Think your wireless service contract ties you down?

More than 500 Canadians filed comments about their wireless service with the Canadian Radio-television and Telecommunications Commission as the telecom regulator wrestles with a proposed code of conduct for Canada’s wireless industry and the contracts they hand customers. Why? Because of language like this from a typical contract with Rogers Communications:

Device Savings Recovery Fee (applicable to term commitment customers only for any new term entered into on or after January 22, 2012): A Device Savings Recovery Fee (DSRF) applies if you have been granted an Economic Inducement (as defined below) upon entering your new term, and if, for any reason, your wireless service or your new term is terminated prior to the end of the term of your Service Agreement (Service Agreement Term). The DSRF is the amount of the economic inducement (which may take the form of a discount, rebate or other benefit granted on the price of your Equipment), as stated in your Service Agreement (Economic Inducement), less the amount obtained by multiplying such Economic Inducement by a fraction representing the number of months elapsed in your Service Agreement Term as compared to the total number of months of your Service Agreement Term (plus applicable taxes). In other words, DSRF = Economic Inducement [Economic Inducement × (# months elapsed in your Service Agreement Term ÷ Total # months in your Service Agreement Term)] + applicable taxes. An Additional Device Savings Recovery Fee (ADSRF) also applies if, for any reason, your wireless data service, or your data plans commitment term (Data Term), is terminated prior to the end of your Data Term. An Additional Device Savings Recovery Fee (ADSRF) also applies if, for any reason, your wireless data service, or your data plans commitment term (Data Term), is terminated prior to the end of your Data Term. The ADSRF is the additional Economic Inducement you received for subscribing to your wireless data service, less the amount obtained by multiplying such Economic Inducement by a fraction representing the number of months elapsed in your Data Term as compared to the total number of months of your Data Term (plus applicable taxes), and applies in addition to the DSRF for termination of your Service Agreement. If you subscribe to a plan combining both voice and data services, both the DSRF and the ADSRF apply, up to the total Economic Inducement.

Despite contract confusion being an issue in the eyes of the CRTC, the overwhelming majority of comments focused on something else that irks Canadians above all else: being held hostage by the industry’s traditional 36-month wireless contract, one year longer than consumers in the United States find common.

“Get rid of the 36 months contract,” wrote one Canadian, noting contract creep is all the rage. “It first started with 12 months, then 24 months, now the standard is 36 months, which is ridiculous!”

Most of the comments came from customers of the chief three providers: Bell, Rogers, and Telus. All three received scorn from customers for uncompetitive, expensive service.

The state of competition in Canada:

Roger offers new plans:
– $55 1000min local, unlimited text, 200MB
– $65 unlimited local/text, 1GB
– $75 unlimited local/text, 2GB
– $95 unlimited canada/text, 5GB

Then Bell offers their new competitive plans:
– $55 1000 min local, unlimited text, 200MB
– $65 unlimited local/text, 1GB
– $75 unlimited local/text, 2GB
– $95 unlimited canada/text, 5GB

Then Telus offers their competitive plans:
– $70 unlimited local/text, 1GB
– $80 unlimited local/text, 3GB
– $100 unlimited canada/text, 5GB

Where is the competition? These plans are all the same.

Also unfamiliar to Americans, the automatically-renewing contract that snags Canadians that forget to cancel with a brand new service commitment complete with a cancellation penalty. Perhaps the most consumer-friendly provinces in Canada are Quebec and Manitoba, which ban certain kinds of termination fees and auto-renewing contracts. Canadians want these bans extended nationwide. The European Union already bans 36 month contracts and made 24 months the maximum. One former resident of the United Kingdom noted the EU also compels providers to offer 12 month contracts for those who want them.

The CRTC may not provide much relief if it remains convinced the marketplace remains competitive.

The agency points out under the Telecommunications Act, the CRTC will only intervene in a market if there is insufficient competition to protect the interests of users.  In the 1990s the CRTC decided to allow market forces to guide the growth of the mobile wireless industry.

