As a summer make work project, the government and CRTC seem bent on interfering with the telecom marketplace. Indeed, these measures are hitting just as the sector braces for the fiercely competitive back-to-school sales period.
The CRTC recently wrote Rogers a letter asking the company to explain how its service set-up fee is consistent with recently enacted changes to the Telecom Act. Three follow-up letters were sent to a wider distribution of service providers dealing with:
You may have missed those legislative changes, characterized as consumer protection measures, since Parliament didn’t bother debating the amendments in Committee. Instead, the Government buried the change in the Budget Implementation Act, (Bill C-69).
Here is what got slid into the Telecom Act:
27.01 (1) A telecommunications service provider must make available to its subscribers a self-service mechanism that meets the requirements established by the Commission under subsection (2) and allows them, within the terms of the contract for telecommunications services that they have entered into with the provider, to cancel the contract or modify the telecommunications service plan established under the contract.
(2) For the purposes of subsection (1), the Commission must establish what constitutes self-service and the requirements in relation to self-service mechanisms. The Commission may also specify types of self-service mechanisms that are acceptable for the purposes of that subsection.27.02 (1) A telecommunications service provider that has a fixed-term contract for telecommunications services with a subscriber must, before the expiry of the contract, provide the subscriber with a notice that the contract is set to expire.
(2) The Commission must specify the form and manner in which — as well as the time within which and the frequency at which — the notice is to be provided under subsection (1).
(3) The notice must contain, for the purpose of assisting the subscriber in selecting a new telecommunications service plan,
- a list of telecommunications service plans offered by the telecommunications service provider that meet the criteria that the Commission may specify;
- information relating to those plans, to be specified by the Commission;
- information relating to the self-service mechanism referred to in section 27.01; and
- any other information that the Commission may specify.
27.03 The Commission may require a telecommunications service provider to provide — in the form and manner and at the frequency that the Commission specifies — its subscribers who do not have a fixed-term contract for telecommunications services with a notice containing the information set out in subsection 27.02(3).
27.04 (1) A telecommunications service provider must not charge a fee to a subscriber that is related to the activation or modification of a telecommunications service plan, or any other fee whose main purpose is, in the opinion of the Commission, to discourage subscribers from modifying their service plan or cancelling their contract for telecommunications services.
(2) The Commission must specify the types of fees for the purposes of subsection (1).
Let me start by observing that this is a poorly worded piece of legislation. It really would have benefited from review in Committee and consultation with stakeholders. You will also notice that each section includes language like “the Commission must establish”, or “the Commission must specify”. Each of those references create more work for the CRTC. That means a regulatory proceeding to define each of those specifications. And the outcome of each of these will add regulatory burden to service providers operating in Canada. And remember, regulatory burden means added costs that need to be recovered.
On first read, some people may think that the Act bans activation fees. In my view, it does not. If that was the intent, the first comma should have been a semi-colon. Maybe you think I am being picking nits, but grammar is very important in law and legislation. Eighteen years ago, an errantly placed comma in a contract proved to be a $2M grammatical ambiguity. As a result, the prohibition in the legislation applies to fees “whose main purpose is [emphasis added], in the opinion of the Commission, to discourage subscribers from modifying their service plan or cancelling their contract for telecommunications services.”
The CRTC’s letter to Rogers asks the company to justify its recently changed service set-up fee, with a view to the new Telecom Act provisions.
Did Parliamentarians think the main purpose of an activation fee could be “to discourage subscribers from modifying their service plan or cancelling their contract”? If anything, one might argue that a set-up fee discourages people from signing up in the first place. Signing up isn’t restricted. Notably, in the Rogers case, the fee doesn’t apply if customers use online tools. So, it seems pretty clear that the fee reflects the costs of customers interacting with human resources. It is a fee for personal service, encouraging the use of online shopping.
The Canadian government has all kinds of fees for service, applying charges to those users who are driving costs. Indeed, ISED describes the Service Fees Act as, “The federal government charges fees for services that provide recipients with direct benefits beyond those received by the public.” Further, the Service Fees Act provides for annual pricing adjustments driven by the consumer price index. A government memo noted, “While fees have not increased over time, costs have.”
It is no different in the private sector. The service set-up fees are avoidable by shopping on-line. And unlike government user fees, for competitive telecom services such as mobile, often these kinds of charges are negotiable. Just for fun, try negotiating a discount at your local Service Canada office. Ha!
These new so-called consumer protection measures can actually serve to limit competition, interfering with the telecom marketplace just as competitive intensity heads toward its back-to-school peak.
The legislation requires the CRTC to provide specifics for a number of the new requirements. The recent slew of letters represent a first step in yet another new regulatory review process.