Canada’s Competition Bureau wants to stop handset blocking

Canada’s Competition Bureau has put forward a submission to the Canadian Radio-television and Telecommunications Commission (CRTC) calling for the practice of operators locking handsets to be abolished and discouraging the application of switching costs when mobile customers look to change provider.

Mobile operators regularly lock new handsets so that they can only be used on that service provider’s wireless network. The Bureau said that in Canada, this means that “regardless of whether a consumer owns his or her wireless device, it can be difficult, costly, or impossible to move the device to a compatible rival network”.

The Bureau sets out two options to deal with handset locking. In situations where a handset has been subsidised by a service provider, a handset cannot be unlocked until 30 days after purchase.

“Where the service provider has provided a locked wireless device to a consumer, it must provide the consumer with the means to unlock the device after no more than 30 days of service, at the rate specified in the contract and personalised information summary,” it stated.

Option two, on the other hand, in where an operator has not subsidised the cost of handset, suggests that the consumer must be provided with the tools to unlock the device immediately after purchase.

“Locked handsets are a powerful block to consumers who want to switch service providers,” the Bureau said, adding that it believes that “device locking should be prohibited in the marketplace, and that service providers should be required to unlock any previously locked devices free of charge”.

Therefore, it recommends that option one be adopted in the Wireless Code, but with no fee attached to the unlocking, as any such fees create switching costs that may harm competition.

The Bureau added that switching charges reduce customer mobility, and abolishing them will allow Canadians to enjoy lower prices, higher quality service and greater innovation.

“The ability to choose from multiple competitors is an essential element of a competitive marketplace,” it said in its submission. “By reducing the switching costs that can be created by existing wireless contracts, consumers gain the ability to freely choose the service provider that offers the best service for their needs,” it said in its submission.

The Competition Bureau noted that with nearly $20bn in annual sales, the wireless sector represents a significant portion of the Canadian economy.