CRTC says three-year device-financing plans violate the wireless code

CRTC says three-year device-financing plans violate the wireless code

Canada’s telecom regulator says device-financing plans that allow customers to pay off the cost of increasingly pricey smartphones over a period of three years violate the wireless code.

Consumer advocates applauded Thursday’s decision, saying it will prevent cellphone carriers from locking customers in for longer periods of time.

“This will allow consumers to shop around freely for the best deal, with their phone, every two years,” John Lawford, executive director of the Public Interest Advocacy Centre, said in an e-mail.

But Telus Corp. noted that three-year financing plans would have given customers the option to reduce their monthly payments by stretching out the rising costs of devices over a longer period of time. “We are hopeful that the [Canadian Radio-television and Telecommunications Commission] will reconsider its position at the next wireless code review,” the company said in a statement.

The CRTC started reviewing device-financing plans shortly after wireless service providers – including BCE Inc.’s Bell Mobility, Rogers Communications Inc., Telus and Iristel Inc. – began offering them in the summer of 2019. The plans allow customers to buy smartphones, including the newest flagship devices from Apple and Samsung, for $0 down, and spread the repayment out over a period of time.

Some of the providers, including Rogers and Telus, offered plans with 36-month terms – a practice that the CRTC asked them to halt while it reviewed whether it violates the wireless code.

According to the code, which was introduced by the CRTC in 2013, wireless carriers that offer an up-front subsidy on a device must recover that cost in equal payments over 24 months and cannot charge a cancellation fee after that, effectively capping contract lengths at two years.

However, carriers began moving away from the subsidy model in 2019 and toward financing plans, which force customers to pay off the remaining balance on their financing plans immediately if they switch carriers. The CRTC said this constitutes an early cancellation fee.

“We want to ensure that device financing plans are not being used to keep customers with their current provider at the end of their service contract,” CRTC chair and CEO Ian Scott said in a statement.

The commission has opted not to penalize the companies for their past actions, however, due to the complexity of the issue, and is instead focusing on ensuring that device-financing plans comply with the wireless code going forward.

The commission is giving wireless providers one month to update their customer contracts and their sales and training material accordingly.

The CRTC is also asking the federal telecom and television ombudsman, the Commission for Complaints for Telecom-television Services, to start tracking complaints related to device financing plans in its annual and midyear reports.

Laura Tribe, executive director of OpenMedia, an organization advocating for widespread inexpensive internet access, said the case demonstrates the length to which Canada’s largest cell phone companies will go “in their attempts to lock customers in with long-term commitments instead of enticing them to stay with more competitive pricing and finance options.”

Bell said it is reviewing the decision but noted that it has never offered device financing plans that went beyond 24 months. Rogers did not immediately respond to a request for comment.

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Published at Thu, 04 Mar 2021 17:33:14 +0000