On Monday morning, the Canadian Radio-television and Telecommunications Commission issued its final Wireless Code, a set of rules all wireless service providers in Canada have to abide by. I was curious how this code compares to the rules the Quebec government put into place in 2009 that similarly protect consumers in cellphone (and other) service contracts.
The result is this story in The Gazette, which appears in Wednesday’s paper. It lists point by point the provisions of both. In general, they’re very similar in terms of how cancellation fees are calculated, how major elements of contracts can’t be changed unilaterally, and how renewals are done. Bill 60 also includes a prohibition on late-payment fees or additional fees for pay-as-you-go services. But most of the advantage for the consumer is in the CRTC’s code, which specifically deals with wireless service. It includes a de facto two-year maximum on contracts, a 15-day trial period, a right to unlock phones, notification of data roaming and caps on data overage and data roaming fees.
You can read the CRTC’s decision here setting the Wireless Code into place and explaining its reasoning. Quebec’s Bill 60 became law in 2009, and the text of it is here (PDF).
The Wireless Code comes into effect with contracts signed on or after Dec. 2, though providers can start applying the new rules to new contracts as soon as they’re drawn up. Since it’s not really in their interest for people to wait, I would expect the code’s provisions to be in new contracts by the major wireless companies before then.
If your main concern is contract length, by the way, you can go ahead and sign now. As of two years from now, all contracts must comply with the code, which means in two years you won’t have a cancellation fee, even if your contract right now says you will.
How will this be paid for?
The big question now is how these changes (particularly contract length) will be reflected in the marketplace. Having phones subsidized over two years instead of three will mean one of three things:
- Higher prices for new handsets. I’m guessing this is the most likely option. Instead of getting, say, a $360 subsidy on a phone, which works out to $10 a month for 36 months, the subsidy might only be $240, which means the phone will be $120 more expensive. Expect fewer $0 smartphones.
- Higher monthly rates. If subsidies are done over two years instead of three, then they have to be 50% higher on a monthly basis. So that $10 a month subsidy now has to be $15 a month if the total subsidy is the same. But in my experience there hasn’t been much flexibility in monthly pricing based on device subsidy, and monthly fees have much more competitive pressure than initial handset cost. Prices might inch up slowly, but only if all the major providers agree their profit margin at the lower price is unsustainable.
- Lower profits. Yeah, go ahead and laugh. But wireless providers make decisions all the time that result in lower profits, hoping that they might result in higher profits down the road. Acquiring new customers has a large price to it (beyond just the phone subsidy), but if you can lock them in for three years or longer, you’ll make much of that money back. Reducing the contract to two years will mean less time to recoup this acquisition cost. We may see an effect on the bottom line here.
Because, in two years from now, all contracts will have to have zero-fee cancellation after two years, expect new handset costs to go up quickly. Which means even though it sounds like it might be a good idea to wait until December, now might actually be the best time to get a new phone.
Actually, the combination of shorter contracts and the ability to unlock the phone really means that this is what is likely to happen:
1) the phone cost will have to be entirely handled within the 2 year contract. Higher initial costs, or likely higher monthly costs will come into play – probably a combination of both.
2) zero dollar phones will likely become either rare or will be even more out of date models than currently owned. Again, that cost has to be sunk against 2 years instead of 3
3) more sneaky costs, like fewer text messages, higher data costs, obligatory data plans with smart phones…
4) higher rates on “bring you own phone” pricing programs as there will be more people in the next two years with a reasonable phone, no desire to change it, and not willing to take on a new contract.
The real truth:
5) people will turn their handsets over more quickly. initially there will be resistance, but instead of 3 years they will be up for renewal in 2 years, and they will upgrade quicker, which in the end sells more handsets and isn’t exactly a benefit for the consumer.
Consumer laws aren’t always good for consumers, are they?
I don’t see any of these happening. Wireless plans are going in the direction of unlimited talk and text, and data is becoming less expensive. I don’t see that suddenly reversing just because we have two-year contracts instead of three-year contracts.
Not hard, simple math: If the companies have to take more of a bath on handsets to stay competitive, they will find other ways to make it up. Quite simply, they won’t just take a bottom line hit and go with it. If you have to spread a handset cost over 2 years instead of 3, then plans end up being more expensive. The companies aren’t making so much that they can afford to eat 33% more of the handset cost without getting it back somewhere. Basic math, really.
No argument there, although I think higher handset costs to the consumer will be the more likely outcome.
Even if the prices of the plans go up, I don’t see prices for add-ons like text messaging or voicemail going up. The trend has been for those to go down.
You are correct that the trend has gone that way, but there is no indication that it will continue. Effectively, if the companies have to recoup, they will try to find a way to do it. Just straight up raising the monthly rates is painful, because it harms their business models. People won’t trade out of their current plans for obviously more expensive ones, so they have to figure out some other way to do it.
The most common way is to raise the monthly costs of the “extra” services. So while they may not limit them, voicemail may be $1 more a month, as an example, or become a manditory part of a play at a given rate to raise the overall ticket price. The other common technique would be to require a more expensive “data” plan with new phones, allowing the value of the new phone with great features sell the more expensive service plan.
In the end, something has to give. Phone companies won’t just swallow another couple of hundred bucks just to make their customers happy.
Hence raising prices on handsets. Keep in mind those plans include prices on things like voicemail and text messages. Under new laws, it will be difficult to change those without the consent of the consumer.
Where are you seeing this? I have a Canadian and a US cell phone. My Canadian cell package would cost me 4 times what I pay in the US if I used it as much. Try $35 a month for unlimited, anywhere in the states talk a month. Where do I get that here?
Assuming “unlimited” means unlimited talk and text, you can get that for $25 a month at Public Mobile.
I nor you can get unlimited talk and text nationwide (including long distance) at Public Mobile nor any other provider in Canada for that price.
So they’re lying?
I think consumer law should consider direct unlocking for smart phone after the end of the contract.(i.e full paid smart phone.)