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Public Notice
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Ottawa, 23 June 1998 |
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Public Notice CRTC 1998-60 |
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A Policy Framework for the Introduction of Competition to the Satellite
Relay Distribution Industry
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Introduction to Decisions CRTC
98-171 to
98-174; and call for comments
and related requests on a proposal to authorize reception by Class 2 and 3
broadcasting distribution undertakings of the 4 + 1 U.S. television network
signals directly from U.S. service providers using U.S. satellites |
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INTRODUCTION |
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1. The purpose of this public notice is to
announce the Commission's policy framework for a competitive satellite relay
distribution industry, and to introduce decisions issued today on a number of
applications heard at a Public Hearing commencing 16 February 1998 in the
National Capital Region. |
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2. In this notice, the Commission also calls for
comments on a proposal that would serve as a key element of its overall
policy framework, namely a plan to permit Class 2 and 3 broadcasting
distribution undertakings (BDUs) to receive the 4+1 U.S. television network
signals directly from U.S. satellite service providers, and calls for
requests to add specific signals to the List of Part 2 Eligible Satellite
Services and the List of Part 3 Eligible Satellite Services (satellite
lists). |
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TODAY'S DECISIONS |
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3. At the 16 February hearing, the Commission
considered an application by Canadian Satellite Communications Inc. (Cancom)
for renewal of its licence to carry on a national, multiple channel
television and radio relay distribution undertaking. In Decision CRTC 98-171
of today's date, the Commission has renewed this licence for a period of two
years. The renewed licence authorizes Cancom to carry on what will now be
called a Satellite Relay Distribution Undertaking (SRDU). |
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4. In other decisions issued today, the
Commission announces its determinations with respect to certain other
applications presented at the 16 February 1998 hearing. All of these
contemplate the introduction of competition, whether on a national or
regional basis, to Cancom's licensed broadcasting activity, that being the
distribution of television services to terrestrial BDUs and direct-to-home
(DTH) BDUs. In Decision CRTC 98-172, the Commission has approved an
application by Star Choice Television Network Incorporated (Star Choice) for
a licence to carry on a second national SRDU service similar to that
currently offered by Cancom. Star Choice is the licensee of an existing,
national, DTH distribution undertaking. As in the case of Cancom, the new
SRDU licence is for a term of two years. |
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5. The Commission's SRDU policy will generally
rely upon competition to ensure that the broadest possible choice is
available to BDUs at a reasonable cost. While the Commission has decided to
renew Cancom's licence and issue a new licence to Star Choice, there exists
uncertainty concerning the future ownership structure within the Canadian
SRDU industry. In the circumstances, the Commission considers that the two
year licence terms granted to Cancom and Star Choice are warranted. |
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6. All of the remaining applications have been
denied, including one by Prime Time Canada, on behalf of a company to be
incorporated, proposing what would have been a third, national SRDU service.
The Commission found Prime Time Canada to be ineligible to hold a
broadcasting licence under the Direction to the CRTC (Ineligibility of
Non-Canadians) P.C. 1997-486(see Decision CRTC 98-173). The other
applications, either by or on behalf of a number of BDUs, sought authority to
distribute U.S television signals (in the case of one application, U.S. radio
signals as well) received directly from U.S. satellites. These applications
have been denied for the reasons set out in Decision
CRTC 98-174. |
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7. Based on the evidence provided at the 16
February 1998 hearing, however, and in keeping with its overall policy
objective of providing subscribers of smaller BDUs with the broadest possible
choice at an affordable cost, the Commission proposes to implement measures
that would permit Class 2 and Class 3 BDUs to receive the 4+1 U.S. television
network signals directly from U.S. satellite service providers. Specifically,
the Commission contemplates that the existing satellite lists would be
amended, by adding signals that Class 2 and 3 BDU licensees would be
permitted to receive directly from U.S. satellite service providers, whether
through authorizations now contained in the Broadcasting Distribution
Regulations (the regulations) affecting Class 3 licensees, or through
authorizations that, upon application by Class 2 licensees, may be granted
pursuant to a condition of licence. Class 1 and Class 2 licensees are
reminded that, in accordance with the Distribution and Linkage Requirements
for Class 1 and Class 2 licensees (Public Notice CRTC 1997-151 dated 22
December 1997), a condition of licence is required in order to distribute
these signals as part of the basic service. |
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8. The Commission notes that, although the
applications dealt with in Decision CRTC 98-174 have been denied, the
flexibility that most of the applicants sought would be achieved under the
Commission's proposal to amend the satellite lists. |
