Background: Canada’s Dysfunctional Cell Phone Market

Insufficient Choice

Mobile connectivity in Canada is increasingly seen as a basic necessity for participation in the economy and society. From job-seeking, to keeping in touch with friends and family, to running a business, high-quality wireless services are an essential part of everyday life.9 Citizens the world over are increasingly going ‘wireless only’, giving up landlines in favour of mobile devices.10 However, Canada lags behind other countries like the U.S. in the shift from landlines to cell phones, and is actually growing in fixed line subscriptions11 while faring extremely poorly when measured in terms of mobile subscriptions per 100 inhabitants.12 In addition, cell phones are increasingly important as a means of accessing the Internet, and in Canada the high cost of handsets and data plans sharply limits this point of access.13 According to the 2011 CRTC Communications Monitoring Report, allowing new entrants into the market increases the number of wireless subscribers, while the average revenue per subscriber decreases as prices become more competitive.14 These beneficial effects of new market entrants suggest that more choice both stimulates the economy and discourages customer price-gouging.

There is clear and growing dissatisfaction among citizens with the general state of Canada’s mobile service market. The Commissioner for Complaints for Telecommunications Services (CCTS) noted a significant increase in the proportion of complaints related to wireless services since its first annual report; from 31% in 2007 – 2008, up to 62% in 2010 – 2011.15 As this study illustrates, and previous far-reaching citizen engagement efforts have shown, Canadians are encountering price-gouging, restrictive contracts, and disrespectful customer service, and have been complaining about these practices for years.16 This increase in telecom complaints is unlikely to change so long as three incumbent service providers—Rogers, Bell, and Telus—have a dominant share of the market.

Figure Two

CCTS Complaints by Type

CCTS Complaints by Type

Canadians have few alternative options because affordable independent cell phone providers cannot effectively reach new customers on a playing-field tilted in favour of these three incumbents. Government policy has allowed the incumbents to entrench and take advantage of their position by acquiring nearly all the wireless spectrum – the infrastructure essential to reaching Canadian customers.17 Rather than providing a level playing-field and effective safeguards for consumers, this allows just three companies are essentially able to regulate the mobile market. There is a serious lack of choice for Canadians, and these incumbents have little incentive to innovate or improve their rates and services, which in turn prevents Canadians from fully realizing the potential benefits of cellular technology. The dysfunctional cell phone market has resulted in poor service, punitively high prices, and acts as a dead weight on the Canadian economy.

Opportunities for Better Service

Wireless spectrum is the digital public infrastructure essential for mobile operators to connect their customers with wireless services. Spectrum is allocated in different frequency bands and Industry Canada is responsible for governing its use. In 2008, Industry Canada reserved a set amount in the AWS spectrum auction for new entrants, calling it the ‘the new entrant set-aside’. This permitted entrants such as Globalive (WIND Mobile) and David A/V (Mobilicity) to successfully enter the wireless marketplace.18 Unfortunately, Rogers Communications Inc., one of Canada's largest incumbent telecom companies recently made arrangements to obtain a portion of AWS set-aside spectrum from Shaw Communications. This defeats the original purpose of the ‘set-aside’ by giving more power to incumbents, further restricting independents, and therefore limiting choice for Canadians. OpenMedia.ca along with experts from public interest organizations and tens of thousands of Canadians through the DemandChoice.ca online campaign19 have called on Industry Canada to stop Rogers from obtaining this spectrum, and to assure Canadians that the government is “committed to advancing real competition that lowers prices and increases consumers' choices of wireless providers”.20

At the time of publication of this study Industry Canada was preparing for the 700 Mhz and 2500 Mhz spectrum auction.21 Industry Canada opted to put a cap on the amount of spectrum incumbents can obtain, rather than setting aside a band of high-quality spectrum for new entrants, as experts recommended.22 Incumbents could therefore use their allotted amount, under the cap, to obtain all the high-quality spectrum. Both spectrum policy and Rogers’ proposed takeover of spectrum assets are opportunities for Industry Canada to make wireless market improvements for Canadians.23

