TORONTO — The federal cabinet may be preparing to intervene against a controversial decision by the country’s telecommunications regulator that consumer advocacy groups say threatens to drive up Internet pricing and drive down innovation.

In a move that signals Ottawa is keen on creating a competitive marketplace across the sector not merely in mobile, Industry Minister Tony Clement said Monday he is scrutinizing a decision by the CRTC that will make so-called “usage-based billing” a standard practice across the industry.

“I can assure that, as with any ruling, this decision will be studied carefully to ensure that competition, innovation and consumers were all fairly considered,” the minister said in a statement.

BCE Inc.’s Bell Canada unit and Rogers Communications Inc. have lowered bandwidth “caps” on monthly plans they sell to retail subscribers in recent years, while charging hefty overage fees.

The practices have drawn fire from consumer groups that suggest bigger profits, not network congestion concerns, are the central motive.

But public anger escalated last week following a decision from the Canadian Radio-television and Telecommunications Commission — at the urging of the major network owners — to imposing the same regime on wholesale independent providers, leveling their primary competitive advantage while ensuring that stringent bandwidth caps become the norm.

The ruling may drive smaller players out of the market, while reinforcing a pricing model for the Internet consumer groups say will deter the kind of bandwidth usage now commonplace in other countries such as United States, and is a requirement that enables companies to innovate and build online business models around.

Major network owners, many of which are looking to fixed broadband to offset revenue pressure in other areas, sell standard plans offering an average of 25 gigabytes a month, Bell and Rogers included.

The amount of data, which equates to about 25 hours of video viewing online, is several times less than what counterparts such as Dallas-based AT&T Inc. provide retail customers within the same price range. Until last week, Canadian consumer at least had the choice to move to a smaller provider that offered higher usage, but now no more.

Mr. Clement’s attention turned to the decision after a direct appeal was made by at least one “market participant” to the federal cabinet, which has the authority to overrule the CRTC and has shown a willingness to do so in the name of enhancing competition for telecom services, a sector taking on increasing economic importance.

At least one appeal, a 27-page document filed by a small Montreal consultancy Vaxination Informatique is known to have been filed. However, comments from U.S. Web-streaming giant Netflix Inc., which requires higher bandwidth usage to be successful, has voice its own concerns.

Bell, supported by other network owners such as Shaw Communications Inc., has long argued that usage-based billing is increasingly necessary to mitigate fast-rising network traffic and to generate the profits which fuel future network investments.

“We’re trying to design the network to have sufficient amount of capacity to provide the best customer service while generating a return,” Mirko Bibic, senior vice-president of regulatory affairs said last week.

Yet with “usage-based” overage fees in excess of $1 to $2.50 per gigabyte, the margin of profit is sizable some analysts suggest.

Mr. Clement thwarted the wishes of Bell, Rogers and other major carriers a little more than a year ago by overturning the regulator’s decision to bar Globalive Communications Inc.’s Wind Mobile from launching, a move that has seen high mobile pricing come down.

Now another clash with Canada’s telecom establishment perhaps awaits, this time to ensure prices do not unjustly rise. “We have always been clear on our policies,” the minister said. “And [we] will continue on this path.”

Financial Post

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