The cost of regulation

Jamie Sturgeon of Global News wrote a story yesterday about new 2-year wireless plans being rolled out in response to the CRTC’s Wireless Code‘s effective ban on wireless agreements longer than 24 months.

As the story says, “customers may shake their fist at the Canadian Radio-television and Telecommunications Commission (CRTC) when the first bill arrives.”

Witnesses at the CRTC hearing had warned that this would be an outcome. Simple math suggests that if a $600 smartphone subsidy is paid off over 2 years instead of 3, the monthly price will increase.

Even the lawyer for OpenMedia acknowledged that its proposal would raise prices. In an exchange with CRTC Commissioner Candice Molnar, OpenMedia was asked to clarify its position:

3255   COMMISSIONER MOLNAR: If I could just kind of put back what I think I heard you say and you can tell me if I understood you?
3256   It is better ultimately for the industry for the potential cost of devices over time and due to the pressures of competition that will be increased by eliminating the switching cost. So it is better over time even though customers may have to pay more upfront. The long term benefits outweigh deferring that payment.
3257   MR. ISRAEL: Right, because the service fees will go down.
3258   COMMISSIONER MOLNAR: Do you promise?
3259   MR. ISRAEL: I’m sorry.
— Laughter
3260   MR. ISRAEL: I promise.
3261   Do I get a commission?
— Laughter
3262   COMMISSIONER MOLNAR: We are going to tell everybody that you said the fees would go up.

So it was a little disingenuous for TechVibes to write yesterday “OpenMedia Communications Manager Lindsey Pinto saw this travesty coming.” OpenMedia didn’t just see “this travesty”; it asked for it. OpenMedia Communications Manager Lindsey Pinto was sitting with her lawyer when he asked the CRTC for provisions in the Code that he acknowledged would make prices go up.

There are a number of other provisions in the Wireless Code that are increasing costs for all of the industry participants. Indeed, beyond the Wireless Code, a number of CRTC and Industry Canada projects are driving costs that can be expected to be passed on to consumers:

• Enhancements to 9-1-1 service to enable call-in-progress location updates and text messaging;
• Database for lost and stolen phones;
• Wireless Code projects including data thresholds, early termination provision tracking, new contracts;
• Wireless site reporting database;
• among others on the way.

As the Treasury Board notes, there is a significant cost of red tape. According to Treasury Board, Canadian regulators are supposed to prepare regulatory impact statements and exchange regulations on a one-for-one basis.

With implications for consumer prices, it might be interesting to see red tape impact statements as part of CRTC decisions.