The federal cabinet has directed Canada's telecom regulator to reconsider whether the country's three largest carriers should be allowed to resell internet services over each other's networks at regulated prices. The move could alter a controversial part of the wholesale regime aimed at improving telecom competition, The Globe and Mail newspaper is reporting Friday.

The cabinet's directive late last week spurred a number of telecoms and industry groups to weigh in on the issue, prompting a rare near consensus in an industry that is perpetually in disagreement about the best way to promote lasting competition in Canada, the report said.

The report noted Cabinet's concern is that allowing the "Big Three" carriers -- Rogers Communications Inc., BCE Inc.'s Bell and Telus Corp. -- to access each other's networks at mandated rates could allow those players to use their market dominance to steamroll local competitors.

In a statement, Industry Minister Francois-Philippe Champagne said cabinet had concerns about "the viability of small and regional internet service providers that provide alternatives" and about maintaining investments in internet infrastructure.

Friday's report noted cabinet has given the Canadian Radio-television and Telecommunications Commission (CRTC) 90 days to review this aspect of the interim wholesale regime, which requires Bell, Telus and SaskTel to grant competitors access to their fibre-optic internet networks at mandated prices.

Currently, under the interim fibre wholesale regime, the report said the CRTC allows the Big Three and their subsidiaries to resell fibre internet outside their networks. It said in August that the incumbents would be "new entrants" outside their markets, and cited the Competition Bureau's view that the benefits of allowing them to do so would "likely outweigh the risks."

However, independent internet service providers, as well as two of the three large carriers, have argued that allowing the incumbents access at mandatory rates is contrary to the regulator's goals of supporting competition. Telus has taken a different view.

Among those who have submitted applications to the CRTC in recent days are Cogeco Inc. (CCA.TO), Bragg Communications Inc.'s Eastlink and the Competitive Network Operators of Canada (CNOC), an industry association representing independent internet service providers, the report noted.

In a joint submission, they argued that the regulator had failed to properly consider the long-term impact of bundling -- or selling multiple services as a discounted package -- by the Big Three incumbents. Many regional competitors either could not offer mobile wireless at all, or in a limited capacity, the group said, and therefore could be undercut.

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