commission becoming much more actively involved within the marketplace.

As the government dithers on real action, the costs to consumers and business are enormous. The average cell phone subscriber spends more each month on their phone ($60 per month is the average revenue per unit according to the BCE 2007 annual report) than a family spends each month on hydro for a four-bedroom house.  Businesses face high costs for data services, forcing some developers to abandon the Canadian market.  

The 15-cent text message charge may have captured headlines, but it is what lies beneath that really matters.  The Canadian cell phone market is discouragingly uncompetitive and expensive by world standards.  Fixing those issues will require more work than a couple of press releases and hollow assurances that Canadian consumers enjoy plenty of choice.


  1. Craig Radcliffe says:

    Materially-Adverse Change
    I’m guessing from this article that Canada does not have the same materially-adverse changes provision that the US does when it comes to cellphone contracts?

  2. $60 a month is more than hydro on a 4-bed house??? Not in any part of Canada I can think of!

  3. I don’t see anything particularly wrong with these companies charging for incoming text messages. If a person doesn’t like it, they can switch providers, right? Of course, if a person is under a contract whose original terms never included paying for incoming messages, then those people should be given either the option to cancel their contract (and pay any *ONLY* the outstanding balance still owing on any phone that they got at a discount because of the contract, which itself should be pro-rated based on the amount of time they had remaining on their current contract, or return the phone for a full refund if that is viable for them) or else continue to utilize the service until the contract expires under the terms that they originally agreed upon. That is, they should continue to enjoy free incoming text messages until their contract is over, at which point the provider can inform them that incoming text message charges will commence. The customer is perfectly free at that time to find another provider that doesn’t charge for incoming messages (currently in Canada, only Fido/Rogers doesn’t charge for incoming messages, so I expect they’re going to get a large influx of people who were disatisfied with Bell or Telus).

  4. No Competition
    The problem is, as Mr. Prentice doesn’t realize, is there really isn’t much choice or competition, especially when two of the big three companies add the same charge within 2 weeks of each other. Of course you can switch to Rogers, but they just introduced a 15cent additional fee to text to the US.

    What I don’t understand is how these companies are allowed to change the terms of a contract midway through, when we, the customer, get dinged for a large amount should we try and opt out, even if it’s for a legitimate reason.

  5. No competition
    They can make these changes because the contract does allow them to change the terms. Maybe more competition would discourage telecomes from this kind of thing, but my guess is that, as with airfares, eventually they all go in the same direction. But that of course is another example of the same problem – Canada will never have the same choice as the US, which is 10 times larger and with, overall, a higher standard of living. There’s no shortage of failed airlines and cellphone companies here. Too few people, spread very thinly.

  6. You really hit it on the head. I’m stuck with a 3-year contract with Bell Mobility which I thought was a great deal at the time I signed. But little did I know at the time that I signed away my freedom of choice and giving Bell the freedom of gaugung me for any service Imight use even if it is receiving a text that was not initiated by me. How cruel is our Candian market that allows such abuse!? For all I know the U.S. and Europe provide safeguards for the consumers against such despicable practice.

  7. Text-Message Fight Obscures Real Consume
    I cannot understand how anyone would not object to paying for someone else’s communication, spam or no spam. There’s a principle at stake here. If you want me to read your snail mail or email correspondence or listen to your voice message, then you should pay for its delivery. If you want me to accept an unsolicited package, then you pay. Why should I incur the cost of your communication? The point here is that under this “payment plan”, regardless of what ever ends up in my text message in-box, I have no right of refusal and have to pay anyway. That is, if I do not wish to read your correspondence, spam or not, then why should I get charge for it? Why should I have to plan my personal budget around someone else’s communication priorities? If you think that your communication/message is so important that I should read/listen to it, then you should pay for its transmission!

  8. This is a key point. The entire cost of texting (or calling cellphones) should fall on the sender, not the recipient. That is what should be in all new contracts. If that makes it more expensive to text/call, so be it

  9. I wouldn’t blame the Canadian marketplace, per se… although I think it’s wrong that a company can change the terms of a previously agreed contract essentially any time they want, and hold people who never agreed to the new terms accountable for abiding by them. I really hope that both Telus and Bell are forced to not change the terms on any current contracts, even if that happens to mean they don’t get to charge for incoming messages for those particular subscribers for up to the next 3 years. When the contracts expire, they can always start charging then, and the subscriber can move to another provider if they are dissatisfied. To alter the terms of a contract before that contract has expired and not leave the other party any option to get out of the arrangement without unwarranted difficulty or expense is just plain wrong, IMO.

  10. hydro bill
    “$60 a month is more than hydro on a 4-bed house??? Not in any part of Canada I can think of!”
    I leave in Vancouver in a 4-bed house and this month bill was $55.92 that is 27.96 per month (since bchydro charges you every other month). That is the average I pay all year around. I have lights everywhere (which we forget on all the time). I have 3 computers turned on all day long (since I’m a computer programmer working from home). I have all my appliances electric (even the stove).

