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Why smartphones likely won't cost more under Canada's new wireless code

After the announcement yesterday of a new wireless code from the Canadian Radio-television and Telecommunication Commission, some have wondered if the new rule that allows customers to cancel phone contracts without penalty after two years will increase smartphone prices.

According to Lindsay Pinto, communications manager for advocacy group OpenMedia, prices will not go up, but having one less year to pay the subsidies wireless companies apply to cellphones could create a perception of increased prices.

"The time you have to pay off your cell phone [will be] a little bit shorter, which means that it's going to look like you're paying more," said Pinto. "But it's actually the same amount over a shorter period of time."

One less year for a cellphone contract can create a perception of increased prices because wireless companies typically discount the price of smartphones when customers join into a contract. Companies then recoup the cost of the phone through monthly fees.

For example, an iPhone 5 can be bought via the Apple Store for $699. But with Bell Canada, the same phone can be purchased for $179.95 if the costumer agrees to a three-year contract. The almost $520 customers don't pay when they sign the contract will be charged over the three-year span.

According to Pinto, if wireless companies plan to raise prices to compensate for shorter contracts, they'll likely have to explain the subsidies system to customers. That, she says, could ultimately lead smartphone and service charge prices to drop.

"There's some opportunities for [wireless companies] to be a little clearer with customers about what it is that they're getting, and possibly to lower prices, because customers [will] know what it is they're getting and where those extra fees are coming from," she said.

For Pinto, this and other new rules implemented in the new code are steps in the right direction. On the other hand, she says the code didn't fully meet OpenMedia's expectations.

"We are not seeing, for example, free unlocking of devices, which is something that we asked for and wanted immediately and free of charge," she said. "[Unlocking of devices] can be done now after 90 days and at the cost set by the telecom company which could be high."

The code will apply to new wireless contracts starting Dec. 2.

Carlos Tello is completing a practicum at The Tyee.

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