The federal government is ordering the CRTC to change its ruling on the regulation of some telephone services offered through broadband internet connections.

In a speech in Toronto, Industry Minister Maxime Bernier said there is no reason to regulate certain parts of the field of voice over internet protocol (VoIP).

Federal Industry Minister Maxime Bernier speaks in Toronto on Wednesday.
(CBC)

"It is time to have a level playing field from which consumers and small businesses will benefit," Bernier said in a speech to the Economic Club of Toronto.

"We firmly believe that eliminating unnecessary economic regulation will stimulate competition in this new and fast-growing market. It will mean lower costs, fewer regulatory proceedings, and more competitive markets," he said.

The move by the federal government to overrule a decision by the CRTC is a seldom-taken step.

The directive is seen as favourable to the large telephone companies, such as Bell Canada and Telus, even though it fell short of the full deregulation of internet phone pricing that the established phone companies had sought.

Some analysts characterized the decision as a relatively minor one. "This is really a small, incremental decision," telecom consultant Eamon Hoey told CBC News. He said Bell and Telus will welcome the ruling because it "gets them on the road to further deregulation." 

VoIP technology allows phone calls to be made over high-speed internet lines. VoIP costs less to operate because it doesn't require expensive wires and switching equipment.

Under the government's decision, the CRTC has been ordered not to regulate "access independent" VoIP services, those services that can reach the customer through any broadband internet connection. "Access dependent" VoIP services connect customers over the service provider's own network.

The CRTC's initial decision on VoIP in May 2005 ruled against the big telephone companies, saying they could not use their pricing power to undercut smaller businesses and newcomers to the telephone market, such as cable companies.

The agency said it would regulate internet-based phone service the same as any other local phone service, meaning large telephone companies such as Bell and Telus can't offer internet-based phone services below cost.

New companies entering the VoIP market, however, can set prices as low as they want, said the CRTC.

In May, the federal cabinet asked the CRTC to re-examine its policy framework on VoIP, saying "it is in the public interest for the CRTC to reconsider its decision."

In September, the CRTC said it was sticking with its initial decision but added that it would review its regulations because of changes in the local telephone market.