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Canadians who sign a wireless contract after Dec. 2 will be able to pay off the full cost of their subsidized smartphones within two years.CHRIS WATTIE/Reuters

Canada's largest cellphone carriers got clearance from the Federal Court of Appeal to challenge a provision written into the country's new wireless code that would allow some customers to ditch three-year contracts ahead of term.

The group of carriers, which includes BCE Inc., Rogers Communications Inc., Telus Corp., Saskatchewan Telecommunications Holding Corp. and Manitoba Telecom Services Inc., is challenging measures that give the code "retrospective application" to wireless contracts signed before it takes effect on Dec. 2. The carriers allege the federal telecom regulator lacks the power to impose that rule on the industry.

(BCE owns a 15-per-cent stake in The Globe and Mail.)

On June 3, the Canadian Radio-television and Telecommunications Commission unveiled the final provisions of its code for the country's $20-billion wireless industry. The regulator's intent was to create a more "dynamic" marketplace by empowering consumers to shop the market for the best deals on a more frequent basis.

The code's centrepiece sets a maximum of two years for the amortization of phones tied to a contract, which will effectively end new three-year contracts once the code takes effect – an outcome supported by consumer advocacy groups. Phones sold with wireless contracts are usually subsidized by the carriers.

Canadians who sign a wireless contract after Dec. 2 will be able to pay off the full cost of their subsidized smartphones within two years. While the CRTC said the code isn't meant to be retroactive, the provisions are meant to apply to all contracts no later than June 3, 2015.

"If the Wireless Code decision applies to all contracts by 3 June 2015, then it will apply retrospectively and interfere with vested rights. Any contract that was entered into before 2 December 2013 and that terminates after 3 June 2015 will be subject to the Wireless Code," reads the appellants' notice of appeal dated Oct. 1.

"The effect of the application of the Wireless code to pre-existing contracts will be to override significant terms of these contracts. CRTC has no power to engage in retrospective rule-making or to interfere with vested rights."

The crux of the problem, according to carriers, is that three-year contracts signed before Dec. 2, such as those entered into during the recent back-to-school season, would not expire until after June 3, 2015. Big carriers don't want the code overriding the terms of pre-existing contracts because it would prevent them from recovering what they spent on smartphone subsidies on some contracts that expire after June 3, 2015.

None of the allegations has been proven in court. The CRTC did not immediately respond to a request for comment.

The appellants have requested that the case, for which no hearing date has been set, be heard in Toronto. They are also seeking the costs of the appeal. The Federal Court of Appeal issued its order granting leave to appeal on Sept. 24.

There are numerous respondents named in the case, including new entrant carriers, consumer groups and individuals who participated in the CRTC's public hearings on the code earlier this year.

Despite their legal challenge, many carriers have already begun adjusting their offers in anticipation of the move to two-year contracts. In an interview last week, CRTC chairman Jean-Pierre Blais did not comment on the carriers' legal action, but did suggest those developments indicate the code is already benefiting consumers.

"When I look at what is happening in the market place and what carriers are currently offering, even though the code is not technically in force, they're already making adjustments," said Mr. Blais. "So, I think that the wireless code is already, in a sense, having an impact."

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