TORONTO — Canada's telecommunications regulator is investigating mobile phone plans that allow customers to spread the cost of new devices over several years to determine if they comply with a mandatory limit on some contract terms.
A notice distributed by the Canadian Radio-television and Telecommunications Commission to various companies says providers offering the option must submit answers to more than a dozen questions by July 30.
The notice doesn't allege the rules have been broken but the questions focus on how retail customers are treated.
CRTC's Scott Hutton, chief of consumer, research and communications said the commission is aware that some wireless service providers (WSPs) are offering financing plans that are separate from the provision of wireless services.
"Commission staff is seeking information to better understand these device financing plans and how they are offered to customers," Hutton writes in a commission letter posted publicly on Wednesday.
Among the specific questions: Can a customer enter into a financing plan with a $0 down payment? Which devices or types of devices are eligible for the financing plans you offer? Can a customer cancel their financing plan?
The CRTC's notice, dated July 16, comes about a week after Rogers Communications announced a new 36-month device financing option as well as a 24-month device financing option.
That followed Telus's July 9 announcement that it would become the first Canadian national carrier to offer device financing, although it didn't offer a 36-month device financing option at the time.
The regulator's wireless code essentially limits service contracts to 24 months in length or less, so the offer of a three-year financing option raised questions about whether they would be acceptable to the CRTC.
Although regional carrier Eastlink has offered a two-year financing option since November 2013, Canadian carriers more typically lower the up-front price of new hardware, fully or partially, with a one- or two-year service contract.
Rogers appears confident that the new device financing options comply with the code because they don't charge interest or a cancellation fee, although outstanding balances may become due if the customer drops the service.
"Customers who choose device financing are on month-to-month service agreements with us. We're doing what's right for our customers and this is about offering them more choice and affordability," Rogers said in a statement Wednesday.
Telus said "Jim Senko our President of Mobility Solutions commented (earlier this month) that a 36-month financing option is attractive for a certain segment of customers and will help make it more affordable for those customers to get the latest smartphones, which continue to increase in price, at a much lower monthly cost when spread out over a longer term."
At one time, Canadian carriers also offered three-year service contracts but that changed after 2017 revisions to the CRTC's wireless code has prevented them from charging an early cancellation fee after 24 months.
Companies in this story: (TSX: RCI.B, TSX:T)