Bell Canada Inc. is not breaking any laws by slowing internet speeds and will be allowed to continue throttling its customers, the CRTC has ruled.

The phone company, Canada's biggest internet service provider with two million high-speed customers, has shown that it needs to be able to manage its network in order to prevent congestion, the Canadian Radio-television and Telecommunications Commission said in a decision released Thursday.

Bell will therefore be able to continue slowing the internet access it sells to smaller wholesale companies, as well as to its own retail subscribers. The company will be required to give its wholesale customers 30 days notice when it wants to implement changes to its network management practices.

"Based on the evidence before us, we found that the measures employed by Bell Canada to manage its network were not discriminatory," said CRTC chair Konrad von Finckenstein in a release. "Bell Canada applied the same traffic-shaping practices to wholesale customers as it did to its own retail customers."

The regulator's investigation, which began in May, was limited to Bell's wholesale practice and did not consider whether internet throttling should be allowed in general.

As such, the CRTC also announced it was opening a new probe into the larger issue of throttling, which is also done by other large internet service providers such as Rogers Communications Inc. and Shaw Inc. Interested parties will have until Feb. 16 to submit their thoughts and a public hearing will be held on July 6 in Gatineau, Que.

"The broader issue of internet traffic management raises a number of questions that affect both end-users and service providers," von Finckenstein said. "We have decided to hold a separate proceeding to consider both wholesale and retail issues. Its main purpose will be to address the extent to which internet service providers can manage the traffic on their networks in accordance with the Telecommunications Act."

Bell and the others say they need to throttle customers who use peer-to-peer applications such as BitTorrent because they are causing congestion on their networks.

Decision affects CAIP companies

The ruling is a blow to the Canadian Association of Internet Providers, made up of 50 smaller companies that rent portions of Bell's network. Bell began throttling its own retail customers in October 2007, then CAIP members in March, prompting the group to complain to the CRTC in April.

CAIP president Tom Copeland was disappointed with the decision and the fact that the CRTC's new investigation likely won't conclude until 2010.

"Canada slips further in broadband world standings. Canadians still don't have any resolution," he said. "This is a licence for the carriers to continue to interfere with the consumer's use of the internet."

Copeland said CAIP was weighing its options, but an appeal to cabinet was a possibility.

Mirko Bibic, head of regulatory affairs for Bell, was pleased with the decision and welcomed the upcoming investigation into network-management practices.

"It certainly is the correct decision because this ensures we can continue to offer a better user experience to all our customers," he said. "There will be some clarity at the end of that process that avoids Bell or other ISPs in the future being subject to applications like the one filed by CAIP. That will be a good outcome. There will be clarity for all concerned."

Bibic also said the fears that ISPs will use throttling or other network-management practices to dictate how customers can use their internet connections are overblown.

"The commission said there was no evidence to find or even suggest that was the case," he said.

Bell is still facing a class-action lawsuit in Ontario and Quebec over throttling. The suit was started by L'Union des consommateurs in May.

The CRTC's investigation prompted more than 1,100 letters from individuals as well as submissions from major technology companies including Skype and Google Inc., which accused Bell of acting as the internet's "gatekeeper."

CAIP has said the large providers have failed to prove this congestion and are instead throttling peer-to-peer applications because they compete with their own services. Internet calling service Skype, for example, uses peer-to-peer technology to compete with Bell's core phone business.

Much of the data detailing the level of congestion on Bell's network was filed with the CRTC in private. The regulator has not released that information at Bell's request, which cites competitive reasons for the private disclosure.

Net neutrality advocates questioned whether the CRTC is acting in the public's best interests, as well as the suitability of commissioners at the regulator and the Competition Bureau, some of whom have worked in Bell's regulatory affairs department.

"For some reason the CRTC is not listening to the Canadian public and is abdicating its duties to the Canadian public," said Steve Anderson, who runs Saveournet.ca. "Anyone familiar with this issue knows this is a fundamentally unpopular decision they just made. Canadians want an open internet and the CRTC knows that, yet they just made a ruling that goes against the public interest."

New probe welcomed

Other net neutrality advocates said the CRTC decision was a mixed bag and are optimistic about the larger investigation.

"Though we're disappointed with the outcome of this proceeding, we're pleased the CRTC are looking at how to best keep the internet open, an important public policy issue for the future of the internet worldwide," said Jacob Glick, policy counsel for Google Canada.

University of Ottawa internet law professor Michael Geist also said the ruling was only the first step toward deciding what form net neutrality should take.

"A year ago, the net neutrality debate focused on whether rules were needed. Today, the debate is changing from whether there should rules on network management to what those rules should be," he said. "We are in the early stages of the more difficult questions of what constitutes reasonable network management practices and the opening of a formal proceeding puts those tougher questions squarely on the table."

The government has so far declined to get involved in the issue. Former minister of industry Jim Prentice earlier this year said the government was opposed to regulating the internet.

MP Charlie Angus, the NDP spokesman on digital issues, blasted the CRTC decision and the government for its inaction on the issue.

"Whether it’s throttling the internet, imposing unfair text message fees or price gouging on cell-phone rates, it seems Canadian telcos can count on the backing of this government," he said in a statement. "[The] CRTC is applying outdated rules that this government has refused to change, leaving the average consumer and emerging business models at the mercy of the telecom giants."

Regulators in the United States have taken decisive action against throttling by service providers. The Federal Communications Commission in August ordered Comcast Corp., the country's largest cable company, to cease its throttling of peer-to-peer applications.

"This practice is not 'minimally intrusive' but invasive and outright discriminatory," the FCC said in its ruling. "Consumers are entitled to run applications and use services of their choice."

In reaction, Comcast said it would introduce a new application-neutral system by the end of the year that will throttle only heavy users.

The United States is also poised to clamp down further on interference by internet service providers under president-elect Barack Obama, a supporter of net neutrality. Obama last week appointed two longtime net neutrality advocates, University of Michigan law professor Susan Crawford and former FCC staffer Kevin Werbach, to conduct a review of the regulator.