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Beware cancellation fees when switching cellphones
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This is the online version of a story that appeared in the Toronto Star, 22 November 2003.

Beware cancellation fees when switching cellphones


Alison Prentice was a loyal Fido cellphone customer. Then she saw a promotion at a Telus Mobility store in Oshawa and decided to switch.

She signed a two-year contract, but was told she had 30 days to change her mind and return the phone for a full refund.

"Less than 24 hours after signing the contract, I wanted to cancel," she says.

In her view, Telus Mobility had no better cellphone coverage than Fido in areas where she couldn't get coverage before.

She went back to the store, only to find she couldn't cancel unless she paid $20 a month for the remaining 24 months ($480) or unless she found someone else to take over the contract.

Telus Mobility didn't respond to her lawyer's letter sent on Nov. 4. But it relented when we got involved this week.

"It appears there were indeed some process errors in the handling of her contract, so we are happy to release her from it and assume any related costs," said Mark Langton, a Telus Mobility spokesperson.

While conceding that Prentice got bad advice, Langton insisted his company had better service than Fido (the brand name of digital wireless services offered by Microcell Solutions Inc.).

"Our coverage footprint is eight times greater than Fido's in Ontario alone," he said. "We've converted thousands of Fido clients since we began our campaign in early October, largely based on that coverage difference."

Rogers and Bell Mobility are also targeting Fido customers, offering to let them keep their old rate but get a free cellphone and up to six months of unlimited local calls.

Fido, which recently emerged from bankruptcy protection, is taking an aggressive stand in bidding for business. This fall, it launched a $40-a-month plan with unlimited local calls in Vancouver and said it hoped to extend the fixed-price plan across the country.

Fido's larger rivals (Telus Mobility, Rogers and Bell Mobility) have limits on local calls in their rate plans. All three are now running promotions in Ontario targeting Fido customers and urging them to switch.

Telus was the first to start the negative ads. "Why? Because large numbers of the company's clients are leaving," says Langton, who doesn't mention the Vancouver price war, "and we'd simply like to ensure that we get our fair share of them."

More than 40 per cent of Canadians already own a cellphone. With the market close to saturation, it's easier for companies to expand by stealing customers away from a weaker rival than by lowering monthly rates.

Cellphones, known as handsets, are heavily subsidized by service providers. The standard benefit is $50 off the price of a phone for each year you sign a contract. For example, a $300 phone would cost you only $150 if you signed a contract for three years.

The companies hope to make up the profits they lose on the discounted cellphones in the higher rates customers pay over the life of the contract.

"The majority of our clients sign contracts," Langton says. "It's a two-way street. Clients like contracts because we make them attractive."

The downside, however, is having to pay a cancellation fee if you want to get out early.

Telus Mobility charges $20 times the number of months left in the contract, with a minimum of $100, as a cancellation fee.

Rogers Mobility also charges $20 a month times the number of remaining months, with a $200 maximum. Bell Mobility has a $99 service disconnection fee.

Fido is the only major carrier that doesn't sign people up to contracts. Customers are on a month-to-month plan and can leave any time.

We found details on cancellation fees at an independent Web site for Canadian phone shoppers, Comparecellular.com, as well as an article titled, "Contracts: Should I Sign?" at another Canadian Web site, GeckoBeach.com.

None of Fido's rivals force people to sign a contract to take advantage of the switching offers. But they load on the incentives and aren't always up-front about the cancellation fees.

What's next for Prentice? Now that she's out of her Telus contract, she plans to go back to Fido, which sent her a new and better phone after she called to cancel.

"My best advice, if you are a Fido subscriber and have some concerns about your phone or service, call and see what they can do for you," she says.

"If you want to try Telus, go ahead. But don't lock into any of their contracts."

We agree. Pay in full for the phone, in case you want to return it later. And if you're induced to sign a contract by a salesperson who offers a full refund, confirm it with the store first and make sure you get it in writing.


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