Wireless Code Primer, Part 1: To Sign or Not to Sign?

In anticipation of the CRTC’s new Wireless Code of Conduct, this summer wireless carriers across Canada changed their plans from 3- to 2-year term lengths. Prices changed (they went up) and the amount of minutes and data that come packaged together changed as well.

Some people will tell you that the CRTC is responsible for the price increase. This is not true – the price of the phones remains the same, but now the carriers are charging the same price over 2 years instead of 3. They’re also still making large profits. The rest of the world uses 2 year contracts. Our carriers stuck to 3 year terms for so long because the longer you’re locked in, the less providers have to compete for your business.

The shelf life of an average smartphone is about 2 years – another reason why 3 year plans don’t make sense – after so many charge cycles, the battery starts to wear down, the screen gets scratched up, and the hardware becomes outdated in relation to the software. You can keep your phone working just fine if you take good care of it, but it seems that for many people 2 just might be the magic number.

Since the new code is about to roll out, it seems like an opportune time to discuss the ins and outs of Canadian wireless plans.

So, without further ado, here’s Part 1 of my Wireless Code Primer: To Sign or Not to Sign?

The wireless carriers all offer service plans that come with a free or discounted phone, if you sign a contract. If you don’t take the cheaper phone, you can get a discount on your monthly rate instead, even if you sign a contract, or you could go month-to-month. It can be pretty confusing.

My friends often ask me (I’m that guy), ‘Should I sign a contract, or should I buy the phone outright? Which is the better deal? Oh, and it has to have data.’

‘There really are no good deals’ is my standard response. I often end up recommending MTS, because they give you more data for the same dollar, but they haven’t got national calling so you wind up paying the difference in long distance charges anyway. If you’re outside of Manitoba, try Wind – but don’t bother if you plan on leaving sight of their towers.

(Note that in both of these cases, the likely cause of these shortcomings is reluctance on the part of Bell, Rogers and Telus to offer reasonable commercial terms to smaller regional competitors.)

The data plans offered by the big boys are pretty much all the same: a mid-range contract will have a $55 line charge, a $30 charge for 1GB of data, and $0-200 up front for a smartphone. Some details are different, like the brand of device, the colour of the storefront, and advertising language, but dollar for dollar there are no substantial differences in terms of price.

The prices do vary by province. For instance, data seems to be a lot cheaper here in Manitoba. MTS has been a lot more generous with their data plans, so companies like Bell and Rogers are forced to match their offers. Pay attention to where each carrier has coverage, because some carriers will have less coverage than others. If you sign a contract and you get no bars at home, you might be out of luck!

When it comes to choosing a plan, your first consideration should be whether to buy the phone outright, or take the discounted phone and sign a contract.

Unless you really can’t afford to pay for the phone up front, you’re almost always better off when you don’t sign a contract. It’s cheaper up front to sign, but it isn’t always in the long run. You’re making a decision that’ll be with you for the next two years, so think about it first. Over 2 years, the price of a “free phone” is usually the same as one you buy outright, and it comes with some pretty big restrictions.

For only two choices, knowing which is the right one to make can be pretty confusing. Rogers says you ‘save $5*, $10*, or $20*, or up to 20%* if you ‘bring your own device.’ But they also tell you that you’ll get the phone as a gift or at a discount if you’ll sign a contract. Is it really a saving if everything’s permanently on sale?

Well it turns out that you don’t really save either way you choose. For the term option, while Rogers is busy giving you a gift with one hand, they’re reaching into your pocket with the other – the contract stipulates that you pay a higher monthly rate than you would with your own phone.

That’s because you’re essentially taking a loan from the carrier – but at what interest rate? You know the retail value of the phone, but there’s no way to tell how much they’re paying for it – that’s a trade secret. The reason they charge you a higher rate is to recover the cost of the “gift” that they gave you. Remember, there’s no such thing as a free lunch.

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The chart shows that if you’re buying a new iPhone, it’s only $9 cheaper over two years to sign the contract. This number varies depending on which phone you pick, so make sure to double check. A contract could wind up saving you as much as $100, or it could wind up costing you even more.

No matter which phone you pick, you’re paying $20 more per month on contract than on a month-to-month plan. And if you have an old phone that’s in good condition (my iPhone 4 is still going strong) you can really save some cash – at least $480 over two years.

Rogers, Bell, and Telus sell all of their phones locked, regardless of whether you’re signing a contract or not. That means that if you buy a phone from Rogers, you can only use it with Rogers.

The CRTC’s Wireless Code forces the carriers to unlock your phone for you, but they can still charge you a fee to do it. If you decide to go month-to-month, you’re better off to buy your phone from the manufacturer whenever possible. It will cost the same and that way you can switch providers whenever you want, and swap SIM cards when travelling to save on roaming.

You should also remember that Rogers exaggerates how much you save when you sign on the dotted line. On their website, in red block letters, they say “YOU SAVE $489.01right under the iPhone listing. This is false advertising. On a two year term, which is the only way you can get that discount, you only save $9.

This is the second time in as many months that I’ve caught Rogers using misleading advertising on their website. The CRTC should have the power to penalize these companies when they intentionally confuse their customers.

If you are thinking about signing a contract, you should probably wait until after December 2, since that’s the day that the CRTC’s Wireless Code takes effect.

In cases where the price works out to be the same in the long run, the question you should ask yourself when signing a contract that comes with a free phone is:

Would I rather pay less now and more later, or more now, and less later?

The bottom line is that you are generally better off saving up for your phone than you are signing a contract!

* The website’s fine print might as well be written in Klingon. Good luck figuring out the discount until they’ve got you in the store, where, if you’re anything like me, you’ll be right out of your element. I like to take my time when deciding to make a major purchase; I’d rather not be forced to decide on a 2-year commitment at the spur of the moment.

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One comment

  1. I would suggest looking at some of the phones coming out of China. Not only are they cheap but surprisingly high quality. Most are dual sim too. Just be sure to find out if they will work with whatever carrier you decide on.

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