Why 3-Year Contracts Are Bullshit

We pay some of the highest rates for mobile phone service in Canada. To add insult to injury, we are also part the of lucky group of countries that have 3-year contracts. And it’s bullshit. Here’s why:

Direct Comparison

Let’s take a look at the exact same phone (iPhone 5) from two companies – TELUS in Canada and Verizon in the USA.

In Canada, the 16gb iPhone 5 will run you $179 with a 3-year contract. There is no option for a shorter contract. The only option is to buy the phone outright for $699.

iPhone5TELUS

In the US, the 16gb iPhone will run you $199 with a 2-year contract or $649 outright.

iPhone5Verizon

“Hey,” you say, “it’s actually cheaper in Canada on a contract!” Why yes, yes it is. By a whopping $20.

Let’s fast forward two years. If you’re a Verizon customer, your contract is up and you can upgrade to the newest phone with no penalty. If you’re a TELUS (or Bell or Rogers) customer, you’ve still got a year remaining on your contract. What does that mean? A penalty if you want to cancel and upgrade to a new phone. I logged into my TELUS account and found out I owe $404 on my device and I have 27 months remaining. That means I’m paying $14.96/month against my “device balance.” Extrapolating that out, here’s where I would stand after two years of ownership:

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Verizon

  • $199 up front
  • $0 to cancel
  • $199 total

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TELUS

  • $179 up front
  • $179 to cancel
  • $358 total

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Yeah, the $20 savings up front really makes a huge difference.

3-year contracts are bullshit.

 

Why Do We Have Them?

The big three will tell you that infrastructure costs are astronomical for such a large country with such a small population. That’s been debunked. Let’s not pretend the United States isn’t a huge country with lots of rural areas to service. Let’s also not pretend that none of the big three have ever received government money or payroll rebates or any other kind of handout over the years.

And it’s not like the providers are hurting. Bell made $2.6b in profit in 2012 on revenue of $19.9b, $5.5b of which was from their wireless division . TELUS made $362m in 2012. Both of these numbers were up from the previous year – 6.5% and around 5% respectively.

They are making a tonne of money on the backs of Canadians. The CRTC is implementing some welcomed changes, but 3-year contracts remain. Yes, you’ll be able to cancel after two years, but you’ll still have to pay to get out of the contract. No, you won’t pay a bullshit cancellation fee that is just a straight up cash grab, but you’ll still have to pay off what the company tells you remains on your “device balance.” So not much has changed on that front. The above table will still ring true.

Say it with me: 3-year contracts are bullshit.

Matt

About Matt

My name is Matt. I live in Nova Scotia, Canada. I am an educator, a photographer, and a lover of all things technology. Check out the About page for more information.

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