BCE Inc. is proposing to change the way it bills independent internet service providers who rent portions of its network, changes that small ISPs say will ultimately mean the end of "unlimited" plans for consumers.

In a recent submission to the Canadian Radio-television and Telecommunications Commission, Bell proposed introducing usage-based billing instead of a flat rate for wholesale customers, a pricing method the company says would be in line with changes to its own retail offerings.

"The implementation of usage-based billing for this wholesale service represents but a further appropriate step in the evolution of pricing to reflect the realities of the companies' need to manage capacity on their networks," said Denis Henry, Bell Aliant's vice-president of regulatory and government affairs, and David Palmer, Bell Canada's director of regulatory affairs, in a joint submission.

Bell is proposing to begin the changes in billing beginning May 31, 2009.

The proposal would effectively kill access to unlimited download plans in Ontario and Quebec, according to Rocky Gaudrault, chief executive officer of Chatham, Ont.-based independent ISP TekSavvy Solutions.

"If Bell were to be allowed to introduce UBB on this service, a cap of 60GB would be imposed on all of its users, with very heavy penalties per Gigabyte afterwards," wrote Gaudrault in a letter to his customers on Tuesday, April 14, the last day interested parties could comment on the proposal.

"This would inherently all but remove unlimited internet services in Ontario/Quebec and potentially cause large increases in internet costs from month to month," he wrote.

Bell could not be reached for comment.

Proposal follows ruling on ISPs

The company made the proposal in response to a December 2008 ruling from the CRTC requiring Bell to provide wholesale internet service providers access to the same speeds Bell offers.

Smaller ISPs were given access to the networks of phone companies in the first place because the incumbents held a natural infrastructure monopoly, which was initially built through taxpayer funds when they were government-owned. The rules were put in place to boost the number of competitors selling internet access to the public, and thus keep prices down and service levels up.

In March, Bell petitioned the federal government to overturn the ruling, but the company was still required to come up with a plan detailing how it might charge the smaller ISPs for the service.

The proposal, submitted on March 13, introduced the idea of usage-based billing among its solutions, though critics who responded said its inclusion is inappropriate and unnecessary.

"Usage-based billing (UBB) represents a radical change to current practice and is not warranted," wrote MTS Allstream Inc. vice-president of regulatory affairs Teresa Griffin-Muir.

"It would effectively prevent competitive ISPs from offering flat-rated Internet services, or any other type of offering that didn't follow Bell's UBB model, since they would have no means of containing their costs, if their customers were to exceed Bell's usage caps," she wrote.

A group of nine respondents — including the Canadian Association of Internet Providers (CAIP), AOL Canada and Yak Communications — questioned the timing of the proposal, since the CRTC is already embroiled in a number of regulatory initiatives that could affect, and be affected by, the proposal.

Among these initiatives is the CRTC's plan to hold public hearings on July 6 in Gatineau, Que., on the traffic management practices of internet service providers.

Those hearings were set up following complaints from CAIP that Bell Canada is selectively slowing down or "throttling" internet traffic generated by peer-to-peer (P2P) file-sharing applications such as BitTorrent or "shaping" traffic to favour other applications over P2P in an effort to reduce network congestion.

That policy affects both Bell customers and customers of small, independent ISPs that buy network access wholesale from Bell.

The CRTC, which has the power to impose conditions on the way retail internet services are offered, is looking into what types of traffic management practices are used by ISPs and whether they violate the Telecommunications Act.

The CRTC launched an online consultation, hosted by Nanos Research, that will allow submitters to post responses to questions about internet traffic management issues until the end of April.