Telecom Commission Letter addressed to the Distribution list

Ottawa, 20 March 2019

Our reference: 8662-C182-201809534

BY EMAIL

Distribution list

Dear Madam/Sir:

Re:   Canadian Network Operators Consortium Inc. Part 1 Application to review and vary Telecom Regulatory Policy CRTC 2015-326 and Telecom Decision CRTC 2016-379 – Interim Relief – Commission Decision

By letter dated 7 November 2018, the Canadian Network Operators Consortium Inc. (CNOC) filed a Part 1 Application (the Application) to review and vary Review of wholesale wireline services and associated policies, Telecom Regulatory Policy CRTC 2015-326, 22 July 2015 (Telecom Regulatory Policy 2015-326) and Follow-up to Telecom Regulatory Policy 2015-326 – Implementation of a disaggregated wholesale high-speed access service, including over fibre-to-the-premises access facilities, Telecom Decision CRTC 2016-379, 20 September 2016 (Telecom Decision 2016-379).

In the Application, CNOC requested the following relief:

  1. removal of the 100 megabits per second (Mbps) speed cap on aggregated high-speed access (HSA) services (the Speed Cap) on an expedited basis;
  2. establishment of a significantly reduced level of disaggregation on the Bell Canada network, and possibly those of Cogeco Communications Inc. (Cogeco); Quebecor Media Inc., on behalf of Videotron Ltd. (Videotron); and Rogers Communications Canada Inc. (RCCI) (collectively, the incumbents);
  3. the addition of port and fibre strand sharing functionality for all incumbent disaggregated HSA services; and
  4. access to fibre-to-the-premises (FTTP) facilities over aggregated HSA services, whereby such access will be phased-out subject to a forbearance framework.

By letter dated 20 November 2018, Commission staff established timelines for addressing the Application in two stages: Stage 1 was to address the option of suspending the Speed Cap on an interim basis, and Stage 2 will address the matter of removal of the Speed Cap, along with the other issues.

The Commission received comments on the option of suspending the Speed Cap on an interim basis from Allstream Business Inc., a wholly owned subsidiary of Zayo Canada Inc.; Bell Canada; Bragg Communications Incorporated, carrying on business as Eastlink (Eastlink); the British Columbia Broadband Association (BCBA); CNOC; Cogeco; Distributel Communications Limited (Distributel); RCCI; Shaw Cablesystems G.P. (Shaw); TekSavvy Solutions Inc. (TekSavvy); TELUS Communications Inc. (TCI); and Videotron.

Preliminary issue

Cogeco and TCI submitted that the Application should be rejected because it was submitted beyond the permitted timeline set out in subsection 71(1) of the Canadian Radio-television and Telecommunications Commission Rules of Practice and Procedure (the Rules of Procedure). Cogeco argued that a delay of more than two years to file an application to review, rescind, or vary, in the absence of exceptional circumstances, is unreasonable.

In reply, CNOC argued that there have been fundamental changes of circumstances and fact that could not have manifested within ninety days of the issuance of either Telecom Regulatory Policy 2015-326 or Telecom Decision 2016-379. These changes include the unreasonable timelines for deployment of disaggregated HSA that were proposed by incumbent carriers and approved on an interim basis in Interim rates for disaggregated wholesale high-speed access services in Ontario and Quebec, Telecom Order CRTC 2017-312-1, 12 September 2017.

The Rules of Procedure provide that an application to review and vary a decision of the Commission under section 62 of the Telecommunications Act must be filed with the Commission within 90 days after the date of the decision. However, subsection 71(2) of the Rules of Procedure allows the Commission to extend the deadline if it is just and equitable to do so. While the Application was not filed within the timeline prescribed in the Rules of Procedure, CNOC has raised significant issues about various aspects of the regulatory framework for wholesale wireline services and the transition to disaggregated HSA services that would take greater than 90 days to manifest. These issues include the timelines to deploy disaggregated HSA services and the viability of the regulatory framework for disaggregated HSA services as a whole. The Commission is therefore of the view that it would be just and equitable to extend the deadline in the circumstances.

