Telecom Commission Letter Addressed to Distribution List
Ottawa, 2 August 2019
File no. 1011-NOC2016-0293
To: Distribution list
Subject: Wireless Code – 2019 Compliance Reports – Device Financing Plan
This letter is in respect of the recent introduction of device financing plans in the mobile wireless service market. The Commission acknowledges that device financing plans with terms that are longer than 24 months may render devices more affordable for Canadians. However, the Commission wants to ensure Canadians continue to be protected by the Wireless Code.
One of the core principles of the Wireless Code is to ensure that customers are able to take advantage of competitive offers in the market. For example, the Commission identified in the original Wireless Code Policy (Telecom Regulatory Policy 2013-271) that high early cancellation fees charged over a three-year period were a fundamental barrier to consumers taking advantage of competitive offers every two years. Accordingly, in the Wireless Code, the Commission, among other things, limited the maximum number of months during which early cancellation fees can be charged to 24 months.
To better understand the new device financing plans and how they are offered to customers, Commission staff sent a request for information (RFI) to wireless service providers (WSPs) on 16 July 2019.Footnote1 WSPs submitted their responses to that RFI on 30 July 2019.Footnote2
A preliminary analysis of the information the Commission has received thus far suggests that these device financing plans, including those on 36-month terms, may not be consistent with the Wireless Code. In particular, the Commission is concerned with customers having to pay the remaining balance of their device financing plan immediately if they wish to change to a different plan or move to a different WSP at the end of their wireless service commitment period.
The Commission is of the preliminary view that certain device financing plans may create a new barrier for customers to take advantage of competitive offers in the market. In particular, customers, who may benefit in the immediate term from lower monthly costs related to their devices, appear to be asked to accept terms and conditions that may require them to stay with their current WSP past the end of their wireless service commitment period.
Moreover, the Commission set out requirements for the Wireless Code in part to contribute to a more dynamic mobile wireless service market, and now considers that the potential negative impact on competitor WSPs from device financing plans, including those on 36-month terms, may be significant and difficult to redress.
Accordingly, the Commission expects that all WSPs cease offering device financing plans on terms longer than 24 months until the Commission has had an opportunity to complete a full review of the practice.
The Commission will be publishing a notice of consultation for a show cause proceeding during which it will consider, among other things,
- whether device financing plans, including those that have terms greater than 24 months, are compliant with the Wireless Code, and
- what regulatory action should be taken in cases of non-compliance, including the imposition of administrative monetary penalties (AMPs).
Should the Commission determine that the device financing plans at issue, including those that have a term greater than 24 months, are non-compliant with the Wireless Code, it may issue a mandatory order prohibiting certain WSPs from offering these plans. In accordance with section 72.001 of the Telecommunications Act, the Commission may also impose on WSPs AMPs of up to $10,000,000 for every contravention of the Wireless Code, and up to $15,000,000 for every subsequent contravention.
The Commission also intends to provide direction and guidance to the Commission for Complaints for Telecom-television Services with respect to addressing complaints related to device financing plans, including those that have a term greater than 24 months.
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cc: Distribution list
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