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Ottawa, 3 November 1993
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Telecom Public Notice CRTC 93-66
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AGT, BC TEL, BELL, ISLAND TEL, MT&T, NBTEL AND NEWFOUNDLAND TEL - 1994 CONTRIBUTION CHARGES
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I BACKGROUND
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In Competition in the Provision of Public Long Distance Voice Telephone Services and Related Resale and Sharing Issues, Telecom Decision CRTC 92-12, 12 June 1992 (Decision 92-12), the Commission approved the application of Unitel Communications Inc. (Unitel) to provide public switched interexchange voice services in the operating territories of Bell Canada (Bell), BC TEL, The Island Telephone Company Limited (Island Tel), Maritime Telegraph and Telephone Company Limited (MT&T), The New Brunswick Telephone Company Limited (NBTel) and Newfoundland Telephone Company Limited (Newfoundland Tel) (the telephone companies). The Commission also liberalized the rules governing resale and sharing, and extended those rules to apply to the services of the Atlantic telephone companies.
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Based on information filed in the proceeding leading to Decision 92-12, the Commission established contribution charges applicable to facilities-based carriers and to resellers. The Commission also directed that, in December of each year, the telephone companies were to provide estimates of appropriate contribution charges to come into effect on 1 April of the following year.
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In Contribution Charges Effective 1 April 1993, Telecom Decision CRTC 93-11, 29 July 1993 (Decision 93-11), the Commission approved revised per-minute contribution charges effective on a final basis 1 April 1993. The Commission also concluded that: (1) conversation minutes provide a more appropriate measure of demand to be used in the calculation of per-minute contribution than billed minutes, (2) revisions to the mechanism adopted in Decision 92-12 for calculating contribution charges would be beyond the scope of the proceeding, (3) in future proceedings, the Commission would examine historical variances in the forecasting of contribution charges and parties would be required to file evidence regarding their forecasting accuracy, and (4) competitors having at least 0.5% of market share in the previous year would be required to file historical and forecasted demand information.
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In AGT Limited - Interconnection of Interexchange Carriers and Related Resale and Sharing Issues, Telecom Decision CRTC 93-17, 29 October 1993 (Decision 93-17), the Commission approved the interconnection of interexchange carriers (IXCs) to AGT's network and the resale and sharing of AGT's telecommunications services, under the general terms and conditions established in Decision 92-12. The Commission noted in that Decision that, in future, AGT would be made a party to the annual proceeding for establishing contribution charges.
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The Commission hereby initiates a proceeding to consider whether changes to the contribution charges of the telephone companies and of AGT (collectively, the respondents) will be required for the year 1994.
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On 27 August 1993, Stentor wrote to the Commission and to competitors making recommendations regarding the filing of competitors' demand data and a review of the contribution mechanism. In a reply dated 17 September 1993, Unitel recommended, among other things, that current contribution charges be made interim as of 1 January 1994 and that revised 1994 contribution charges be approved by the Commission effective back to that date.
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The Commission's findings with respect to these submissions are set out below.
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II SCOPE OF THE PROCEEDING
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In Decision 93-11, the Commission concluded that a consideration of revisions to the contribution charges mechanism, such as the reduction of contribution discounts, the increase of minutes per trunk used in the conversion of the per-minute rate into a rate per interconnecting circuit, and the adjustment of the Direct Access Line (DAL) Loading Factor and the DAL Surcharge, was beyond the scope of the proceeding.
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In its letter of 27 August 1993, Stentor argued that the factors noted above should be assessed in all future contribution proceedings due to their significance in the development of contribution rates.
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In its letter of 17 September 1993, Unitel responded that issues relating to the contribution mechanism should be excluded from this proceeding. Unitel argued that most of the factors identified by Stentor for review are already before the Commission in the proceeding initiated by Review of Regulatory Framework, Telecom Public Notice CRTC 92-78, 16 December 1992. Unitel also submitted that Stentor has not provided convincing reasons to demonstrate that the contribution mechanism is flawed and requires correction.