Test for interim relief

To assess applications for interim relief, the Commission’s general practice is to require the party requesting the relief to demonstrate that it meets the criteria for interim relief set out by the Supreme Court of Canada in Manitoba (Attorney General) v. Metropolitan Stores (MTS) Ltd. [1987] 1 S.C.R. 110, and modified in RJR-MacDonald Inc. v. Canada (Attorney General) [1994] 1 S.C.R. 311. These criteria (the RJR-MacDonald criteria) are that:

  1. there is a serious issue to be determined;
  2. the party seeking relief will suffer irreparable harm if the interim relief is not granted; and
  3. the balance of convenience, taking into account the public interest, favours granting the interim relief.

In order to be granted interim relief, an applicant must demonstrate that its application meets all three criteria.

i) A serious issue to be determined

Positions of parties

CNOC submitted that there is a serious issue to be determined because without interim relief, competitors will be stranded on legacy service speeds for an indefinite period until the Commission issues its determinations regarding the request for final relief in its application. During this time, competitors will continue to face the insurmountable barriers preventing them from deploying disaggregated HSA services, which would be the only means of accessing wholesale HSA service speeds above 100 Mbps once disaggregated HSA service tariffs are finalized. Unless the interim relief is granted, competitors will have no way of providing service to customers requesting speeds above 100 Mbps.

CNOC also submitted that the Speed Cap’s negative impact on competitors will translate into a lessening and prevention of competition in broadband markets and corresponding harm to consumers of broadband services in Ontario and Quebec. CNOC argued that these matters are neither frivolous nor vexatious, and that CNOC’s request satisfies the first step of the test for interim relief.

Distributel submitted that if the Speed Cap is applied when the tariffs for disaggregated HSA services are approved on a final basis, competitors, including Distributel, will be immediately prohibited from offering retail Internet services at the speeds necessary to remain competitive and to meet the rapidly increasing consumer demand for higher-speed Internet services.

Cogeco submitted that CNOC lowers the serious issue criterion to its lowest possible threshold and erroneously applies it by claiming that it is sufficient to show that the request is not frivolous or vexatious. CNOC has the burden to demonstrate the motives of its request are serious; Cogeco argued that CNOC has failed to justify reopening the disaggregated HSA issues which have already been the subject of important proceedings.

Cogeco and TCI submitted that the extended amount of time CNOC has taken to raise the issues found in its application indicates that there is no serious issue that requires interim relief. TCI argued that there is no serious issue at hand since the final rates have not yet been determined for disaggregated HSA services.

TCI also submitted that while it is generally true that the bar for the first stage of the test for interim relief is low, the decision in RJR-MacDonald identified two exceptions. One such exception arises when the result of the motion will in effect amount to a final determination of the action, and when this occurs a more extensive review of the merits of the case must be undertaken. TCI submitted that the higher threshold is set because, under the exception, the applicant is not asking for the status quo to be maintained, but to put into effect a new determination which is also part of the final determination sought. In this case, CNOC is requesting that part of the ultimate relief requested in the Application, the removal of the Speed Cap, be put in place on an interim basis. As such, CNOC is seeking interim relief that amounts to a final determination, and the Commission must go beyond the low bar for the first criterion of the test.

CNOC disagreed with TCI’s interpretation of RJR-MacDonald, and submitted that the exception noted by TCI clearly does not apply to the present request for interim relief. CNOC argued that the granting of interim relief will in no way consist of a final determination, since the Commission will have to reconsider whether or not to definitively eliminate the Speed Cap when issuing its final determinations on the Application.

Commission’s analysis and determinations

If an application is not clearly frivolous, it will generally meet the first interim relief criterion: there is a serious issue to be determined. The party seeking interim relief is not required to demonstrate that their argument is persuasive or strong, but only that there is a legitimate question being asked.

CNOC’s application raises serious questions with respect to various aspects of the Commission’s regulatory framework for wholesale wireline services and the transition to disaggregated HSA services, and the impact of the framework on competition in the downstream retail Internet services market. The Commission considers that these are serious issues and that CNOC’s application is not frivolous.

