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A pedstrian in downtown Toronto uses a smartphone. The CRTC said Thursday it will put an end to fees charged to “unlock” smartphones.

Fred Lum/The Globe and Mail

Canada's telecom regulator is putting an end to fees charged to "unlock" smartphones, a costly irritant to customers that carriers rely on to help reduce subscriber turnover.

The Canadian Radio-television and Telecommunications Commission said Thursday that, as of Dec. 1, customers will have the right to have their mobile device unlocked free upon request, making it possible to use that device on other carriers' networks.

That means, for example, that once a customer has paid off a device subsidy, typically spread over a two-year period, and now owns the handset outright, he or she would be free to use that device with any carrier without paying an additional fee to the original provider.

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The move comes as a result of the commission's review of the wireless code, a national code of conduct that governs the industry and aims to give Canadian customers clear information about their cellphone contracts. It also aims to protect them from unexpected overage fees with rules around caps and warnings that carriers must provide. The CRTC introduced the code in 2013 and held a public hearing in February to assess its effectiveness.

Unlocking fees generated $37.7-million in revenue for Canadian carriers in 2016 as they responded to 943,000 requests to unlock devices. It's a relatively small amount of revenue for the $22.5-billion industry, but the fees – typically about $50 for the code used to unlock the device and use a different SIM card – are a deterrent to switching providers and help keep customers from leaving.

John Lawford, executive director of the Public Interest Advocacy Centre, said he welcomes an end to the "annoyance and expense of cellphone locking, which limits competition between cellphone companies."

Carriers argue that unlocking fees are necessary to protect their investment in the device and prevent customers from leaving before they have paid off subsidies the companies offer on smartphones. The 2013 wireless code required carriers to offer unlocking services after 90 days but the CRTC also said Thursday that as of December, wireless providers must make newly purchased handsets unlocked to begin with.

At the hearing in February, Ed Antecol, vice-president of regulatory for Shaw Communications Inc.'s Freedom Mobile, called unlocking fees "toxic revenue," adding, "It's revenue that we earn that basically angers and displeases customers."

But Freedom executives said it wasn't practical for the small carrier to eliminate the fee entirely – even though it would make customers happy – because the company's larger competitors, BCE Inc., Rogers Communications Inc. and Telus Corp., "would realize that all of our customers have unlocked phones" and target them with promotions to lure them away.

At the time of the hearing, Desjardins Securities analyst Maher Yaghi warned that the CRTC review "generates regulatory risk across the industry," writing that the practice of charging unlocking fees, "reduces churn and increases customer stickiness, decreasing competition slightly."

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CRTC chairman Jean-Pierre Blais in said in a statement Thursday that changes to the code will give Canadians "additional tools to make informed choices about their wireless services and take advantage of competitive offers in the marketplace."

But Marina Pavlovic, assistant professor of law at the University of Ottawa, who specializes in consumer protection, said the ruling missed an opportunity to go further on customer awareness, calling it "underwhelming" on that front.

She had hoped the commission would order carriers to provide a summary of key terms before signing a contract, which would help people comparison shop.

Nonetheless, she called the overall decision positive and said it addressed many ambiguities in the original code. "I think it's a balanced decision. I don't think it's as earth-shattering as the initial code was," Ms. Pavlovic said, referencing the 2013 decision to effectively ban three-year cellphone contracts.

Thursday's ruling will be Mr. Blais's last major act as chairman as his term ends on Saturday and he said he has not asked to return. The government has not yet named a successor.

Representatives from Rogers, Telus and BCE said they are still reviewing the decision while Shaw declined to comment Thursday.

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The CRTC also clarified other issues, in its Thursday ruling, including the way carriers handle data or roaming overage fees for family or shared data plans used by multiple people. Some carriers had been applying the caps the wireless code set for overage charges – $50 for data and $100 for roaming charges – to each individual user of the plan.

The CRTC now says it must be the account holder who consents to any overage charges unless that person authorizes other users of the plan to consent to additional charges as well.

The commission also updated the terms around trial periods, ruling that customers will be able to cancel a cellphone contract within 15 days and return their device for no charge, as long as they have used less than half of their monthly usage limits.

Editor’s note: This story has been updated to clarify that carriers use a code to unlock the wireless device so customers can use a SIM card from a different provider.
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