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The head of Canada's Competition Bureau says policy makers are finally going to have to address the thorny question of regulating the Internet, as converging communications and media change consumer expectations and behaviour.

The recent uproar over phone companies shaping Internet traffic to discourage customers clogging networks with shared video files is just one example of regulators being forced to show their hand, said Sheridan Scott, Competition Bureau commissioner.

"The developments raise the urgency of a question that public policy has been tip-toeing around for a decade or more, but which we will now have to confront head-on: should the government regulate the Internet?" she told the Canadian Telecom Summit Wednesday in Toronto.

Ms. Scott, who found herself in hot water this year for the tactics she used to gather information into a probe of Labatt Brewing Co. Ltd., didn't provide a definitive answer to her question. But she laid out some specific criteria regulators need to consider.

"Policy makers must be very clear about the precise nature of what an intervention should be designed to address," she said.

Industry Canada's auction of wireless spectrum, which has been under way for several weeks, is a good example. When the department announced that a portion of the spectrum would be set aside for newcomers, it was clear about the objectives: greater competition, more innovation, better service and more choice, she said.

Regulation should be a last resort, and policy makers must consider the costs, which include administrative complexities for companies and the risk that they will fall behind the speed of technological innovation, Ms. Scott said.

"In this fast-paced global economy, accelerated still further by deregulation and technological change, I would increasingly put my confidence in the market," she said.

The commissioner's remarks came a day after the head of the Canadian Radio-television and Telecommunications Commission told the same conference that the government might need to step in to set rules on Internet "traffic shaping."

An industry group representing independent Internet service providers has recently complained to the CRTC that Bell Canada is slowing traffic on the network space it is leasing to them.

Bell and other communications companies say they are wrestling with ways to manage hyper-growth on their networks, much of which comes from people distributing large video files.

CRTC chairman Konrad von Finckenstein said guidelines for traffic shaping are probably inevitable.

Vidéotron Télécom Ltée, which recently rolled out one of the fastest consumer Internet services in North America, says even with its huge capacity, managing demand is difficult.

The company's networks have seen traffic loads increase 40 per cent annually for the past six years, creating both engineering and financial challenges, said Robert Dépatie, Vidéotron's president and chief executive officer.

Cable and telecom companies say boosting the speeds of their networks is not enough on its own to handle growing traffic demands.

The rapid rise in online video and file sharing is testing capacity, specifically peer-to-peer (P2P) services such as BitTorrent, which are used to transmit films and other fat files of data.

P2P programs break files into small packets of information and send them over various routes to their destination. They are written to take advantage of as much network space as they can find, meaning the more that becomes available, the more they use, according to Mike Lee, chief strategy officer for Rogers Communications Inc.

The simplest way to handle growing traffic is to build more bandwidth, he said. Unfortunately, "it's just not effective."

As a result, the industry is adopting two other strategies to handle hyper growth: traffic shaping and excess usage fees.

Rogers has adopted both practices, slowing the upload speeds of P2P traffic and establishing a monthly data cap.

Vidéotron has opted for the latter, charging customers extra if they use more data than their plan allows.

"There are those who take exception, though. There are a chorus of voices that believe that the Internet is like the Wild West, a land without borders, without fences, without rules, without law — a digital utopia," Mr. Dépatie said.

He dismissed the idea of this "digital utopia," saying the Internet needs rules to manage it just like other networks, such as highways and roads.

"Try driving at 100 km/h without a seatbelt, using a cell phone, while drinking a beer in the Montreal area. You will attract attention!"

He favours codes of conduct, rather than new laws and regulations.

It is an issue that will keep growing and will eventually need to be addressed by the regulator, said Pierre Blouin, chief executive office of MTS Allstream.

Andrew Clement, a professor in the faculty of information sciences at the University of Toronto, said service providers must be more transparent about the steps they take to manage network traffic.