ARCHIVED -  Letter

File No. 8665-C12-201212448

BY E-MAIL

Mr. Bernard Lord
President and Chief Executive Officer
Canadian Wireless Telecommunications Association
300 - 80 Elgin Street
Ottawa, Ontario K1P 6R2
blord@cwta.ca

RE: Clarification on elements of the Wireless Code, Telecom Regulatory Policy CRTC 2013-271

Dear Mr. Lord:

I am in receipt of your letter dated 12 June 2013, requesting clarification on behalf of your members of certain elements of the Wireless Code, Telecom Regulatory Policy CRTC 2013-271 (the Regulatory Policy). Specifically, your questions relate to wireless service providers’ (WSP) obligations following the final implementation date
(3 June 2015), with respect to remaining balances on customers’ devices and related early cancellation fees.

As you mention in your letter, paragraph 369 of the Regulatory Policy states that the Code a) should apply to contracts entered into, amended, renewed or extended on or after 2 December 2013 and b) should apply to all contracts by no later than 3 June 2015, no matter the date upon which they were entered into.

The Commission’s analysis related to implementation of the Code, detailed in paragraphs 365 through 367, recognized that application solely to new or amended contracts would severely limit the benefit to Canadians with existing contracts. Conversely, immediate application to all existing contracts would not be proportionate to the costs and resources required for such an implementation by the wireless industry.

As you will recall, during the public hearing the Commission asked your members how quickly their customers would be covered by the Code, based on rates of churn, contract renewal and device upgrades. In general, your members responded that all customers would be covered by the Code within two to three years. In fact, Bell Canada, KMTS, and NorthernTel, Limited Partnership (collectively, Bell Canada et al.) stated that Canadians replace devices every 2.5 to 2.75 years. Moreover, your members filed confidential calculations on the record in response to this same question.

The Commission used this information, along with other evidence on the public file of the proceeding, in arriving at its determinations and conclusions. Given all the information, the Commission noted in the Regulatory Policy that approximately 50% of all customers would be covered by the Code by December 2014, and most wireless customers would be covered in less than two years given the natural course of rates of churn, contract amendments and renewal, and device upgrades. Though the confidential calculations filed used different bases, that evidence suggests that approximately 80% of wireless customers, depending on the service provider, would be covered by the Code by
3 June 2015.

As clearly indicated in the Regulatory Policy, the Commission determined that full implementation of the Code in June 2015 would strike a reasonable balance between managing the transition for WSPs and ensuring that there is no undue discrimination against those customers already bound by a wireless contract. It is essential to make sure that the transition period for the implementation of the Wireless Code is as short as reasonable in order to ensure that all Canadians realize the benefits from the Wireless Code.

It is clear that the Commission intended the final 3 June 2015 implementation date to be a mandatory date. Consequently, after 3 June 2015, early cancellation fees for all wireless service contracts will be determined in accordance with the formula set out in the Code.

With respect to the scenarios described in paragraph 6 of your letter, I understand the desire of the industry for detailed interpretation of possible operational scenarios:

i. Scenario A: a customer on a 36 month contract starting April 2013 with a $360 device subsidy. By 3 June 2015, the customer will have been under contract for more than 24 months and will have 10 months remaining on their contract, and $100 remaining on their device subsidy.

a) As you will recall, your members indicated during the hearing that they were unable to separate the value of the device subsidy from the monthly service rate paid by customers. Consequently, it would appear that the majority of the market does not operate in the way described in Scenario A.

However, to reiterate, the Wireless Code does not immediately apply. If a customer wishes to cancel a contract signed before 2 December 2013 prior to 3 June 2015 where no amendment or modification has been made by either party, the customer will have to pay the early cancellation fee that is set out in the contract, even if it is higher than the fee permitted by the Code.

The first time a contract is amended, renewed, or extended after 2 December 2013, the Code will apply to the contract and from that time, a customer exiting the contract will be subject to a cancellation fee that is consistent with the Code. Also, no matter when the contract is signed, the Code will apply to it as of 3 June 2015.

ii. Scenario B: a customer on a 36 month contract starting October 2013 with a $360 device subsidy. By 3 June 2015, the customer will have been under contract for 20 months and will have 16 months remaining on their contract, and $160 remaining on their device subsidy.

b) The six month transition period was established to allow the industry to adjust its business practices to bring them into line with the Code. Carriers are free to implement any part or parts of the Code prior to the 2 December 2013 implementation date. It would be surprising that in October of 2013 a customer would be offered a plan with a device subsidy with a 36 month term as that would be contrary to the spirit of the Code and the development of a more dynamic marketplace.

I look forward to the cooperation of the CWTA and its members in the implementation of this positive initiative for Canadian wireless consumers.

Yours sincerely,

Original signed by

Barbara Motzney
Chief Consumer Officer
Consumer Affairs and Strategic Policy

Date modified:

2013-06-18