If Verizon Communications takes over Canada's telecommunications will they pass Canadians' personal data to U.S. intelligence agencies?
With the Harper government offering the New York-based company significant advantages to enter the Canadian wireless market, it is important to look at the privacy and security implications of this move.
In recent weeks it has come to light that Verizon has been working intimately with the U.S. National Security Agency (NSA) to collect the personal information of millions of its U.S. customers. The New Yorker has called the scandal "an outrageous breach of the privacy and rights of American citizens."
Reportedly, Verizon has built a dedicated fiber-optic line running from New Jersey to a military base in Virginia to transfer all communications flowing through its operations centre to U.S. authorities. The company even makes money wiretapping its customers. Verizon charges the U.S. government $775 a month ($500 for each additional month) for every wiretap it places on its customers.
While Verizon claims a court order obligated it to cooperate with the NSA, a number of commentators have pointed out that the company had legal avenues to push back but appears to have chosen not to. In its 2013 evaluation of the privacy records of 18 major technology companies the Electronic Frontier Foundation ranked Verizon at the bottom of the list. It was the only corporation that didn't receive at least one star out of six.
If asked by U.S. authorities for the personal information of Canadian subscribers Verizon would have ample reason to fulfil the request. For one, the New York based company has federal contracts worth tens of billions of dollars, including with the U.S. military. In 2007, for instance, Verizon and two other telco companies won a ten year deal worth up to $48 billion to supply various U.S. federal agencies' telecommunication needs.
Verizon's business is also dependent on the goodwill of U.S. Federal Communications Commission (FCC) regulators. In its 2013 annual report to shareholders Verizon gave a window into its motivation for cooperating with government data collection efforts: "As part of the FCC's approval of Vodaphone's ownership interest, Verizon Wireless, Verizon, and Vodaphone entered into an agreement with the U.S. Department of Defense, Department of Justice and Federal Bureau of Investigation which imposes national security and law enforcement-related obligations on the ways in which Verizon Wireless stores information and otherwise conducts its business." In other words, Verizon is dependent on U.S. government regulations for its profits so it will go to great lengths to fulfil their information requests.
Beyond the pull of U.S. government contracts and staying in the good graces of the FCC, Verizon is bound to comply with the US Patriot Act and Foreign Intelligence Surveillance Act. The Foreign Intelligence Surveillance Act sets no limits on U.S. surveillance of non-American citizens or companies and the Protect America Act of 2007 specifically allows the acquisition of foreign intelligence information from or with the assistance of communication service providers or anyone else with access to foreigners' communications.
It's long been accepted that there are privacy and national security concerns with foreign companies controlling Canada's telecommunications sector. Brian Mulroney's government produced a comprehensive telecommunications policy document that argued: "Domestic ownership of Canada's telecommunications infrastructure is essential to national sovereignty and security."
After the Conservatives announced they were looking to open the sector up to foreign telecom providers, Public Safety Canada privately warned Industry Canada that the plan poses a "considerable risk" to national security. According to a Feb. 25, 2011 letter marked "secret" that Daniel Lavoie, a senior official with Public Safety, sent to Industry Canada, "The security and intelligence community is of the view that lessening or removing restrictions from the Telecommunications Act, without implementing mitigation measures, would pose a considerable risk to public safety and national security."
The fundamental issue for foreign control over telecommunications is that laws protecting Canadians may not be enforceable when these companies' owners are located outside of Canada.
As the Conservatives woo a serial abuser of its U.S. customers privacy rights, now is a good time to ask what consequences this will have on Canadian's privacy and security.
How much of the code is new?
<em>Answer from Marc Choma of the Canadian Wireless Telecommunications Association, the industry lobby group representing incumbent players:</em> A lot of these things are already common practice from carriers, but I think it’s good that consumers, on a national basis, know this and it applies to everybody. It’s going to supercede any provincial legislation and that was our main goal going into this because we were seeing a patchwork of regulations across provinces and it was costing the industry a lot of money to adapt their systems potentially 13 different ways.
Are there any restrictions in the code that will prevent the cost of two-year contracts going up as a result of the new rules?