For the last ten years, the Canadian Radio-television and Telecommunications Commission (CRTC), the key organization responsible for ensuring fairness in the cell phone market, has effectively held off on addressing the problems of the Canadian wireless industry.24 This inaction has given the incumbents license to price-gouge customers and monopolize the market—even developing their own competitors, for example Rogers’ subsidiary Fido—leaving customers with few alternative options for services.25 OpenMedia.ca sought to emphasize the need for a fairer wireless market through its StopTheSqueeze.ca campaign in 2012, enabling 64,674 Canadians to call on government officials to promote policies that provide mobile service affordability and choice.26

Building on the clear public discontent expressed through the StopTheSqueeze.ca campaign, on December 22, 2012 the Public Interest Advocacy Centre (PIAC), alongside the Consumers’ Association of Canada (CAC), submitted an application to the CRTC requesting national rules that would curb the price-gouging practices of wireless telecommunications providers.27 The creation of these national rules falls within the CRTC’s mandate to “facilitate the development of a telecommunications system that enriches the social and economic fabric of Canada [and] that is accessible and affordable” and ensure that the system is “generally responsive to the economic and social requirements of individual users”.28

Establishing a national ‘Code of Conduct’ for wireless service providers is an opportunity for policymakers to begin to finally take steps to fix Canada’s broken telecom market. Following PIAC’s request, in April 2012 the CRTC launched a call for comments to decide whether the market situation was such that a code for retail wireless services was needed.29 OpenMedia.ca facilitated a demonstration of public support by creating an online tool that allowed Canadians to write in and request that the CRTC establish national rules,30 arguing, along with many other civil society groups, that policies are needed to promote a level playing-field, and that these policies should build on top of, rather than undermine, existing provincial rules.31 In the context of clear public pressure, on October 11, 2012, the CRTC announced it would develop a national Code for wireless service, and would hold a public consultation on this Code.32

Several provinces have already established rules of their own, including Quebec33 and Manitoba,34 while a regulatory framework was also proposed in Private Members Bill 133 in Ontario, which is currently on hold pending elections.35 These provincial rules give Canadians more control over their cell phone services but do not exist in all provinces. The CRTC’s decision to take these provincial initiatives further and create national rules is a welcome step.

The incumbent wireless providers also seem to be in favour of a national set of rules. Soon after PIAC submitted their request Rogers followed suit,36 and Telus made a request for minimum national standards, rather than having to adhere to differing provincial rules.37 During the hearing, the Canadian Wireless Telecommunications Association explicitly called for the national rules to supercede any existing provincial rules,38 confirming OpenMedia.ca’s fears that the incumbents would try to use the code to their own ends and to the disadvantage of customers. Incumbents hope to bypass strong provincial rules by pushing for a weaker set of national rules. OpenMedia.ca has therefore stressed that new rules must build substantially on these existing provincial efforts, and not override them.

Listening to What Canadians Have to Say

OpenMedia.ca took the CRTC’s national Code process as an opportunity to research the effect of the broken cell phone market on the lived reality of Canadians. The group began soliciting the input of citizens through its ‘Cell Phone Horror Story’ campaign.39 A wide sample of Canadians across the country were recruited in an effort to consolidate stories of wireless services from the customer perspective. Participants were reached through online advertising; social media platforms such as Twitter, Facebook, Pinterest, and Reddit; websites and blogs; traditional media outreach; as well as email. The public was asked to vote for the cell phone ‘horror story’ that best reflected their frustrations with their wireless companies: either price-gouging through extra charges, being locked into restrictive contracts, or being met with disrespectful customer service when trying to communicate with a service provider.40 OpenMedia.ca then surveyed specific experiences through an online tool which allowed the members of the public to submit a detailed description of the problems they had encountered.41 The group received robust public participation, with 2,859 responses recorded through the story submission tool over a period of approximately four months, and many more submitted afterwards. Citizens were later given the option of signing a petition calling for the CRTC’s new rules to protect customers.

