* Bell ups the price it charges own customers (Adds Bell price rise)

By Alastair Sharp

TORONTO (Reuters) - Online video rental company Netflix Inc has tweaked its Canadian streaming service to cut down on the amount of data it uses in a country where Internet usage is typically metered and capped.

The move came hours after major Internet provider BCE Inc took a step back in its fight to impose the same usage-based billing it charges its retail customers on resellers who lease space on its network.

Proponents of more generous pricing models for Internet use are prodding politicians and regulators to support their cause and seek to make it an issue in the May 2 federal election.

Netflix said its streaming service in Canada will by default now use two-thirds less data on average, with only a minimal impact on video quality. A customer can choose to select two higher quality streams that use more data. It will still charge C$7.99 a month, regardless of the video size.

Thirty hours of streaming film or television typically uses 31 gigabytes of data; it would now use only 9 gigabytes, Netflix said in an email sent to customers late on Monday.

Netflix noted that this would fall well below the data caps of most Canadian Internet service providers, which typically sell monthly packages allowing between 20 and 60 gigabytes.

The company said earlier on Monday it had reached a five-year deal with Viacom's Paramount Pictures to add more than 350 films to its Canadian catalogue.

The deal also includes exclusive subscription television rights to upcoming first-run films, bypassing the traditional route of licensing through Canadian content owners Corus Entertainment and Astral Media.

Netflix has also bought exclusive North American rights for a Kevin Spacey television series to debut late next year.

"Over time you'll see more and more deals such as this," said Dvai Ghose from Canaccord Genuity in Toronto, who says expanded Netflix offerings will boost pressure on cable and satellite companies such as Rogers Communications, Shaw Communications and Quebecor, which all also offer Internet services.

BCE, which operates under the Bell brand, said on Monday it was dropping plans to charge its wholesale Internet customers on a per-user basis, following a public outcry that sparked political intervention.

Instead, Bell now says it will aggregate the amount it charges wholesalers that lease bandwidth on its network, based on the total amount of data they use. It will also lower the access fees it charges them to use its newest fiber network.

"They're trying to placate the political and regulatory backlash against them while at the same time trying to maintain the concept," Canaccord's Ghose said.

It could still become a major election issue, however, with leading advocacy group Openmedia.ca pledging to question the parties on their digital policies and report back to their supporters. The group has garnered almost half a million names for an online petition against usage-based billing.

Canada's communications regulator will hold a hearing in July to decide what pricing arrangements should be in place for wholesalers. It does not plan to rule on what companies such as Bell can charge their own customers.

Bell this month said it was adding $3 a month to the cost of each of its retail Internet packages, as well as its Fibe Internet-protocol television product.

From May, the cheapest broadband package will cost C$34.95 for 2 gigabytes, while for 75 gigabytes a customer will pay C$70.95. The more expensive plans also offer faster speeds.

The same plans cost C$21.95 and C$52.95 a month in late January, printouts from their website showed. A Bell spokesman said those prices were most likely promotional rates.

The regulator returned to the issue after the federal government, under pressure from opposition politicians and advocacy groups, said it would block an earlier decision that supported Bell's move to pass on usage-based billing to wholesale customers.

($1=$0.98 Canadian) (Additional reporting by Euan Rocha; editing by Rob Wilson, Gary Hill)