The CRTC has approved Bell Canada's request to bill internet customers, both retail and wholesale, based on how much they download each month.

The plan, known as usage-based billing, will apply to people who buy their internet connection from Bell, or from smaller service providers that rent lines from the company, such as Teksavvy or Acanac.

The regulator attached a key caveat to the approval, however, in that Bell must apply usage-based billing to all of its retail customers before it can implement the scheme with its wholesale internet service providers.

Bell will therefore need to move any customers it has on unlimited downloading services onto new usage-based plans before it can apply the same scheme on a wholesale basis.

Smaller ISPs had opposed the plan, which the Canadian Radio-television and Telecommunications Commission provisionally approved in August last year, on the grounds that it will make them indistinguishable from Bell.

Companies such as Teksavvy typically offer plans with hundreds of gigabytes of usage, whereas Bell's most popular services limit users to 50 or 75 GB.

Bell has argued that it needs to implement usage-based billing to curtail the congestion caused on its network by heavy downloaders.

Plan will use flat fees

Under the plan, Bell will charge wholesale ISPs a flat fee for connecting to its network, and for a set monthly usage limit per customer. Beyond that set limit, users will be charged per gigabyte, depending on the speed of their connections.

Customers using the fastest connections of five-megabits per second, for example, will have a monthly allotment of 60 gigabytes, beyond which Bell will charge $1.12 per GB to a maximum of $22.50.

If a customer uses more than 300 GB a month, Bell will also be able to implement an additional charge of 75 cents per gigabyte.

The CRTC is also requiring Bell to make any "usage insurance plans," which give its own retail customers extra monthly usage for a small fee, available to wholesale ISPs.

Small ISPs took the CRTC's approval of Bell's plan as an inevitability, but weren't pleased with some of the details.

"The rates are absolutely atrocious. How the hell are we doing above one dollar for extra usage?" said Rocky Gaudrault, president of Chatham, Ont.-based Teksavvy. "It's in the thousands of multiples beyond what the costs are."

Gaudrault said Bell also continues to have an advantage over smaller ISPs in that it is able to offer superior speeds. The CRTC issued an order in December 2008 that gave wholesale ISPs access to the faster networks of phone companies such as Bell and Telus, but the federal government last year ordered the regulator to reconsider the decision.

The CRTC has until September to report back on the so-called matching speeds ruling, but in the meantime smaller ISPs can only sell connections up to five-megabits. Bell is currently selling connections of up to 25 megabits per second.

A spokesperson for Bell said the company is studying the usage-based billing decision and declined to comment further.

CRTC commissioner Candice Molnar attached a dissenting opinion to the ruling. She said the requirement on Bell to move all of its customers off unlimited downloading plans was unnecessary because a vast majority are already on usage-based services.