OTTAWA - The federal regulator will continue to allow Canada's big telecommunications firms to restrict traffic on their Internet networks, but under new and potentially strict rules.

The decision Wednesday by the CRTC is a partial win for both consumer advocates and independent broadband wholesalers who had complained the telecoms were using their power to throttle certain web usage and competition.

But it also left Canada's Internet providers, such as Bell Canada (TSX:BC.PR.C), Rogers Communications (TSX:RCI.B), Shaw Communications (TSX:SJR.B), and Telus Corp. (TSX:T.A) free to use throttling and other measures to "shape traffic" on their networks, as long as they abide by the new rules.

Shares of some of the providers immediately jumped on the news.

Some, though not all, of the providers say they need the power to ensure enough capacity for all users, arguing that rampant file sharing for broadband-gobbling videos could make the web experience a nightmare for other users.

If throttling had been banned, "it could have been disappointing for customers," said Ken Engelhart, chief of regulator affairs for Toronto-based Rogers.

"If you wanted to talk to your friends around the world on your computer, you might find your call was being crowded out by other people engaging in peer-to-peer."

Bell spokesman Mirko Bibic called the decision good for the industry and consumers.

The reaction was more mixed on the consumer side. Steve Anderson of called it a step forward though not perfect, while the Public Interest Advocacy Centre denounced the decision as a rubber stamp for the Internet service providers.

"We just went backwards at warp speed," said John Lawford, counsel for advocacy centre. "ISPs should act as common carriers and just carry traffic ... now they can decide what gets through - and how much they get to charge you for the privilege."

Canadian Radio-television and Telecommunications Commission chairman Konrad von Finckenstein characterized the decision as trying to strike the correct balance between competing interests.

He said it would be ideal if there was no need for traffic management, but said that was probably not realistic given the speed of developments in the sector.

"I doubt you will ever have unlimited capacity that can accommodate everybody," he said. "Some countries like Australia want to every Australian connected with 100 megabytes of broadband, but who knows in five years that might be insufficient."

Von Finckenstein said Canada is the first country to develop and implement a comprehensive approach to Internet traffic management, although the U.S. will publish proposals on Thursday that will go into effect in a year.

Telus spokesman Michael Hennessy, whose company has not resorted to throttling, said the CRTC did a good job of walking the line between those who want a completely unregulated web and the needs of telecoms to manage networks.

In its decision, the CRTC said its first preferences is that Internet providers invest on increasing the capacity of their networks so they won't be faced with capacity problems.

If providers do need to manage traffic, the commission said its preference is that they do so through imposing higher charges on heavy users, rather than limiting traffic.

But if networks believe they need to resort to throttling, the commission said it must give retail customers 30 days notice, and wholesale customers at least 60 days notice, before putting in place restrictions.

The regulator also said ISPs cannot discriminate against wholesalers who purchase broadband in bulk and sell it retail, ordering that they treat them the same way as their own customers - unless they get prior approval by the CRTC.

The commission has also established a complaint mechanism for consumers.

Ultimately, whether the CRTC has struck the right cord may depend on how the U.S. Federal Communications Commission proposes to deal with the issue on Thursday, said Michael Geist, a University of Ottawa law professor who specializes in technology issues.

"That will be the barometer for me," Geist said, adding that public hearings this summer did make the case that in some cases throttling was appropriate.

The throttling issue has been on the CRTC's plate since independent providers - wholesalers - complained that Bell was restricting their ability to deliver services to their clients, accusing the company of using its ability to control traffic to stifle competition.

Earlier in the year, the CRTC sided with Bell on their use of throttling during peak periods, but at the same time launched a review of the whole issue, resulting in Wednesday's decision.

The commission said the new rules take effect immediately.