T-Cubed: CRTC Revamps Wireless Code, Introduces Changes to Contract Length and Fees

The Canadian Radio-television and Telecommunications Commission (CRTC) announced a new wireless code on June 3 that they hope will make mobile device contracts easier to understand and establish basic consumer rights in the wireless industry.
The CRTC was prompted to issue the new wireless code due to numerous complaints from Canadian consumers who expressed frustrations with the current wireless industry. The new wireless code allows individual and small business consumers to terminate contracts at no cost after two years. Data overage and roaming charges will be capped at $50/month and $100/month respectively to prevent surprise bills at the end of each month. Phones can be unlocked after 90 days under contract, or immediately off-contract, and can be returned within 15 days under specific usage limits, if a consumer is unhappy with their service. Contracts now have to be easily readable and understandable, and consumers can accept or decline any changes to the contract once it is signed. These rules will apply primarily to postpaid contracts, but can apply to prepaid contracts as well where applicable.
Consultations for the new wireless code were held in two phases: once in November 2012 and the other in February 2013. The three-year contracts commonplace in the Canadian wireless market were the primary focus of most complaints from consumers, who were frustrated that the long contract terms restricted their choice in carriers and devices. In almost every other country, two-year contracts are the norm, and most developing nations prefer to use prepaid plans. The new ability for consumers to cancel their contracts after two years fee-free effectively eliminates three-year contracts.
Bell, as one of the three large carriers in Canada, claimed that reducing contract length would cause the subsidy on smartphones to decrease, since the device price would be spread over a shorter period. Telus indicated that it already implements most of these measures, such as international data roaming caps and phone unlocking. Rogers warned that they may not have the ability to implement the infrastructure to support the new rules in only six months and echoed Bell’s concern about smaller subsidies on new devices. Some journalists also sided with their argument that the new rules ultimately reduce competitive pricing in the market due to the more strict contract rules.
The lack of such subsidized phones may encourage consumers to consider a phone more like a computer or game console, where they are encouraged to use the device for as long as they can before it becomes irrelevant, as opposed to the current highly disposable model fuelled by wireless providers. The idea that the latest smartphones are disposable is bizarre, as some phones today contain more computing power than many laptops from six years ago. The model encouraging consumers to see phones as throwaway tools, that can be easily replaced for almost no money, is a holdover from an era not too long ago where phones were good for texting, calling, and playing the really bad embedded Java versions of Tetris or Pac-Man.
Even before the new wireless code was announced, some carriers in the United States and discount carriers in Canada were already slowly making their way to having unsubsidized devices be their expected offerings, as it costs carriers a significant monetary investment to offer devices for cheap in exchange for locking users into multi-year contracts. While the subsidy will likely disappear entirely over the long-term, this will encourage users to hold onto their phones longer and be more conscious of what they are purchasing, much like they are when they purchase a tablet or a computer. Not many people would be aware that the true price of a 16 GB iPhone 5 is $699, a 16 GB Samsung Galaxy S4 is $700, a 16 GB BlackBerry Z10 is $650 and a 32 GB Nokia Lumia 920 is $599. This could also encourage manufacturers to try hitting lower price points as consumers realize the true cost of many smartphones. Carriers can either absorb the extra money saved by not having to offer such high subsidies or apply it to phone bills to offer more savings for the end user and ultimately offer a greater value as a company.
Many contracts are tied towards specific phone plans, with clauses similar to corporate poison pills that trigger the user to pay the full price of the phone immediately if they pick a cheap contract or opt to stop using data during the duration of their contract. By putting control in the hands of the consumer through reducing or eliminating the contract model, it can be a lot easier for a user to switch plans, switch carriers, argue for fairer prices, and generally carry more leverage in their arguments with phone companies.  At present, those phone companies often turn their nose up and metaphorically wave contracts around when one calls the retentions department, reminding them that they signed away their bargaining chip for three years and that they aren’t really going to follow through on that threat to cancel their contract, unless they want to pay through the nose to do it.
The contract model has unfortunately found its way into other aspects of these companies’ business models, particularly the unnecessary hassle of setting up home internet for the first time. This process should not require the end user to rent out the company’s router/modem combination, use the company’s software to set up a simple Internet connection, and jump through all the company’s other loopholes just to get online. Using Rogers as a model, they require the use of their proprietary key, their router and modem, and their software to just set up a connection. TekSavvy, who rents the exact same cables from Rogers, only requires that you plug in a modem that supports the correct protocols and you’re good to go, and you’re free to use whichever router you like. Going the direction of devices separating from service providers is ultimately better for the consumer, even if in the short term it seems unwise, since it will force the provider to think more about how to offer you a better service, not how to lock you into an underwhelming service with a shiny gadget.