MONTREAL - Canada's mobile phone companies will be required to make sure consumers understand their contracts when they buy a cellphone under a new code of conduct.

The code of conduct also says cellphone companies are to "communicate with their customers in a way they understand."

The rates, terms and coverage offered all have to be explained clearly to consumers, said Bernard Lord, head of the Canadian Wireless Telecommunications Association.

"In some cases, our members will have to change and adapt some of their practices to meet the code that is now in force as of today," Lord said Tuesday.

Much of the new code of conduct is already respected by cellphone companies, he added.

Consumers have often been frustrated by the terms of their cellphone contracts. Canada's cellphone bills are considered among the highest in the world along with the United States and Spain.

There also have been well-publicized stories about users who didn't understand the terms of their bills when it comes to text messaging or downloading movies or music and ended up with monthly bills costing thousands of dollars.

Quebec consumer group Option Consommateurs said the industry shouldn't be coming up with its own code of conduct.

"We've been wrestling with a code of conduct for the banks, for credit cards, nowhere have we seen it work because the codes of conduct are devised by the supplier," spokeswoman Anu Bose said from the organization's Ottawa office.

Bose said cellphone contracts are difficult to understand because there is little competition in Canada to make them more readily understandable.

"We find that choice is limited and we find that consumers, therefore, have their options really limited and you cannot leave easily without a cellphone."

But, Lord said the new code will give consumers the information they need to make informed decisions.

"This will mean good service, better service, easier to resolve complaints," he said from Ottawa.

If a consumer's complaint isn't resolved after 30 days, the consumer can go to Canada's Commissioner for Complaints to have it resolved, said Lord, former premier of New Brunswick.

Bose said consumers "already have to go through the maze that is the complaints procedure" and then have to spend more time taking the complaint to another level.

All the major wireless services providers have signed on to the new code of conduct, including Bell, (TSX:BCE), Rogers (TSX:RCI.B), Telus (TSX:T), Videotron (TSX:QBR.B), MTS Allstream (TSX:MBT) and new players Public Mobile and WIND Mobile.

"The code is very clear that our carriers will provide consumers with complete details of rates, the terms of coverage in each of their plans, that the advertising will be clear and they will communicate with consumers in a way that they understand," Lord said.

Anthony Lacavera, CEO of new cellphone player WIND Mobile, has been an advocate of easy-to-understand contracts.

"We think it's a great step to bring some transparency and some clarity to what is really a very confusing product purchasing experience and product experience for consumers," he said.

Lacavera hopes to have WIND Mobile operating by late this year or early next year.

The code gives consumers the ability to budget for their cellphone costs, he said from Toronto.

But he noted that providing good customer service is a challenge.

"There have been so many bad experiences out there that we thing we have a good benchmark to say 'This is what we can't do."'

Technology analyst Duncan Stewart said cellphone bills shouldn't be complex.

"The bills should, in fact, be understood by people who don't have PhDs in nuclear physics," said Stewart of Toronto-based DSAM Consulting.

Stewart said he doesn't find it unusual that the industry came up with its own code because professionals such as doctors, lawyers and engineers devise their standards of conduct.

He added that cellphone contracts will now bind wireless providers and consumers to the terms of a contract and prevent arbitrary changes.

"When we, as consumers, signed them we had to do what was said but they didn't," Stewart said of cellphone companies.