Relaxing the Wireless Code

Do we need to limit the amortization period for devices in the Wireless Code? The subject was raised by Bell in its intervention on Telecom Notice of Consultation CRTC 2017-259 [Reconsideration of WiFi Roaming]:

Instead of mandating access for Wi-Fi-first mobile virtual network operators (MVNOs), a far more effective measure to address the affordability concerns of low- and middle-income Canadians would be for the Commission to extend the maximum contract length under the Wireless Code from two years to four years, allowing Canadians who wish to do so to reduce the upfront cost of a wireless device with less of an impact on their monthly bill.

We can argue all you want about whether this proceeding was the right place to introduce the subject, but the fact remains that the Wireless Code has raised consumer costs significantly by virtue of the simple mathematics of amortization. Amortizing a device over 2 years instead of 3 means monthly payments are 50% higher. Last year I wrote about a number of regulatory factors that increase consumer bills.

Now Apple has introduced the iPhone X with a Canadian price point in the order of $1300 [the 256 GB version will sell for an additional $220]. Most Canadian phone subsidies have been in the order of $35 per month, which results in $840 over two years. That implies an up-front price of about $450 for consumers. That could lead to more sticker shock than anyone would want to see, inhibiting adoption of these new high-end devices. Alternatively, carriers may raise the subsidy by $15 per month to $50 per month to enable a more reasonable $100 down-payment.

What purpose is actually served by limiting device amortization to 2 years?

Customers can still switch at will anytime during the contract period. They just have to pay off the balance owing. With higher device costs, people have hefty balances owing anyway, whether it is a two or three year contract.

Eliminating the regulatory restriction on longer contracts could lead to carriers offering direct consumer incentives to switch: “Come to us and we will pay up to $600 of your remaining balance.”

Once the Commission allowed consumers the right to leave a carrier by simply paying off the remaining balance, what purpose is served by the further regulation of how long the amortization period could be?

Perhaps more faith could be placed in the marketplace to create more competitive offers. In the alternative, Canadians may find the price of new devices is just too high.

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