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Consumers Face Barriers in Taking Advantage of Wireless Competition

By Michael Geist

As Industry Minister Tony Clement prepares to provide an update on Canada's digital economy strategy later this month, the state of competition within the Canadian wireless sector promises to play a prominent role.  Consumers have bemoaned the dominance of the big three carriers for years, leading to complaints about limited choice and high prices.

My recent technology law column (Toronto Star version, homepage version) notes that in recent years, however, the government has begun to map out a strategy to address the competitiveness concerns.  The 2008 spectrum auction opened the door to new competitors, with many launching over the past year.  Moreover, the prospect of removing foreign ownership restrictions is gaining traction and there are indications that additional spectrum will soon be made available.

While these changes have established a market with more providers, the ability for consumers to take advantage of greater competition remains a work-in-progress. 

From a pricing perspective, the incumbent providers maintain important advantages, particularly the ability to bundle wireless, landline, Internet, and television services into a single package featuring discounted prices that any new entrant would be hard-pressed to match.

Beyond pricing, consumers face other barriers.  Many are locked into long-term contracts that far exceed the norm in other jurisdictions. Establishing term limits would require provincial intervention and would likely raise objections over interference with consumer choice.

The Quebec government recently implemented an alternative approach by establishing legal limits on cancellation fees.  The provincial consumer protection law now limits the fee to the actual discount received by the customer.  Moreover, if there was no inducement or discount to enter into a contract, the fee cannot exceed 10 per cent of the value of the unpaid services or $50, whichever is less.

Assuming consumers can get out of an existing contract, they still face the challenge of transferring or "porting" their number to their new provider.   In theory, this should be easy since Canada implemented wireless number portability, which allows consumers to keep their existing cellphone numbers as they change providers, in 2007.

However, a new report from the Commissioner for Complaints for Telecommunications Services, which addresses consumer complaints about wireline and wireless services, finds that there are significant problems with portability in practice. The CCTS says it often receives complaints from consumers who have asked to port their number to a new provider, but encounter inaccurate billing or service errors along the way.

The report identifies a host of problems including providers submitting the wrong customer information or wrong dates for porting orders as well as numbers being ported without the correct services.  The CCTS notes that the mistakes often result in delays in porting the number or in billing errors, including customers being billed by both providers for the same service.

The problems associated with number portability are not easy for an individual consumer to address, since it is not always obvious whether the error lies with the old provider or the new one.  Regardless, the CCTS sternly notes that "when completing requests to port telephone numbers, service providers have an obligation to ensure a seamless transition and must therefore ensure that all related systems are accurate and up to date."

Fostering a competitive wireless environment in Canada requires attention to both the provider and consumer perspectives.  New spectrum and removing foreign ownership restrictions should help increase provider choice, but there is work to be done by federal and provincial governments to ensure that consumers have the ability to take advantage of greater competition.

Full post as published by Michael Geist on November 11, 2010 (boomark / email).