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9. In the circumstances, the Commission
considers that interested parties should be given a further opportunity to
provide written comments and supporting evidence with regard to the potential
impact of this measure on the Canadian broadcasting system and the ability of
its components to achieve the policy objectives set out in the
Broadcasting Act (the Act). These comments will assist the Commission in
reaching its ultimate determination on implementation of this policy
proposal. Details concerning the public process that the Commission will
conduct on this matter are provided later in this notice. |
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10. In view of the above, the Commission
denies the request, presented at the 16 February 1998 Public Hearing by
the Canadian Cable Systems Alliance, that the signals of the U.S. satellite
service provider known as Prime Time 24 be added to the satellite lists. |
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SRDU POLICY FRAMEWORK |
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11. The policy framework described below
addresses, among other things, the role that SRDU undertakings are expected
to play within the Canadian broadcasting system and the contributions they
are required to make to the creation and presentation of Canadian
programming. In order to ensure fair and sustainable competition, the policy
framework also prescribes a specific condition of licence to deal with
concerns about undue preference or disadvantage. Further, the Commission has
imposed conditions on licensees regarding their conduct and obligations in
resolving disputes between themselves and either their affiliates or program
providers. |
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Fair and sustainable competition |
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12. Fair and sustainable competition within an
industry is taken to require increased reliance on market forces for the
provision of facilities, products and services. The Commission's policy
framework for the SRDU marketplace favours entry to all qualified applicants,
with primary consideration being given to the financial ability of the sector
to sustain competition, rather than to the financial viability of specific
undertakings. |
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13. The Commission is satisfied that the
introduction of competition to this sector will benefit the viewing public
and the Canadian broadcasting system generally, and the subscribers of
smaller systems in particular. Objectives include both the development of a
strengthened Canadian distribution sector better able to compete with the
unlicensed "grey market", and the emergence of certain system-wide benefits,
including enhanced choice and cost-competitiveness, flowing from the greater
efficiencies, innovation and customer service that generally exist in a
competitive |
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Extension of Service |
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14. While the role of an SRDU has grown to
encompass more than the original goal of extending Canadian services to
remote and underserved communities, the Commission emphasizes that this
remains its fundamental purpose and objective. The Commission notes that
SRDUs also serve as signal suppliers for urban areas. New entrants to the
SRDU marketplace should bring the benefits of competition to these areas as
SRDUs increasingly compete with terrestrial alternatives, such as optical
fibre and microwave distribution networks. |
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Preponderance of Canadian signals |
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15. Licensed SRDUs will be required to
distribute a preponderance of Canadian signals. The Commission notes that the
two successful applicants proposing national operations indicated their
acceptance of such a requirement in order to help ensure the continued
availability of, and choice among, Canadian signals. |
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Minimum levels of French-Language services
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16. Licensed SRDUs offering a national service
will be required to provide national distribution for the signals of all
conventional, Canadian, French-language television services that purchase
national program rights, other than the French-language television network
service of the Canadian Broadcasting Corporation (CBC), which service is
already generally available to BDUs via satellite. With respect to regional
SRDUs, the Commission is prepared to consider exceptions to this general
requirement on a case-by-case basis. |
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17. The Commission encourages Cancom and Star
Choice, as resources permit, to increase the range of French-language
services that they make available to affiliates. |
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Contributions to the creation and
presentation of Canadian programming |
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18. Licensed SRDUs will be required to provide
contributions to the creation and presentation of Canadian programming
representing a minimum of 5% of their annual gross revenues derived from
broadcasting activities. This is the same level of contribution that is
generally required of all BDUs under the regulations, with the exception of
Class 3 terrestrial distributors. |
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19. At the hearing, the Commission discussed
with Cancom the appropriateness of including, as part of that licensee's
required contribution to Canadian programming, the annual costs that are
currently absorbed by Cancom through its policy of subsidizing the cost of
the equipment used by its BDU affiliates to decode Cancom's satellite
signals. In the Commission's view, Cancom's decoder subsidy program has
served essentially as a marketing technique to attract and retain affiliates.
