An expectation, backed by a threat

On Friday, the CRTC issued a letter to wireless service providers (WSPs), warning them that it “expects that all WSPs cease offering device financing plans on terms longer than 24 months until the Commission has had an opportunity to complete a full review of the practice.”

Although the letter is not an actual Order, it is signed by the Secretary General, representing a letter from the Commission (as contrasted with a staff opinion), and the letter includes a sharp warning:

Should the Commission determine that the device financing plans at issue, including those that have a term greater than 24 months, are non-compliant with the Wireless Code, it may issue a mandatory order prohibiting certain WSPs from offering these plans. In accordance with section 72.001 of the Telecommunications Act, the Commission may also impose on WSPs AMPs of up to $10,000,000 for every contravention of the Wireless Code, and up to $15,000,000 for every subsequent contravention.

This is a Commission expectation that we expect will be treated like an Order. The potential penalty for defiance is set out in plain language, up to $15M for “every contravention.”

The Commission is of the preliminary view that certain device financing plans may create a new barrier for customers to take advantage of competitive offers in the market. In particular, customers, who may benefit in the immediate term from lower monthly costs related to their devices, appear to be asked to accept terms and conditions that may require them to stay with their current WSP past the end of their wireless service commitment period.

Let’s look at this section of the CRTC letter in a little more detail. The CRTC is acknowledging that these newly forbidden plans provided a “benefit in the immediate term from lower monthly costs related to their devices”. Consumers were benefiting. What was wrong? Well, the CRTC says that the consumers appear to be asked to stay with their service provider beyond the 24 month maximum set out in the Wireless Code. If this is the concern, we seem to be about 23 months away from the first problems emerging. If consumers aren’t happy with the early termination fees associated with the new plans, don’t they already have recourse through the Commission for Complaints for Telecom-Television Services?

It can be argued that the Commission’s letter was premature; the CRTC should have allowed the marketplace to work, intervening only when there is a failure. Zero percent financing is consumer-friendly for every income bracket.

As a matter of national policy, shouldn’t we be looking for ways to make advanced devices more accessible to a wider demographic? In the CRTC’s upcoming “full review” of the device financing plans, what kind of data will be produced to understand the type of people who choose longer term financing plans? Groups claiming to represent consumer interests should be prepared to demonstrate public support for policy positions that favour shorter terms and the resultant higher monthly payments.

A few weeks ago, I wrote a post called “Increasing consumer choice” that concluded “if the Wireless Code prohibits these kinds of choices, then maybe it’s the Code that needs changing, not the option of such innovative consumer pricing plans.”

I continue to hold that view.

3 thoughts on “An expectation, backed by a threat”

  1. Not convinced the solution is that simple: for two years, Canada has already required that “Any device provided by a service provider to the customer for the purpose of providing wireless services must be provided unlocked.”

    [see F(1) in the Wireless Code Simplified by CRTC]

  2. Consumer Surplus

    I don’t get it. If handsets are by default unlocked, what is CRTC’s beef with device financing?

    Is there any evidence of carriers tying device financing to service purchase requirements for the duration of the financing?

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