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Big Telecom Is Doing All They Can to Keep Phone Contracts Long

07/04/2013 01:09 EDT | Updated 11/13/2013 08:44 EST

The CRTC released its consumer wireless code last month, receiving kudos for new measures that should eliminate three-year contracts. Now the major telecom companies are preparing a lawsuit challenging the rules associated with the implementation of the code. While the code will take effect for any new, renewed, or changed contracts starting on December 2, 2013, the CRTC has stated that all consumers should benefit from the code by June 3, 2015 or two years after its initial release. The telcos object to this position, arguing that it retroactively applies new conditions to contracts that existed prior to the start date of the code. According to an affidavit from SaskTel, the major concern involves the potential for consumers on three-year contracts to walk away from those contracts in June 2015 without further payment, despite terms that could run months longer.

Yet during the wireless hearing, some telcos assured the CRTC that customers would benefit from the code within two years. For example, SaskTel told the Commission that its customers now upgrade their devices (and thus would fall under the code) roughly a year and a half after signing the initial contract:

Customers are turning over their devices in the second to third year. We have introduced an early device upgrade program in October of last year which gives customers the ability to upgrade their device at any time. Since we have implemented that program we've seen customers upgrading after about 17.5 months.

Indeed, the company stated that a significant percentage of its customers would be under the code after two years, despite the fact that the majority of them sign three year contracts. At para 8911:

THE CHAIRPERSON: So, as I understand, you have about 600,000 contracts that are churning, I guess, and renewing at different rates. You may have been present when I -- we asked questions of other companies to be able, maybe through an undertaking, to tell us in your normal course of renewing those, assuming a prospective implementation, how much of those contracts within after one year, two years, three years would eventually have been switched over to a fully implemented code?

MR. ANDERSON: We will see if we can provide some accurate numbers for the 22nd, but I've got to believe intuitively -- again, we see a large percentage of our customers upgrading plans prior to the three-year term because they want to get the new devices. So intuitively I've got to believe even if you didn't have that phenomena, you've got probably one-third of your customer base every year is upgrading to a new contract anyway. So after two years you've probably got two-thirds of the customer base not allowing for any churn, competitive activity or customers that just simply want to upgrade for the new device. So I've got to believe after two years you're going to get a significant percentage of the customers that will be onto a new contract, but we will try and see if we can quantify that a little better --

Telus was similarly asked directly how long it would take for its customer base to benefit from the wireless code. The exchange (at para. 2836):

THE CHAIRPERSON: Okay. Assuming that -- and I take it that you will want to address that perhaps in your comments, but assuming that, from a factual perspective, if you look at the amount of churn, that is, new clients coming in, as well as patterns of amendments from the past, how long would it take, on a prospective basis, for all of your customers to be subject to the --

MR. WOODHEAD: I would say, probably, somewhere between two to three years, and probably closer to two. And, you know, I don't want to leave this as me sounding like I am afraid of anything in this code, or that we are afraid of it, it's about the application of it. We actually want customers to have the benefit of some of these things, it is the actual -- and, again, we will get to it, I think, in the response to Commissioner Molnar's question, in the undertaking, but there are some operational challenges around applying it retrospectively.

THE CHAIRPERSON: And I have never mentioned application retrospectively. I am asking, let's say that we -- and I am just saying six months. I know that some people will comment that six months is too quick, but let's assume that in six months we decide the new code applies. Without it applying retroactively, but prospectively, when will Canadian customers, in your customer base, be able to benefit?

MR. WOODHEAD: I think two years.

THE CHAIRPERSON: Within two years.

MR. WOODHEAD: Yes.

The telcos provided confidential data to the CRTC that may have backtracked somewhat on this timeline, but what is clear is that many still want to lock-in as many Canadians as possible under three-year contracts. The CRTC had expected the carriers to shift more quickly to two-year contracts, but they seem likely to stick with three-year contracts through the two busiest sales periods of the year (back to school and Christmas) as they fight in federal court for the right to enforce those long-term contracts right down to the very last day.

This ran originally on Michael Geist's blog.

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