Thursday 7 February 2013

Competition Bureau Responds to the CRTC Regarding a Cell Vendor Code

The Federal Competition Bureau (CB) has finally broken its self-imposed silence on competition in the cell phone industry with a submission to the CRTC as part of the ongoing examination of the proposal for a national cellular code.
The CB addressed two distinct areas with a number of specific issues, namely restraints to users switching service providers with the subsequent impact on new and competitive service providers and the need for clarity in all aspects of the service provider and user relationship.
With regard to switching service provides, the CB named three current practices that they think are restrictive in nature and need to be modified:
a. Contract length: - like most respondents, they found fault in the three year contract model. Also like most respondents, the CB referenced the standard two year policy in the US and the legal requirement in the European Union (EU) for a two year maximum term.
b. Handset Locking: - Ideally, the CB wants to do away with handset locking. At a minimum it wants a simplified process with little or no costs, especially if the unit is no longer being subsidized by a vendor.
c. Separate the subsidy from the service: - The CB suggests the subsidy contract or agreement be treated as a standalone purchase on credit contract with flexible payment conditions including early payout. It should only be tied to the handset, presumably unlocked, since the user could freely move to any compatible service provide while still paying the original vendor for the handset.
The other major area of concern for the CB was accurate information.
a. The CB recommend that the agreement total all in pricing showing all fees, options, charges , etc. that will be added and any options which may impact on them. They were willing to allow a little more flexibility in marketing and advertising as long as it was not misleading.
b. The use of the term "unlimited" raised a number of red flags for the CB. They want the service providers to clearly spell out their definition of "unlimited" and identify anything that may limit the "unlimited" in a material way. ( One of my favourites is the claim of unlimited data service but with the fine print caveat that significantly reduces the speed transfer after a data cap of a small number of GB i.e. the first 3 GB are at 6 Mbps but everything after that is throttled back to 256 kbps until the start of next billing period. Yes it is unlimited data; it just cannot be used for a lot of applications.)
Finally, the CB recognized the rapid pace of technological change and recommended a full review of the code every three years.
What is not clear in the CB submission is whether or not it was a shot across the bow of the service providers, and to lesser degree the CRTC, that unless they saw significant change in the application of policies affecting their area of concern, they might be willing to exercise their legal authority and force change on the industry.
What  does come through very clearly, is the CB is interested in increased competition in the industry and is concerned about any activity that may restrict or prevent  the new entrants from gaining market share through fair and open competition. 

1 comment:

  1. That submission is a great read. Thanks for summarizing it here. Not sure if they're firing a warning shot, but at the very least it reads like a well deserved shaming of Bell / Rogers / Telus.

    Even if all the CB recommendations are included in the wording of the proposed wireless code, I wonder if the Bureau will immediately step in and regulate the telco's the first time they don't toe the line. Personally I like the regulatory approach because even with a code, my gut sense is that there will be some customer(s) out there somewhere getting screwed, unless there is a financial penalty involved for the perps.