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TORONTO (Reuters) - Canada's telecoms regulator will reconsider its own ruling that would have effectively stopped small Internet providers from offering unlimited downloads, taking a step back under pressure from the government.
Industry Minister Tony Clement had threatened to block the regulator's decision, citing the need to protect consumer choice. The government's stance, which follows a public outcry over the cost of Canadian Internet services, is a blow to the country's dominant providers.
In its ruling last week, the Canadian Radio-television and Telecommunications Commission, or CRTC, said BCE Inc, the parent of Bell Canada, could charge wholesalers that lease bandwidth on its network on the same usage basis it charges its own customers, minus a 15 percent discount.
That would force small carriers to pass along the extra cost to their customers and push them to abandon their unlimited download service plans.
"CRTC must go back to the drawing board," Clement wrote late on Wednesday on the social networking site Twitter. (twitter.com/#!/TonyClement_MP)
The issue has taken on urgency for Canadians as online video services such as Netlix grow more popular at the expense of programing from satellite and cable companies, which have been long dominant as Internet service providers.
"I think frankly there have been long simmering frustrations with the lack of competition around Internet services in Canada," said University of Ottawa law professor Michael Geist. "In a sense, the usage-based billing decision in particular was the boiling-over point for many consumers."
An online petition opposing the usage-based billing regime has collected more than 300,000 signatures, signaling that the controversy could become a political issue if elections are called this spring.
Bell, Telus and other big providers say they spend heavily to upgrade and maintain their networks. They claim the right to set prices that ensure a fair return on their investments.
The CRTC's chairman, Konrad von Finckenstein, told a parliamentary committee on Thursday the regulator would delay implementing the ruling, due to come into force on March 1, for at least 60 days and launch its own review.
But Von Finckenstein also defended the rationale behind the CRTC's ruling.
"We are convinced that Internet services are no different than other public utilities, and the vast majority of Internet users should not be asked to subsidize a small minority of heavy users," he said at the hearing.
The Conservative government last shot down a CRTC ruling in 2009, when it allowed upstart Globalive to launch its Wind Mobile service. The regulator had said the company was in violation of foreign ownership restrictions.
Major Canadian providers such as Bell, Shaw Communications and Rogers Communications charge customers extra if they download beyond their monthly limits, usually between 20 and 60 gigabytes.
A typical Internet package with Bell costs C$32 ($31.70) a month for 25 gigabytes. If a user exceeds that amount they are charged C$2 for each additional gigabyte.
By comparison, Verizon's landline Internet plans in the United States are all unlimited, and priced between $30 and $55 based on download speed.
Small providers often offer plans with 200 gigabyte ceilings, or even unlimited use, via bandwidth the CRTC requires big operators lease to them.
Some 500,000 Canadians, or 5 percent of all Internet users, buy Internet access from smaller ISPs, mostly via the networks of the incumbent telecom operators.
Cable companies such as Rogers and Shaw have more than 50 percent of the market for high-speed Internet, according to CRTC data. It is more difficult technically for the smaller ISPs to lease space on cable infrastructure.
Netflix said its video streaming service, launched in Canada in September, uses between 300 megabytes and 2GB an hour depending on quality, and averages around 1GB an hour.
Canadian Prime Minister Stephen Harper ordered a review of the CRTC ruling on Tuesday, a day after the opposition Liberals said they would raise the issue in Parliament. The left-leaning New Democratic Party also complained.
Additional reporting by Pav Jordan in Toronto and Leah Schnurr in Ottawa; editing by Peter Galloway