The CRTC seems to have already made up its mind on this issue when it announced its proceeding:

In the decision issued on 11 October 2012, the CRTC found that there was competition sufficient to protect the interests of consumers and it did not need to regulate rates.  Although many consumers indicated concerns about wireless rates and the competitiveness of the wireless market, a number of market indicators demonstrate that consumers have a choice of competitive service providers and a range of rates and payment options for mobile wireless services. According to the CRTC’s 2012 Communications Monitoring Report, new entrants in the mobile wireless market continue to increase their market share and coverage. Companies continue to invest in new infrastructure to bring new innovative services to more Canadians. Moreover, the average cost per month for mobile wireless services has remained relatively stable.

The CRTC concluded that competition in the mobile wireless market continues to be sufficient to protect the interests of users with respect to rates and choice of competitive service provider.

That makes it more likely than not the agency will limit itself to ordering wireless carriers to better explain their wireless policies, not force them to change them.

The only relief potentially available outside of canceling service is considering one of several new competitors which offer relaxed terms and better prices to attract customers. So far, only 4% of Canadians have switched to WIND, Mobilicity, Vidéotron, or Public Mobile. Some may be trapped in current contracts with larger companies or are discouraged having to buy new equipment to switch providers. Most providers in Canada, like in the United States, lock phones so they cannot be easily used on another company’s network.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/CRTC Cell Phone Contracts 12-12.flv[/flv]

The CRTC used this video to invite consumers to share comments about confusing wireless service contracts. Instead, criticism of tricky term contracts that auto-renew and last three years arrived in buckets. (2 minutes)

AT&T has once again received the dubious distinction of being America’s worst cell phone company, according to ratings (sub. required) from Consumer Reports.

AT&T’s bottom-of-the-barrel status has become something of an annual tradition in the consumer magazine’s ratings, as the company remains in last place year after year for dreadful performance, poor value, and downright lousy customer service. Its one bright spot: the company’s new 4G LTE service, which gets top marks for speed, although that rating comes before the majority of its customers are on the new network.

Verizon Wireless also took a tumble in the ratings published in the January 2013 issue. Verizon got downgraded for its new Share Everything plan, rated as only a fair value. Verizon’s vaunted customer service also declined significantly.

The highest ratings went to companies many never heard of:

• Consumer Cellular: This company resells AT&T service. The disparity between this top-rated, no contract provider and AT&T demonstrates that a bad customer experience with AT&T’s high prices and poor customer service can topple your ratings across the board. Consumer Cellular will face the same growing pains AT&T’s customers do in congested cities, but their customers seem to tolerate them better;
• U.S. Cellular: Top rated last year, this regional carrier provides service in the Pacific Northwest, Midwest, parts of the East and New England. The carrier, like the southern U.S. provider C-Spire, would probably have been acquired by one of the top-four carriers if the Justice Department seemed willing to accept further market consolidation. Its customers benefit from the company’s independence.
• Credo Mobile: Resells the Sprint network, but delivers superior customer service, which boosts its overall ratings. Formerly known as Working Assets, this progressive organization also enjoys loyalty because customers approve of the political and social causes with which it affiliates.

Overall, the magazine increasingly recommends consumers investigate no-contract or prepaid service plans before signing an expensive 2-year contract with the major four carriers. Pricing changes in 2012 have caused many subscribers to see bills rise, even as perks and benefits continue to erode. Device activation fees, upgrade fees, limits on early upgrades, restricted data plans, and all-or-nothing offerings that deliver (and charge) for features many consumers don’t use much have all reduced the value of contract service.

What keeps most customers coming back to another two-year contract is the chance to grab the hottest new smartphone at a discount. But consumers ultimately pay back whatever they have saved in higher fees over the life of the contract, which may make buying your own device at full price a better value with a no-contract plan.

Major cable and phone companies are rolling out new bundled packages and promotions designed to protect their cable television packages from cord cutting.

Verizon, Comcast and Time Warner Cable have all run promotions that carry a clear message: cancel your cable television and your wallet gets it.

The Wall Street Journal shared the story of Comcast subscriber Cathy Vu, who decided she no longer wanted cable TV and tried to downgrade to a broadband-only account.

Comcast gave her an offer she could not afford to refuse when the representative explained canceling cable television would increase her monthly bill $20. As a result, Vu decided she would save more money keeping her cable television turned on.