<em>Answer from the CRTC:</em> The CRTC wireless code proceeding did not address pricing, as the Commission had previously determined that there is sufficient competition to protect consumer interests with respect to rates. Service providers are free to determine their rates for service and how much will be charged for phones up front. At the same time, improving consumers’ abilities to switch providers should push service providers to compete on price.
How will the shorter contract length affect handset costs?
<em>Answer from Steve Anderson, executive director of OpenMedia.ca, a wireless consumer advocacy group:</em> It’s unclear. There’s no market reason while the cell phone companies would suddenly raise the cost of cellphone service because people are on shorter contracts. So if they do that it’s really just price gouging. They could try and raise upfront handset costs, but the Canadian companies have higher revenue per user than any other telecom companies in the world and other places where we have two-year contracts, the device cost is not higher than it is in Canada, a great example is the U.S. (Pictured: Steve Anderson of OpenMedia)
<em>Answer from Lawford:</em> It’s call your bluff time. The CRTC is saying “let’s see if it’s true that really your costs are so high and that really you're subsidizing these devices so much, or is it that you’re locking people in so the contract is longer than the usable life of the device?” If we send people back in the market every two years is that going to make competition pick up the slack. If they all go up in lockstep, [then] the Competition Bureau should be looking into what’s going on. Pictured: John Lawford of PIAC
<em>Answer from Choma of CWTA:</em> Changing the length of the subsidy from three years to two years can actually raise the price of the upfront cost for your device. So before you had the option of putting it over three years and you could get a much lower rate for your phone, but now you’ve only got 24 months to earn that subsidy back. Obviously, carriers are going to have to adapt their business models to comply with that. But we’ll have to wait and see how carriers respond.
The new rules allow a fully purchased handset to be unlocked immediately or a subsidized handset to be unlocked in 90 days. What effect will this have?
<em>Answer from Anderson of OpenMedia.ca:</em> Unlocking the phone means it’s easier to switch carriers, easier to go international and use different services that aren’t Canadian, so it makes it more affordable. But I also think that area could have been better, for example they didn’t talk about what the cost of unlocking would be. And even the 90-day part could have been stronger. If I get a contract for a phone I should be able to do what I want with it. <em>Answer from Choma of CWTA:</em> Most carriers already do that now and some of them actually do it before 90 days now.
Are providers allowed to charge a fee to unlock a phone?
<em>Answer from CRTC:</em> Yes. Since the CRTC did not examine rates or prices, it is up to the provider to decide on their unlocking fee. However, as of December 2, that rate must be clearly identified in your contract and your critical information summary. <em>Answer from Shawn Hall, Telus spokesman:</em> We already do that – we charge $35 and allow unlocking after 90 days. That covers our costs of providing the service.
What are the effects of the new rules on people who are not on a contract or already have their phones unlocked?
<em>Answer from the CRTC:</em> People not currently on a contract will be covered if they sign a contract after December 2. If they are currently on an indeterminate or month-to-month contract, they will be covered as of December 2. <em>Answer from Marc Choma of the Canadian Wireless Telecommunications Association:</em> Most of the elements of the Code deal with contract services, so the impact on no-contract customers that already own their unlocked phone would be minimal.
Do the caps mean the carriers will cut off your data or roaming after a certain point?
<em>Answer from Anderson of OpenMedia.ca:</em> What’s expected is once you hit your limit in data roaming charges, you’ll receive a text message notification asking if you’re okay with that and do you want to continue. <em>Answer from Choma of CWTA:</em> Most carriers already provide notifications when you are approaching your data limit, or provide you with notification that you are roaming and how to purchase roaming packages. With the new code, a customer's data services will be automatically suspended once the customer has reached $50 of usage, unless the customer expressly consents to override the $50 default limit. In the case of international roaming, a customer's service would be suspended after the customer has reached $100 of usage, again, unless the customer expressly consents to override the $100 default limit. <em>Answer from Telus:</em> Currently, Telus caps international data roaming at $200. We send customers a free text message when they hit that point letting them know (after a series of usage notifications starting at 2 MBs), and will only reactivate roaming if they ask us to. <em>Answer from the CRTC:</em> The code doesn’t prescribe how carriers should do it. The way the code is set, there is a maximum amount carriers can charge unless they make specific arrangements with the consumer or the cell user gives consent to continue after a notification is delivered.