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The Commission is of the view that the 1994 contribution proceeding should be confined to an examination of contribution estimates and supporting information, as was the case for the 1993 proceeding. Regarding the issue of adjusting the DAL Loading Factor and the DAL Surcharge, the Commission is of the opinion, as stated in Decision 93-17, that the reasons set out in Decision 92-12 for establishing the surcharge at 2% remain valid; specifically, that the use of DALs may increase if the surcharge is set too high.
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III INTERIM CONTRIBUTION CHARGES
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In Decision 92-12, the Commission directed that, by 15 December of each year, the telephone companies were to provide estimates of appropriate contribution charges to come into effect on 1 April of the following year. In the 1993 contribution proceeding, the Commission's decision was delayed beyond 1 April due, in part, to a delay requested by the telephone companies regarding their filing of proposed contribution charges and supporting information.
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In its letter of 17 September 1993, Unitel recommended that the Commission make current contribution charges interim effective 1 January 1994. The company argued that it is apparent that the Commission will not be able to grant final approval to revised contribution charges by
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1 April 1994. Further, Unitel submitted that 1 January is a more sensible effective date for contribution charges than 1 April, as the forecasted Phase III information and minutes relate to the calendar year. Unitel maintained that, since contribution charges are based on each respondent's contribution requirement for the period January to December, contribution payments should relate to or match the period for which the contribution has been calculated. Finally, Unitel argued that in a period of declining long distance rates and/or increasing local rates, the three-month lag results in overpayment by competitors.
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The Commission agrees with the view that existing contribution charges should be made interim as of
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1 January 1994. However, the Commission considers that all parties should be given the opportunity to comment on the proposed effective date for new contribution charges of 1 January 1994. Parties wishing to comment on this matter may do so during the final comment and reply stages of this proceeding (see Part VI, paragraphs 21 and 22).
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IV DEMAND DATA
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In Decision 93-11, the Commission stated that competitors having at least 0.5% of market share in the previous year would in future be directed to file historical and forecasted demand information in the annual contribution charge proceeding. The Commission also stated that parties would be required to file evidence regarding their forecasting accuracy.
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In its letter of 27 August 1993, Stentor argued that there is little publicly available information on which to base estimates of competitors' future demand. Stentor noted further that such information received following the December filing of forecasts does not assist in the estimation of future demand. Accordingly, Stentor recommended that historical demand information be made available prior to the December filings.
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Stentor also recommended that competitors having at least 0.5% market share provide (1) estimates of total actual switched originating plus terminating conversation minutes (corresponding to lines 7 and 8(a) of page 198-R of Decision 92-12 for a respondent's or entrant's data, respectively), (2) actual originating plus terminating minutes associated with DALs (in order to assess the impact of the contribution exempt status of DALs), and (3) actual terminating minutes provided via another carrier's long distance service (for example, use of Wide Area Telephone Service for terminating a reseller's off-net traffic). Stentor suggested that this information be provided for six-month periods ending June 1992, December 1992, June 1993, and December 1993; also, this data should be made available no later than 1 October 1993 in order to permit time for parties to assemble, analyze and incorporate it into the December filings.
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In its letter of 17 September 1993, Unitel recommended that, to avoid the problem of the "recycling of forecasts" raised by Stentor and to streamline the overall process, each Stentor member provide historical toll information, from 1973 (or the earliest year available) to 1993, in sufficient detail to permit Unitel and other competitors to model toll demand.
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Unitel agreed with Stentor regarding the provision of information per lines 7 and 8(a) of page 198-R of Decision 92-12, but objected to competitors being obliged to file disaggregate demand data associated with DALs, because data at the service-specific level for small competitors such as itself would permit the telephone companies to better target their pricing and marketing plans. Further, Unitel recommended that parties provide the required information by 15 October 1993, rather than by 1 October 1993.
The Commission notes that there was a general agreement among parties to last year's contribution charge proceeding regarding the benefits associated with all entrants providing market share information. The Commission's determination in Decision 93-11 to consider historical and forecasted demand information of competitors having at least 0.5% market share in the previous year was based on the Commission's view that such information is necessary for setting future contribution rates.
