Competition watchdog seeks ban on smartphone ‘locking,’ end to high termination fees

Feb 6, 2013

Source: National Post

Canada’s competition watchdog is weighing in on a draft code of conduct for the wireless industry and calling for a ban on “locking” handsets, minimal termination fees and other steps that would encourage mobility between different carriers.

In a submission released Wednesday evening, the Competition Bureau said Canadians would enjoy lower prices, better service and increased innovation through “discouraging the creation of switching costs that tend to reduce customer mobility, and effectively encouraging the provision of sufficient information to enable informed consumer choice.”

Industry practices have tended to impose costs on consumers who wish to avail themselves of competitive alternatives

The federal agency made the submission in response to the Canadian Radio-Television and Telecommunications Commission’s publication last week of a working paper on a proposed code of conduct for Canada’s $19.1-billion wireless industry.

The CRTC began seeking input into a national code of conduct last fall and will hold public consultation hearings on the code next week.

In Wednesday’s submission, the competition watchdog focused on two main issues.

“First, certain industry practices have tended to impose costs on consumers who wish to avail themselves of competitive alternatives,” the Bureau said. “Second, consumers are not always provided with sufficient information in an adequately clear manner to make informed purchase decisions.”

On the issue of switching costs, the Bureau said wireless service contracts should be limited in duration, noting that long-term contracts like the three-year terms common among Canadian wireless carriers, can harm competition.

It also said locked handsets, which can only be used on one network, “are a powerful block to consumers who want to switch service providers,” and the practice should be prohibited.

The Bureau also targeted excessive termination fees in its submission.

Regarding the information required for consumers to make informed choices, the Bureau essentially called for more transparent advertising.

It said advertised prices should disclose all mandatory costs and limited plans should not be advertised as “unlimited.”

© National Post