GATINEAU – CRTC commissioners said they are concerned Canadian wireless companies are overcharging their customers when the device subsidy is paid off and there isn’t a corresponding drop in their monthly bill.
On Tuesday morning during day two of the Wireless Code of Conduct hearing, chairman Jean-Pierre Blais wondered if Telus customers who have paid off their device subsidy will see a reduction in their monthly bill. The company said it doesn’t happen automatically and consumers have to request it.
David Fuller, chief marketing officer at the “future is friendly” wireless operator, said customers can see a bill reduction, but only if they let Telus know that they are keeping their device and not upgrading. This doesn’t happen automatically at the end of the contract. “In the event that you decided that you decided that you wanted to keep the device because it was fine, you’re happy with it and you’ve decided you want to keep it for another couple of years, you can… move to a month to month plan which would basically be 10% off our then existing rate plans,” he said. “We find the vast majority of our customers upgrade at that point and move into another contract term with another subsidy.”
This didn’t satisfy Blais.
“It still seems to me that there is an amount in your rate plan that was attributable to the device subsidy that you don’t need anymore because [the consumer] now owns outright the phone,” he countered.
Brent Johnston, VP of mobility solutions, responded by saying that based on a $600 device, the bill reduction could range from $5 to $10 per month. He added the company decided to offer this type of plan was because more and more people were coming to retail outlets with used devices passed along from friends and family.
Blais put the question to Rogers Communications on Tuesday afternoon. The company noted in response that while it doesn’t offer such a plan, it is considering it. “That movement to SIM only pricing (when a customer already has a device in hand) has only recently entered the marketplace. Logic would dictate that you’re right but demand hasn’t been there. That demand I think is now there. That’s why Bell [Canada] and Telus are now offering SIM only plans and I think that market will develop,” said Ken Engelhart, senior VP of regulatory for Rogers.
Commissioner Louise Poirier pressed Rogers on issues surrounding handsets subsidies and services, wondering why if some countries allow handset subsidies for devices yet don’t tie that device to a specific carrier, the Canadian wireless operators aren’t doing it.
Engelhart noted the model of tying handset subsidies to service plans is what Canadian consumers appear to want. He spoke about Wind Mobile’s initial plan to not subsidize devices and go totally contract-free, yet a year or two after entering the market they began subsidizing devices like everyone else. “Customers want that subsidized phone. They want that latest and greatest device, they don’t want to pay for the full cost up front. That’s why we’re in the model that we’re in,“ he said. “In countries where they have outlawed that subsidy, everyone is running around with old Motorola flips, they don’t all have the latest and greatest phones.”
Rogers also downplayed some of the criticism being leveled at the wireless carriers during this proceeding, particularly as it relates to three-year contracts combined with better termination fees. Engelhart noted that the total costs of Rogers three-year plans for an iPhone is less than the total costs for two-year contracts with AT&T and Verizon in the U.S.
This “says to me that there’s not a real problem here we need to solve,” he said. The Rogers executive then added that part of the problem may reside with consumers simply wanting the benefits of a lower priced device that comes with a three-year contract but only having to pay for service over two years.
“In the same way that if this was a cable TV hearing, everyone would say I don’t want to pay $100 for 100 services, I want to pay $8 for 8 services. But the economics of the cable TV business mean that smaller packages you pay a higher wholesale fee, you pay a higher rate,“ Engelhart said. “I understand that people wish they had a two-year contract but I think that if they knew that there were tradeoffs involved, their views might be different.”
The hearing continues Wednesday with Bragg Communications, Mobilicity and some consumer groups facing the panel.
