New CRTC wireless rules ban contract break fees after 2 years

The CRTC has unveiled a new code of conductthat forbids cellphone companies from charging customers feesto break their contracts after two years and makes it easier to unlock cellphones.

Those are two of the biggest takeaways froma new code of conductthatthe broadcast regulator unveiled on Mondayand will come into effect for contracts signedafter Dec. 2, 2013.

• Read the CRTC's wireless code of conduct

The Canadian Radio-television and Telecommunications Commission has been working on the code for a number of months after a lengthy consultation process with consumers and the industry.

The new code will allow consumers to:

• Terminate their wireless contracts after two years without cancellation fees, even if they have signed on for a longer term.
• Cap extra data charges at $50 a month and international data roaming charges at $100 a month to prevent bill shock.
• Have their cellphones unlocked after 90 days, or immediately if they paid for the device in full.
• Return their cellphones, within 15 days and specific usage limits, if they are unhappy with their service.
• Accept or decline changes to the key terms of a fixed-term contract (i.e., two-year), and receive a contract that is easy to read and understand.

"Hopefully, these rules will convince the companies to treat people with a little more respect," saidSteve Anderson of consumer watchdog group Open Media.

Rules will create 'more dynamic marketplace'

In the lead-up to public hearings held earlier this year, the CRTC said it heard a lot of angry comments about three-year contracts offered by wireless carriers when it was putting together a draft version of the national code for wireless services.

"The wireless code will contribute to a more dynamic marketplace by making it possible for Canadians to discuss their needs with service providers at least every two years," CRTC chair Jean-Pierre Blais said.

The CRTC has a backer in the federal Competition Bureau, which has said it supports measures to limit contract length.

Cellphone contracts of no more than two years are the standard in the U.S, Europe and elsewhere in the developing world. Many say it's no coincidence that cellular users in those places own more phones, use them more and replace them more frequently.

"What we were concerned about was ensuring that there was a dynamic marketplace, that is, that people didn't feel entrapped in their contracts when they want to maybe use the offer of a new entrant or a competitor across the street," Blais said.

"So, it really is about freeing up Canadians to choose either stay with their current carrier, under renegotiated terms, or go to a competitor."

To be clear, the new code will not go as far as "banning" cellphone contracts of three years or longer. It simply means a consumer can't be charged a fee for getting out of a contract they've dutifully paidoff for more than two years.

Effectively, it likely spells the beginning of the end for the once ubiquitous three-year subsidized cellphone contract in Canada.

"Glad to see three-year wireless contracts will soon go the way of the Dodo bird in this country," cabinet minister Tony Clement tweeted after the code was released.

Big3 providersreact

Telus, one of Canada's "big three" wireless providers, said it already does a lot of the things mentioned in the new code.

"Telus replaced contract cancellation charges with a device balance some years ago," the company said in a statement. "We also already offer phone unlocking for our customers, and we already have a cap on international data roaming."

It said the new code will "give Canadians a strong and friendly set of protections."

Rival wireless provider Rogerstold The Canadian Press it also already fulfillsmany of the requirements but said the company might not be able to put in place all the necessary technology and systems that are needed to comply with the new codeby the CRTC's December deadline.

"None of this is rocket science, but it all takes time," Ken Engelhart, Rogers vice-presidentin charge ofregulatory issues, told the news agency.

"And when you're a big company with big IT systemsor for that matter, a small company with small IT systemsthese things typically take 12 to 18 months to implement, and the CRTC has given us six months."

Shorter contracts could also mean cellphone companies might offer smaller subsidies on devices meaning customers might pay more upfront for their phone, Engelhart said.

"I'm not sure that this will be something that consumers are necessarily going to be positive about, but time will tell," he said.

Bell spokesman Paolo Pasquini told The Canadian Press that the company already provides customers with a number of ways to avoid signing a long-term contract and warned a two-year time frame could end up limiting their options.

"Most have chosen three-year contracts because of the big price reductions they mean on the latest smartphones," he said. "Restricting to two years means less flexibility for consumers, so it remains to be seen how they'll respond."

Price hikes possible

There's a good chance, however, that Canadians could see the price they pay for their cellphones up front rise as a consequence of their newly won long-term freedom.

"This requirement does limit consumer choice in the marketplace, and could make a customers upfront purchase price of a smartphone more expensive than current offerings," the CanadianWireless Telecommunications Association said in a statement. The CWTA is the lobby group that represents the industry in Canada.

"There will be some major technology development and costs associated with implementing and complying with the new code, but the industry will work very hard to have all aspects of the code ready for customers by Dec. 2, 2013."

But at least one consumer group welcomed the move.

"The wireless code has rules to help wireless customers where it counts the bottom line," John Lawford of the Public Interest Advocacy Centre said in a statement.

"It also makes it easier to switch companies because those costs are limited and are clear."