The latest decision by Canada's telecommunications regulator on wholesale rates carriers can charge small independent Internet service providers has left both carriers and ISPs scratching their heads.

The reason is that decision, which takes effect Feb. 1, is anything but simple and elegant.

"I don't think anybody wins here," observed Iain Grant, managing director of the SeaBoard Group, a Montreal-based telecommunications consultancy.

One ISP with customers in several provinces predicted that the new rate plan means he might have to double his rates to subscribers 12 months from now.

"It just doesn't seem to add up," Marc Gaudrault, CEO of TekSavvy Solutions, said in an interview. "I'm concerned we won't be able to offer a good value proposition to our customers.

On the other hand, Mel Cohen, who heads an Ottawa-based ISP called Distributel, was satisifed. "We can go up to 25 Mbps (in areas where a phone company has fibre to the node) and only pay 30 cents more for 7 Mbps service. The cable prices are better, still."

Chris Allen, president of British Columbia-based rural ISP ABC Communications, foresees "a little price reduction for our residential customers, a little price increase on the business ones. But all very survivable."

As for carriers, the vice-president of regulatory affairs at a major cable company said the new framework is acceptable but was puzzled by the rates.

Almost everyone interviewed said their companies are going to have to do detailed financial studies before being certain of the new ruling's effect.

The CRTC regulates wholesale rates carriers charge ISPs for connectivity, but not the retail rate subscribers pay.

However, for over two years Canada's ISPs have been fighting the federal telecom regulator over a carrier's plan to impose billing by the byte on them. The commission approved the idea, but after a public uproar last spring it was forced theCRTC to hold another hearing.

In Tuesday's decision the commission approved two wholesale rate plans. For carriers who want, the existing wholesale flat rate plan stays the same. For carriers who want some element of usage tied to the rates, the commission approved a capacity-related schedule.

Under it, ISPs will have to buy capacity by the month in 100 Mbps chunks. The more capacity they buy, the more they pay.

The CRTC hopes the new framework wil give ISPs the ability to set rates they want.

Under usage-based billing, ISPs said, their rates would have effectively been controlled by carriers. Meanwhile carriers get wholesale rates linked to capacity, which is supposed to put some brake on the ever-increasing demand by subscribers for bandwidth, which is supposed to meet their demands for control