With respect to the argument made by TCI that granting the proposed interim relief would amount to a final determination on the issue of the application of the Speed Cap, the Commission considers that granting interim relief would not amount to a final determination. Regardless of whether interim relief is granted or denied, the Commission is not bound by the outcome of its interim relief decision and will have to make a final determination on the continued applicability of the Speed Cap, along with the other issues raised in the Application.

In light of the above, the Commission considers that CNOC has met the first criterion of the test.

ii) Irreparable harm if the relief is not granted

Positions of parties

CNOC argued that if interim relief is not granted, CNOC members, and competitors more broadly, will suffer irreparable harm, since they will be foreclosed from competing in the retail market for Internet services at speeds in excess of 100 Mbps as soon as the disaggregated HSA tariffs are approved on a final basis and the Speed Cap comes into effect. Competitors will not be able to offer competitively relevant Internet service speeds to the increasingly larger group of existing and prospective customers who want Internet service speeds greater than 100 Mbps.

CNOC, supported by Distributel, submitted that its members will suffer irreparable pecuniary harm in the form of lost customers and revenues, and that the longer the Speed Cap is maintained, the more pronounced and harmful these losses will be. CNOC argued that losses will be unrecoverable, since some lost customers will enter into two-year agreements for broadband (and perhaps other services) and customers are generally averse to the inconvenience of switching telecommunications service providers. Even if the Speed Cap is ultimately rescinded, these factors work against the ability of competitors to compete aggressively to win back customers and mitigate the harm caused by the Speed Cap.

CNOC also submitted that there is increasing consumer demand for broadband speeds in excess of 100 Mbps. CNOC noted that the Commission’s 2018 Communications Monitoring Report (CMR) reported that the subscriber distribution for service speeds at and above 100 Mbps has increased from 8% in 2015 to 25.8% in 2017. Denial of wholesale access to speeds in excess of 100 Mbps therefore threatens to severely undermine the competitiveness of a growing segment of the retail Internet services market in Ontario and Quebec.

CNOC argued that the Speed Cap will cause severe and irreparable harm to the business reputation of CNOC members and competitors. When customers realize they can only obtain broadband speeds above 100 Mbps from incumbents, they will view competitors as second-class providers. Competitors pride themselves on their reputation and rely heavily on customer goodwill. Unless interim relief is granted, the Speed Cap will subject competitors to severe depreciation of reputation and customer goodwill.

CNOC submitted that a recent Commission decision Footnote1 granted interim relief on the grounds that the application would suffer reputational harm, which the Commission noted could not be cured by pecuniary damages. The facts leading to that determination involved denial of access to wholesale HSA, which is precisely what will occur if the Speed Cap comes into effect.

Distributel argued that it is unlikely that potential and existing customers will be content to purchase slower speeds that do not meet their needs from a competitor, resulting in a substantial and increasing percentage of customers that can only be served by the incumbents. Distributel also argued that the losses incurred by competitors if the Speed Cap is applied are not quantifiable, since there is no way to track the number of existing or potential new customers that turn to an incumbent after they see that competitors do not offer Internet services at the speeds that they need.

Cogeco and RCCI submitted that CNOC’s allegations of irreparable harm are purely speculative and do not take into account that the final rates, terms, and conditions for disaggregated HSA may fundamentally alter CNOC’s analysis. Cogeco submitted that CNOC offered no calculations or suppositions concerning the number of customers or the amount of revenues that could be lost due to the Speed Cap.

TCI submitted that CNOC raises only vague notions of harm, with no evidence of where actual harm would ensue and to what extent. In the case of reputational harm, damage to reputation is not necessarily irreparable harm, and that in this case the reputational damage is illusory since differences in speed capabilities among Internet service providers are a fact of life.

TCI also submitted that CNOC’s justification for removing the Speed Cap assumes that competitors will be foreclosed from retail markets for broadband speeds above 100 Mbps. However, competitors will have access to speeds greater than 100 Mbps via the disaggregated HSA service. TCI argued that any pecuniary harm that CNOC members face as a result of taking the disaggregated HSA service is no harm at all, since they would be paying cost-based rates, approved by the Commission as just and reasonable.

Videotron submitted that less than 5% of its wholesale end-users access speeds greater than 100 Mbps. As a result, it is clear that CNOC members have the ability to offer competitive Internet packages to their customers while the Commission examines CNOC’s full application and CNOC members will not be significantly affected if the interim relief is rejected.