Welcome to the new world of double and triple play bundled pricing promotions that bring downgrade penalties customers cannot ignore.

The idea of repricing cable service to protect vulnerable cable television and phone service began in earnest after analysts like Sanford Bernstein’s Craig Moffett began noticing customers were no longer addicted to keeping cable television, no matter the cost. He proposed a solution: price broadband service higher and cut the cost of cable television.

The result: carefully constructed promotional and bundled package offers that entice customers to purchase services they might not even want, to get the best (and sometimes lowest) price. Gone were promotions that offered phone, broadband, and television service for $33 each. In their place, new pricing that charges $60-70 for the first service, and heavily discounted prices for each additional service.

You know the pitch:

“Yes, I am calling to sign up for broadband service,” you say.

“Certainly, I would be glad to help you with that. But did you know that for just $20 more a month, you can also get cable television?”

“Really, it’s only $20 more? Sure.”

“I am thrilled to hear you say that. But I hope you are sitting down because I have more good news. For just $10 more, we can give you a phone line with unlimited local and long distance calling. How much do you pay the phone company now?”

“Too much, that sounds like an amazing deal, so I get everything together for $99 a month?”

“You sure do, for the first 12 months anyway.”

One year later when the promotion ends, you call to begin downgrading service to lower your bill. But cable and phone companies are increasingly ready for you.

First they will offer you a slightly less attractive promotional retention offer to keep your business. If you accept, the company gets to book the extra revenue and probably locked you into an annual service agreement.

If you don’t bite and insist on a downgrade, they have some bad news for you — that broadband service you still want will now cost you $60-70 a month, including the modem fee.

If you bail early on a promotional discount offer, the bite on your wallet can be significant.

The Journal found unbundling just does not pay:

• Comcast: TV + Internet for about $50/month for the first 6 months vs. standalone same speed Internet for about $70/month.
• Verizon FiOS: TV + Internet for about $85/month (two-year contract) vs. standalone Internet for about $80/month.
• Time Warner Cable: TV + Internet for about $50/month for 12 months vs. standalone Internet for about $45/month for 12 months, then up to $60 after that.

At the end of the day, Moffett and the rest of Wall Street get their wish — preservation of the all-important growing average revenue (ARPU) collected from each customer. Downgrades lower ARPU, so they must be discouraged at all costs.

Cable operators “recognize that their most advantaged product is broadband,” said Moffett. “They don’t want to sacrifice that advantage by giving the opportunity for customers to cherry pick their best product at a low price and take the rest of your services from somebody else. In effect, they are pricing the broadband at a price that discourages you from taking broadband only.”

Customers primed for cord cutting (or who have never bought cable TV) are likely to receive targeted mailings from Verizon, Comcast and Time Warner Cable encouraging subscriptions to cable TV and prices that nearly give the service away.

Comcast’s Blast Plus promotion in selected markets delivers 30Mbps broadband with Digital Economy television service, both for $50 a month for six months. Internet-only customers would pay $70 per month for the same speeds without television.

Time Warner Cable in New York City wants to be your cable TV supplier so much, it offers a package of broadband and throws in Broadcast Basic service for just $5 more per month. Combined, Turbo Internet and television will cost $49.99 a month for a year. Standalone Internet on a promotion runs $45 a month for 12 months.

On a strict cost basis, charging more for Internet does not make sense. The Journal reports that about 90% of your monthly broadband bill is pure profit for cable operators, because the cost of delivering the service has continued to plummet to all-time lows. Cable television is no longer the cash cow it used to be for cable operators because programmers increasingly demand a piece of the profit pie. Today, cable operators only get to book about 35% of your monthly cable television payment as profit.

[flv width=”640″ height=”369″]http://www.phillipdampier.com/video/WSJ Cable Cord Cutting Less Attractive 11-13-12.mp4[/flv]

The Wall Street Journal examines the trend towards repricing broadband service so that customers feel compelled to keep their cable television package or face even higher bills.  (5 minutes)

Two class-action lawsuits were filed Tuesday on behalf of Time Warner Cable customers in 29 states to force the company to refund ill-gotten modem rental fees in violation of consumer fraud laws.

