Virgin Mobile

Get it? Flipout?

Canadians pay too much for their monthly cell phone bill, and are dragged into lengthy contracts that punish consumers for ending them before their term, according to a SeaBord Group study entitled “Death Grip.” (Great name!)

There will likely be another wireless spectrum auction in 2012 or 2013, and could increase competition again in the country, as the auction did in 2008, leading to the creation of WIND Mobile and Mobilicity, two companies who are completely contract-free.

But these companies will always be at a disadvantage to the three incumbents, Rogers, Telus and Bell, in part because they are established brands within the country, whose networks extend nationally, but also because they offer huge phone subsidies when signing a contract.

The problem comes in when customers want to remove themselves from the contract; they have already received promotional prices on their phone, and likely preferred monthly rates on their plan, but the cancellation fee is directly tied to how many months remain in his or her contract. Sometimes these penalties can cost more than the cost of the phone itself, which is the whole reason the contract exists in the first place.

But contracts are guaranteed revenue for these carriers, and they are loathe to change their business model, especially for higher-end business and data clients, who spend $100+ every month on their smartphone plan.

The report goes on to say that even though the Canadian carriers have less “buying power” when purchasing handsets, the discrepancy between the cost to the consumer and to the carrier is too high, and consumers end up with the brunt of it.

Read the entire report, and see for yourself.

(via The Globe and Mail)