New Wireless Rip-off Safeguards Too Weak

The Canadian Radio-television and Telecommunications Commission unveiled its much-anticipated draft wireless code of conduct this week, offering a promise of new, enforceable protections for consumers. The draft code, which is open for public comment until mid-February, generated a mixed reaction.

Some consumer groups welcomed it as a step in the right direction. But other commentators were left underwhelmed, disappointed that the code does little to address consumer frustrations with issues such as long-term wireless contracts and exorbitant roaming fees.

The draft code features some welcome changes to the current wireless landscape, including the possibility of consumer cancellation of contracts when providers change key terms, clear limits on contract termination penalties, and monthly bill caps when additional fees are incurred (thereby reducing the likelihood of bill shock after a trip abroad). Perhaps most importantly, the code is enforceable, backed by the possibility of monetary compensation of up to $5,000.

Yet the draft code ultimately disappoints, since its underlying philosophy is that consumer frustrations with the Canadian wireless market can be best addressed by more information.

The "more information" approach is a recurring theme throughout the code:

Angry with expensive roaming charges? The code mandates that carriers provide greater disclosure about fees and provide warnings if your bill starts climbing.

Frustrated by the use of three-year contracts as the norm in Canada (which is longer than virtually any other developed country)? The code requires carriers to disclose all the costs associated with your plan.

Surprised by a host of extra fees and charges, often disguised as "regulatory" charges? The code stipulates that carriers use a plain language, fully inclusive disclosure of the costs associated with each plan.

Exasperated by cellphones locked to a specific carrier, even though the carriers maintain pricy termination policies that ensure that the "subsidy" on the phone is repaid? The code may require the means to unlock, but at a rate disclosed in the contract.

In other words, once the code is operational (which the CRTC says may be immediate or phased in), consumers will have far more information about their wireless services provided in more accessible manner, but the underlying concerns with a market that lags behind many more competitive countries will remain largely unchanged.

More competition, please

The fundamental problem with the Canadian wireless market isn't solely a lack of consumer information but rather the dearth of strong competitors positioned to shake up the big three incumbent providers (Rogers, Bell, and Telus). Solving that issue will require more than a new code of conduct.

The CRTC could be bolder with its code -- mandatory unlocking of phones at no cost (carriers are protected by termination fees), limits on roaming fees (as is found in Europe), and two-year maximums on contract length by separating phone subsidies from contractual term are all doable -- but fully addressing consumer wireless frustration will require federal and provincial governments to act as well.

At the federal level, the most important step for Industry Minister Christian Paradis would involve fostering a more competitive environment. After several years with new entrants struggling to make a serious dent in the market shares of the incumbents, it is increasingly clear that a series of undercapitalized small players will only yield modest change.

Instead, the government should remove all foreign investment restrictions on telecommunications providers, opening the entire sector to new capital and the possible entrance of a major, world-class competitor. Moreover, the government must move forward with the inexplicably stalled spectrum auction process, which should generate billions in revenues and holds the promise of injecting some additional competition into the market.

The provincial governments also have a role to play since it was provincial initiatives on wireless consumer protection that sparked the carriers to ask the CRTC to act. If the CRTC code fails to fully address consumer concerns, the provincial governments could step in with their own legally binding rules, thereby creating a patchwork framework with long overdue consumer protections.