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In Exemption of Resellers from Regulation, Telecom Public Notice CRTC 93-62, 4 October 1993, the Commission indicated that resellers of telecommunications services are not subject to Commission regulation under the new Telecommunications Act, which came into effect on 25 October 1993. However, the Commission does have authority under subsection 37(2) of the new Act to order that resellers provide the information noted above.
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The Commission has identified ACC Long Distance Ltd. (ACC), Cam-Net Communications Inc. (Cam-Net), Fonorola Inc. (Fonorola), Smart Talk Network (STN), Sprint Canada Inc. (Sprint) and Unitel (the entrants) as having at least 0.5% of market share in 1993. Accordingly, the Commission directs them to provide historical and forecasted demand information in the present proceeding, as set out in Part V, Section A, below.
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V INITIAL FILING REQUIREMENTS
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A. Demand Data
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The Commission directs the respondents to file, by 17 November 1993, historical data regarding the total originating and terminating conversation minutes (per line 7 of page 198-R of Decision 92-12) for each of the first three quarters of 1993 and for each of the four quarters of 1992. The Commission directs entrants to file, by the same date and for the same quarters, historical data regarding the total originating and terminating conversation minutes corresponding to line 8(a) of page 198-R of Decision 92-12 (separately for each respondent's operating territory).
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Respondents are directed to file, by 31 January 1994, historical data regarding the total originating and terminating conversation minutes (per line 7 of page 198-R of Decision 92-12) for the fourth quarter of 1993 and total 1993. The Commission directs entrants to file, by the same date and for the same quarter and year, historical data regarding the total originating and terminating conversation minutes corresponding to line 8(a) of page 198-R of Decision 92-12 (separately for each respondent's operating territory).
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Entrants are directed to file, by 31 January 1994, forecast data regarding the total originating and terminating conversation minutes (per line 8(a) of page 198-R of Decision 92-12) for 1994 (separately for each respondent's operating territory).
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The Commission expects that the above data would be placed on the public record.
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B. Estimates of Contribution Charges
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The respondents are directed to file, by 31 January 1994, proposed tariff pages setting out estimated contribution charges for 1994. Underlying calculations are to be provided in the format shown in the Attachment to Decision 92-12 (see page 198-R), modified to show the Reseller Discount and Contribution per Minute per End - Reseller (per lines 16 and 16(a) in the Attachment to Decision 93-17).
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C. Comparison of 1993 Forecast to Actuals
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The respondents, except AGT, are directed to file, by 31 January 1994, the actual 1993 values for all lines in the calculation of contribution in the format shown in the Attachment to Decision 92-12 (see page 198-R). Updated Phase III or Equivalent information should be used to determine the Contribution Requirement (see Section D, below). For each of these lines, the variance from the corresponding 1993 forecast should be indicated in total amounts and in percentages. Explanations should also be provided regarding any individual variances greater than 5%.
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D. Phase III or Equivalent Results
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For the purposes of the 1994 contribution charge proceeding, the Commission amends the date established for filing the Phase III information set out in Telecom Order CRTC 91-1004, 25 July 1991, from 15 December 1993 to 31 January 1994.
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The following additional supporting material is to be filed and served by 31 January 1994:
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Bell and BC TEL shall file and serve:
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(1) actual 1992 Phase III results;
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(2) updated 1993 Phase III forecast results incorporating a minimum of 10 months of actuals, including explanations for view-over-view changes resulting from significant changes in methodology or historical ratios, or from variances in revenue, investment or expense, based on the latest Corporate View; and
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(3) 1994 forecasted Phase III results, including explanations for 1994-over-1993 (updated forecast) changes resulting from significant changes to methodology or historical ratios, or from variances in revenue, investment or expense, based on the latest Corporate View.
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AGT, Island Tel, MT&T, NBTel and Newfoundland Tel shall file and serve:
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(1) for each of the years 1992 to 1994, best estimates of Phase III equivalent non-toll expenses and revenues and calculations of the non-toll deficit, as found at lines 1 and 2 of the Attachment to Decision 92-12 (page 198-R);
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(2) for each of the years 1992 to 1994, the actual/estimated Total Operating Revenue, Total Operating Expense and Net Income After Taxes;
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(3) an explanation for all significant year-over-year (1993/1992 and 1994/1993) variances for the estimates provided in (1) and (2) above; and
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(4) a detailed description and supporting calculations of how Phase III equivalent non-toll expenses and revenues were derived for the years 1992, 1993 and 1994, specifying all data sources.
