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A man uses a cellphone in downtown Toronto in this file photo. (Fred Lum/The Globe and Mail)
A man uses a cellphone in downtown Toronto in this file photo. (Fred Lum/The Globe and Mail)

Watchdog calls for ban on 'misleading' telecom ads Add to ...

The Competition Bureau is weighing in on a proposal to create a binding code of conduct for Canada’s $19-billion wireless industry, arguing that carriers should be barred from advertising limited data plans as “unlimited” and from locking smartphones so they only work on one network.

In a submission released late Wednesday, the federal competition watchdog outlined a litany of issues that it says harm marketplace competition for Canada’s 27.4 million wireless subscribers, saying consumers often lack information to make “informed” decisions when buying cellular services.

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“Basically anything that’s keeping those customers locked up and making it difficult for those new [wireless companies] to attract customers, that’s what we have concerns with,” said Vicky Eatrides, deputy commissioner of competition, in a telephone interview.

Last week, the Canadian Radio-television and Telecommunications Commission released a draft code with an eye to beefing up consumer protections in the wireless industry. Those proposals will be the subject of public hearings next week and the telecom regulator has asked Canadians to offer their input on those provisions. Among the ideas under consideration are creating new rules for unlocking smartphones and forcing carriers to come clean on the limits of so-called “unlimited” plans.

The Competition Bureau contends the CRTC’s wireless code ought to discourage carriers from marketing wireless service plans as “unlimited” if they are, in fact, subject to material limits – an issue that has also been raised by Canada’s Commissioner for Complaints for Telecommunications Services.

“In the Bureau’s view, a claim that a service plan is ‘unlimited’ could be considered misleading if, in fact, the plan is limited in some material way,” says its submission.

Moreover, the bureau suggests that carriers ought to be prevented from locking smartphones to keep consumers tied to their networks and contends that companies should be forced to unlock all devices for free.

The competition watchdog also stressed that wireless contracts should be “limited in duration” because lengthy terms can result in prohibitive “switching costs” or “termination fees” for consumers who want to change carriers. Even so, the bureau stops short of advocating that carriers be limited to two-year terms, which is the standard contract length in other countries.

“Canada is one of the only jurisdictions worldwide where a large proportion of wireless contracts are three years in duration,” said the bureau’s submission. “For instance, in the United States, contracts are regularly only two years in duration, and in Europe, service providers are prohibited by law from requiring wireless contracts in excess of 24 months.”

For its part, the CRTC has acknowledged that Canadians have expressed anger about three-year contracts, but said it “felt it was more appropriate to deal with the effects of the three-year contracts such as transparency in billing: (separating phone-set subsidy from service) and the cancellation fees rather than removing an option that many Canadians choose.”

The Competition Bureau, though, suggests the CRTC’s proposed wireless code does not go far enough in this regard. Instead, it proposes that consumers be given flexible options to repay device subsidies even if they switch carriers.

“For instance, consumers should be allowed to make advance payments against device “subsidies,” much as homeowners can with respect to mortgage balances, as opposed to being constrained to normal monthly commitments. The Bureau supports methods to add flexibility when repaying device “subsidies.”

Ms. Eatrides declined comment on whether the bureau planned to take unilateral action on any of these issues if the CRTC failed to toughen up provisions of the final wireless code. Although the two federal agencies have separate mandates, they often oversee the same companies. For instance, the bureau has previously taken legal action against wireless carriers over allegations of misleading advertising.

“I wouldn’t want to speculate on whether we would take enforcement action on any of these issues. Obviously, we’re looking forward right now to the outcome of the consultation to see what the CRTC comes out with,” said Ms. Eatrides.

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