Bell Canada has defended its call for a new way of billing independent internet service providers who rent portions of its network, saying the changes are a key part of its strategy to battle network congestion.

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. The pricing method is needed to cope with increasing internet traffic, and is in line with changes it has made to its own retail offerings, said Mirko Bibic, Bell's chief of regulatory affairs. Bell stopped offering unlimited downloading plans to its retail customers in 2007.

"Congestion of our pipes is a real issue," said Bibic. "The strategy to deal with that has at least three prongs. One is traffic shaping during peak periods, two is to build more capacity, which we are doing … and the third prong is to modify pricing to effect consumer behaviour."

In the proposal, Bell called for a move away from flat fees for wholesale internet service providers in favor of usage-based billing.

Usage by smaller ISP customers would be measured and billed on a monthly basis, with charges ranging from $1.125 to $1.875 on each full Gigabyte of usage beyond the monthly allowance, depending on the plan offered, according to Bell's filing with the CRTC.

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

'Excessive usage' charge proposed

Bell also proposed introducing an "excessive usage charge" to its wholesale clients to target heavy internet users.

Under the proposal, Bell would charge the wholesaler an additional 75 cents for every GB in excess of 300 GB of monthly usage that a wholesaler's customer used. But Bell said the excessive usage charge wouldn't be put into effect until Bell implemented a corresponding charge to its own retail customers of $1 per GB in excess of 300 GB, a change it has yet to implement.

Critics say Bell's introduction of usage-based billing is another attempt to squeeze out small ISPs by robbing them of the ability to differentiate from the large telecommunications company.

"Bell's basically trying every tactic in the book to delay or twist things remove competition," said Rocky Gaudrault, the chief executive officer of Chatham, Ont.-based independent ISP TekSavvy Solutions.

"In the meantime they're not doing any favours for the consumers, as they're the ones who ultimately are going to pay for all of this."

Smaller ISPs were given access to the networks of phone companies in the first place because the incumbents like Bell and Telus held a natural infrastructure monopoly, which was initially created using taxpayer funds.

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.

Bell challenging previous CRTC ruling

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

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 services it did not dispute.

Bibic said the company has been transparent about its plans to move to usage-based billing, and the regulatory filing seemed the perfect time to introduce the new plans.

He said the pricing plan is not unprecedented, as cable companies such as Videotron Ltee and Rogers Communications have already introduced a similar pricing for their equivalent service to small ISPs, called third-party internet access.

Critics who responded to Bell's proposal however said its inclusion was 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.

Bell, ISPs, already in fight over network management

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.

Bibic said the pricing proposals are a separate issue from how it manages its traffic, however, and the timing of the network management hearings should have no impact on the CRTC approving its pricing changes.

Interested parties had until Tuesday to comment on Bell's proposal, and Bell now has 10 days to respond to those comments, a spokesperson for the CRTC said.

After that time, the CRTC will consider whether to accept the proposal, reject it or ask that it be amended. However, there is no timetable for when that decision would have to be made, the CRTC said.