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The Commission expects that the information described above would be placed on the public record.
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E. Other Matters
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The Commission will address initial interrogatories to the respondents, by 1 December 1993, regarding the methods, assumptions and underlying data to be employed in arriving at the contribution estimates. The Commission will also address interrogatories to Unitel and the other entrants. The Commission anticipates that the responses to these interrogatories may contain some detailed and disaggregated information for which confidentiality may be claimed.
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Respondents or entrants wishing to claim confidentiality for any of the information to be filed in this proceeding are to file an abridged version to be placed on the public record, along with a detailed explanation of the potential harm that would result from the disclosure of the information in question, taking into consideration the public interest in its disclosure. In assessing any claims for confidentiality, the Commission will, as is its practice, take into consideration the degree to which the market is exposed to competitive forces.
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VI PROCEDURE
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The procedures set out below require the respondents to file proposed revised contribution tariffs by 31 January 1994. The Commission notes that these procedures contemplate that the record of the proceeding will not be completed within 45 business days after the date that the proposed tariffs are filed. Accordingly, the Commission will be unable to approve or disallow the proposed tariffs within the 45 business day period set out in section 26 of the new Telecommunications Act. The Commission intends to determine the matter in the third quarter of 1994.
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1. The mailing addresses to be used in this proceeding are:
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Mr. Allan J. Darling
Secretary General
CRTC
Ottawa, Ontario
K1A 0N2
Fax: 819-953-0795
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Mr. James H. Pratt
Vice-President
(Regulatory Affairs)
AGT Limited
10020-100 Street
31st Floor
Edmonton, Alberta
T5J 0N5
Fax: 403-493-6577
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Ms. Sandra Hertz
Director
Regulatory Matters
BC TEL
18th Floor
3777 Kingsway
Burnaby, British Columbia
V5H 3Z7
Fax: 604-434-6616
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Mr. B.A. Courtois
Vice-President
(Law & Regulatory Affairs)
Bell Canada
105 Hôtel-de-Ville Street
6th Floor
Hull, Quebec
J8X 4H7
Fax: 819-778-3437
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Mr. F.D. Morash
President and
Chief Operating Officer
The Island Telephone Company Limited
69 Belvedere Avenue
Charlottetown, Prince Edward Island
C1A 7M1
Fax: 902-566-4665
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Ms. Wendy J. Paquette
Regulatory & Government Relations Manager
Maritime Telegraph and Telephone Company Limited
P.O. Box 880, Station M
Halifax, Nova Scotia
B3J 2W3
Fax: 902-421-1538
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Mr. Steve J. Palmer
Manager _ Pricing and Regulatory Matters
The New Brunswick Telephone Company, Limited
One Brunswick Square (BS19)
P.O. Box 1430
Saint John, New Brunswick
E2L 4K2
Fax: 506-694-2473
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Mr. Donald R. Tarrant
General Manager
Regulatory Matters
Newfoundland Telephone Company Limited
Fort William Building
P.O. Box 2110
St. John's, Newfoundland
A1C 5H6
Fax: 709-739-3122
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Mr. Robert Watson
President
ACC Long Distance Ltd.
5343 Dundas Street West
Suite 401
Etobicoke, Ontario
M9B 6K5
Fax: 416-236-4749
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Mr. Garth W. Edgar
Vice President
Regulatory Affairs
Cam-Net Communications Inc.
220-885 Dunsmuir Street
Vancouver, British Columbia
V6C 1N5
Fax: 604-684-0638
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Ms. Andrée Noël
Director and Corporate Secretary
Regulatory and Legal AffairsFonorola Inc.