In reply, CNOC submitted that, as demonstrated throughout the Application, competitors are unable to deploy disaggregated HSA services, even while this platform is the only path to access wholesale HSA services over FTTP facilities, and possibly destined to become the only option for access to service speeds in excess of 100 Mbps. Without interim relief, the only alternative option for access to wholesale HSA services above 100 Mbps will be eliminated.

In response to Videotron’s claims that less than 5% of the company’s wholesale subscriptions are at speeds of 100 Mbps or higher, CNOC argued that this can be explained as a rational commercial response by Videotron’s wholesale customers to the regulatory uncertainty that surrounds the current wholesale framework for wireline services.

In reply to claims that the harm to CNOC members is speculative in nature, CNOC argued that the substantial pecuniary and reputational harms that would result absent interim relief are certain and unavoidable. CNOC submitted that without interim relief, competitors will be foreclosed from accessing a segment of the market that represents 25.8% of Canadian residential broadband subscriptions and is constantly expanding. As a consequence, competitors will invariably suffer the pecuniary and reputational harms that CNOC has described.

Commission’s analysis and determinations

The second criterion requires that the party requesting interim relief demonstrate that it will suffer irreparable harm if its request is not granted. Unlike the first criterion of the test, the threshold for irreparable harm is high. “Irreparable” harm requires analysis of the nature of the harm, rather than its magnitude. With respect to the nature of the harm, an applicant must also show that the harm is not speculative. Harm is also more likely to be irreparable where there is an unquantifiable loss or a loss that the applicant may not be able to recover.

In the case of pecuniary harm, the Commission considers that CNOC did not provide any specific evidence quantifying its claims of irreparable pecuniary harm, such as estimates of the number of lost customers or lost revenues that its members would suffer absent interim relief.

In response to Videotron’s submission that less than 5% of the company’s wholesale end-users subscribe to speeds greater than 100 Mbps, CNOC argued that this is a rational response to the current regulatory uncertainty surrounding the wholesale wireline framework, without expanding on what this meant or providing evidence to support this claim. The Commission considers that if CNOC’s members are already limiting the number of end-users subscribing to speeds above 100 Mbps prior to the implementation of the Speed Cap, then this does not support CNOC’s claims that its members will suffer irreparable pecuniary harm after the Speed Cap is applied.

With respect to CNOC’s argument that its members will be foreclosed from competing for the share of the retail Internet services market that desires speeds greater than 100 Mbps, the Commission considers that CNOC has not provided evidence that any market loss would be permanent and therefore irreparable. If the Speed Cap is applied, CNOC members will have access to speeds above 100 Mbps if they transition to disaggregated HSA services once they are deployed. In addition, should the Commission grant CNOC’s final relief, the Speed Cap would only be in place for a limited time until CNOC members would resume having access to speeds above 100 Mbps through aggregated HSA. Accordingly, the Commission does not agree that CNOC members would be foreclosed from competing in the retail market for Internet services at speeds above 100 Mbps, nor that any harm would be permanent if interim relief is not granted.

With regard to the issue of reputational harm, the Commission considers that the recent decision on interim relief that CNOC argued supported its position is not similar to the present situation. In that decision, the Commission granted interim relief to Frontier Networks Inc. (Frontier) pending the Commission’s final determinations on a dispute between Frontier and Eastlink. In that case, Eastlink was refusing to process any new service activations for Frontier and was threatening to disconnect Frontier’s existing customers. Absent the interim relief, which required Eastlink to continue processing service activations for Frontier until the Commission made its final determinations, Frontier would not have been able to add any new customers. Frontier would have suffered reputational harm that could not be cured by pecuniary damages since it would not have been able to offer service at all, absent the interim relief. In the present case, the Commission considers that CNOC members will still be able to offer services to its customers, as well as add new customers, whether or not the Commission grants interim relief. Since CNOC members are still able to offer service to customers, the Commission considers that they will not suffer the irreparable reputational harm that was present in the Frontier case.

