Article Summary
Now that flagship smartphones cost well over $1,000, Canadians are looking for ways to afford this new tech. Three-year plans are still banned in Canada, but Rogers has introduced 36-month financing on new smartphones, tablets and smartwatches. How does it work and does it comply with the CRTC's Wireless Code of Conduct?
Update - March 5, 2021: The CRTC has finally ruled on the three year financing options offered by Rogers and Telus way back in 2019. The Commission concluded that the existing guidelines set out by the Wireless Code of Conduct applies to longer financing plans, so early cancellation fees must be reduced to $0 by 24 months.
As WhistleOut describes below, the 36-month financing contracts were inexorably linked to maintaining a minimum service plan with the carrier. This prohibits the customer from changing carriers after 24 months without incurring cancellation fees — even if those fees are the cost of the device.
While experts discuss if there is consumer interest in 3-year plans as new device pricing soars over $1,000, the Wireless Code remains in place to ensure competitive offers in the mobile industry. Ian Scott, Chairperson and CEO of the CRTC states, "We want to ensure that device financing plans are not being used to keep customers with their current provider at the end of their service contract."
Since 2015, Canadians have been freed from restrictive 3-year cell phone plans. Before that, cutting your contract early included harsh penalty fees. You were forced to continue paying for a smartphone for two years after it was the no longer the "hottest new thing".
Recently, cell phone prices have surged. Less than four years ago Apple released the iPhone 6s starting at $749 Canadian. When the iPhone XS was announced last year the Canadian price for the base model was over $1,000. To help afford ever-increasing device pricing, Rogers has introduced Edge Financing on 24-month and 36-month plans. WhistleOut covers the history of three-year plans, why they were banned, the ways Rogers Edge Financing is different and how it works around the rules.
Canada's Dark History With 3-Year Cell Phone Plans
In the first decade of the 21st century, flip phones and other cell phones were simpler, had batteries that lasted a week, and cost $200-$300 with some premium models like the Motorola RAZR costing as much as $500. Mobile phone users were mostly using their device as a phone. Sometimes they would text, but for the most part there were no features or speed boosts released annually that made people want the newest device.
When smartphones started showing up, prices also started to go up. By 2013 the newest iPhone 5 cost over $700 Canadian for the base 16GB model. Carriers like Rogers would offer the iPhone 5 for a low upfront cost if you signed up on a 3-year mobile plan.
And Then You Need A New iPhone
There are a few reasons you might need to upgrade your iPhone. You might have dropped it on the ground or jumped in the pool while it was still in your pocket. You might just want the newer model with a faster processor and more storage. No matter the reason, you should have the right to upgrade with little consequence, right?
Three-year plans in Canada from every carrier were notorious for steep cancellation fees. If you wanted to upgrade after two years, you needed to pay off the remaining 1/3 of the phone plus a cancellation fee that could be a hundred dollars more. In the US, plans for the same smartphones were cheaper and only two years. Canadian consumers started to complain and the CRTC took measures into their own hands.
The CRTC and the Wireless Code of Conduct
The Canadian Radio-television and Telecommunications Commission is a government agency responsible for regulating telecommunication carriers. In response to an increasing number of complaints from Canadian consumers about the mobile services industry, the CRTC created the Wireless Code of Conduct; a set of guidelines that wireless carriers must follow.
Highlights of the Wireless Code of Conduct include:
- Limits on data and roaming charges
- All cell phones must be sold unlocked, and older models unlocked for free upon request
- 15-day trial period on plans and devices without penalty
- Clear language on all contracts
- No cancellation fees after 2 years
That last one was a big deal for the industry. It used to be almost impossible to buy a new phone on contract without signing up for three years.
Rogers 36-Month Financing Solution
According to the Wireless Code of Conduct, if Rogers signed you up to a three-year contract then you could leave after two years without paying any penalty fees. None. Zilch. Just walk away.
So, how is it possible to buy a phone using the Rogers Wireless 36-month Edge Financing and just leave at any time?
The Problem With 3-Year Plans
Let's use an example from a current Rogers Wireless promotion:
The iPhone 7 (32GB) is being sold on Rogers Infinite plans with 3-year Edge Financing. The retail price of $650 is split over 36 equal payments of $18.05/month. That's pretty affordable, right?
Flash forward to the year 2022. You're still paying eighteen bucks every month for a phone that was released more than four years ago. That might not be a big problem for you. After all, not everyone needs the newest and fastest phone.
However, Apple will probably stop supporting software updates for the iPhone 7 as early as next year. By your third year you could be still paying off a phone that no longer gets security updates and is possibly out of warranty.
The software update support window is even smaller for Android devices. For example, if you buy last year's LG G7 ThinQ on 3-year Edge Financing, you pay $12.50/month until summer 2022, but software upgrades end next year and security updates end by spring 2021.
The Loophole: Separating the Plan From the Phone
While they appear on the same bill, your monthly wireless fees will be separate from your financing. You effectively buy the phone when you sign up and then immediately put it on a 3-year 0% financing plan.
At any time you can leave the plan and even move to another carrier without any cancellation fees. However, your financing plan is also cancelled leaving you to pay off the remaining financing balance.
Where Rogers Might be in Trouble
WhistleOut received an official statement from Rogers making it clear that the only option when severing a wireless plan with 36-month financing was to pay off the remaining owed on the device.
Under the Wireless Code of Conduct, early cancellation fees on subsidized devices "must be reduced by an equal amount each month, over a maximum of 24 months". For example, if you cancel a 24-month plan with 6 months left and you received an iPhone for $0 down, then your cancellation fee is 6÷24 = 25% of the original price of the iPhone.
Any time after 24 months the service contract cancellation fee should be $0. With 36-month Rogers Edge Financing you need to pay the remaining owed even after 24 months because the service contract and device financing are separate.
Or are they? After all, you can't cancel your service plan without also cancelling the device financing.
Guides for Changing Cell Phone Plans
Many cell phones already work across all Canadian mobile networks. If you bought a smartphone in 2018 or 2019 then it will already be unlocked (provided you bought it in Canada). Older than that, and your current carrier must unlock it for free upon request. It's your right, and we have a full guide to unlocking your cell phone to help you do it.
For over a decade, Canadians have had the right to change phone providers and while keeping their phone number. Don't cancel your old line, but instead read up on switching phone companies and keeping your number.
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