OTTAWA — Canada’s telecom regulator said Friday it will not expand its probe into Internet pricing to look at the billing practices of retail Internet services because market forces are working just fine for consumers.

The Canadian Radio-television and Telecommunications Commission (CRTC) also hinted that it may stand by the principle of usage-based billing, despite facing heat last month from Prime Minister Stephen Harper and Industry Minister Tony Clement to overturn its decision about wholesale Internet services.

The decision — now on hold pending a CRTC review after a massive online protest — said Bell Canada could charge wholesale Internet service providers lease space on their networks using a usage-based billing model, or a per-byte basis, effectively killing their unlimited Internet plans by forcing smaller ISPs to charge customers extra for exceeding monthly download caps.

Such smaller telecom providers as TekSavvy built a business model around unlimited download packages to compete against such larger providers as Bell and Rogers, which use bandwidth caps.

In a statement Friday, the CRTC acknowledged it had been bombarded with requests to widen the scope of the review beyond wholesale Internet service to tackle questions about why Canadians pay so much for their Internet — but it is rejecting the request.

“The CRTC will not be expanding the scope, as requested by several parties, to include the billing practices for retail Internet services,” the commission said. “There is no evidence that market forces are not working properly in this unregulated market.”

The CRTC also said it would be inappropriate to expand the review, as requested by many, to cover the overall regulatory framework for wholesale high-speed Internet access services.

The review — now to include online consultations and oral hearings in July — will examine the issue of network capacity and congestion.

Clement took to Twitter to respond on Friday, saying he was “pleased” the CRTC is opening up the process and will include “a real debate on ‘congestion.’”

But Clement also said that while the CRTC is focused on usage-based billing, the “door must still be open to Canadians’ broader concerns re pricing and competition.”

In a followup statement, Clement said while he understands the need for CRTC to limit the scope, “it is clear that there are outstanding issues with regard to wider wholesale regulation that Canadians want to see addressed.”

The CRTC, meanwhile, hinted at possible problems with the government down the road with the release Friday of a letter to groups that had requested hearings of wider scope.

The online letter states that “the scope of the proceeding does not preclude proposals for billing practices that incorporate usage-based charges aggregated on a per-ISP basis or that are driven by peak period traffic.”

The Public Interest Advocacy Centre was one of the groups calling for the scope of the CRTC’s review to be expanded.

Staff lawyer John Lawford called CRTC’s salvo “passive aggressive,” saying it’s an indication of where CRTC is heading with usage-based billing.

“Basically they’re saying you can talk about capacity and congestion if you like, but they’re going to stick to deciding the wholesale regime on the principle that usage-based billing needs to be used to punish people that go over certain notional limits that they think is a heavy user,” he said.

“Well, why should one party — that is the major ISPs — be able to decide what the level is for someone who is a wholesale customer, like TekSavvy, that can decide that for themselves?

“I just do not understand how they can say that with a straight face and think that they’re not engaging in what would be, but for their little legal regulatory regime here, retail-price maintenance.”

Clement has said the government would overturn the CRTC’s usage-based billing decision if the regulator doesn’t rescind the ruling itself.

Both the NDP and the Liberals supported an expanded review to look at Internal billing practices for retail services, increasingly criticized as slow and pricey as more consumers turn to the web to share videos and watch movies — practices that require more bandwidth than traditional uses, such as email.

A 2010 report coming out of the U.S. ranked Canada 22nd out of 30 OECD countries for overall Internet access, based on penetration, speed and price.

sschmidt@postmedia.com

Twitter.com/sarah_schmidt_