06/03/2013 12:12 EDT | Updated 11/13/2013 08:45 EST

The CRTC Hangs Up on Three Year Contracts


The CRTC released its much-anticipated consumer wireless code this morning. While much of the code remains unchanged from an earlier draft proposal, the headline-grabbing change is that the Commission has effectively brought three-year contracts to an end. The issue of contract length was the top issue raised by consumers, who argued that Canadian wireless contracts were longer than most other countries and that they represented a significant barrier to effective competition.

While the incumbent wireless carriers argued that consumers like three-year contracts, the CRTC sided with consumers. Effective December 2, 2013, consumers will be allowed to terminate their wireless contracts after two years with no cancellation fees. The ability to cancel with no further costs should result in two years becoming the standard for a long-term wireless contract. It will be interesting to see how quickly the carriers implement this change as smart consumers may decide to delay signing new contracts unless they are protected by the new wireless code if the carriers insist on retaining early cancellation fees in the final year of a three-year contract until the code takes effect.

The wireless code includes several other notable features. The CRTC has established mandatory caps on data roaming and data fees to avoid the bill shock that sometimes seems to hit Canadians who unexpectedly run up huge roaming fees. The caps will be set at $100 for data roaming (both national and international) and at $50 for data overage fees. Fees can only exceed these amounts if the consumer expressly consents to it.

The CRTC has also established a mandatory unlocking requirement for devices. Carriers must offer consumers the ability to unlock unsubsidized devices (i.e.: devices purchased at full price) at any time. For subsidized devices, carriers can implement a 90-day waiting period. Note that there is no cap on the cost for unlocking (which currently varies widely), though carriers are required to disclose the cost at the time the contract is signed. The remainder of the code includes return rights that allow for 15-day trials of new devices, plain language requirements, and early cancellation fees (earlier than two years).

The code is a definite improvement over the earlier draft version. At that time, I argued that the draft disappointed since it did little to address the major concerns involving contract length, roaming fees, and device locking. I thought the Commission could have been bolder with mandatory unlocking of phones at no cost, limits on roaming fees, and two year maximum contracts. The final code moves in this direction with the ability to opt-out of contracts at no cost after two years. That will be the most obvious and dramatic change to the Canadian wireless landscape once the code takes effect late this year.

The code also represents a major policy loss for the incumbent carriers. As recently as 2006, wireless protections were viewed as an impossibility. As consumer frustration mounted, the CWTA established a weak voluntary code in 2009 with no expectation of government enforcement. Yet that did little to stem the tide and once the provinces began establishing their own consumer protection laws for wireless services in 2010, the CWTA called for a single national code and fought to retain three year contracts (the new entrants left the CWTA in part over the issue). The CRTC has obliged with a code that goes beyond the provincial requirements on contract length and undoubtedly beyond what the carriers thought would result when the process started in 2012.

This blog was first posted on Michael Geist's blog.

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