Canadians don’t switch communications providers despite their dissatisfaction with pricing and service, according to a new report from the Public Interest Advocacy Centre (PIAC).
The report looked at home internet, home telephone, mobile phone, and paid television services, finding that contractual penalties and consumer behavioural patterns are among the factors at play.
Most respondents to consumer surveys researchers analyzed (one conducted by the CRTC and another by PIAC) showed that over three-quarters felt they had a “real choice” of providers in the four segments of the market (mobile, home internet, landline telephone and home TV), but under a fifth of respondents had actually switched their provider over the most recent two-year period. The low switching number was not because they appeared to be greatly satisfied with their current service provider. In fact, a large majority expressed reservations about their present service and in particular, pricing. In addition to the fifth of the respondents who did switch, over a third of respondents actively considered switching providers in the two-year period.
PIAC says in addition to lengthy contracts with early termination fees for some services and pricing structures such as “bundled” packages that inhibit choice, telecom companies may be taking advantage of so-called “behavioural economics” that inhibit consumer decision-making. The report goes further to say communications companies appear to be well-aware of these consumer biases and design their offerings accordingly to increase profit.
“These behavioural biases interact with, and in many cases amplify, the structural barriers to choice and switching that exist in the communications marketplace creating an extremely challenging environment for ensuring beneficial outcomes for consumers. Most challengingly for regulators and consumers, it appears that behavioural biases may even encourage providers to engage in marketing, contractual and other practices that exploit those biases to limit choice and reduce switching,” the report states.
”Consumers are reluctant to try out competitive communications services, despite feeling they can and should,” said John Lawford, Executive Director and General Counsel at PIAC. “There are clearly behavioural barriers as well as market barriers to exercising choice in these markets.”
The report notes that while the CRTC has addressed some switching cost barriers for certain services with the implementation of the Wireless Code, regulatory and political action promoting choice across all four communications services has been limited and uncoordinated.
The report makes several recommendations:
- The CRTC should place an eventual ban on multi-year contract lock-ins for all communications services to enable customers would to be eventually on month-to-month contracts.
- Communications service providers eventually not be permitted to link the sale of service plans to the provision of devices in contracts (three-year phase-out of device linking).
- The CRTC should establish technical standards for enabling devices such as set-top boxes and related equipment so they are interoperable on all providers’ networks. This could also help in the long run to create a vibrant third-party market for the sale of such equipment and possibly lower service prices.
- The CRTC should ensure that consumers have easy and widespread access to an online rate comparison and calculating mechanism, providing up-to-date information on the features and costs of all communication services in Canada, including bundles that can be easily understood. These services should be accredited by the CRTC to fairly function and produce reliable results.
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