In addition, while Internet service speed is an important factor for consumers when they choose a service provider, the Commission considers that competitors can still be innovative and differentiate their services in other ways, such as customer service, capacity, and price. The low percentage of CNOC members’ end-users subscribing to speeds greater than 100 Mbps, as noted by Videotron and supported by confidential information filed for the CMR, indicates that they currently offer a desirable value proposition to their customers at speeds of less than 100 Mbps. As a result, the Commission considers that the application of the Speed Cap is unlikely to result in irreparable reputational harm to CNOC members in the interim until final relief is determined.

With respect to the second criterion of the test, the onus of proving irreparable harm is on the party seeking interim relief. The Commission considers that the information provided by CNOC is insufficient to demonstrate irreparable harm for the period of time until a final determination is made. Therefore, the Commission considers that CNOC has failed to demonstrate that it would suffer irreparable harm if interim relief is not granted.

iii) The balance of convenience, taking into account the public interest

CNOC submitted that, taking into account the public interest, the balance of convenience strongly favours interim relief. CNOC argued that even if the Commission ultimately rescinds the Speed Cap when issuing a decision on the final relief requested by CNOC, competition in downstream retail markets will be substantially lessened and prevented for the effective period of the Speed Cap if the interim relief is not granted. This undesirable consequence from a public interest perspective is easily avoidable by granting the interim relief requested by CNOC.

Bell Canada, Cogeco, RCCI, Shaw, and Videotron submitted that the balance of convenience does not favour interim relief, since the Speed Cap has been coming for over three years, yet CNOC did not seek to review and vary the Speed Cap until this last minute application. Videotron argued that the fact that CNOC waited so long to file the Application raises serious doubts about the urgency for interim relief. Bell Canada, supported by Eastlink, argued that CNOC is engaged in regulatory gaming, since it is easier for a party to claim it has no alternatives left when relief is sought at the last minute.

Bell Canada, Eastlink, RCCI, Shaw, and TCI argued that CNOC’s proposal undermines the incentive for competitors to move to disaggregated HSA services.

Cogeco submitted that the proposed interim relief would negatively interfere with the incumbent carriers’ investment plans of deploying facilities to support disaggregated HSA services.

RCCI submitted that suspending the application of the Speed Cap disproportionately affects cable carriers, since speeds above 100 Mbps on incumbent local exchange carrier (ILEC) fibre-to-the-node facilities do not exist. RCCI argued that suspending the Speed Cap would be in contravention of the Policy Direction, Footnote2 which requires the Commission to ensure technological and competitive neutrality to the greatest extent possible with respect to regimes for access to networks.

In reply, CNOC noted that the Commission has found that where irreparable harm is very likely to occur, the presumption is that the balance of convenience favours granting interim relief and that it would require special circumstances to rebut this presumption. Given the irreparable harm demonstrated by CNOC, in accordance with previous Commission considerations, the presumption is that the balance of convenience therefore favours granting the interim relief.

In response to RCCI’s argument that the interim relief would be in contravention of the Policy Direction, CNOC noted that in Canadian Network Operators Consortium Inc. – Application for transitional access to incumbent carriers’ fibre to-the-premises facilities through aggregated wholesale high-speed access service, Telecom Decision CRTC 2018-44, 2 February 2018, the Commission determined that the exclusive availability of cable carrier wholesale services in areas where incumbents have no obligation to provide aggregated HSA services (i.e. in areas where only FTTP facilities are available) is an acceptable outcome. This demonstrates that interim relief would not create a situation that is contrary to the Policy Direction.

CNOC submitted that the insurmountable barriers to competitors accessing disaggregated HSA services have rendered the transition to disaggregated HSA impossible, which consequently prevents the achievement of the policy objectives underpinning Telecom Regulatory Policy 2015-326, such as increasing competitor investment in middle-mile facilities. Under these circumstances, the Speed Cap has completely lost its purpose, and the balance of convenience favours granting interim relief.

