Wireless providers question 'bill shock' protection

Proposed measures to protect cellphone customers from unexpectedly high wireless bills are bad for customers and will stifle competition, wireless providers tell Canada's telecommunications regulator.

CRTC chair asks why customers' fees stay the same when devices are paid off

Proposed measures to protect cellphone customers from unexpectedly high wireless bills are bad for customers and will stifle competition, wireless providers have told Canada's telecommunications regulator.

"I think a lot of customers don't want a cap [on their monthly bill]," David Fuller, chief marketing director for Telus Corp., told a Canadian Radio-television and Telecommunications Commission (CRTC) hearing Tuesday in Gatineau, Que., on proposed rules governing wireless contracts and fees.

"If they want a service that's capped… that's what a prepaid service can provide."

That sentiment was echoed later in the day by Ken Engelhart, senior vice-president of regulatory for Rogers Communication, saying the company prefers an opt-in version of a monthly cap.

A draft version of the "wireless code" being proposed by the CRTC proposes allowing wireless customers to set a limit on their monthly bill, which would be $50 by default. If the customer exceeds that amount, the wireless provider would have to automatically suspend any services that would cause the customer to keep racking up costs.

'Not all customers want to spend their time sorting out how much data they have left.'—Candice Molnar, CRTC commissioner

Other proposed measures to protect customers from "bill shock" include:

  • Requiring providers to notify the customer when he or she consumes 50 per cent, 80 per cent and 100 per cent of his or her usage limit for a particular service, such as voice minutes or megabytes of data.
  • Requiring providers to provide tools that allow a customer to monitor usage of different services online.

Telus argued that such notifications for voice and text usage would be difficult to build, because the rate depends on the time of day and the number dialed, and are unnecessary, since customers usually understand how much they have used.

Engelhart echoed this sentiment, citing the cost of building such a system would make it economically unfeasible.

Monthly bill cap unnecessary: Telus

With respect to data and roaming, Fuller said that as long as wireless carriers were providing such notifications and online monitoring tools, as Telus already does, a monthly bill cap is unnecessary.

But CRTC commissioner Candice Molnar disagreed.

"Not all customers want to spend their time sorting out how much data they have left, particularly in something like a family plan," she said. "I'm a customer and that's not what I want to do."

She added that data usage is new to many customers, estimating usage is complex and the CRTC's public consultations indicated that customers want some protection against high data charges.

Molnar also questioned the suggestion that customers who want that should get a prepaid plan, which doesn't offer some of the services under postpaid contracts. She noted that customers on prepaid plans can't get their handsets subsidized, for instance. Telus itself also acknowledged that it doesn't offer roaming to prepaid customers, and therefore they can't use their wireless service outside Canada.

Fuller said if the CRTC thinks monitoring tools alone aren't sufficient, then it should consider the fact that letting people choose individual amounts for the cap on their bill would be technically complex and therefore "very expensive" for carriers to implement. He suggested that allowing customers to opt in to a predetermined cap of $150 or $200 would make more sense.

"We firmly believe $50 is far too low," he said.

During Monday's hearing, the Canadian Wireless Telecommunications Association, which represents "virtually all of the major companies" that offer wireless service in Canada, said that while it supported all the proposed options to prevent bill shock, it believed they should  be optional.

Bernard Lord, president and CEO of the association, told the CRTC that the proposed requirements "limit a consumer's option… and interfere in the operation of competitive market forces."

Contract term length

While speaking on Tuesday, Engelhart and other representatives of Rogers Communications defended the company's three-year contracts, saying they are necessary to amortize the cost of a device.

Three-year contracts are rare outside of Canada, with carriers in the U.S. and Europe primarily offering two-year contracts to subsidize the cost of a device.

When pressed by Molnar as to the disparity between contract lengths, Engelhart and senior vice-president of products Raj Doshi said Canadian carriers pay manufacturers 15 to 20 per cent more than American carriers for wholesale phones.

Doshi also said that for the launch of the BlackBerry Z10, the three-year contract offered on Rogers was more popular than the two-year contract offered by Rogers-owned Fido, although there was a $200 price difference in the up-front cost of the phone.

Both Rogers and Telus also faced questions about why customers continue to pay just as much each month for their wireless service after their three-year contract is up and the customer's phone is completely paid off, even though the fee under the contract presumably included both service and a monthly payment toward the cost of the device.

"I don't get that," CRTC chair Jean-Pierre Blais told Ted Woodhead, senior vice-president of government and regulatory affairs for Telus. "If you've recovered your costs ... why doesn't the cost [to the customer] go down?" He accused the company of "pocketing" the difference.

Woodhead acknowledged that the customer doesn't automatically get a lower price. However, he said, the customer could bring the paid-off phone to a Telus store and enrol in a new plan at a 10 per cent discount.

Blais suggested that customers weren't typically informed about that option. Woodhead countered that the offer was "prominently displayed" on the company's website. He added that most customers actually opt to upgrade their device and enter into a new three-year contract rather than continue using the one they've paid off.

When Blais later asked why Rogers customers don't pay a lower monthly fee after they've paid off their handset, Engelhardt responded that up until now, there hasn't been customer demand for that.

"That demand I think is now there," he added, "and I think that market will develop."

Implementing the code

Engelhart also said that implementing the proposed wireless code could take a great deal of time, with some phases taking as long as 12 to 18 months to be fully put in place.

Distributing the wireless code to its stores and distributors would take six months, the commission was told.

Engelhart also said the communications giant would only want the wireless code to apply to new and renewed contracts, not to existing contracts. This 'grandfather' clause would mean customers signing up for plans a day before the wireless code is enacted would not be protected under it for the length of their contract — up to three years.

The hearings, which opened Monday, will continue through Friday. The CRTC is inviting the public to submit comments to an online discussion on the draft code throughout the hearings.