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Broadcasting Public Notice CRTC 2005-1
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See also: 2005-1-1
Ottawa, 7 January 2005 |
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Determinations with respect to the establishment of rules to govern
the distribution of specialty services on the basic service of fully
digital cable undertakings; and call for proposals for a framework to
guide the migration of pay and specialty services from analog to a
digital distribution environment
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The Commission has decided not to establish
new rules for the distribution of specialty services on the basic
service of fully digital cable broadcasting distribution undertakings
at this time. However, it is now calling for proposals for a framework
that will govern the migration of pay and specialty services from
analog to digital distribution. The Commission notes that the issues
raised by this call for proposals are related to those raised by
Call for comments on a proposed framework for the licensing and distribution
of high definition pay and specialty services, Broadcasting Public
Notice CRTC 2004-58,
6 August 2004 (Public Notice 2004-58).
Accordingly, the Commission’s determinations in the new proceeding
may be influenced by its determinations in the proceeding initiated
by Public Notice 2004-58. |
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Introduction
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1. |
In Call for comments on the establishment
of rules to govern the distribution of specialty services on the basic
service of fully digital cable undertakings, Broadcasting Public
Notice CRTC 2002-48,
16 August 2002 (Public Notice 2002-48),
the Commission sought comments on the rules that should govern the
distribution of specialty services on the basic service1
of those cable broadcasting distribution undertakings (cable
BDUs) that distribute programming to subscribers exclusively via digital
technology (fully digital cable BDUs). |
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Positions of parties
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2. |
The Commission received 24 comments in the
first stage of the proceeding and 9 in the second. In general,
distributors and their representatives, specifically the Canadian Cable
Telecommunications Association (CCTA), the Canadian Cable Systems
Alliance Inc., Quebecor Media Inc., Saskatchewan Telecommunications (SaskTel)
and TELUS Communications Inc. (TELUS), supported a shift towards a more
market-driven approach that would permit the basic service to be
determined through negotiation and consumer demand. They recommended
that the Commission drop the dual status rules,2
not only in a digital distribution environment but also in
analog, noting that the analog specialty services governed by those
rules are now well-established and no longer need the protection that
dual status affords. Distributors further submitted that increased
flexibility in the analog distribution environment would facilitate the
transition to digital distribution. |
3. |
Cable BDUs and BDUs using digital
subscriber line technology (DSL BDUs) also generally recommended that
the Commission re-examine the rules that currently apply to analog
distribution with a view to establishing competitive equity with
direct-to-home distribution undertakings (DTH BDUs), arguing that
asymmetric regulations for DTH BDUs are no longer necessary or
appropriate. SaskTel and TELUS further argued that, as fully digital
distributors, they should already have the same latitude as DTH BDUs. |
4. |
Broadcasters and their representatives,
including the Canadian Association of Broadcasters (CAB), Astral Media
inc. (Astral), CHUM Television Inc., CTV Inc. (CTV), Pelmorex
Communications Inc., and Vision TV: Canada’s Faith Network/Réseau
religieux canadien (VisionTV) generally opposed a market-driven approach
and supported the continuation of the dual status rules in a digital
distribution environment. They suggested that this was the best way to
ensure that the benefits that have accrued from the existing regulatory
framework continue to be realized as the industry completes the
transition to digital distribution. They recommended that any changes to
the distribution rules should also include consideration of mechanisms
to ensure that specialty services are able to continue to meet their
commitments, either through reconsideration of their obligations or
through specific regulatory safeguards related to pricing, packaging,
penetration, wholesale rates and promotion. |
5. |
Le Regroupement francophone de créateurs de
contenus (Le Regroupement) responded on behalf of l’Association de
l’industrie du disque et du spectacle du Québec, l’Association des
producteurs de films et de télévision du Québec, l’Association des
réalisateurs et réalisatrices du Québec, la Société des auteurs de
radio, télévision et cinéma, la Société professionnelle des auteurs
compositeurs du Québec, and l’Union des artistes. Le Regroupement
pointed out that the Francophone market is not subject to the same
criteria as the Anglophone market, and that the distribution system
should above all respond to objectives of the Broadcasting Act
(the Act), not to the requirements of market forces. It noted
that, in 1987, when the Commission granted the first licences for
specialty services with the objective of providing more diversity and
curbing the erosion of Francophone audiences, the Commission determined
that French-language specialty services should have the benefit of a
protected environment. |
6. |
Astral, which owns most of the
French-language specialty services, emphasized that the Act
clearly affirms that the Canadian broadcasting system is a public
service that is essential for maintaining and strengthening national
identity and cultural sovereignty. Astral stated that the Canadian
broadcasting system’s activities cannot be left to market forces, but
must be regulated in order to meet the objectives of the Act. Astral
noted that, when specialty services were introduced in the early 1980s,
two types of services were authorized: discretionary subscription
services (pay television) and basic cable services. Due to the different
modes of distribution, these two types of services were subject to very
different rates. In the French-language environment, the monthly rates
for discretionary subscription services were several times higher than
rates for services carried on basic. It was only under these conditions
that these two types of Canadian services were able to develop. |
7. |
Three other main issues emerged from the
comments, related to the following: |
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- the criteria for selecting the services that should have basic
carriage status on fully digital cable BDUs;
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- the appropriateness of establishing rules for fully digital cable
BDUs at this time; and
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- the growing need for guidelines to govern the transition from an
analog to a digital distribution environment.
