(Recasts with analyst comment in 10th paragraph, background)
OTTAWA/TORONTO, May 7 (Reuters) - The Canadian government has decided to intervene in a court case to argue that new rules for the country's wireless providers should be retroactive, possibly reducing the chance telecom companies have of winning an appeal against the measure.
It is the first sign that the Conservative federal government will fight in the courts to protect the new wireless code's implementation, underscoring its determination to stoke competition in the sector.
Canada's biggest wireless operators, including BCE Inc , Rogers Communications, and Telus Corp , had sought legal recourse against aspects of the code from the telecoms regulator, the Canadian Radio-television and Telecommunications Commission (CRTC).
The companies got the upper hand last week after a judge ruled that CRTC could not argue its own case in court, which it had done in the absence of government lawyers getting involved.
In response, Industry Minister James Moore has requested that the attorney general act as an intervener in the case at the Federal Court of Appeal, Moore's spokesman Jake Enwright told Reuters on Wednesday.
"We support the CRTC's decision to apply the Wireless Code retroactively. Our government will intervene in this case on behalf of Canadian wireless consumers to ensure that their voices are heard," Enwright said.
The code came into force last December, making it harder for carriers to charge customers for early cancellation of their contracts. All existing wireless contracts need to comply no later than June 3 next year.
Applying the code to existing contracts by mid-2015 would likely dissuade carriers from otherwise tying customers to longer-term contracts before the deadline.
Telecom executives have said shorter contracts for the latest smartphones would force higher monthly bills, as carriers would have less time to recoup upfront payments they make to handset makers.
"The government is going to need to show that this is no retrospective rate making - not easy, given that the issue is whether the CRTC had the power to allow people to walk away from the unpaid balance on their handsets as of June 2015," Mark Goldberg, a consultant to Canadian telecom companies, said of Ottawa's decision to step in.
The attorney general, Justice Minister Peter Mackay, has already agreed to be an intervener and will apply to the court shortly, said a senior government official, speaking on condition of anonymity due to the sensitivity of the matter.
The government did not initially instruct its lawyers to intervene because it was not clear whether the telecoms companies would exercise their right to ask the federal cabinet to overturn the CRTC's decision, the official added.
"At the time, because the telecoms companies could still ask the cabinet to appeal the decision, it would have put the government in conflict of interest to intervene in the court case," the official said.
The companies' deadline for appealing to cabinet was Sept. 3, 2013. They opted for legal action instead, filing an appeal to the court in July last year.
If the companies succeed in having the rules apply only to new contracts, it would sharply restrict the effect of the new code, which enforces shorter contracts and seeks to prevent so-called "bill shock" by warning customers when they have exceeded certain dollar limits on monthly roaming charges or data usage.
The government has made it a priority to encourage more competition in the telecom sector, blocking several attempts by Telus to acquire a smaller competitor and creating rules in recent spectrum auctions that encourage new entrants, with limited success.
(Editing by Jeffrey Hodgson and Tom Brown)