Submission to CRTC consultation 2018-422: Reply to interventions

See initial intervention

January 28, 2019

On this page:

  1. Introduction
  2. A standardized quote and CIS should be provided to customers pre-sale
  3. A standardized quote and pre-sale CIS will reduce barriers to switching and drive competition
  4. Conclusion

I. Introduction

  1. This is the second intervention of the Competition Bureau ("Bureau") in response to Telecom Notice of Consultation CRTC 2018-422.Footnote 1
  2. While the Bureau and several service providers agree that a mismatch between what customers think they are going to get and what they actually get is a leading cause of customer frustration, there is disagreement regarding the appropriate way to remedy the issue.
  3. As set out in the Bureau's first intervention, to offset potential behavioural biases, key contract terms should be simplified to ensure they are read and understood by consumers. To achieve that, the Bureau recommends the development and implementation of a clear, simple and standardized quote that would be provided to a customer after an offer is discussed with a service provider or its third party representative. The standardized quote would be included at the beginning of the Critical Information Summary (“CIS”), summarizing the key components of the contract in simplified terms.
  4. In relation to section A.5 regarding clarity of offers in the Internet Code Working Document (“Working Document”), several service providers, through their initial interventions in this proceeding, state their opposition to the provision of a pre-sale CIS, citing that such a requirement would be overly burdensome for both consumers and service providers.
  5. In place of a pre-sale CIS, they assert that the Internet Code (the “Code”) should adopt the requirements set out in the Wireless Code and Television Code (the “Existing Codes”). Specifically, they assert that the Code should only set out communication standards which place parameters around what is disclosed to the customer during telephone calls and door-to-door sales as well as in its promotional material. They assert that providing the CIS post-sale would be sufficient to ensure contract terms are clearly understood by the customer.
  6. The Bureau disagrees that the approach set out in the Existing Codes is sufficient to address pre-sale non-disclosure concerns. Despite the implementation of the Existing Codes, non-disclosure continues to be the leading cause of complaints to the Commission for Complaints for Telecom-television Services’ (“CCTS”).Footnote 2 The CCTS has also reported that the communications standards provisions in the Existing Codes have been one of the most breached terms, with the number of breaches increasing over time.Footnote 3
  7. A pre-sale CIS would create greater accountability for both customers and service providers to help remedy issues of non-disclosure. Beyond mitigating non-disclosure issues, the provision of a pre-sale standardized quote and CIS would reduce barriers to switching service providers by allowing customers to compare offers from competing service providers more easily.

II. A standardized quote and CIS should be provided to customers pre-sale

a. There continues to be a disparity between a customer’s expectation and actual experience with their internet service

  1. The Bureau often receives complaints about discrepancies in expectations and reality with respect to billing charges, service delivery or usage. These include situations wherein additional non-optional fees, price increases and terms of service are not disclosed or understood in promotional offers or telephone calls with sales representatives prior to sale.
  2. According to the CCTS’s 2017-18 Annual Report, concerns about service providers’ failure to disclose important information was the top issue raised by customers across all telecommunication services, accounting for almost 15% of all issues raised. For internet services, non-disclosure complaints represent 13% of all complaints, and have increased by 56% from 2016-17.Footnote 4
  3. The CCTS also features various case studies to illustrate the types of complaints they receive, for example:
    • A customer from Saint-Charles-Borromée, QC agreed to a bundle of services for home phone, internet and TV. A service provider representative told him the price of the package would never increase. A few months later, the customer received a notice that the price would increase by $4 per month. During the investigation, the CCTS obtained a chat log between the customer and his provider, and confirmed that the agent had clearly promised the customer he would have this rate “forever.” This information was clearly wrong because the provider’s terms of service allow for it to increase its monthly prices. Based on these findings, the CCTS informed the provider that it expected it to maintain the price quoted to the customer ($117.85 per month) for 24 months because this is what the customer would have obtained had he been under a fixed 2-year term contract.Footnote 5
  4. Similarly, non-disclosure issues are a leading cause of complaints for the Bureau. The following is an illustrative example of the types of complaints received by the Bureau relating to non-disclosure:
    • A customer committed to a 2 year contract for internet services with unlimited data. Upon entering the contract, the customer agreed to pay $55 per month for the first 6 months, and then $90 per month for the remaining 18 months. A few months later, the customer was notified that their monthly bill would be increasing by $5 per month. At the time of sale, the customer was given no indication that the price could increase during the term of the contract. The only indication of a potential increase in price was included as part of the terms of service, which were sent to the customer after the contract had been entered into.
  5. According to the CCTS, such complaints arise not only from non-disclosure, but also ineffective disclosure, where there is disagreement between what an agreement or contract actually says and what the customer believes they were told and agreed to. They submit that clear and timely disclosure of key information to customers will help to reduce the number of non-disclosure issues raised by customers,Footnote 6 and suggest that the timing of the disclosure needs to be before the customer consents to the service.Footnote 7
  6. Furthermore, the CCTS suggests that customer complaints related to service delivery or billing, the top two issues raised in relation to internet services, often stem from non-disclosure issues.
  7. The CCTS notes that the mismatch between expectations and outcomes often manifests itself in complaints about billing charges, service delivery or usage, and changes to any of these that take the customer by surprise. It suggests that, in many cases, this arises from the service provider having failed to disclose, or having ineffectively disclosed, key aspects of the contract, service or pricing.Footnote 8
  8. In sum, based on the complaints received by the CCTS and the Bureau, it appears that non-disclosure is a significant and persistent issue across all telecommunications products, including internet services. As will be discussed further herein, a pre-sale CIS can reduce instances of non-disclosure complaints by increasing accountability and ensuring that customers can make informed purchasing decisions.

