Telecom issues were in the spotlight yesterday with the government ordering the CRTC to “examine claims of aggressive or misleading sales practices concerning telecommunications services, the prevalence and impact on consumers, as well as potential solutions.” The Order-in-Council, which was accompanied by a request to the Competition Bureau to provide assistance, follows CBC reports on misleading sales tactics from companies such as Bell and Rogers and the CRTC’s rejection of a request to conduct an inquiry into the matter. The announcement from Innovation, Science and Economic Development Minister Navdeep Bains is a welcome development, signalling the government’s frustration with a CRTC under new chair Ian Scott that has seemingly abandoned consumer interests.
The difference in perspective between the government and the CRTC on the misleading sales tactics is instructive. The CRTC’s response to PIAC’s request for an inquiry amounted to little more than a message to Canadian consumers that they were on their own:
I note that Canadians already have a variety of options available to them to seek redress depending on the nature of the issue. If Canadians consider that their wireless, Internet, home phone or TV service provider has not provided clear and accurate information to them about their contract(s), or is not acting in a manner consistent with the CRTC’s Wireless Code or Television Service Provider Code, they should first try to resolve the issue with their service provider. If the matter is not resolved to their satisfaction, they are encouraged to escalate the complaint to the Commissioner for Complaints for Telecom-Television Services (CCTS).
In contrast, the government’s order-in-council recognizes that misleading sales tactics by their nature means that most consumers won’t know that they have been misled. As the government notes:
those misleading or aggressive sales practices may include the abuse of information asymmetries by Canada’s large telecommunications carriers in order to benefit those carriers
The same point is made in its letter to the Competition Bureau:
There are reports that these practices exploit the unequal level of information possessed by sales agents relative to consumers and that vulnerable Canadians are more likely to be harmed.
In other words, the market features systemic inequality and simply assuming that most consumers can identify misleading tactics and take steps to remedy the issue by complaining to the company or the Commissioner for Complaints on Telecommunications Services is pure fiction. That the CRTC did not recognize its responsibility in addressing these issues is deeply troubling. Indeed, the government’s order identifies several things it should have investigated, including whether there are misleading practices, measures to monitor consumer risks, the effectiveness of consumer protections, and potential ways to strengthen or expand those protections.
The absence of the consumer from the CRTC’s world view of the telecom market is consistent with its recent broadcasting report that envisions new Internet and wireless taxes that will increase consumer costs and its earlier decision to reject new measures to inject competition into the marketplace through MVNOs, relying instead on the creation of new low-cost data-only plans. A proceeding into the carrier proposals is underway, sparking a Competition Bureau submission that highlights why the CRTC’s measures are inadequate and the “low-cost” plans priced far above costs. The Bureau laments that “market power concerns persist in the Canadian wireless industry” with the following consequences:
When market power is exercised, prices are higher, and wireless penetration is lower, than in a market that is competitive. The exercise of market power forces some consumers, who would purchase a product or service at a competitive price, to forego such purchase because prices, as a result of market power, are simply too high. These consumers no longer participate in the marketplace, and these foregone purchases create what economists refer to as deadweight loss.
That is the state of the Canadian wireless market, yet the CRTC chose to claim “there have been positive signs that the intensity of facilities-based competition is increasing across the country”, focusing more on the investment of the carriers than on the actual pricing and affordability of wireless services. The CRTC concluded that low-cost data plans would help address the affordability issue, leading to proposals that the Competition Bureau notes exceed wholesale pricing by more than 300 percent:
The Bureau also notes that the prices of proposed plans filed by Canada’s national wireless carriers exceed the wholesale roaming rate by a wide margin. Table 2 reports the results of calculations comparing the wholesale roaming rate per megabyte of data with prices per megabyte proposed by Canada’s national wireless carriers in this proceeding. These calculations show that the proposed prices exceed wholesale prices by more than three hundred percent.
The over-priced “low-cost” data-only plans are little surprise given that the CRTC has given every sign in repeated decisions over the past year that it will prioritize the interests of carriers over consumers. Yesterday, the government made it clear that needs to change.