New Wireless Code Could Backfire with Higher Handset Prices

by Istvan Fekete on June 10, 2013

Ottawa’s move to engineer competition in the Canadian wireless market is indeed plausible, but it could backfire. The CRTC has finally announced the Wireless Code, which makes three-year contracts history starting December 2, 2013, as consumers will have the right to cancel their contract without paying any early cancellation fees.

While the big three have greeted the Wireless Code, they have also suggested that Canadian wireless subscribers can expect changes on the carrier side as well.
But the government didn’t stop here: it is also forcing the big three to comply with the rules of wireless competition they have engineered. Industry Minister Christian Paradis’ recent announcements have made it clear to all players that Ottawa would block any move by the big three to buy out smaller rivals, preserving a division of wireless spectrum licenses between incumbents and startups.

From a consumer perspective, at first glance this certainly looks good, as it would lead them to believe they will have more choice and lower wireless service costs, which is exactly what the Conservative government is highlighting.

The only thing they may have left overlooked is the market share the incumbents control and the percentage owned by wireless startups, and I am referring here to Wind Mobile, Mobilicity, and the recently acquired Public Mobile: 90% vs. a combined 5%.

The power of the incumbents is unquestionable; each one has more than 7 million subscribers, which pushes them upwards, while the smaller players are too small and undercapitalized. More importantly, they are also losing money. It remains to be seen how well they can survive on the market.

Meanwhile, let us see what kind of reaction the Wireless Code has triggered from the incumbents, and what consumers can expect when it comes into effect: “Telus replaced contract cancellation charges with a device balance some years ago,” the company said in a statement. “We also already offer phone unlocking for our customers, and we already have a cap on international data roaming.”

Shorter contracts could also mean cellphone companies might offer smaller subsidies on devices — meaning customers might pay more up front for their phone, Ken Engelhart, Rogers vice-president in charge of regulatory issues said. “I’m not sure that this will be something that consumers are necessarily going to be positive about, but time will tell,” he said.

“Most have chosen three-year contracts because of the big price reductions they mean on the latest smartphones,” Bell spokesman Paolo Pasquini said. “Restricting to two years means less flexibility for consumers, so it remains to be seen how they’ll respond.”

The first conclusion is obvious: as a result of technology developments, and costs associated with implementing and complying with the code, Canadians will likely pay higher upfront prices for their smartphones. Further surprises may come in time.

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Written by: Istvan Fekete. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Facebook, or YouTube.

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