Drawing on these detailed responses, OpenMedia.ca has produced this study outlining some of the main wireless service concerns of citizens. The report also puts forward recommendations to both the CRTC and Industry Canada for more citizen-centric policies that will facilitate a level playing-field and more choice in the wireless market (for a description of the methodology used to analyze citizen concerns, see Appendix A). In addition, OpenMedia.ca partnered with the Canadian Internet Policy and Public Interest Clinic (CIPPIC) to create a crowdsourced submission to the CRTC’s national wireless Code consultations,42 outlining detailed Code-specific recommendations that are grounded in Canadian experiences.43 Individual citizen stories were also sent directly to the CRTC, with the expectation that Commissioners would take the time to read each one.

Footnotes

9. OpenMedia.ca. (2011, June). Casting an Open Net: A Leading Edge Approach to Canada’s Digital Future. Retrieved from http://openmedia.ca/plan
10. Ofcom. (2011). International Communications Market Report 2010. Retrieved from http://stakeholders.ofcom.org.uk/binaries/research/cmr/cmr11/icmr/ICMR20..., p. 256
11. OECD (2011). OECD Communications Outlook 2011, OECD Publishing. http://dx.doi.org/10.1787/comms_outlook-2011-en, p. 129-130
12. ibid, p. 132
13. Ofcom. (2011). International Communications Market Report 2010. Retrieved from http://stakeholders.ofcom.org.uk/binaries/research/cmr/cmr11/icmr/ICMR20..., p. 210 – 211
14. CRTC. (2011, July). Communications Monitoring Report . Retrieved from http://www.crtc.gc.ca, p. ii.
15. Commissioner for Complaints for Telecommunications Services (2011) CCTS Annual Report 2010 – 2011. Retrieved from http://www.ccts-cprst.ca/wp-content/uploads/pdfs/en/CCTS-The-Year-in-Rev..., p. 13
16. OpenMedia.ca (2011, December 12) Stop the Meter Timeline. Retrieved from https://openmedia.ca/sites/openmedia.ca/files/Tariffs_Timeline_111212_0.png
17. Mewhort, K., and Anderson, S. (2012, March 8) Spectrum Policy in Canada: Leveling the playing-field for affordable rates and a breadth of choice. Retrieved from http://openmedia.ca/cellphoneplan
18. ibid, p. 8
19. OpenMedia.ca (2013, January) Demand Choice. Retrieved from http://www.demandchoice.ca
20. PIAC et al. (2013, January 18). Letter to The Hon. Christian Paradis, Minister of Industry, Re: Shaw-Rogers Option to Acquire Set-Aside AWS Spectrum. Retrieved from https://openmedia.ca/sites/openmedia.ca/files/PIACLetterReShawRogersAWSS...
21. Industry Canada. (2012, March 14). Policy and Technical Framework: Mobile Broadband Services (MBS) — 700 MHz Band, Broadband Radio Service (BRS) — 2500 MHz Band. Retrieved from http://www.ic.gc.ca/eic/site/smt-gst.nsf/eng/sf10121.html
22. Mewhort, K., and Anderson, S. (2012, March 8) Spectrum Policy in Canada: Leveling the playing-field for affordable rates and a breadth of choice. Retrieved from http://openmedia.ca/cellphoneplan
23. For more on spectrum governance see OpenMedia.ca’s Spectrum policy in Canada: Levelling the playing field for affordable rates and breadth of choice, available at http://openmedia.ca/cellphoneplan
24. CRTC. (2012, April 4). Telecom Notice of Consultation CRTC 2012-206. Retrieved from http://crtc.gc.ca/eng/archive/2012/2012-206.htm
