The CRTC on Monday got round to considering whether to allow the controversial introduction of usage-based billing by phone and cable companies that charge wholesale indie internet service providers (ISPs) for the use of their networks.

But the regulator surprised industry watchers Monday when it said the week-long hearing will only deal with wholesale rates paid by ISPs, and not the thorny issue of rates paid by ordinary internet users who use Netflix, YouTube and other online bandwidth hogs.

“We believe that retail rates – the prices charged by ISPs to consumers – are best set by the market. This issue has not and will not be part of the commission’s considerations,” Konrad von Finckenstein, chairman of the CRTC, told the public hearing in Gatineau, Quebec as it got underway.

The hearing was prompted by BCE earlier this year proposing that smaller, third party ISPs scrap their unlimited internet offerings to thwart Netflix Canada and other U.S. over-the-top digital players entering the Canadian market.

BCE later modified its stance on usage-based billing by indicating it would not charge ISPs according to a per-byte model, but instead would adopt a per-ISP model.

BCE SVP Mirko Bibic on Monday reiterated to the CRTC that wholesale ISPs account for a disproportionate share of the heavy traffic on Bell Canada’s network, and need to be accordingly charged to reduce gridlock.

“No single user or wholesale customer is the cause of congestion. But clearly, wholesale users contribute a disproportionate share of total traffic, and by extension, congestion,” Bibic told the regulator.

Rival phone giant Telus Corp. also backed the introduction of usage-based billing during the CRTC hearing.

“We do not oppose the principle of usage-based billing and reserve the right to adopt UBB if bandwidth demand requires it,” Michael Hennessy, SVP of regulatory and government affairs at Telus, argued Monday when appearing before the CRTC hearing.

“Usage-based billing is an economically rational way to recover traffic sensitive costs from the customers that cause them,” he added.

The CRTC hearing into internet rates for wholesale ISPs is expected to conclude on Friday.

Photo: bigpresh, flickr creative commons