As such, the costs associated with this program are most appropriately
identified as a cost of doing business rather than as a bona fide
contribution to Canadian programming. Accordingly, and as a matter of policy
applicable to all licensed SRDUs, the Commission has decided to disallow the
inclusion of decoder costs as part of required annual contributions to
Canadian programming. |
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20. Otherwise, considerable flexibility will be
accorded SRDUs in choosing where their contributions will be directed. For
example, the Commission would be disposed to accept financial contributions
to independent Canadian program production funds, or to certain named parties
who might otherwise have difficulty obtaining funding, including groups
active in native and French-language broadcasting, and in programming
involving distance learning. |
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21. Licensees will be required, by condition
of licence, to file a report for the Commission's approval within
three months, identifying the recipient(s) of their contributions to the
creation and presentation of Canadian programming, as well as the projected
annual amounts that they intend to allocate to each and the timing of such
contributions, if the contribution is to a recipient other than a production
fund. Contributions directed to a production fund are required to be made on
a monthly basis. The due date for Cancom is set out in Decision
CRTC 98-171 and in Decision
CRTC 98-172 for Star Choice.
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Undue preference and dispute resolution
provisions |
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22. Each SRDU licensee will be subject to a
condition of licence containing provisions comparable to those found in
section 9 of the regulations. This condition will prohibit the licensee from
giving an undue preference to any person, including itself, or from
subjecting any person to an undue disadvantage. |
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23. The Commission notes that it will take some
time for transition to full competition in the delivery of signals to
distribution undertakings. Accordingly, it has imposed a condition of licence
requiring an SRDU licensee to submit to a dispute resolution process, where
the Commission is of the view that such a process will assist in resolving a
dispute. The Commission, however, encourages parties to make every effort to
resolve disputes in a timely and effective manner on their own. |
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24. The Commission contemplates a process for
dispute resolution similar to that set out in the regulations. At the
hearing, parties expressed particular concern about releasing confidential
information, especially agreements with affiliates. Recognizing this concern,
the Commission intends to keep information submitted in the course of such a
process confidential, and not to use such information in subsequent processes
before it (unless obtained independently). Nevertheless, the Commission
intends to tailor the dispute resolution process to the requirements of each
particular situation. |
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25. In this regard, having considered requests
from various parties that it require SRDU licensees to file affiliation
agreements, the Commission has decided not to do so at this time. It may,
however, require that such agreements be filed, on a case by case basis, at a
later date. The Commission may, on request, grant confidentiality concerning
all or part of such agreements that it requires be filed. |
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Rate regulation |
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26. Cancom is currently subject to rate
regulation in the form of a cap on the overall rate that it may charge
affiliates who receive some or all of its signals (rate cap). Because Star
Choice is already in operation as a licensee of a DTH distribution
undertaking, the Commission is satisfied that it is in a position to compete
immediately with Cancom in the SRDU market. Accordingly, rate regulation by
means of a rate cap will not be imposed at this time on either of these SRDU
licensees. Nevertheless, as mentioned earlier in this notice, there is
considerable uncertainty surrounding the future ownership structure within
the Canadian SRDU sector. The Commission therefore emphasizes that it is
prepared to reconsider the possibility of regulating the rates charged by
SRDUs at the time it considers the licence renewals of Cancom and Star Choice
in two years. |
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27. In the absence of a rate cap, and as a
consequence of BDUs having the choice of obtaining signals from two
competitors, the Commission notes that, over time, any cross-subsidization of
one signal by another that may have occurred in the past will likely
disappear (or at least be reduced), and the price charged by an SRDU for any
given signal will more closely reflect the actual cost of providing that
signal. |
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Other matters |
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28. The television satellite services that
Cancom and Star Choice are authorized to distribute by condition of licence
also appear in Part 2 or Part 3, or both as appropriate, of the revised
