36-month financing plans violate Wireless Code: CRTC

The fees required for a customer to buy out of a 36-month mobile phone financing contract amount to a cancellation fee, and are therefore a violation of the Wireless Code, according to the CRTC. In a decision released Thursday, the regulator wrote that "the required repayment of the balance of a device financing plan ultimately constitutes an early cancellation fee for the purposes of the Wireless Code." The code, first instituted in 2013, prohibits wireless service providers from charging cancellation fees after 24 months. Telecom companies began reintroducing 36-month wireless phone financing plans in the summer of 2019, partly in response to a wave of new and expensive smartphone models. “One of the core principles of the Wireless Code is the ability of customers to take advantage of competitive offers in the marketplace. 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 Ian Scott said in a release. Shortly after Rogers Communications Inc. announced its three year financing plans in July 2019, the Commission for Complaints for Telecom-television Services (CCTS), which deals with complaints related to the Wireless Code, said that the new plans could run afoul of the code. Telus Corp. quickly followed with its own plan, and BCE Inc. pledged that it would too. However, since the CRTC opened its consultation into the financing plans, telecom companies have largely moved away from the 36-month offerings. In a note published Thursday after the decision, RBC Capital Market analyst Drew McReynolds wrote that the development was a "neutral" for telecom companies. Should the CRTC have allowed the three-year plans to go forward, it "would have likely translated to a modest step-up in wireless activity for the group given the added handset affordability benefit to consumers," McReynolds wrote. However, he added, "we believe this decision was widely anticipated with operators essentially 'moving on' to the rollout of two-year" financing plans. In the fall of 2019, the Competition Bureau wrote that the financing plans would hurt competition in the marketplace, as part of an intervention for a CRTC proceeding on the matter. “If new competition develops, but consumers must pay hundreds of dollars in order to switch, how will those consumers take advantage of the lower prices, greater choice, and increased levels of innovation that are characteristic of greater competition?” the bureau asked in an October 2019 intervention in the CRTC's consultation. In its Thursday decision, the CRTC wrote that phone financing plans could not be reasonably considered as being distinct from wireless service contracts, as was argued by the telecom companies. "Device financing plans are inextricably linked to the provision of wireless services," the CRTC wrote, adding that financing plans should "be considered as forming part of the entire contractual relationship between the customer and the WSP for the provision of wireless services." In the decision, the regulator also directed the Commission for Complaints for Telecom-television Services (CCTS) to begin tracking customer complaints specifically related to financing plans. — Reporting by Michael Lee-Murphy at mleemurphy@thewirereport.ca and editing by Tim Forster at tforster@thewirereport.ca

36-month financing plans violate Wireless Code: CRTC

News | March 4, 2021

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36-month financing plans violate Wireless Code: CRTC

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