Commission’s analysis and determinations

The Commission considers that neither CNOC, nor any incumbent providers, have provided sufficient information that would quantify the harm imposed on them resulting from the Commission’s decision on interim relief. With respect to the argument that approving the interim relief will cause harm as a result of negatively interfering with plans for investments in disaggregated HSA facilities, the Commission notes that CNOC has not requested the elimination of disaggregated HSA services in the Application. Rather, CNOC requests modifications to the Commission’s wholesale wireline framework, including continuing with the availability of disaggregated HSA services. As a result, the Commission considers that these investments made by Cogeco and RCCI will not necessarily be stranded if the proposed interim relief is approved.

With respect to RCCI’S argument that granting interim relief would contravene the Policy Direction, the Commission has previously placed different regulatory requirements on the wholesale HSA services offered by incumbents. Examples include the Commission requiring cable carriers to offer aggregated HSA services in areas where ILECs are not mandated to provide aggregated HSA services (i.e. areas covered by ILEC FTTP facilities). The Commission therefore considers that granting interim relief would not contravene the Policy Direction’s requirement that access arrangements or regimes be technological and competitively neutral to the greatest extent possible.

In regards to the timing of CNOC’s application, while the issues raised by CNOC may not have manifested themselves within a short time after the issuance of Telecom Regulatory Policy 2015-326 and Telecom Decision 2016-379, the interim tariffs for the disaggregated HSA services of Bell Canada, Cogeco, RCCI, and Videotron in Ontario and Quebec have been in place since September 2017. The Commission considers that filing the Application at such a late date before the Speed Cap comes into effect undermines regulatory certainty associated with the Commission’s regulatory framework for wholesale wireline services.

In assessing where the public interest lies with respect to the proposed interim relief, the Commission considers that the public interest lies with a decision that would have the lowest impact on consumers. In the present case, the lowest impact on consumers would likely result from granting interim relief, which would result in minimal disruption to consumers in the marketplace until the Commission makes its final determinations on the Application.

Given the potential impact on consumers and competition if the proposed interim relief is denied, the Commission considers that, taking into account the public interest, the balance of convenience favours granting interim relief.

However, in order to meet the test for interim relief, an applicant must demonstrate that it satisfies all three criteria. Based on the conclusion that CNOC has not provided sufficient evidence to demonstrate that its members will suffer irreparable harm absent interim relief, the Commission considers that CNOC has not satisfied the test for interim relief.

Commission determination

Despite the Commission’s conclusion that CNOC has not satisfied the test for interim relief, the issues raised in this request are unique and significant enough that they warrant further consideration and a departure from the Commission’s general practice of applying the interim relief criteria outlined above when considering whether or not to grant interim relief.

At the outset, the Commission is not determining whether to grant interim relief in this case as a result of a bilateral dispute between two parties. Rather, the issues in the Application stem from Commission determinations made in Telecom Regulatory Policy 2015-326 and Telecom Decision 2016-379, which were the results of an extensive review of the Commission’s regulatory framework for wholesale wireline services, and involve broad policy considerations that impact multiple stakeholders. The review process for the disaggregated HSA tariffs of Bell Canada, Cogeco, RCCI, and Videotron in Ontario and Quebec has been a lengthy process and is still ongoing. As a result, there is still uncertainty surrounding the final rates, terms, and conditions of these tariffs. In addition, once these tariffs are approved on a final basis, further time will likely be required to deploy disaggregated HSA facilities. If the Speed Cap is implemented, consumers may be limited in their choice of service provider for speeds above 100 Mbps until disaggregated HSA services are available.

Further, the Commission is concerned that implementing the Speed Cap as planned could prove disruptive for consumers in a growing segment of the retail Internet services market.

The Commission considers that, in the present circumstance, the public interest rests with the outcome with the lowest potential disruption for consumers, which would be to suspend the implementation of the Speed Cap until the Commission makes final determinations on the Application.

In light of the above, the Commission determines that these unique considerations justify (1) a departure from the Commission’s general practice of applying the RJR-MacDonald criteria for granting interim relief; and (2) granting interim relief. Accordingly, the Commission approves the interim relief. The implementation of the Speed Cap when the tariffs for the disaggregated HSA services of Bell Canada, Cogeco, RCCI, and Videotron in Ontario and Quebec are made final is suspended, pending the Commission’s final determinations on the Application.

Sincerely,

Original signed by

Claude Doucet
Secretary General

Distribution list

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