  11. Europe
    In Europe there isn’t any single carrier that charges you on receiving neither text messages nor phone calls. In fact if your SIM is empty you still can receive calls. That seems to me very ethical since the receiver does not have any control on who is calling or text messaging.
    (I’m talking about SIM because does not exist any kind of contract neither short or long: you charge your SIM and talk until is not empty).

  12. Text Message
    The problem is this – Canada has such limited choices, that the safest course ismonopoly by market leader. Each (both?) players recognize that they have their decent share, and that rocking the boat to attempt to win market share is in the end a no-win situation. Like airline price wars, or the banks fighting over customers – if one lowers his prices, then the others do too. Soon, everyone is right back where they were, but with less revenue. So they happily play follow-the-leader in pricing.

    There are several suggested solutions; make it easier to get into the game; make the carriers (the towers, network, etc.) a separate business, and the phone service sellers their customers. More regulation would in some ways open things up, much as it pains me to say so. Mandate maximum fees, open phones, etc.

    I have a large house in Winnipeg and my electricity is about $100/mo; why should telephone service come even close to electricity as a cost? Yet information costs are a huge part of my budget – $95 for phone, internet, and long distance; $60 for relatively basic Satellite (would be even more for worse service for cable on MTS tv); and $22/mo for a cellphone advertised as $9.95/mo., since the network access fee is another $10/mo. – oh, and if I want a simple basic service like caller-id on my cellphone, it would be $7, bringing a simple $9.95 plan to $27 plus tax!

    Since I remember the days of $8/mo. for my phone and $8/mo for cable in downtown Toronto, I have serious reservations about diving into the mobile world with silly charges that could make my cellphone bill match my electrical or gas bill.

    Text? Never used it.

    I go all over the world, I see kids in Europe and Australia having fun (NZ is a rip-off) with their phones -even the USA. Here, we’re stifled by a lack of openness to innovation by the suppliers.

  13. Yeah I remember those BC Hydro bills!
    I live in Ontario now, and the OntarioHydro was so mismanaged before I came that they had to change the name to HydroOne.
    The Hydro bills here compared to BC are the biggest sad joke I have seen in a long time, not to mention that I have to pay a debt reduction fee on every bill for their mismanagement before I even lived here. Sorry to hijack the comment, I just wanted to prove buddy\’s point!

  14. stupidity of contracts
    When I needed a new cell phone, everybody told me that I absolutely HAD to sign up for a contract – one year minimum, but preferably three years. Friends and family said this is the only possibility. Cell phone companies tried to tell me that it’s required.

    Nuts to that, I said. I went from one cell phone place to another in a large mall, each time saying “I need a new cell phone. I won’t sign up for a contract, and I want a free phone. Can you guys help me?” Finally somebody said “oh yes!” and now I have a snazzy new phone, and no contract. Didn’t bother me that I needed to switch providers. Telus lost my business, and the new company I’m dealing with seems fine. They bought my business by giving me a free phone, but they’ll only keep my business if I like them.

    What I don’t get is why consumers put up with crap. Contracts – why? What benefit do they give the consumer? None, as far as I can see. But this contract nonsense will be around for as long as people fall for it. We’ve got to stop signing up for nonsense, people.

    Once you don’t have a contract, you can ditch any company that annoys you.

    That said, I think we do need some regulation in this industry. Seems there are just too many unfair things going on, and the text message charging gouge is one of them.

  15. On the subject of these companies changing the terms of recent contracts, I’m reminded of a rather famous quote, “I am altering the deal, pray I don’t alter it any further.”

  16. Gouging.
    It’s just another example of the opportunist nature of the Telco’s

    You should write about the Rogers $50 fee if you decrease your services, the $400 dollar fee for canceling your all or nothing contracts – even though you’ve paid for the phone.

    You should write about why is it all the Major internet providers charge the same price for ‘High Speed’ Service (Price Fixing)?

    So it’s fair for consumers to get defensive against any new charge. These companies haven’t played fair before – why would they start now?

  17. some other charges
    just a comment. Im with telus for my mobile service. And on this months bill they suddenly started charging me 11$ (instead of the usual 10$) for my text message/voicemail etc plan. It just happens to coincide with the 15cents a message charge. Since they cant nail the ones with plans, they just upped the price. no notice of any sort. I understand its within their rights in the contract to change the price of extras without notification. but its still bothersome. seems underhanded. even if its only an extra buck.

    But dont worry folks, they offer the 10$ plan without the text messages. (just be prepared to pay the cost of incoming texts)

  18. I don\’t think it\’s contract length it\’s the ability to endow themselves in the contract with the power to unilaterally change said contract. THAT should be illegal. Would defang one of the worst parts of EULAs too.

  19. Organization
    I don’t see why everyone is complaining about the incoming text charge. If you really hate it, you could join together in sending Jim Prentice (or the people responsible for these charges) a few text messages. 15 cents from a few hundred thousand people should wake him up, don’t you think?

    Although this might seem funny, but I’m serious.