UPDATE 1-Watchdog asks BCE to justify Web traffic shaping

(Adds comments from BCE, CAIP)

By Wojtek Dabrowski

TORONTO, May 15 (Reuters) - The country's top telecom watchdog wants BCE Inc (BCE.TO: Quote, Profile, Research) to explain exactly how and why it decided to slow down certain file-sharing traffic on wholesale networks it leases to smaller independent Internet service providers.

The Canadian Radio-television and Telecommunications Commission sent a set of questions to BCE's Bell Canada phone company unit on Thursday, after it ruled that the phone giant can continue "shaping" traffic for the time being.

A final decision on the matter is due later this year. The CRTC's letter comes following a complaint from the Canadian Association of Internet Providers (CAIP) against Bell Canada.

Bell and other large telecom companies engage in a practice called "traffic shaping," which basically involves slowing down some Web activity like peer-to-peer, or P2P, file sharing. P2P file swappers usually exchange large, bandwidth-intensive music or movie files.

Bell and others like it argue such file swappers choke its network at the detriment of other users.

One of the CRTC's questions to Bell asks: "Provide full rationale and evidence in support of Bell Canada's view that 95 percent of its customers were being negatively affected."

CAIP also has claimed that aside from file sharing, audio and video streaming services like Internet radio and YouTube have been affected by traffic shaping.