b. Communication standards do not sufficiently reduce customer confusion

  1. In the Working Document, section A.5 on clarity of offers states:
    • Option 1: A service provider must ensure that any offers made to consumers are clearly explained in all communications with consumers, including during telephone calls and door-to-door sales as well as in its promotional material. The explanation of an offer must clearly state the following:
      • the duration of the offer;
      • in the case of an offer that includes a time-limited discount or other incentive, the price of the service at the end of the time-limited discount or incentive;
      • any associated obligations on a consumer in relation to accepting the offer, including the commitment period during which an early cancellation fee can be applied and whether accepting the promotional offer changes other aspects of the customer’s contract.
    • AND/OR
    • Option 2: A service provider must provide a customer with a written pre-sale Critical Information Summary within 24 hours of making a specific offer to a consumer in person, over the phone, or online. See section C of this Appendix (Critical Information Summary) for more information on what a Critical Information Summary must contain and how and when it must be provided.
  2. Option 2 in section A.5 of the Working Document proposes that a service provider must provide a customer with a pre-sale CIS after an offer is discussed with a service provider or its third party representative. However, in their initial interventions, several service providers suggest that setting standards around how offers are communicated to customers, as set out in Option 1, is sufficient to remedy customer confusion.
  3. For example, Bell Canada (“Bell”) agrees that a “mismatch between what customers think they are going to get and what they actually get” is the leading cause of customer frustration, however it suggests, without providing any explicit rationale, that the communication standards set out in Option 1 are sufficient to remedy the issue.Footnote 9
  4. The Bureau does not agree that setting requirements around what is communicated to the customer during telephone calls and door-to-door sales as well as in its promotional material goes far enough. Despite similar requirements to those outlined in Option 1 in the Existing Codes, there continues to be a mismatch between what a customer expects when they subscribe to a service and their actual experience with the service in wireless and television services. Footnote 10
  5. More specifically, even with the communication standards set out in the Existing Codes, non-disclosure continues to represent the leading cause for complaints to the CCTS.Footnote 11 In fact, section B1(iii)(a-e) in the Wireless Code which sets out the communication standards for wireless services was the second most breached section of the Wireless Code in 2017-18, accounting for over 13% of all confirmed breaches. TFurther, the number of confirmed breaches of section B1(iii)(a-e) of the Wireless Code increased by 114% in 2017-18.Footnote 12
  6. The communication standards set out in the Existing Codes are similar to those described in Option 1 and have not sufficiently remedied non-disclosure issues. A pre-sale CIS can help to hold sales associates and customers accountable since a written record of the quote provided will exist and be in the possession of both parties. This can also simplify dispute resolution if a complaint is escalated to the CCTS.

c. A post-sale CIS will not serve to prevent pre-sale non-disclosure and confusion

  1. The current approach set out in Existing Codes with respect to the provision of a post-sale CIS does not go far enough to address pre-sale non-disclosure, which is evidenced by the persistent and growing number of non-disclosure complaints received by the CCTS for wireless services.
  2. In their initial interventions, several service providers suggest that the Code should adopt the same approach as Existing Codes with respect to the provision of a post-sale CIS. For example, Rogers Communications Canada Inc. (“Rogers”) highlights that Existing Codes require a CIS to be provided to the customer when the permanent copy of the contract is provided, and suggests that the same approach should be adopted for the Internet Code.Footnote 13
  3. In the 2017 review of the Wireless Code, the CRTC noted that despite some recent progress in addressing the issue of contract clarity, CCTS reports showed that misleading or unclear contract terms continue to be the most prevalent complaint received by the CCTS for wireless services. In their 2017-18 Annual Report, the CCTS reported that almost 18% of all wireless service complaints related to non-disclosure issues, and that the number of non-disclosure complaints has increased by 104% since 2016-17.Footnote 14 This is consistent with the experience of the Bureau.
  4. As set out in the Bureau’s initial intervention, a standardized quote and CIS should be provided to a customer after an offer is discussed with a service provider or its third party representative.
  5. In its initial intervention the Bureau described how certain industry practices have tended to impose costs on consumers who wish to avail themselves of competitive alternatives. These are called switching costs.
  6. Consumers are currently expected to compare service packages from different internet providers and evaluate variables such as connection type, data allowance, download/upload speed, promotional pricing and bundling, without a standardized format to effectively do so. Further, consumers are not always provided with sufficient information, or information that is explained in an adequately clear manner, to make informed purchase decisions.Footnote 15
  7. Due to the complexity associated with internet purchases, consumers are likely to simplify complex evaluation tasks in order to reduce mental burden, which can result in biased decision-making.Footnote 16 This can further exacerbate the time and mental costs associated with switching services.
  8. The provision of a pre-sale standardized quote and CIS will allow a customer to compare offers from different service providers more easily, which will reduce switching costs and increase customer mobility.Footnote 17 This will help to foster a level competitive playing field in a way that a post-sale CIS cannot. It will also prevent misunderstandings that may lead to customer confusion and support accountability on both sides of the transaction.