satellite listsissued today in Public Notice
CRTC 1998-61. |
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29. The Commission notes that an exempt
distribution undertaking, such as a master antenna television system (MATV),
is permitted to distribute the same signals that a licensed terrestrial BDU
is authorized to distribute in the same area served by the exempt
undertaking. |
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30. The Commission also notes that Cancom and
Star Choice both indicated that they did not require exclusivity with respect
to the programming services they will offer. Accordingly, the Commission is
disposed to deal expeditiously with applications by either licensee to
distribute any service that has been authorized, by condition of licence, for
distribution by the other. |
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CALL FOR COMMENTS ON A PROPOSAL TO PERMIT
CLASS 2 AND 3 BDUS ACESS TO THE 4 + 1 U.S. TELEVISION NETWORK SIGNALS
DIRECTLY FROM U.S. SERVICE PROVIDERS USING U.S. SATELLITES |
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31. As indicated earlier in this notice, the
Commission is satisfied that the circumstances of Class 2 and 3 BDUs in the
emerging competitive marketplace and, in particular, their need for maximum
choice and affordability in choosing the 4 + 1 U.S. television network
signals they deliver to their subscribers, warrant particular consideration
by the Commission. The Commission therefore proposes to authorize the
licensees of these smaller BDUs to obtain the signals of these network
services directly from U.S. satellite service providers. |
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32. While the Commission considers that it may
be in the public interest to allow direct access by Class 2 and 3 BDUs to the
4+1 U.S. television network signals from U.S. satellite service providers,
this enhanced flexibility has, as its rationale, the desire to ensure maximum
choice and affordability for such undertakings within a competitive
marketplace. Accordingly, interested parties are advised that should the
Commission decide to implement this measure, it may, following due public
process, remove authorizations for the carriage of signals obtained from any
U.S. satellite service supplier that it determines to be engaging in
anti-competitive behaviour. |
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33. Parties wishing to submit comments should
also take into account the following statement contained in the Schedule
of Specific Commitments (the schedule) made by Canada to the World Trade
Organization on 11 April 1997: |
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On March 1, 2000, Telesat Canada will no longer
be authorized to be the sole operator in Canada of fixed satellite space
segment facilities used to provide national and Canada-U.S. fixed satellite
services. |
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34. The applications of Cancom and Star Choice
are both predicated on their use of Canadian fixed satellite space segment
facilities, which may soon be open to competition. The Commission notes that
broadcasting is excluded from the schedule. Accordingly, direct broadcast
satellites (DBS) are not considered to be fixed satellite space segment. |
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35. As discussed earlier, the Commission's
policy framework requires each SRDU licensee to provide a contribution to the
creation and presentation of Canadian programming representing 5% of its
gross annual revenues derived from broadcasting activities. Should the
Commission, following its consideration of comments received, decide to
implement its proposal to permit direct access to the 4+1 U.S. television
network signals from U.S. service providers using U.S. satellites, the
Commission intends to require those licensees of Class 2 and 3 BDUs who avail
themselves of the new policy to make a similar contribution. Specifically,
and in the interest of maintaining a competitive balance among distributors,
those Class 2 and 3 licensees who subsequently obtain any of the 4+1 U.S.
television network signals directly from a U.S. satellite service provider
(such as Prime Time 24 or Netlink International) would be required to make a
5% contribution to an independent Canadian program production fund. The 5%
would be calculated based upon the annual gross amount of the payments by the
BDU to the U.S. satellite service provider. This requirement would be
enforced through the inclusion of a notation in the satellite lists, whereby
a Canadian licensee would only be authorized to continue distributing these
services so long as it makes the requisite contributions. |
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36. The Commission does not wish to limit the
scope of the comments that may be filed addressing this matter. Indeed, in
the interest of maintaining a balance among the economic, social and cultural
objectives of the Act, it seeks to benefit from the broadest and most
enlightened discussion possible of the many related and important issues at
stake in implementing the policy change it is currently proposing. In
particular, the Commission wishes to receive documentary evidence that would
substantiate or lend support to any opinions submitted. Supporting
documentation could include, but need not be limited to, specific economic
models or analysis and information on cost structures for individual signals.