“It’s a massive hi-tech consumer fraud accomplished by low-tech methods,” said attorney Steven L. Wittels. “Send customers confusing notice of the fee in a junk mail postcard they’ll throw in the garbage, sock them with a $500 million dollar a year rate hike, then announce on your website that customer satisfaction is your #1 priority. That’s some way to deliver satisfaction.”

The context for the class action suit is that Time Warner Cable began imposing the fee Nov. 1 without giving customers appropriate notification. New York City residents had little more than two weeks notice in the form of a poorly printed postcard. Some residents in western New York and other cities have still not received notification from the cable company, either on bills or in the mail.

The two lawsuits were brought on behalf of Manhattan resident Kathleen McNally and Fort Lee, N.J. resident Natalie Lenett, but the suit asks the court to order refunds for all Time Warner Cable customers charged modem fees across their national service area.

The Consumerist thought the company’s failure to meet the timely notification requirement about the forthcoming modem rental fee might have the cable company dead to rights:

Pricing and Service Changes

Unless otherwise provided by applicable law, Time Warner Cable will notify you 30 days in advance of any price or service change. Notice of these changes may be provided on your monthly bill, as a bill insert, as a separate mailing, in the Legal Notice section of the newspaper, on the cable system channel(s) or through other written means.

But on closer examination, that provision only applies to pricing and service changes for Time Warner Cable’s television service, not broadband or home phone service.

In fact, Time Warner Cable’s new Subscriber Agreement has reserved the right to change just about anything it likes, just by updating the terms and conditions on its website:

We May Change our Customer Agreements

(a) We may change our Customer Agreements by amending the on-line version of the relevant document.  Unless you have entered into an Addendum that ensures a fixed price for a period of time (for instance, a Price Lock Guarantee Addendum), we may also change the prices for our services or the manner in which we charge for them.

(b) If you continue to use the Services following any change in our Customer Agreements, prices or other policies, you will have accepted the changes (in other words, made them legally binding).  If you do not agree to the changes, you will need to contact your local TWC office to cancel your Services.

(c) Any changes to our Customer Agreements are intended to be prospective only.  In other words, the amended version of the relevant document only becomes binding on you as of the date that we make the change.

One significant change Time Warner inserted in its Subscriber Agreement (the one printed in tiny print on tissue-thin paper, occasionally mailed with your bill) was deemed so important, it appears highlighted and in bold language:

Time Warner Cable now requires customers to submit disputes individually to binding arbitration, denying the right to bring or participate in any class action case. However, customers can opt-out of this provision simply by notifying the company through an online form. (You will need your Time Warner Cable account number.)

In practice, this would require McNally, Lenett, and millions of other customers to individually submit to a time-consuming arbitration proceeding — all to fight a $3.95 monthly fee. Few would bother. Wittels told The Consumerist the lawsuit still has merits because of other language Time Warner Cable maintains in its agreement which he believes holds the door open to a class action challenge.

Although customers are invited to purchase their own cable modem equipment to avoid the fee, the lawyers involved say the options are limited and expensive.

Time Warner Cable has expanded the list of modems approved for customer purchase. Buying your own cable modem will exempt you from the company’s $3.95/month modem rental fee, applicable to all but customers on special promotions or the elite Signature Home tier.

The Motorola SB6121 ($79) is back on the approved list, although customers intending to aggressively upgrade speeds as Time Warner introduces faster tiers may be happier with the Motorola SB6141 ($99), which supports more bonded channels than its lesser counterpart. The models from Netgear and Zoom were undistinguished in customer reviews — the Zoom for a noticeable number of reports complaining about the product’s short longevity and the Netgear for compatibility issues, poor quality control, and irritating customer/technical support.

Stop the Cap! continues to recommend the Motorola SB6141, which delivers top-rated performance and is future-proof with support for up to eight bonded data channels — 300Mbps service. Although still expensive on Amazon.com, increased competition has dramatically cut pricing on eBay at “Buy It Now” prices ranging between $86-100 at time of writing. This means no bidding hassles, no upfront sales tax, and free shipping for most buyers. The Motorola 6141 is what we use here at Stop the Cap!, acquired from an eBay vendor for $99. Now you can do even better.