d. A “cooling off” period does not fully protect consumers from pre-sale non-disclosure

  1. The provisions established in sections B.4 and D.1, which set out key contract terms and how those can be changed by the service provider, and G.2, which mandates a minimum “cooling off” period, are insufficient to fully protect consumers from pre-sale non-disclosure – particularly when it is discovered past the “cooling off” period.
  2. As illustrated in the complaint to the CCTS provided in section II.a.(10) of this document, customers discover instances of ineffective or non-disclosure, such as unexpected terms and conditions that take the customer by surprise, well after they have entered into the contract with the service provider. Take for example, a customer who received a 6 month time-limited promotional rate, however it was not properly disclosed or understood by the customer that the promotion was time-limited. In such cases, the provision of a mandated “cooling off” period does little to protect the customer.

e. Burden should be considered and mitigated wherever possible

  1. In their initial interventions, several service providers suggest that providing a pre-sale CIS would be costly and overly burdensome to both customers and service providers.
  2. For example, Rogers argues that consumers would be required to spend considerably more time on the phone or at a retail store to provide personal information in order for Rogers to establish a customer profile.Footnote 18 Similarly, Cogeco suggests that seeking personal contact information from prospective customers to send a CIS appears overly intrusive, particularly at a pre-sale stage.Footnote 19
  3. Wherever possible, burden placed on customers and service providers should be minimized. For example, the CRTC should consider what personal information is necessary from the customer for the service provider to accurately complete and deliver a standardized quote (e.g. address, email) and complete the pre-sale CIS. Upon the customer entering into the contract, the service provider can then complete the CIS by obtaining any remaining personal information required.
  4. The Bureau also submits that, while not directly comparable, the collection of personal information for the purpose of sending a customer their pre-sale quote is common practice in other industries. In the car insurance industry, for example, upon receiving a quote from an insurance provider, a customer can request to receive a copy of their quote via email. The quote is sent to the customer virtually instantaneously and includes the customer’s personal information, coverage details, quote number and date through which the quote is valid.Footnote 20
  5. In their initial interventions, the CCTS and several service providers also advocate for consistency between telecommunications codes in order to minimize additional operating costs for service providers and reduce confusion for consumers, particularly in the case of bundled services.Footnote 21
  6. As set out in its first intervention, the Bureau agrees that provisions such as reviewing all telecommunications concurrently or amalgamating codes into a single code should be considered in order to ensure consistency across codes. Doing so will help to reduce regulatory challenges and costs for service providers and reduce confusion for consumers.

III. A standardized quote and pre-sale CIS will reduce barriers to switching and drive competition

  1. As has been discussed herein, a standardized quote and CIS should be provided to a customer after an offer is discussed with a service provider or its third party representative. This will increase accountability and ensure customers are provided with sufficient information, explained in an adequately clear manner, to make an informed purchase decision.
  2. There are, however, additional benefits to providing a standardized quote pre-sale. As was discussed in detail in the Bureau’s initial intervention, studies suggest that offers are easier to compare if they are organised into salient categories and expressed in terms of a common standard,Footnote 22 and that the provision of a simplified pre-sale quote can reduce barriers to switching by allowing for increased comprehension and comparability of offers.Footnote 23
  3. Switching costs deprive customers, businesses and the Canadian economy of the benefits of competition. In addition, switching costs reduce the incentive for established service providers to discount their prices and innovate as customers’ incentives to switch are diminished.
  4. The provision of a standardized pre-sale quote and CIS will reduce barriers to switching by allowing internet customers to more easily comprehend and, importantly, compare offers between service providers.

IV. Conclusion

  1. As noted above, a clear, simple and standardized quote and CIS should be provided to consumers pre-sale. In support of this, the Bureau submits that:
    • There continues to be a disparity between a customer’s expectation and actual experience with their internet service;
    • Communication standards do not sufficiently reduce customer confusion;
    • A post-sale CIS will not serve to prevent pre-sale non-disclosure and confusion;
    • A “cooling off” period does not effectively protect consumers from pre-sale non-disclosure; and,
    • Burden should be considered and mitigated wherever possible.
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