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The CRTC is being accused of using harsh regulations to clamp down on unlimited Internet use in Canada, just as popular yet bandwidth-heavy services such as Netflix are starting to take off.

By reaffirming its decision to allow "usage-based billing" on Tuesday, the federal telecom regulator has fuelled another round of criticism from citizens' groups and small telecom providers, which say the federal regulator is killing innovation and allowing large Internet service providers, such as BCE Inc., to raise rates and reduce download limits without any competitive threat - all at the expense of the consumer.

"Unlimited Internet service died today," John Lawford of the Ottawa-based Public Interest Advocacy Centre said on Tuesday, as the Canadian Radio-television and Telecommunications Commission issued its much-anticipated ruling on how much large telecom providers can charge smaller providers to ride on their networks.

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Larger telecom providers, such as Telus Corp. and BCE's Bell are mandated to lease network space to smaller providers across the country. Many smaller providers often offer popular unlimited packages that allow users to download as much content as they want, whereas the larger providers often have download "caps," with strict extra charges for going over the limits.

The decision, small providers say, effectively destroys their ability to offer such unlimited packages in the future. Large providers, however, argue it's necessary in an era when some consumers download lots of TV shows and movies that they say clogs their networks. The regulator, as it usually does, has attempted to find middle ground. While the CRTC is allowing large providers to charge usage-based billing to smaller, "wholesale" Internet firms, it has mandated larger providers give them bandwidth for 15 per cent less than their own retail customers.

An earlier decision included a 25-per-cent discount, which Bell appealed - arguing it didn't apply to its cable company rivals. The new ruling applies to all large providers, whether phone companies or cable companies, but Mirko Bibic, Bell's senior vice-president for regulatory affairs, maintained in an e-mail that "a mandated discount, let alone at 15 per cent, is simply unnecessary."

This is not the first pay-per-use model for Internet service in Canada. Bell, for example, put so-called "data caps" in place in 2007, and almost every major provider has caps in place today. But smaller Internet providers have never been charged on a per-use basis, and say the shift hobbles their ability to put competitive pressure on big providers and hurts consumers. "They can raise the rates and lower the caps without anyone forcing them to get real," said Rocky Gaudrault, chief executive officer of Chatham, Ont.-based TekSavvy Solutions Inc. "This is a slap in the face for consumers.", a group of open-Internet activists that started an online petition counting more than 40,000 signatures, condemned the ruling on Tuesday - even as it welcomed the slight discount. Steve Anderson, the group's national co-ordinator, said it goes beyond being charged for downloading a lot of movies on Netflix, and could act as a deterrent to small technology startups experimenting with new technologies.

"Most online innovation is bandwidth heavy; most of these services were created in someone's garage with an Internet connection," he said. "The message to innovators and entrepreneurs is, 'Don't start up here, because you're going to have to deal with these new fees.' "

Large providers have long argued that network space, especially in wireless, is scarce and hence valuable in a world where everyone is streaming or downloading bandwidth-intensive video. But critics have pointed out that because these companies own broadcasters, offer TV services, and also run Internet service businesses, there is an inherent interest in safeguarding traditional business models - at the expense of innovation and consumer choice.

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"To me, this is really just anticompetitive," said Mr. Lawford of the Public Interest Advocacy Centre.

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