Bureau says three-year device financing will harm competition

In its intervention to the CRTC’s consultation on the emergence of three-year device financing plans, the Competition Bureau has cautioned the regulator against the new financing schemes. “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 its Oct. 15 submission. In bringing up the cost of switching, the bureau is referring to the stipulation of the new phone financing plans, which carriers began offering this summer, that customers on a device financing plan who want to switch their wireless service plan to another company would have to first pay off the balance of the device. Whether or not such a condition creates a barrier to customers leaving their service arrangements after two years is central to the question of whether or not the new plans violate the Wireless Code, which expressly prohibits cancellation fees after two years. Shortly after Rogers Communications Inc. announced its three year financing plans in July, 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 it would too. “The fact that customers are not free to shop around for a new plan while maintaining monthly payments of their device after the 24-month contract period ends might be seen as a problem,” a CCTS spokesperson said at the time. Now the Competition Bureau has echoed those concerns, while acknowledging that the new plans do indeed have some upsides for consumers. “Lower monthly device financing payments have their benefits, but these benefits must not outweigh other policy goals, including the continuing development of effective competition in the wireless sector,” the bureau wrote. The bureau also said that the introduction of a new set of switching costs “reduces the contestability of Canadian wireless markets, and results in lowered competitive pressure on service providers to deliver the best services at the lowest prices,” and also pointed to several scenarios in which the Competition Tribunal had intervened with orders designed to lower switching costs in other industries. In the intervention, the Competition Bureau added its voice to the CCTS and the Public Interest Advocacy Centre in opposing the new financing plans. In its own submission, PIAC went a step further and criticized the CRTC for initiating a consultation proceeding at all, rather than simply issuing a notice of violation of the Wireless Code. The CRTC, writes PIAC as part of a submission alongside a number of other consumer organizations under the banner of the Coalition for Cheaper Wireless Service (CCWS), “has conflated and confused compliance with regulation and policy-making by giving alleged offenders not only a chance to justify their actions without invoking the proper administrative penalty procedure but also a chance to modify the Wireless Code for the worse, soon after its recent review.” The result, PIAC and the CCWS argue, allows telecom companies to “effectively change the law they were openly violating by baldly stating their change benefits consumers after brazenly violating it.” “This way lies madness,” the submission reads. Shaw Communications Inc. -- which over the summer declared the new financing plans an “affront” to the Wireless Code -- also weighed in with an intervention, referring to the new plans as a “potent mechanism through which the Big 3 can pursue anti-competitive customer retention tactics.” “Ultimately, by reducing churn and upholding the Big 3’s market dominance, the competitive pressure that is being imposed by Freedom and the other regional competitors, will be diminished, and the consumer benefits that are being realized, will be lost,” the Shaw submission reads. — With reporting by Michael Lee-Murphy at mleemurphy@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca

Bureau says three-year device financing will harm competition

News | October 18, 2019

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Bureau says three-year device financing will harm competition

News | October 18, 2019

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