The CRTC has rejected arguments by phone companies that giving small ISPs equal internet speeds would discourage investment in new infrastructure. (Matt Rourke/Associated Press)

Fresh off a loss in a battle with Bell Canada Inc. over the throttling of internet connections, small service providers have won a victory that will enable them to offer the same speeds as big phone companies.

The Canadian Radio-television and Telecommunications Commission on Thursday issued a decision ordering Canada's big phone companies, including Bell, Telus Corp., MTS Allstream Inc., SaskTel and Bell Aliant, to offer the same internet speeds to smaller wholesale customers as they themselves sell on a retail basis.

Under existing CRTC regulations, the big phone companies are required to rent out their networks to smaller service providers, who then sell internet access to their own customers. The rules boost the number of competitors selling internet access to the public, and thus keep prices down and service levels up. The regulations, however, have only applied to older infrastructure based in phone companies' centralized office buildings.

Recently, phone companies have been pushing their networks out of those buildings by putting new equipment into streetside cabinets in an effort to boost their customers' internet speeds. Smaller internet service providers haven't had regulated access to those cabinets, however, which means they have been limited to selling slower speeds than those offered by the big phone companies.

In Quebec, for example, Bell has been selling internet connections with download speeds around 16 megabits per second while small ISPs have topped out at less than half that.

Phone company arguments rejected

In its decision, the CRTC rejected arguments by the phone companies that speed parity would discourage them from investing in new infrastructure, and moved to fix the competitive discrepancy.

"Service speed is an important competitive attribute, with rates differing significantly by speed and speed often being a major differentiation point from a marketing standpoint," the CRTC ruled.

"The commission considers that absent a matching service speed requirement, the ability of competitors that rely on the mandated [access] to compete in the retail market would be significantly restricted, which would likely result in a substantial lessening or prevention of competition in the retail high-speed internet services market."

The decision came in response to a CRTC filing by Cybersurf Corp, an independent ISP based in Calgary, in June. Cybersurf had asked the regulator to force the phone companies to automatically offer matching speeds to small ISPs, a request the CRTC half-granted.

The phone companies will only be required to offer faster speeds to wholesale ISPs when they sell them on a retail basis in a given area. Smaller ISPs will therefore have to request the faster connections from the phone companies.

Hearings scheduled for this summer

Bell, Telus and the others have 45 days to file with the CRTC the proposed rates they intend to charge the small ISPs for faster services. The rates will have to represent the actual cost of the service, plus "a reasonable mark-up," the regulator said.

Small ISPs suffered a setback last month when the CRTC ruled against them and in favour of Bell in a dispute over the connections the company rents them. Earlier this year, Bell began slowing down certain internet uses of its retail and wholesale customers, which prompted a battle in front of the CRTC. Bell said it needed to "throttle" internet subscribers who were using peer-to-peer software such as BitTorrent because they were causing congestion on its network.

The small ISPs said Bell was breaking the Telecommunications Act by interfering with the service it was selling them, but the CRTC last month rejected the argument and allowed the company to continue its throttling practices.

As part of that ruling, however, the CRTC launched a larger inquiry into how much control large network owners such as Bell, Telus, Rogers Communications Inc. and Shaw Communications Inc., should have over the internet connections they sell to customers.

The inquiry is open to public submissions until February, followed by hearings this summer.