GATINEAU – With the latest and greatest smartphones now costing more than $2,000, Rogers Communications launched new device financing plans in July 2019, which would let customers spread the cost of a new handset over 36 months, paying $0 up front, if they wanted.
Rogers (and Telus and Ice Wireless, which followed their competitor’s lead) was convinced the device financing plans were on side with the CRTC’s Wireless Code of Conduct because the no-interest financed phones were not tied to a wireless service plan. If customers wanted to leave for another provider, all they had to do was pay off the device.
For years, wireless providers subsidized devices inside the service plans they sold to customers and this move spearheaded by Rogers was a major shift away from that costly (for the carrier) business model. Separating the device cost from the service cost is more transparent for customers and also shifted the device costs off the wireless companies’ books and onto the user.
Customers “told us they want affordable and transparent options to get the latest wireless devices and that’s what we’ve introduced,” said Brent Johnston, Rogers’ president, wireless services, back in 2019. “Offering our customers three-year device financing means lower monthly payments – it’s the right thing to do for our customers.”
Others, however, thought this was nothing more than a loophole where the device contract would still tie cosnumers to wireless providers for longer than 24 months, something the Commission wanted to put a stop to with the 2013 Wireless Code. Consumer groups and others insisted the CRTC’s wireless code of conduct did, or at least should, include such financing plans – as did the Commission itself, and so it quickly opened a proceeding to study it, asking Rogers and the others to prove their case.
Today, the Regulator clarified the Wireless Code does indeed apply to all device financing plans sold to consumers by their wireless service provider. That means device financing plans must wrap up in under two years as anything owed by customers beyond that constitutes an early cancellation fee, which the Code prohibits beyond 24 months. Another part of the problem, added the Commission, is the device financing plans are not portable. A customer can’t be financing a device with Rogers while using it under a service plan with Bell, for example.
The CRTC has “established that device financing plans are similar to device subsidies when determining early cancellation fees under the formula established in the Wireless Code. To ensure that customers know what early cancellation fees to expect, the same protections will apply,” says the Commission’s announcement today. “The Wireless Code requires early cancellation fees to be reduced to zero within 24 months. Within the 24 months, you may need to pay an early cancellation fee and it will be calculated according to the formulas set out in the Wireless Code.”
“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,” said the quote provided with the press release today attributed to CRTC chair Ian Scott.
Wireless service providers will have one month to update their contracts and documentation and train their staff to reflect this determination, although the wireless companies placed a moratorium on financing devices for longer than 24 months as soon as the Commission told them to stop and opened this proceeding almost 20 months ago.
We asked to talk to a Rogers executive about this decision and instead received an emailed statement which reads: “We are always looking at ways to offer flexible, affordable options for our customers to purchase new devices and we are disappointed in this decision. We are reviewing the decision to determine its impact and any next steps.”
