Canada's telecom regulator is making it easier for consumers to switch wireless providers, the centrepiece of a set of reforms aimed at creating greater competition and lower prices.
In a surprise move, the Canadian Radio-television and Telecommunications Commission said Monday its new wireless code will empower Canadians to cancel their cellphone contracts after two years without the sting of cancellation fees, even if they had agreed to a longer term.
Although the CRTC stopped short of banning three-year contracts, its new rule effectively spells the demise of those long-term agreements that slap consumers with penalties if they try to switch carriers prior to expiry.
By tackling that hot-button issue, the commission says it is putting more "control" in the hands of consumers, making it easier for them to shop for better deals sooner while shielding them from "bill shock" with other measures that cap extra charges for data usage and international roaming, and other measures to enable consumers to more easily switch providers.
The CRTC's move comes as the federal government's earlier effort at boosting competition, by enticing new entrants into the market, teeters toward collapse, with three independent upstarts up for sale. However, the government has not abandoned that strategy, with Industry Minister Christian Paradis to unveil a key decision Tuesday morning on whether large players will be able to acquire those upstarts.
Carriers and some analysts warned the code could still result in higher prices for consumers, but the CRTC's head said the changes will boost competition.
"It will make for a more dynamic marketplace," said CRTC chairman Jean-Pierre Blais in an interview. "So, at least every two years, there is a rendezvous – an opportunity – for consumers to either re-sign with their existing carrier or look what is available across the street."
It's just what Lee Carswell from Stittsville, a suburb of Ottawa, wanted to hear from the regulator. The heavy BlackBerry user has one year left on his three-year plan, and has a habit of changing providers at the end of each contract to score a better deal upon renewal.
"I'm not against the whole contract thing," he said. "But I don't like how you can be surprised and how there's no flexibility at all once you've signed – they'll do everything in the world for you when your contract is up but nothing when you're already a customer."
Under the new rules, which come into effect in early December and are not retroactive, anyone signing a contract would pay the full cost of their handset within two years. That would free them to either get a new device sooner, or take their current phone to a new company if they think they can get a better deal.
That would definitely help Trevor Howard. His family has four phones on contracts, and all four of them died before the deal was up. They've been riding out the last year of their contracts with hand-me-downs and cheap phones bought from a department store. "All of those phones probably would have been fine on two-year contracts," said Mr. Howard, who lives in Whitehorse.
Although big Canadian wireless carriers have argued that three-year contracts are "popular" with consumers because they offer generous discounts on devices, two-year agreements are standard in other countries including the United States.
During the hearings, big carriers warned the commission that banning three-year contracts would raise prices – a prospect they floated again on Monday. "I think the market is very competitive right now and people, you know, are getting very fancy, new smartphones at a big discount," said Ken Engelhart, senior vice-president of regulatory affairs, at Rogers Communications Inc. "The question is whether the discount will be as big over a two year contract and common sense would say 'no' but we'll see."
Although BCE Inc. said it was prepared to "work within the new rules," it too hinted that restricting contracts "two years means less flexibility for consumers."
According to sources, Mr. Paradis will announce that the Conservative government remains committed to ensuring that there are at least four carriers in every regional market. In doing so, he will outline the government's intention to use any and all tools at its disposal to ensure the success of that policy. The options available include regulation of fees charged to competitors, including domestic roaming rates and charges for sharing cellular towers – or even forcing big carriers to lease out network capacity at regulated rates.
The code will also limit overage charges for data at $50 a month, while international data roaming charges will be capped at $100 a month. That could mean that consumers run the risk of their service being cut off when travelling if they do not choose to sign up for additional roaming usage. Consumers will also have the right to have their smartphones "unlocked" after 90 days, but the CRTC will not regulate the price that consumers pay.
Simon Lockie, chief regulatory officer for Wind Mobile, said the code is a positive step but cautioned it, alone, would not be a "magic bullet" that leads to sustainable long-term competition in the $19-billion sector.