Why did the CRTC decide on two-year contracts, rather than one year, the direction the rest of the world is taking?
<em>Answer from the CRTC:</em> The Commission looked at what would be best for Canadians. Many jurisdictions feature two-year contracts – we also heard evidence during the hearing that multi-year contracts with subsidized devices allow Canadians to get new, sophisticated devices at a lower upfront cost. <em>Answer from Lawford of PIAC:</em> We’re in Canada, so we’re always behind. They could have done that too, but then they would have almost certainly raised everybody’s rates, at least the cost of a handset quite a bit. I hope that as the two-year contract becomes standard the one-year will become a competitive offering.
Are the new rules on three-year contracts retroactive? Can I get out of a three-year contract today?
<em>Answer from CRTC:</em> The rules apply, as of December 2, to all new contracts. In addition, on June 3, 2015, all wireless customers are covered, regardless of when their contract was signed. In practice, that means that if someone signed a contract in May 2013, then on June 3rd 2015, they can cancel without penalty. <em>Answer from Choma of CWTA:</em> With most carriers right now, there isn’t a cancellation fee. If you want to cancel, you just cancel and pay off your device subsidy.
Can a consumer use the new rules as an argument to fight an "outrageous roaming bill" they receive before they are technically protected?
<em>Answer from CRTC:</em> Consumers are always free to contact their service provider to contest a bill. The service provider is not obligated to lower the bill simply because new rules are on the horizon. <em>Answer from Choma of CWTA:</em> Yes they could. However, the Commissioner for Complaints for Telecommunications Services (CCTS) is already available for consumers that have billing issues. The CCTS will also be the body responsible for enforcing the new Code. <em>Answer from Lawford of PIAC:</em> No. In the meantime you can go to the CCTS and say the rate being billed wasn’t made clear. The CCTS has a history of knocking those down unless the company can show the customer was made very aware of what was going on.
If you decide to get out of a three-year contract after 2 years, do you still have to pay fees like the cost of the handset?
<em>Answer from the CRTC:</em> If you currently have a contract and you want to exit, you will likely be charged a cancellation fee, which is determined by your service provider. Some provinces have rules setting out how these fees must be calculated. Once the code is in force, you will be able to exit after two years without any penalty or fee.
Sky high billing is the biggest concern in Canada. Why weren't rates per second and per megabyte addressed?
<em>Answer from CRTC:</em> The CRTC’s wireless code proceeding did not address pricing, as the Commission had previously determined that there is sufficient competition to protect consumer interests with respect to rates. The new rules will enable consumers to make informed decisions and shop around for the best deal that meets their needs. In addition, the rules around bill shock, including caps on data and roaming, will reduce the high bills that some consumers see. <em>Answer from Lawford of PIAC:</em> The code wasn’t intended to reduce rates or touch rates at all. The whole premise behind us even getting any rules was we’re not talking about rates because the CRTC says, "We’re not rate regulating, all we’re doing is putting in standards so everyone is treated relatively fairly." The Commission could regulate rates, but they don’t. But addressing high rates is the next step, so that [question is] onto something.
Will providers have to show separately the handset cost consumers pay each month?
<em>Answer from CRTC:</em> No. However, the service provider will need to clearly indicate the price of the phone, and any discount, in the contract and on the critical information summary.
So is there any incentive before or after the rules come into effect in December to choose a three-year contract?
<em>Answer from Lawford of PIAC:</em> If the code’s coming out in December a lot of people will be wondering, "Should I lock in now if they offer me three years or wait until to get a two year [contract]?" You could wait and get the benefit of the code or cash in on a sweetheart deal for a three-year plan ahead of the code, which carriers are likely to offer. There will be some pretty nice deals coming even at the end of the summer, trying to get people in on the three-year plan. <em>Answer from Anderson of OpenMedia.ca:</em> After the rules go into effect, there may be some trinkets that they put into a three-year contract that they won’t put into a two-year contract, but you’ll still be able to leave whenever you want, so I think they might find ways to add value to three-year contracts and get people to sign onto them.
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