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A man uses his cellphone in downtown Toronto September 03 2013.

Fernando Morales/The Globe and Mail

The federal agency that handles telecom complaints is weighing in on how it expects wireless carriers to handle the end of three-year cellphone contracts.

The Commissioner for Complaints for Telecommunications Services (CCTS) published a statement Wednesday outlining how it will interpret a deadline in the wireless code, which will apply to all cellphone contracts, regardless of when they were signed, as of June 3.

The deadline will affect two main groups of customers: Those who signed three-year contracts before the Canadian Radio-television and Telecommunications Commission (CRTC) announced the code on June 3, 2013; and those who signed a three-year contract between June 3 and the date the code first came into force six months later on Dec. 3, 2013.

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The code states that wireless carriers that provide customers an up-front subsidy on their handset must spread the cost of recouping that out evenly over no more than 24 months. After that length of time has passed, customers are free to cancel their contract without paying any cancellation fee.

Howard Maker, chief executive officer of the CCTS, said the ombuds office – which is responsible for enforcing the terms of the code – is issuing guidelines on how to interpret the provisions because it has been an area of "some confusion and uncertainty."

"The messaging to date has not been entirely consistent from carrier to carrier. They have interpreted what's going to happen on June 3 in their own ways and not all of them are on the same page on this yet," Mr. Maker said in an interview. "Part of our objective was to go out publicly with this information and try to get everybody on the same page and explain what our expectations are."

The CCTS has been forced to move quickly on this issue because although the CRTC announced the deadline two years ago, a group of wireless carriers challenged it in court, arguing that it amounted to retroactive interference with contractual rights. The Federal Court of Appeal did not rule on the case until last week, when it dismissed the challenge, leaving the terms of the code to be applied as originally envisioned by the CRTC.

"The code applies automatically, but what that means and what the consequences of that are for customers on three-year plans, that's really been the issue," Mr. Maker said.

"We're making it clear that if you have an unexpired three-year plan and it has run the 24 months in which the code requires the fees to go to zero, then you're good. [The cancellation fee] is going to be zero. And those would be contracts entered into before the code was announced on June 3, 2013.

"In a perfect world, carriers will look at this and say, 'Okay, this is the expectation,' and they will govern themselves accordingly. But the reality is not everybody always sings off the same song sheet and there may be situations in which we're required to become involved," he added.

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The Ottawa-based CCTS, which is funded by the telecom industry, handles complaints that customers cannot resolve directly with their providers.

Mr. Maker said there were fewer three-year contracts signed between June 3 and Dec. 3, 2013, when the code first came into force because the carriers began to offer two-year deals instead.

"But in those cases, if there was a device subsidy, again there's a 24-month issue. So, if your contract hasn't run the 24 months, [the cancellation fee] doesn't reduce to zero, so there's still an outstanding early cancellation fee," Mr. Maker said, noting that the CCTS has provided a formula for how to calculate that fee.

The formula requires determining the amount of the subsidy at the time the contract was entered into, dividing it by 24 and multiplying that amount by the number of months that have passed in the contract. The difference between that amount and the total value of the subsidy is the amount the service provider can recover as an early cancellation fee.

"The calculation is maybe a bit challenging, because not all customers' contracts will indicate what the device subsidy is," Mr. Maker acknowledged, adding that customers will probably have to approach their provider to find that out.

Those customers could also wait until 24 months have passed since they signed their contract and cancel with no fee at that time, he confirmed.

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For those on three-year contracts who did not receive an up-front device subsidy, the CCTS has provided a separate formula for calculating the early cancellation fee. They would also be free to cancel with no fee after 24 months is up.

The deadline has presented an opportunity for customers to negotiate perks such as discounts on handsets or to consider "bring your own device" deals that offer a monthly discount, typically in the range of $20.

However, since monthly rates have become more expensive since the switch to two-year agreements, some customers might be hesitant to walk away from the terms of their three-year contract.

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