25. Winseck, D. (2012, April 7). “Ask the Wrong Questions and . . . : the CRTC’s Review of Wireless Competition” in Mediamorphis. Retrieved from http://dwmw.wordpress.com/2012/04/07/ask-the-wrong-questions-and-the-crt...
26. OpenMedia.ca. (2012, February 6). Stop the Cell Phone Squeeze. Retrieved from http://stopthesqueeze.ca/
27. CRTC. (2012, April 4). Telecom Notice of Consultation CRTC 2012-206. Retrieved from http://crtc.gc.ca/eng/archive/2012/2012-206.htm
28. Israel, T. (2012, December 4). Intervention of the Samuelson-Glushko Canadian Internet Policy & Public Interest Clinic (CIPPIC) and OpenMedia.ca. Retrieved from http://cippic.ca/uploads/2012-557_Comments.pdf p. 2
29. CRTC. (2012, April 4). Telecom Notice of Consultation CRTC 2012-206. Retrieved from http://crtc.gc.ca/eng/archive/2012/2012-206.htm
30. OpenMedia.ca. (2012, April). Send your comments to the CRTC. Retrieved from http://openmedia.ca/nationalrules
31. CRTC. (2012, October 11). Telecom Decision CRTC 2012-556. Retrieved from http://www.crtc.gc.ca/eng/archive/2012/2012-556.htm
32. CRTC. (2012, October 11). CRTC invites Canadians to participate in the development of a code for cellphones and other mobile devices. Retrieved from http://crtc.gc.ca/eng/com100/2012/r121011.htm
33. Roseman, E. (2010, August 4). “Ellen Roseman: Quebec consumer law welcome move” in CBC News. Retrieved from http://www.cbc.ca/news/business/moneytalks/2010/08/ellen-roseman-quebec-...
34. WIND. (2011, June 21). “Manitoba the Wireless Consumer First with Bill 35” in Wind Mobile Blog. Retrieved from http://windmobileblog.com/2011/06/manitoba-puts-the-wireless-consumer-fi...
35. The Canadian Press. (2010, November 16). “Ontario MPP goes after cellphone billing practices” in CBC News. Retrieved from http://www.cbc.ca/news/story/2010/11/16/con-cell-legislation.html
36. Rogers Communications. (2012, March 8). Part 1 Application by Rogers Communications Partnership to implement a National Wireless Services Consumer Protection Code. [Letter] Retrieved from http://www.crtc.gc.ca/public/part1/2012/8620/r28_201202598/1683667.pdf
37. CRTC. (2012, April 4). Telecom Notice of Consultation CRTC 2012-206. Retrieved from http://crtc.gc.ca/eng/archive/2012/2012-206.htm
38. Canadian Wireless Telecommunications Association (2013, February 11). Transcript of Proceedings Before the Canadian Radio-Television and Telecommunications Commission. Retrieved from http://www.crtc.gc.ca/eng/transcripts/2013/tt0211.html
39. OpenMedia.ca. (2012, October 17). What's your cell phone horror story? Retrieved from http://openmedia.ca/horrorstory
40. OpenMedia.ca. (2012, October 31). What scares you the most about cell phone service in Canada? Retrieved from http://openmedia.ca/halloween
41. OpenMedia.ca. (2012, October 17). Canadians invited to tell their cell phone horror stories, as CRTC considers new protections. Retrieved from http://openmedia.ca/news/canadians-invited-tell-their-cell-phone-horror-...
42. CRTC. (2012, October 11). Telecom Notice of Consultation CRTC 2012-557. Retrieved from http://www.crtc.gc.ca/eng/archive/2012/2012-557.htm
43. Israel, T. (2012, December 4). Intervention of the Samuelson-Glushko Canadian Internet Policy & Public Interest Clinic (CIPPIC) and OpenMedia.ca. Retrieved from http://cippic.ca/uploads/2012-557_Comments.pdf

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