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Text-Message Fight Obscures Real Consumer Costs

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Of all the recent controversies involving Canada’s wireless carriers - and there have been many - the fight over the 15-cent charge for the receipt of text messages must surely rank as the most puzzling.  

The issue, which generated an enormous amount of attention from politicians, company executives, and consumers, effectively came to a conclusion on Friday after Industry Minister Jim Prentice acknowledged that he was not prepared to intervene.

Scratch below the surface and it is difficult to understand what all the fuss was about. Text messaging has admittedly become an enormously popular form of communication and the new charges feel like an ill-advised cash grab by Bell and Telus. To be fair, however, the charges are also a relatively minor consumer issue given that the overwhelming majority of wireless subscribers are not affected by it.  

Moreover, the political reaction reeked of opportunism.  Prentice had endured weeks of criticism from consumer groups across the country over his copyright reform bill and may have been looking for a way to re-make himself as a friend of Canadian consumers by briefly vowing to fight over the issue.

With the saber rattling over text-messaging charges now concluded, the issue should serve as a wake-up call on several festering problems with telecommunications in Canada.

First, the new charges again raise the concerns associated with long-term contracts that grant carriers the right to unilaterally change key provisions and leave consumers with little recourse (the contractual issue is currently the subject of a class action lawsuit).  Sign the three-year contract demanded by many carriers and you are stuck facing huge penalties for early termination.  Other countries have recognized this problem and mandated limits on the term of cell phone contracts. Canadian officials have stayed silent.

Second, Prentice highlighted the inherent unfairness of charging consumers for receipt of text-message spam.  Dig deeper, however, and the real problem lies with the inaction on spam more generally.  Canadians already pay for spam with expensive wireless data rates that do not distinguish between legitimate email and spam.  Canada remains one of the only developed countries to have not introduced anti-spam legislation, an issue that falls squarely within Prentice’s mandate.

Third, the new charge is part of a broader problem within the Canadian marketplace where in the face of limited competition, consumers pay more, but get less.  The Canadian Radio-television and Telecommunications Commission has been mandated to move toward a market-oriented approach for telecommunications, ensuring that there will be no broad ranging regulation of the wireless marketplace any time soon.  

In the absence of robust competition, many consumers have been left to wonder whether some form of regulation is needed. The same questions were recently raised in Europe, with the European Commission becoming much more actively involved within the marketplace.

As the government dithers on real action, the costs to consumers and business are enormous. The average cell phone subscriber spends more each month on their phone ($60 per month is the average revenue per unit according to the BCE 2007 annual report) than a family spends each month on hydro for a four-bedroom house.  Businesses face high costs for data services, forcing some developers to abandon the Canadian market.  

The 15-cent text message charge may have captured headlines, but it is what lies beneath that really matters.  The Canadian cell phone market is discouragingly uncompetitive and expensive by world standards.  Fixing those issues will require more work than a couple of press releases and hollow assurances that Canadian consumers enjoy plenty of choice.

 
 
Michael Geist holds the Canada Research Chair in Internet and E-commerce Law at the University of Ottawa, Faculty of Law. He can reached at or online at www.michaelgeist.ca.