CRTC tells wireless companies to stop offering 3-year contracts again

Canada's telecom regulator is asking major wireless companies to stop offering cellphone plans in which the cost of the phone is spread out over three years because those offerings may contravene the wireless code.

The Canadian Radio-television and Telecommunications Commission (CRTC) said Friday it thinks some recently announced wireless payment plans may run afoul of Canada's Wireless Code, a set of rules that apply to any cellphone contract signed since 2013.

The code brought in a slew of regulations to cover frequent consumer complaints, such as misleading bills, difficulties with switching carriers and caps on excessive data overage charges.

Among the major changes in the code was a cap on contracts at 24 months.

Prior to the code, three-year contracts were the industry standard, as such contracts allow wireless companies to entice customers with the latest devices for a lower cost up front, but obligated the consumer to effectively subsidize that discount over time.

The code capped contract lengths at two years, but in recent months some carriers have floated offers that look a lot like the old three-year contracts.

'An intelligent move'

Last month, Rogers unveiled a program it called "Edge Financing" that allowed consumers to finance their smartphone purchases for in some cases $0 up front in exchange for 36-month contracts.

On its quarterly earnings call with analysts on Thursday, BCE president George Cope said the wireless company is considering doing something similar.

"The equipment financing programs in the market where folks are getting the handset then paying for it over time … that was another development in the industry which we will clearly participate in," Cope said, calling three-year funding plans specifically "an intelligent move for the consumer market and one that you'll probably ultimately see us roll out with as well."

Telus also recently allowed some customers on some phones to finance their devices over three-year terms, in exchange for a $0 payment up front.

But those plans seem to have raised the eyebrow of the regulator, who is now asking the industry to stop offering those plans while it investigates.

"We want customers to have options for financing their device, if they so choose, but we also need to make sure these new 36-month device financing plans are fair for consumers," CRTC chair Ian Scott said.

Full review

Among the concerns are that consumers may have to pay fees if they switch providers mid contract, a practice that is also covered in the code.

"Therefore, the CRTC is asking all wireless service providers to stop offering device financing plans on terms longer than 24 months until the commission completes a full review of this practice," the CRTC said.

Telus said in a statement that it worked hard to ensure its 36-month device plan followed the Wireless Code, while also providing customers with "more choice, transparency and affordable ways to manage their device costs."  

The company said the offers will be suspended until the CRTC completes its review. 

Rogers said consumer response to its financing plan has been "very positive."

"While we believe this is … compliant with the code, we respect the directive of the commission and will remove this option from the market during the review," the company said. 

BCE spokesperson Nathan Gibson said in a statement that the company is "looking at new ways to make premium phones more accessible to consumers" and that the CRTC "shouldn't be looking at restricting options that make high-end phones more affordable for more people."