Companies & Industries

Wireless changes will hardly be felt by carriers and consumers

More flexibility but also more charges.

Reaction is mixed towards a new CRTC wireless code but most feel that there will be little if any impact felt by the large wireless carriers.

The new code will allow Canadians to cancel their contract with their wireless service providers after two years without penalty. But the fee adjustments and the flexibility will likely just mean higher handset fees as the big three carriers, Bell, Rogers and Telus adjust their prices to the new environment.

The CRTC is also capping extra data charges at $50 per month and international data roaming charges at $100 per month to avoid huge, surprise bills.

“What we were concerned about was ensuring that there was a dynamic marketplace; that is, that people didn’t feel entrapped in their contracts when they want to maybe use the offer of a new entrant or a competitor across the street,” said CRTC Chairman Jean-Pierre Blais.

“So it really is about freeing up Canadians to choose to either stay with their current carrier, under renegotiated terms, or go to a competitor.”

For telecom management consultant Eamon Hoey, of Hoey & Associates, the new rulings are a wash for both consumers and carriers.

Hoey sees the CRTC announcement as a “wet noodle” in terms of its ability to effect change in the telecom industry, which drew criticism from Canadians during public CRTC hearings regarding wireless service in February. He criticized the new wireless code for being a policy rather than an order, a “nowhere decision from the consumer perspective” leaving too much room for wireless service providers to interpret the rules in their own way.

“It doesn’t change their business,” Hoey said of major service providers, noting that the changes for three-year contracts won’t take effect until December 2013.

“Whoever’s got a contract now with a carrier doesn’t receive any relief by this decision.”

In a note, Scotia Capital analysts Jeff Fan, Warren Hastings, and Jay Oduwole described the CRTC’s code as an “appropriate” way to regulate the industry. Under the new rules, announced Monday, Canadians can cancel their wireless contracts after two years instead of three, without incurring any cancellation fees. The CRTC has also capped extra data charges at $50 per month, and limited international roaming charges to $100 a month “to prevent bill shock,” according to a release. All of Canada’s wireless service providers, including major players Rogers, Bell, and Telus, will be subject to the new rules.

Fan and his associates stated that overage charges for data and roaming contribute little to the revenues of major service providers, and the caps will be more of an effective means of limiting bill shock for consumers rather than restricting a company’s average revenue per user. Their ratings and target prices were unchanged by the new rules. They also expect that handset prices for wireless customers will increase for two-year contracts, “to maintain subscriber economics.”

Rogers VP Ken Engelhart sees the code as a step in the right direction, as there will now be one set of regulations governing wireless service for the country that will take precedence over any provincial systems. Overall however, the changes won’t have too much of an effect on how Rogers conducts business, he said. “Time will tell,” though if the code has an effect on the upfront prices of handsets, as consumers may get smaller subsidies when signing onto two-year instead of three-year contracts, he added.

As for the ongoing discussion among Canadians about the level of competition in the country’s telecom industry, Engelhart believes “the market is already very competitive.”

“In Canada we have three almost equally-sized wireless companies, which gives people a lot of choice,” he said.

Bell spokesperson Paolo Pasquini says the company won’t have any trouble complying with the new rules, but did speculate as to the effect two-year contracts might have on handset prices.

Many customers take on three-year contracts to offset smartphone costs.

“Restricting to two years means less flexibility for consumers, so it remains to be seen how they’ll respond,” Pasquini said in an email.

 

With files from The Canadian Press

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