New Democrats Seek Cell Phone Reform

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THUNDER BAYOTTAWA – “Parliament needs to end repressive cellular phone network locks in order to promote consumer choice and to encourage much-needed competition in Canada’s cell phone market”, says New Democrat Small Business Critic Bruce Hyer.  The Thunder Bay Superior North MP tabled the Cell Phone Freedom Act Thursday to ban “network locks” or “SIM locks” on new mobile phones sold outside of contract.

“Mobile phone customers should have the freedom to choose whether they want to be locked into a company’s cell network or not.” Hyer insists. “Right now, most consumers don’t even know they can’t switch to another network without throwing out their phone and buying a new one, or trying to unlock their handset at some expensive aftermarket shop. Many resort to trying to download complicated instructions off the internet, but these can result in dead phones if used improperly.”

“When a consumer’s contract ends; they have in effect paid for their handset,” said New Democrat Consumer Protection critic Glenn Thibeault. “Once the contract is over, the consumer’s old service provider shouldn’t be able to dictate which service provider is used next. The handset belongs to the consumer and as does the choice of service network.”

The New Democrats state, “Because of an effective lack of competition in the Canadian marketplace, big wireless providers are not motivated to unlock phones, unlike carriers in most other countries”.

“The Cell Phone Freedom Act mandates that consumers must be informed of the existence of any network lock on new phones they buy” added Hyer . “Moreover, consumers should be able to ask that their handsets be unlocked if they choose to pay full price for the phone, when buying it outright without a contract. And when a consumer ends a multi-year contract with a company, they should also be able to get their phone unlocked, free of charge. This legislation will ensure consumers have that freedom. Restrictive cell phone locks should no longer be used as a tool to restrict consumers from moving to more competitive providers and to artificially restrict competition.”

“When we buy or lease a car, we would never tolerate the car company dictating that we can only fill up at a certain gas station. Why should the big phone companies get a free pass on similar behaviour?  It’s well-nigh anticompetitive.” continued Hyer.

A 2009 study by the Organization for Co-operation and Development found that Canada had amongst the highest prices for mobile phone calling amongst all OECD countries. Additionally, reports by wireless industry consultants the Seaboard Group found Canadian wireless penetration to be second last in the OECD, and implicated the relatively high Canadian prices in the suppression of demand for wireless services.

A petition at the site www.DontLockMyFreedom.ca was launched to present the case for an end to confining network locks. Unlocking a mobile phone is usually a trivial matter for phone companies, and can often be done by providing customers a simple unlock code that can be typed into handsets.

A “network lock” or “SIM lock” is a function of most modern cell phones that mobile service providers use to restrict customer phones to work on their specific network only, and in specific countries only. These locks prohibit consumers from switching to another carrier without incurring substantial costs such as purchasing a new phone or signing another multi-year contract, and inhibit competition. Unlike almost all other countries, in Canada there are no major cell phone service providers that sell unlocked mobile phones, or that unlock customer phones.

Highlights

  • The Cell Phone Freedom Act encourages competition and consumer choice by requiring that:
    • Consumers buying new cell phones in Canada must be informed of the existence of any network lock on their phone before sale;
    • Phone companies must unlock handsets upon request, without penalty, when a consumer purchases a new phone outright (unsubsidized) without a contract;
    • Phone companies must unlock handsets upon request, without penalty, when a consumer comes to the end of their contract or at any time thereafter;
    • There is an associated petition, website at www.DontLockMyFreedom.ca and Facebook group.

Key Points

  • Lack of competition in the Canadian wireless market, and lack of regulation, has led to a market situation where mobile phone providers can routinely place restrictions on consumer choice.
  • Placing “network locks” on phones so that consumers can only use their phones on a single provider’s network is standard practice in Canada.
  • These locks limit consumer choice and limit competition, resulting in poorer service and higher prices for Canadians.
  • Most Canadians aren’t even aware of the existence of these locks when they buy their phones.
  • While it is possible to do, it can be expensive, time-consuming and potentially damaging to unlock a mobile phone without knowing how to do it or where to go in the grey aftermarket. Unlocking a phone is a trivial matter for mobile service providers.
  • The Cell Phone Freedom Act levels the playing field for Canadians by ensuring, outside of contract, that they have the freedom and choice to move if they are dissatisfied with prices or service of their current phone company. This helps restore market competition.

Secondary Points

  • The ‘Big Three’ providers, Bell, Telus & Rogers currently control close to 95% of the Canadian market. Network locks will become increasingly important as new phone entrants offer competitive services more customers may want to try, and as Bell and Telus migrate to HSPA networks (whose phones use SIM cards). Rogers already employs SIM locks for phones on its GSM network.
  • Competition and regulation has drastically reduced or eliminated the practice of network locking most other countries in comparison to Canada. Examples: Australia, Holland, Spain, UK, USA
  • A number of other countries have already banned or placed restrictions on unreasonable network locks, especially at the end of a contract, or when full price is paid for a mobile phone to purchase it outright with no contract. Examples: Singapore, France, Finland, Brazil, Denmark.
  • This bill does not impose an outright ban on all handset locks, but instead strikes a balance between consumer protection, encouraging marketplace competition, and the ability of carriers to recoup handset subsidies over the life of a contract.
  • The government’s current copyright legislation, Bill C-32, includes an exception for unlocking cell phones. Thus, unlocking handsets will continue to be legal even if C-32 is passed.
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