Cellphone users may be catching a break beginning next week when a new CRTC ruling will prohibit carriers from charging cancellation fees after 24 months of a contract.
In short, the decision will have unexpected benefits for those who signed a three-year contract with their mobile carrier prior to June 3, 2013. As of next Wednesday, June 3, those customers will be able to walk away from their contracts with no penalty. Even customers who signed a three-year contract between June 3, 2013 and December 2, 2013 will be able to save some extra cash as they will still incur cancellation fees, but the charge will be determined by a CRTC formula, not by their carrier.
What this means for Canadian carriers like Bell, Rogers and Telus is that a large wave of customers will effectively become free agents. A Scotia Capital report released in January estimated that 2.2 to 4 million of Canada’s ‘big-three’ customers were still on three-year contracts at the end of 2014. The barrage of customers expected to take advantage of their new-found freedom and ability to switch carriers or negotiate better deals has mobile companies nervous and desperate to retain their business.
While the change is not news to the industry – it was announced in December 2013, the beginning of carriers offering a maximum of two year contracts – there is anecdotal evidence, according to Business News Network, that carriers are willing to negotiate some unprecedented deals with high-value customers leading up to June 3.
“None of the carriers have actually advertised on their websites or anything, but there’s a lot of anecdotal evidence,” Greg MacDonald, head of research at Macquarie Capital Markets Canada told BNN in April. “I think if you’re a plus-$70 [a month] customer, you stand a good chance of getting a free upgrade on a new phone.”
Carriers began removing three-year contracts from their offerings in early 2014, spreading out the money made over three years onto a two-year contract, causing plans to immediately inflate in price. Part of the CRTC’s reasoning for this change was that most customers needed to replace their devices before their three year contract was up, causing many to incur costly cancellation fees to save money on a phone by signing a new contract.
Canadians pay some of the highest mobile fees in the world, according to a 2013 OECD report. We are the third most expensive country for data plans out of 34 analyzed in the report and Canadian carriers have the third highest revenue-per-user in the G8.
A standard Rogers ‘Share Everything’ plan with 1GB of data, unlimited Canada-wide calling and unlimited messaging currently goes for $85 a month.