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The Globe and Mail

Ottawa enters dispute over higher Internet fees

The Harper government is stepping into a contentious debate over just how much Canadians should pay for Internet service, as Industry Minister Tony Clement says he will review a federal regulator's decision that will raise prices for consumers and businesses.

As people access increasing numbers of documents, video, software and other large files through the Internet, major communications providers such as Shaw Communications Inc. and BCE Inc.'s Bell Canada unit have begun to regulate how much their customers can download - charging them extra when they exceed monthly limits. Many consumers have responded by turning to smaller Internet providers that lease space on networks such as Bell's and offer popular "unlimited" plans without such caps.

But a decision last week from the federal telecommunications regulator that effectively kills unlimited plans has triggered widespread outrage from a variety of consumer and citizens' groups. It has also prompted a backlash from small business owners who warn that the ruling will thwart their ability to use online services such as video and online teleconferencing.

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In an interview, Mr. Clement acknowledged the strong reaction. "I am hearing from a lot of people who feel this will damage our economy," he said. "I have to be fair on these things - but I am hearing from people that they are worried this will stifle innovation because the cost of using Internet services will be prohibitively high."

The minister said he will study the Canadian Radio-television and Telecommunications Commission decision to see how it squares with the government's commitment to encourage competition and consumer choice. He'll then make a recommendation to cabinet on how to proceed.

The CRTC decision appears to put the government in a difficult spot. In telecommunications policy, it has tended to favour lighter regulation. But if it allows the ruling to stand, it will likely come in for sharp criticism by those who say the commission is protecting the interests of a few of Canada's largest companies at the expense of consumers and small- and medium-sized businesses.

Mr. Clement, who referred to himself last year as the "consumer minister" in an interview with The Globe and Mail, has been involved in such decisions before. In 2009, the Harper cabinet overturned a CRTC ruling that had blocked Globalive Communications from launching wireless service in Canada because of foreign ownership rules. (Globalive's major investor is an Egyptian company.)

In the Internet ruling, one option would be for cabinet to throw the decision back to the regulator. "We can refer it back to the commission and say 'We'd like you to look further at this through government policy on competition, on innovation, on consumer choice,' " Mr. Clement said.

Monthly download limits have been in place since at least 2006. But most Internet users rarely found themselves exceeding the caps.

That is now changing as more people become comfortable with newer technologies, such as the video-streaming service Netflix, which uses up Internet usage quotas far faster. Online video use is rising sharply, and Canadians are among the heaviest users of online video in the world, according to data compiled recently by Bank of Nova Scotia's investment research division.

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Businesses have become more reliant on the Internet as well for functions such as serving customers, communicating with distant offices and purchasing downloadable software. Many business people object to the suggestion that those most affected by the CRTC decision are simply people using Internet connections to watch movies and other entertainment.

Large companies such as Bell, which argued for the right to levy an even more expensive charge to small providers, say their networks are expensive to maintain and that Internet service is a business with slow return on investment.

Liberal industry critic Marc Garneau, who said he will pressure Mr. Clement to throw the decision back to the regulator, said he doesn't buy the large providers' arguments about Internet network traffic and congestion.

"There's more and more use," Mr. Garneau said. "But to some extent, it's also self-serving as well. And in this case, the ruling of the CRTC has gone too much in favour of the arguments presented by the big players."

Mr. Clement was careful not to take sides, but said it is incumbent on the government to scrutinize whether the CRTC decision makes Canada less competitive.

Many small Internet providers, and one citizen who filed a last-ditch appeal to cabinet, have argued the decision is anti-competitive because it forces small providers to make their Internet plans conform to Bell's.

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Bill Sandiford, who runs a small Internet company in Oshawa Ont., and heads a consortium of small Canadian Internet providers, said the group is considering its options, including a formal appeal to cabinet, asking the CRTC to review the decision, or going to the federal court.

Netflix, the online movie service which launched its Canadian operations last year, has said that charging as much as $2.50 for each extra gigabyte of data makes no sense when the cost to transport that gigabyte, for telecom companies, is often less than a penny. "Consumers shouldn't be paying extra for it," Netflix spokesman Steve Swasey said. A high-definition movie consumes about 1.5 gigabytes, according to Rogers Communications Inc.

With a report from Susan Krashinsky

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