Wireless code will deprive carriers of due funds: lawyer

OTTAWA — Whether the CRTC is infringing on carriers' "vested rights" was among the arguments that came up in the Federal Court of Appeal Wednesday as mobile operators challenged a key provision of the commission's wireless code. Lawyers for the wireless carriers, the government and an advocacy group argued before a three-judge panel over whether the CRTC has the authority to impose its wireless code on all wireless contracts as of June 3, 2015, even if they were signed before the Dec. 2, 2013, implementation of the code. A key provision of the wireless code, which was announced June 3, 2013, is that no early cancellation fees can be applied on customers who have fulfilled at least two years of a contract. John Laskin, representing carriers such as BCE Inc., Rogers Communications Inc. and Telus Corp., said by making all wireless subscribers subject to that rule next June, the CRTC has inserted itself in what had previously been "a matter of private contract" between carriers and their customers. Laskin told the court that three-year contracts had become most common arrangement in the retail wireless industry because they were a way for carriers to provide expensive devices at affordable prices and that early cancellation fees give carriers another way to recoup their subsidies. "The provider is deprived of full recovery" of the value of a vested contract, Laskin said, meaning the carrier has lost its right to the money it would have otherwise been paid without the wireless code. Laskin presented a three-year contract with Rogers entered into on Nov. 30, 2012, which included monthly service fees of $45 a month on a BlackBerry Bold smartphone that carried a retail price of $499.99 without contract but that the customer bought for subsidized price of $44.99. Laskin said that in this case there would be five months left on the contract when the code becomes universally applicable on June 3. If that customer cancels their service at that point, it would represent $62.50 in lost subsidies for the carrier, he said. Laskin said about 20 per cent of wireless users in Canada, or about five million people, will be still under an existing contract with a term of more than two years when June 3 comes around. The Wire Report reported last year that the provision could cost wireless carriers hundreds of millions of dollars if consumers can exit these three-year contracts without repaying the device subsidies they received when signing their contracts. Lawyers with OpenMedia.ca, who were defending the code's merits, said there are no vested rights affected by the code's application because early-cancellation fees are as a way to enforce contracts rather than recoup lost subsidies. "There is no correlation between the value of the handset and what is ultimately extracted when a customer tries to leave," OpenMedia lawyer Tamir Israel told the court, adding that this was a finding of CRTC proceedings that led to the implementation of the wireless code. "It's not to compensate the carrier for the cost of equipment,” said David Fewer, one of the other lawyers representing OpenMedia. “It's to be a barrier to switching ." The government did not try to argue that the code did not affect carriers' vested rights. Instead John Tyhurst, a Department of Justice lawyer, said the Telecommunications Act gives the CRTC the power to do so. Tyhurst noted Section 24 of the Telecommunications Act is "open-ended" and "broadly framed" in order to empower the commission in these situations. The act reads: "The offering and provision of any telecommunications service by a Canadian carrier are subject to any conditions imposed by the Commission or included in a tariff approved by the Commission." Tyhurt also cited Section 7 of the act, which lays out a number of objectives for telecommunications policy including the establishment of "reliable and affordable telecommunications services" across Canada and the enhancement of "efficiency and competitiveness" in the industry. He said the CRTC would be compromised in its ability to carry out its mandates if pre-existing contracts could not be affected by its initiatives. Tyhurst added that carriers’ interests were considered in the implementation timeframe of the code, which allows pre-existing contracts to remain intact for a year-and-a-half after the code started applying to new contracts. "It's not as if simply disregarded the appellants' interests in existing contracts," he said. Laskin, on behalf of the carriers, said that if legislators intended for the commission to have the authority to overrule existing contracts and apply rules "retrospectively," it would have explicitly stated so in the act. Without that, he argued, there is a "presumption" in law that regulatory measures imposed by regulatory bodies can't work that way. All parties wrapped up their oral arguments on Wednesday and are now awaiting the court's decision. — With reporting by Derek Abma at dabma@thewirereport.ca and editing by Peter Henderson at phenderson@thewirereport.ca

Wireless code will deprive carriers of due funds: lawyer

News | November 12, 2014

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Wireless code will deprive carriers of due funds: lawyer

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