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CRTC chairman Konrad von FinckensteinSean Kilpatrick/The Canadian Press

Canada's telecom regulator has cut down the middle on the controversial topic of usage-based billing for Internet services, handing down a compromise on an issue that has divided the telecom industry.

BCE Inc. originally asked the Canadian Radio-television and Telecommunications Commission to allow it to charge smaller wholesale Internet providers that lease space on Bell's network by how much their customers download. Critics, including the small providers, said that this would be an end to rate plans with unlimited downloading and that it would raise costs for consumers as bandwidth-intensive online video gains popularity.

On Tuesday, the CRTC released a decision rejecting Bell's revised proposal that would see a smaller provider charged for the aggregate total of data used by all its customers. The CRTC instead introduced a pricing model that would see smaller providers pay for the total capacity they need, but not the volume of data downloaded.

The CRTC said this new approach will address issues of dramatically increased bandwidth usage while allowing independent Internet service providers (ISPs) to offer competitive rate plans.

The decision reinforces – in principle, at least – the idea that smaller, independent providers could no longer continue to offer, at least at the same price, the unlimited downloading plans that made them popular with consumers.

"Rates are going up," said Bill Sandiford, president of Telnet Communications and of the Canadian Network Operators Consortium, an industry group for smaller providers.

Online Internet activist group called the compromise it a "step forward," while Chatham, Ont.-based independent Internet provider TekSavvy Solutions Inc. called it a "step backward."

Given the complexity of new rate charges, many industry experts were still examining the material after the CRTC released its decision late Tuesday afternoon.

Bell had the most to lose from the decision, since it is by far the biggest seller of wholesale Internet services. Bell's senior vice-president for regulatory and government affairs, Mirko Bibic, said he was not pleased with the discounted rates that the company gets to charge for accessing its network, but said the major policy issues have been "put to bed."

Mr. Bibic said providing Internet service is like a paying for space on a highway. Independent ISPs "are going to have to lease more traffic lanes," he said. "I think the philosophy is [to]put the independent ISP in a position of responsibility. If usage goes up, you're going to have to buy more lanes – it's the same decision that we have to make."