500 René-Lévesque Boulevard West
Suite 305
Montréal, Québec
H2Z 1W7
Fax: 514-954-4329
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Ms. Tina J. Hodgson
Vice President
Regulatory Affairs
Smart Talk Network
405 Riverview Drive
3rd Floor
Chatham, Ontario
N7M 5J5
Fax: 519-352-6097
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Mr. Jean Brazeau
Sprint Canada Inc.
105 Gordon Baker Road
7th Floor
Willowdale, Ontario
M2H 3S1
Fax: 416-496-0975
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Mr. D.W. McKeown
Executive Director
Regulatory Matters - Policy and Costing
Unitel Communications Inc.
200 Wellington Street West
Suite 1600
Toronto, Ontario
M5V 3C7
Fax: 416-345-2878
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2. AGT, BC TEL, Bell, Island Tel, MT&T, NBTel and Newfoundland Tel (the respondents), and ACC, Cam-Net, Fonorola, Sprint, STN and Unitel (the entrants) are made parties to this proceeding.
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3. As described in Part V of this Public Notice, respondents and entrants are to file historical data, serving copies on each other, by 17 November 1993.
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4. Respondents and entrants may file requests for public disclosure of information for which confidentiality has been claimed, setting out the reasons for disclosure, by 22 November 1993. Copies are to be served on the party asserting confidentiality, also by 22 November 1993.
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5. Replies to requests for public disclosure are to be filed with the Commission and served on the party making the request by 29 November 1993.
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6. The Commission will address interrogatories to respondents and entrants by 1 December 1993.
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7. Other persons (interveners) wishing to participate in this proceeding must notify the Commission in writing by 10 December 1993.
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8. The Commission will issue a complete list of parties and their mailing addresses by 17 December 1993.
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9. The Commission will issue a determination with respect to any requests filed pursuant to paragraph 4 as soon as possible. The Commission intends to direct that any information to be released pursuant to its determination be placed on the public record and served on other entrants and respondents by 21 December 1993.
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10. By 21 December 1993, respondents and entrants are to serve on interveners copies of the historical data required by paragraph 3, including any information required to be disclosed by virtue of the ruling noted in paragraph 9.
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11. The respondents are to file contribution estimates and supporting information, serving copies on all parties, by 31 January 1994.
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12. By 31 January 1994, respondents and entrants are to file the remaining required historical and forecast data, and their responses to the Commission's interrogatories of 1 December 1993, serving copies on all parties.
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13. Requests for public disclosure of information filed pursuant to paragraphs 11 and 12 for which confidentiality has been claimed, setting out the reasons for disclosure, must be filed with the Commission and served on the party asserting confidentiality by 7 February 1994.
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14. Replies to requests for public disclosure are to be filed with the Commission and served on the party making the request by 14 February 1994.
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15. The Commission will issue a determination with respect to any such requests as soon as possible. The Commission intends to direct that any information to be released pursuant to its determination be placed on the public record and served on all parties by 8 March 1994.
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16. Parties may address interrogatories to the respondents and entrants. Any such interrogatories are to be filed with the Commission and served on the respondent or entrant in question by 22 March 1994. The Commission will also address interrogatories by that date.
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17. Responses to interrogatories are to be filed with the Commission and served on all parties by 12 April 1994.
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18. Requests for further responses to interrogatories, specifying in each case why a further response is both relevant and necessary, and requests for public disclosure of information for which confidentiality has been claimed, setting out the reasons for disclosure, must be filed with the Commission and served on the party in question by 19 April 1994.
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19. Replies to requests for further responses and to requests for public disclosure must be filed with the Commission and served on the party who made the request by 26 April 1994.
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20. The Commission will issue a determination with respect to any such requests as soon as possible. The Commission intends to direct that any material required by that determination be filed with the Commission and served on all parties by 20 May 1994.
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21. All parties may file comments with the Commission, including comments on the proposed 1 January 1994 effective date for contribution charges set in this proceeding, serving copies on respondents and entrants, by 3 June 1994.
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22. Respondents and entrants may file replies to any such comments, serving copies on all parties, by 13 June 1994.
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23. Where a document is to be filed or served by a specific date, the document must be actually received, not merely mailed, by that date.
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Allan J. Darling
Secretary General
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