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Cell phones in use (M. Spencer Green)
Cell phones in use (M. Spencer Green)

Telecommunications

Cellphone contracts slammed Add to ...

Canada's largest wireless providers have confusing and overly lengthy cellphone contracts that are more expensive than those found in other countries, says a report released yesterday by a telecom consultancy.

BCE Inc.'s Bell Mobility and Telus Corp. - which disputed the report's main general conclusions - and Rogers Communications Inc. have contract terms and "early termination fee" penalties that are "downright draconian," says the report by the SeaBoard Group consultancy, entitled " Death Grip."

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Contracts exist to help recoup the costs carriers incur when they subsidize newer and more expensive handsets, such as the iPhone. This is common in several countries and remains incredibly popular in Canada, where pricing and contract terms are often similar between the three largest providers. But the SeaBoard Group report said Canadian wireless contracts "are some of the longest in the world." The penalties to cancel are usually tied to the number of months remaining on the contract.

The government licensed new competitors in part to bring down prices and introduce more consumer choice. "It is true that Canadians are now offered more choice before they purchase their wireless services," the report says. "This choice disappears, however, once they enter into a mobile services contract."

The government's decision to arrange the 2008 wireless spectrum license auction, where roughly 40 per cent of licenses were set aside for new wireless providers, was made in part on a SeaBoard report that unfavorably compared Canadian prices to those overseas.

Representatives of incumbent providers, who remain wary of public perceptions of an oligopoly before another wireless license auction likely in 2012 or 2013, said the report was commissioned by a new wireless player seeking advantages. But another SeaBoard author, Iain Grant, said the report was not sponsored by anyone and is reliant on subscribers, which the company does not disclose - though he added that none of the three incumbent carriers is currently a subscriber.

"It's self-interested industry folklore," said Telus spokesman Shawn Hall. "What's critical to note here is that our customers have always had the choice. All of our phones and rate plans are available with or without a contract."

The report does note that Canadian carriers are smaller than many of their global peers and therefore have weaker buying power. Orascom Telecom Holding SAE, for example, which funds new wireless company Wind Mobile, has about four times as many wireless customers worldwide as Bell, Telus and Rogers combined. Smaller players have to pay more for handsets, but the report notes that this can't account for the whole discrepancy between Canadian telcos and other global players on contracts.

Follow on Twitter: @iainmarlow

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