Why CRTC’s New Wireless Contract Rules Actually Give Us Less Freedom

Do Canadians pay too much for wireless telephone service? As my colleagues have recently pointed out, Canadian prices are higher than some, but lower than others. And in many countries with lower prices, investment in the latest technologies has lagged, whereas Canadians enjoy some of the fastest, most advanced wireless services.

But one lower-cost option that Canadians used to have was taken off the table by the Canadian Radio-television and Telecommunications Commission (CRTC) exactly a year ago, when the new Wireless Code came into force: the much maligned three-year plan.

Prior to last December, you could choose to purchase a new cellphone at a subsidized price in exchange for committing to a 36-month deal. Essentially, this meant you were spreading the true cost of the phone over three years. Alternatively, you could choose to pay a little more up front and sign a 24-month contract. Or again, you could pay full price for your phone and not be tied by any contract whatsoever.

By decree of the telecom regulatory body, the first option is no longer available. That is to say, a company can still offer three-year deals if it wants to, but they are no longer permitted to enforce those deals with cancellation fees. They would be three-year deals in name only, therefore no company offers them, and consumers have fewer options than they did before.

One result of this regulatory change: higher up-front prices for your new phone. It can also mean higher monthly fees. Indeed, the latest report from Wall Communications, released this summer, found that the monthly charge for basic plans has jumped from $31 to $36 since last year. The report attributes this hike to the regulatory reduction of maximum contract lengths.

What justified this costly, heavy-handed government intervention? CRTC chairman Jean-Pierre Blais said at the time that the agency wanted to ensure "that people didn't feel entrapped in their contracts" and added that it was all about "freeing up Canadians to choose to either stay with their current carrier, under renegotiated terms, or go to a competitor."

But contracts are voluntary. Generally, no one forces you to sign one — and if someone does, the contract is null and void. If you don't want to feel "entrapped" by a contract, then don't sign one, because the whole point of a contract is to bind two parties, allowing voluntary exchanges that are more complex than a simple and straightforward purchase of groceries.

Similarly, talk of "freeing up" Canadians is misleading doublespeak. We were perfectly free to sign or not to sign three-year deals before. We were free to sign shorter deals with those carriers that were willing to offer them, or to pay for our phones outright and sign no deals. Making you "free" to change carriers more readily by removing your option to commit for more than 24 months actually makes you less free.

The CRTC apparently heard a lot of complaints from people who felt they were being "held hostage" by the 36-month contracts they had signed and who considered such long commitments "ridiculous." I wonder how many people wish they had spoken up about how much they appreciated the benefits of such contracts –especially now that those deals, and their attractive pricing, are a thing of the past.

Michel Kelly-Gagnon is President and CEO of the Montreal Economic Institute. The views reflected in this column are his own.

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