Netflix told its Canadian users this week that it will start reducing the quality of streaming videos to meet data caps set by Internet service providers.

The move underscores a concern by online video providers such as Netflix, YouTube and Hulu that data caps set by Internet service providers could steer users away from Internet videos. AT&T announced this month that DSL and U-Verse landline Internet service subscribers would have a 150 gigabytes data limit per month. Comcast has a 250 gigabytes limit. All major wireless providers except for Sprint Nextel have tiered data prices.

In a blog post, Netflix said that by changing settings for streaming videos, consumers would use on average 2/3 less data than before with “minimal impact to video quality.”

“We made these changes because many Canadian Internet service providers unfortunately enforce monthly caps on the total amount of data consumed,” Neil Hunt, Netflix’s chief product officer, wrote in the blog. The Canadian government has been debating the use of data caps and usage-based billing, a practice consumer groups there have fiercely opposed.

Netflix has argued to the Federal Communications Commission that usage-based pricing schemes for Internet service could affect its business and hurt new online upstarts trying to compete with cable and satellite firms who have their own subscription-based television services.

The FCC endorsed usage-based data billing practices in its open Internet access order last December.

Related stories:

Netflix goes up against the networks

As telecom industry evolves, Netflix is its biggest threat