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37. Examples of areas that might be addressed
include the potential impact that such a decision may have on the following:
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· the viability of the current and future SRDU
licensees, as well as the sustainability of competition within the SRDU
sector; |
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· the ability of SRDUs to distribute a variety
of Canadian signals, including French-language signals; |
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· the pricing and affordability of distant
signals supplied by SRDUs, particularly the pricing of Canadian signals,
including French-language signals; and, |
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· the level of contributions provided by
licensed SRDUs to certain parties who might otherwise have difficulty
obtaining funding, including groups active in native and French-language
broadcasting, as well as the level of contributions by licensed SRDUs to the
Canadian programming funds. |
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38. The Commission will consider requests for
confidentiality on a case-by-case basis. Persons submitting commercially
sensitive information that they wish to be held confidential are requested to
identify and substantiate all claims for such confidential status. |
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PUBLIC PROCESS |
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39. The Commission will follow a three phase
written comment process in this proceeding. As the first phase, interested
parties are invited to file written comments no later Friday, 7 August 1998
Parties requesting to have specific U.S. television network signals added to
either or both of the satellite lists(i.e. signals that are now
uplinked to U.S. satellites by such service providers as Primetime 24 or
Netlink) should file such requests with the Commission by that same date.
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40. In the circumstances, such requests shall
not be considered to fall within the moratorium on additions to the satellite
lists announced in Public Notice CRTC
1997-33-2. However, all other requirements governing such requests,
including the requirement for sponsorship, remain unchanged. |
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41. In the second phase, interested parties,
regardless of whether they have participated in phase one, will have an
opportunity to reply to any or all of the written comments and requests for
additions to the satellite lists that are received by the Commission during
phase one. These replies must be filed with the Commission, and be served
upon the party or parties who submitted the comments or requests to which the
replies are addressed, by no later than Friday, 21 August 1998. |
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42. In the third phase, involved parties will
have an opportunity to rebut any comments made in phase two related to
requests for additions to the satellite lists. These rebuttals must be filed
with the Commission, and be served upon the party or parties who submitted
the comments to which the rebuttals are addressed, by no later than
Monday, 31 August 1998. |
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43. The Commission will only accept submissions
that are received by the Commission on or before the prescribed dates noted
above. |
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44. Comments filed in response to this notice
must be addressed to the Secretary General, CRTC, Ottawa, Ontario K1A 0N2 and
must be filed in hard copy form. |
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45. Parties filing submissions that are over
five pages in length are asked to include a short executive summary. |
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46. All comments will be considered by the
Commission, and will form part of the public record of the proceeding without
further notification, provided the procedure set out above has been followed.
Interested parties are therefore strongly encouraged and expected to monitor
the content of the public examination files. |
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EXAMINATION OF RELATED DOCUMENTS AND PUBLIC
COMMENTS AT THE FOLLOWING COMMISSION OFFICES DURING NORMAL OFFICE HOURS:
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Central Building
Les Terrasses de la Chaudière
1 Promenade du Portage, Room 201
Hull, Quebec K1A ON2
Tel.: (819) 997-2429 - TDD: 994-0423
Telecopier: (819) 994-0218 |
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Bank of Commerce Building
Suite 1007
1809 Barrington Street
Halifax, Nova Scotia B3J 3K8
Tel: (902) 426-7997 - TDD 426-6997
Telecopier: (902) 426-2721 |
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Place Montréal Trust
1800 McGill College Avenue
Suite 1920
Montréal, Quebec H3A 3J6
Tel: (514) 283-6607 - TDD 283-8316
Telecopier: (514) 283-3689 |
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Kensington Building
Suite 1810
275 Portage Avenue
Winnipeg, Manitoba R3B 2B3
Tel: (204) 983-6306 - TDD 983-8274
Telecopier: (204) 983-6317 |
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530-580 Hornby Street
Vancouver, British Columbia V6C 3B6
Tel: (604) 666-2111 - TDD 666-0778
Telecopier: (604) 666-832 |
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Laura M. Talbot-Allan
Secretary General |
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This document is available in alternative
format upon request. |