Three-year contracts an endangered species

10 Dec
If wireless carriers had their way, we'd still be using Zack Morris phones.

If wireless carriers had their way, we’d still be using Zack Morris phones.

The CRTC’s open call for complaints on wireless services has closed and topping the list – surprise, surprise – are three-year contracts. With two-year terms being the maximum norm elsewhere, Canadians are understandably upset that they’re being “held hostage” for longer, for no real reason.

Wireless carriers have variously said their uniquely longer contracts are necessary because their monthly rates are lower than in other countries or because Canada is a smaller market, which makes it more expensive to provide phone subsidies. Both rationalizations don’t hold water, given that Canadian carriers lead the world (next to Japan – see slide 24) in average monthly revenue per user while smaller countries – say, Australia – somehow get by with two-year contracts.

Carriers have also been quick to point out that their customers don’t have to sign up to contracts if they don’t want to; they’re free to purchase phones for their full price up-front. That’s true, but it’s also an effort to deflect attention from the real point – that carriers in other countries are selling the same devices for the same price or even much cheaper on two-year deals.

With further public hearings on the upcoming wireless rules set for February, it’s a safe bet that three-year contracts are now an endangered species. The carriers, as they always do when faced with the likelihood of new regulation, will soon make a big dog-and-pony show about “listening to customers” and voluntarily drop down to two-year commitments ahead of any rules being instituted. The pool is officially open on which will be the first to do it, and we’ll know it’s official and symbolic when it’s applied to the iPhone.

Of course, voluntary action is no substitute for rules. Three-year contracts may be going away, but they’ll only stay away if they’re prevented from coming back.

It’s been interesting to watch reactions to the process so far. Open Media has taken a somewhat pessimistic stance on the CRTC’s effort to establish some rules, pointing out that any process that is supported by the likes of Telus and Rogers – as this one is – can’t be good for consumers.

The advocacy group is concerned that the national regulator’s effort will undermine some of the progressive rules that have already been instituted by several provinces. With the CRTC long criticized for kow-towing to industry, there is the fear that some of these positive developments will be sublimated by national rules that are favourable to the carriers.

While history has given warrant to Open Media’s suspicions, the reality is that national rules will benefit everyone. They are naturally preferable for carriers, since it’s far easier (and cheaper) for them to ensure compliance with one set of rules rather than 10.

But it’s also good for consumers. Imagine buying a phone in one province where the wireless rules are relatively strict, then moving to another province where they’re not. Complications – and anger – would follow.

Rules with teeth are good, but simple rules that are easy to understand and applicable everywhere are almost as good.


Posted by on December 10, 2012 in crtc, mobile, telecommunications


4 responses to “Three-year contracts an endangered species

  1. Cynic

    December 10, 2012 at 4:01 pm

    Let’s assume that you’re right and the scumbags offer 2-year contracts to avoid regulation. You don’t think they’ll make that all back and more by raising other fees? First, the initial buy-in price will be higher. How about tripling the ETF and unlock fees? You think roaming is expensive now? Just wait. Bundled SMS? Gone. 50¢/message now. Don’t forget the new executive early retirement fee.

    I’m a cynic for good reason. The carriers despise their customers and thumb their noses at the CRTC. The only thing that will get the incumbents to compete is to throw the doors wide open to competition.

    • petenowak2000

      December 10, 2012 at 4:59 pm

      All of that is fine because, with contracts that are the same length as elsewhere, it’ll be easier to see disparities, which can then lead to further action.

      • Cynic

        December 10, 2012 at 5:12 pm

        But we know there are disparities now, I don’t think there’s much doubt about that. Several studies have shown how Canadians are getting screwed. It’s taken years for the CRTC to even show interest in what the carriers are doing to their customers.

        When it comes to a battle between the CRTC and the carriers, the carriers will always win because the CRTC is reactive.

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