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A Toronto student uses his cellphone. (Kevin Van Paassen/Kevin Van Paassen/The Globe and Mail)
A Toronto student uses his cellphone. (Kevin Van Paassen/Kevin Van Paassen/The Globe and Mail)

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Ontario is promising to put a stop to cellphone “shock,” a move certain to be applauded by consumers who have been stung by painful cancellation fees and obscure contract language.

But Canada’s major phone companies are growing increasingly troubled by a patchwork of provincial regulations they say is driving up costs.

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Premier Dalton McGuinty’s minority government announced Thursday it plans to beef up consumer protection by, among other measures, allowing cellphone users to cancel their contracts at any time, while placing a ceiling on penalties.

In doing so, Ontario becomes the fourth province after Quebec, Manitoba and Newfoundland and Labrador to step into the vacuum left by the federal telecommunications regulator, which decided against active regulation of wireless contracts almost two decades ago.

While the Canadian Radio-television and Telecommunications Commission had originally deemed the sector sufficiently competitive to warrant a hands-off approach back in 1994, consumers have become increasingly incensed in recent years by confusing contract language in a $17-billion market dominated by three national carriers.

“The concern that we have is that with all these different regulations popping up across the country, it is actually going to increase costs to consumers,” said Bernard Lord, president of the Canadian Wireless Telecommunications Association, which represents the big three telecommunications companies, as well as new entrants. “Because companies will have to comply to different sets of rules and regulations and standards from province to province.”

The Ontario government says its Wireless Services Agreement Act will adopt measures originally introduced in a private member’s bill from MPP David Orazietti.

“The lack of competition in the sector at present has created these one-sided contract that clearly disadvantage consumers,” said Mr. Orazietti, MPP for Sault Ste. Marie.

Ontario feels compelled to act, he said, because the federal government has demonstrated an “unwillingness” to protect consumers.

“Take for example cancellation fees. Right now, the cancellation fees are outrageous and they are gouging consumers,” he said.

The proposed legislation would give consumers the right to exit their wireless contracts at any time. While cancellation costs would vary based on the type of contract, there would be a cap placed on those fees to ensure they remain “modest.”

For example, for fixed-term contracts where a phone was not provided, the maximum cost to cancel would be $50 or 10 per cent of the remaining payments under the contract, whichever is less, the province said.

If a free or subsidized phone was included in a contract, cancellation costs would be pro-rated to the cost of the device.

The legislation would also require “the express consent” of consumers to renew, extend or change a contract and force wireless carriers to use easy-to-understand contract language to provide more clarity around costs among other measures. Mr. Orazietti said he’s confident the legislation will garner all-party support in the legislature.

Industry reaction was mixed. New entrants are applauding the proposed bill. “This is a good day for consumer protection,” said Anthony Lacavera, chief executive of Wind Mobile. Those sentiments were echoed by Mobilicity president Stewart Lyons, who said Ontario is protecting consumers from “restrictive, oppressive wireless practices.”

A spokesman for Telus Corp. , meanwhile, said it appears the company already meets or exceeds many of the proposed measures. For instance, Telus already has plain-language contracts and does not have penalties for early termination because consumers are only expected to pay the unrecovered subsidy on the device to exit an agreement.

Leigh-Ann Popek, a Rogers Communications Inc. spokeswoman, said the company is reviewing Ontario’s proposal. “Generally speaking we support standards that deliver clarity and transparency to customers,” she said.

The CWTA and companies like Rogers and Telus are urging the CRTC to implement a national consumer protection code for wireless services to create uniform standards across the country.

Earlier this month, the CRTC announced that it will hold a consultation to determine whether it should actively regulate wireless service contracts. A decision is expected later this year.

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