Canada's telecom companies want clarity on part of the new wireless code

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MONTREAL -- Canada's major telecom companies are challenging part of the CRTC's new wireless code of conduct, saying it would affect millions of three-year cellphone contracts retroactively.

Rogers (TSX:RCI.B), Bell (TSX:BCE), Telus (TSX:T), SaskTel, Manitoba Telecom Services (TSX:MBT) and others say the code would retroactively apply to three-year contracts signed before it comes into effect on Dec. 2. They say that would include this year's busy back-to-school and pre-holiday sales.

The telecom companies said Wednesday the result will be confusion for carriers and consumers and have turned to the Federal Court of Appeal to resolve the issue.

"Wireless service providers that continue to offer three-year fixed-term contracts with a heavily subsidized device do not know whether these customers will be entitled to cancel those contracts after two years starting June 3, 2015, without repaying the unpaid portion of their device subsidy," the telecom companies said in their legal brief seeking leave to appeal that part of the code.

The sticking point for the companies is the subsidy on a device, usually an expensive smartphone that can cost as much as $700, that customers receive when they agree to a three-year contract.

"The application of the wireless code to those contracts that terminate after 3 June 2015 is uncertain," the companies said in their brief.

The CRTC has said the "wireless code should apply to all contracts, no matter when they were entered into, by no later than 3 June 2015," the brief said.

The Canadian Radio-television and Telecommunications Commission said it had no comment on Wednesday since the matter is now before the courts.

Under the new rules unveiled last month by the CRTC, cellphone customers will be able to walk away from their contracts after two years without any early-cancellation penalties.

The CRTC ruled early cancellation fees must not exceed the value of a device subsidy and must be gradually eliminated over 24 months.

But the telecom companies note that the CRTC through its staff members has taken "inconsistent positions" on whether the code applies on a mandatory basis to contracts signed before Dec. 2.

Telus spokesman Shawn Hall said changing contracts that have already been signed by consumers is a "troublesome precedent" and the company has been unable to get a firm answer from the CRTC on whether its decision is retroactive.

"So we are seeking clarity from the courts," Hall said.

"We support the code and are actively working to implement the code, but we're concerned about this one aspect of it."

Advocacy group OpenMedia.ca said the code should be applied retroactively and Canadians will be upset otherwise.

"What big telecom are trying to do is they're just trap Canadians into these completely unfair, extortionist contracts for even longer," spokesman David Christopher said.

"What the CRTC had said is from June 2015 onward, all cellphone users in Canada could escape their contract after that two-year period. That's why so many people are going to be very disappointed and very, I think, outraged at big telecom for making this move," Christopher said.

Industry Canada said it continues to support CRTC's wireless code.

"Our government supports measures that put consumers first and fosters greater competition," Industry Canada spokeswoman Alexandra Fortier wrote in an email.

"Greater competition means better prices for Canadian consumers. The new wireless code is a step in the right direction."

Telecom analyst Troy Crandall said there's roughly a six-month period where the telecom companies could be on the hook for unpaid subsidies which were agreed to with customers.

"Somebody's going to take a hit, basically, for the six months' amortization and the way it currently stands it would be the telecoms," said Crandall, of MacDougall, MacDougall & MacTier.

"The non-clarity here doesn't help anybody," he said.

Rogers said its supports the wireless code, including the new two-year contract provisions, but it is seeking clarity on how it will be applied.

"We believe that both consumers and carriers need predictability and transparency on how the code will be applied," Rogers said in a statement.

"It is unclear whether the code should apply retroactively to contracts signed before the code takes effects. As such, we are seeking clarification from the courts."