Bell Canada says it needs to throttle internet users because its network is congested. (Ryan Remiorz/Canadian Press)

Internet watchers are on the edge of their seats as the CRTC is set to make a landmark ruling Thursday on Bell Canada Inc.'s throttling of speeds.

The regulator will hand down its decision at 9 a.m. ET after twice delaying the ruling. The decision will determine whether Bell Canada has violated the Telecommunications Act by slowing down the internet access it sells to wholesale customers.

Those customers, a group of more than 50 small companies represented by the Canadian Association of Internet Providers, lodged a complaint with the Canadian Radio-television and Telecommunications Commission about the practice in April.

Bell began throttling its own Sympatico retail customers in October 2007, and extended the practice in March to CAIP members, which rent portions of Bell's network to provide internet service to their own customers. The CRTC rejected CAIP's call for an immediate cease-and-desist order but launched a public investigation into Bell's actions.

The throttling affects Bell and CAIP customers who use peer-to-peer file-sharing software such as BitTorrent. Bell has said the throttling is necessary because a small percentage of subscribers are using such services to clog up its network. CAIP countered by saying Bell has failed to prove there is congestion on its network, and that the company is throttling peer-to-peer applications because they compete with services it offers, such as an online video store.

While BitTorrent has become synonymous with illegal file-sharing, the application is also increasingly being used for legitimate purposes such as the legal distribution of music and video, such as the CBC show Canada's Next Great Prime Minister, as well as educational tools. Peer-to-peer technology is also behind internet calling services such as Skype, which compete with Bell's core phone business.

A ruling against Bell would likely allow CAIP members to sell unthrottled internet services, thus giving them a competitive advantage over the company and others that slow peer-to-peer applications, such as Rogers Communications Inc. and Shaw Communications Inc.

Bigger throttling probe likely

A decision against CAIP may not necessarily close the door on the throttling issue, however. CRTC chairman Konrad von Finckenstein this summer said a decision on the Bell-CAIP case will be limited to whether the company has violated its wholesale agreements with the smaller providers. A more detailed CRTC probe into whether throttling should be allowed in a general sense will likely follow, he said.

CAIP members on Wednesday were hoping for the best but girding for the worst.

"We're bracing for a worst-case scenario, as Bell has a lot to lose if this doesn't go their way," said Rocky Gaudrault, chief executive of TekSavvy, a CAIP member. "I would suspect, win or lose, something should be done, going forward, to consider Bell's conflict of interest in dealing as a carrier and a retail internet provider. There are some pretty major issues that need attention going forward, so regardless of the upcoming ruling, this might set things in motion to finally force change."

A Bell spokesman did not immediately return a request for comment.

The throttling issue has angered net neutrality advocates, who maintain the internet should be kept free from discriminatory practices by service providers. The CRTC's probe drew submissions from more than 1,000 individuals, as well as large technology companies such as Skype and Google Inc., which accused Bell of acting as an internet "gatekeeper."

About 300 protestors held a rally on Parliament Hill in May to urge government legislation to protect net neutrality principles. Jim Prentice, who was industry minister at the time, said the government was opposed to regulating the internet.

Regulators in the United States have taken decisive action against throttling by service providers. The Federal Communications Commission in August ordered Comcast Corp., the country's largest cable company, to cease its throttling of peer-to-peer applications.

"This practice is not 'minimally intrusive' but invasive and outright discriminatory," the FCC said in its ruling. "Consumers are entitled to run applications and use services of their choice."

In reaction, Comcast said it would introduce a new application-neutral system by the end of the year that will throttle only heavy users.

The United States is also poised to clamp down further on interference by internet service providers under president-elect Barack Obama, a supporter of net neutrality. Obama last week appointed two longtime net neutrality advocates, University of Michigan law professor Susan Crawford and former FCC staffer Kevin Werbach, to conduct a review of the regulator.

"The momentum in the U.S. is very, very strong. The FCC has been showing a strong inclination to move in this direction even without a change in administration," said University of Ottawa internet law professor Michael Geist. "Clearly we're a laggard on this issue. It's nothing new on telecom issues and it's going to become increasingly evident."