Thursday, September 20, 2007

Cellphone Class Action Northern Style

A potentially large class action has been certified against BCE (BCE) Rogers Communications (RCI) and Telus (TU). BCE is supposedly in the final throes of being taken public by a group led by Teachers Private Capital and Madison Dearborn.

Apparently these three companies have been continuing to charge a system access fee in addition to the normal monthly charges. After interest the charges could amount to approximately $20 Billion or somewhere in the range of $600 to $700 per subscriber.

The system access fee used to be a tax imposed by the Canadian Federal Government. In 1986 the tax was no longer to be charged separately but was to be incorporated into charges from the cell phone companies. The cell phone companies just continued to charge a system access fee which no longer existed and have been enjoying a huge free cash flow.

No other cell phone companies charge a separate system access fee in this manner. By making it look as if this is a separate tax the cell phone companies have been able to give the appearance of lowering monthly rates and then pocketing the system access fee.

Apparently the issue has been festering for the past ten years. But now that the class action has been certified the cell phone companies must hand over records. As an interim measure they will surely mount their own court challenges to dismiss.

Watch for this one to slowly grow in stature and eventually become an important consideration. Wow $700 back on my cell phone bill where do I sign up?