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Criteria for selecting services for basic carriage
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8. |
Only a few parties commented on specific
criteria that could be adopted for determining the services that should
receive mandatory basic carriage on fully digital cable BDUs. VisionTV
recommended that the Commission preserve a public "greenspace" in the
broadcasting system for services mandated to address identifiable public
policy goals, rather than commercial interests. |
9. |
The Commissioner of Official Languages
recommended that the Commission continue to ensure that Canadians have
access to a broad array of national, regional, educational and cultural
services in both official languages. Similarly, Le Regroupement
recommended that the Commission continue to determine the services that
have to be distributed as part of the basic service. Le Regroupement
submitted that services distributed as part of the basic service should
include public broadcasting services in both official languages and
services that most fully reflect Canadian culture in music, drama and
documentary programming, as well as local services. |
10. |
The Union des consommateurs noted the
rising costs of cable service and recommended that the Commission take
advantage of this proceeding to establish a small and affordable basic
service composed only of local Canadian signals and community channels,
where they exist. The Union des consommateurs submitted that, if rates
increased unduly, a return to rate regulation might be desirable. It
also recommended that the Commission consider the possibility of
requiring all distributors to distribute a package of French-language
services. |
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The timing of establishing rules for a digital basic service
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11. |
The majority of parties to this proceeding
suggested that it was premature to establish rules concerning the
distribution of specialty services on the basic service of fully digital
cable BDUs. Many submitted that it is difficult to forecast with any
accuracy what a fully digital distribution environment will look like.
The CCTA, for example, suggested that, for both regulatory and economic
reasons, it was unrealistic to believe that fully digital cable BDUs
would emerge in the near future. For its part, the CAB submitted that
there was no urgency to develop new rules for the distribution of
specialty services by fully digital cable BDUs. It suggested that the
Commission should conduct a comprehensive review of the framework
governing all BDUs once it is clear that the cable industry is committed
to becoming fully digital with no analog offering. The Directors Guild
of Canada (DGC) suggested that the process was premature, and noted that
the Commission risks establishing rules for a world that will not exist
for many years to come. The DGC further stated that it would be hard to
comment on the end game without commenting on the rules that need to be
put in place to govern the transition from analog to digital
distribution. |
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The need for guidelines to govern the transition from an analog to a
digital distribution environment
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12. |
Several parties emphasized the importance
of setting the ground rules for the transition of analog services to
digital distribution. The CCTA specifically urged the Commission to
initiate a separate proceeding to examine the continued appropriateness
of the existing distribution rules, given the state of competition in
distribution, as well as issues related to the transition to a fully
digital distribution environment. The CAB recommended that the
Commission enunciate principles to guide the transition from analog to
digital distribution. CTV also suggested the development of rules to
ensure an orderly and balanced transition. |
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The Commission’s analysis and determinations
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13. |
The transition to digital distribution is
well underway, with several distributors, including DTH BDUs, multipoint
distribution system (MDS) BDUs, and DSL BDUs already distributing
services on a fully digital basis. In addition, larger multiple system
cable operators provide a substantial array of digital services in
addition to those services distributed using analog technology.
Vidéotron ltée, Cogeco Cable Canada Inc., and Rogers Cable Inc. are
already distributing services to some subscribers on a fully digital
basis. |
14. |
The Commission has already established some
rules with regard to the services that must be offered as part of
a basic service distributed using digital technology. In Renewal
of the licence for TV5 Québec Canada, Broadcasting Decision CRTC
2003-77, 27
February 2003, the Commission clarified the distribution and linkage
requirements applicable to the distribution by terrestrial BDUs of
dual status services to subscribers who receive all their services
via digital distribution technology. The Commission determined that
such cable BDUs are required to distribute specialty services that
have dual status as part of the basic service, regardless of whether
the subscriber receives the service via analog or digital distribution
technology, unless the programming service has consented in writing
to the contrary. |
15. |
In addition, some rules for basic service
distributed via digital technology are being set in the context of
the development of the overall framework for digital broadcasting
and the distribution of digital signals. For example, in The regulatory
framework for the distribution of digital television signals,
Broadcasting Public Notice CRTC 2003-61,
11 November 2003 (Public Notice 2003-61),
the Commission ruled that the signals of licensed, priority, digital
television stations must be carried as part of the basic service distributed
via digital technology. The Commission further notes that Public Notice
2003-61 specified
that, once 85% of a cable BDU’s subscribers are served digitally,
the licensee of such a BDU may apply to be relieved of the obligation
to distribute analog signals. The Commission stated that the terms
and conditions under which analog services may be removed would be
considered at that time. |
16. |
Although the transition to a digital
distribution environment has begun, the Commission agrees with those
parties who submitted that the development of fully digital cable BDUs
may not occur for some time, and that it is difficult to predict what
the environment will be like at that time. In addition, the record of
this proceeding clearly demonstrates a need to explore issues related to
the broader question of the migration of analog programming services to
digital distribution. Finally, the Commission considers that the
appropriate regulatory approach to the distribution of specialty
services by fully digital cable BDUs could be better examined in a
broader context that would take such migration issues into account. |
17. |
In light of the above, and based on the
record of this proceeding, the Commission does not consider it
appropriate, at this time, to alter the approach set out in paragraph 14
above regarding the distribution of analog dual status specialty
services on the basic service, whether distributed via analog or digital
technology. The Commission notes that, until such time as it may rule
otherwise, the existing rules with respect to the distribution of
specialty services will continue to apply. Specifically, Class 1 BDUs
must distribute a specialty service that has dual status as part of the
basic service, unless the operator of the programming service has
consented in writing to its distribution on a discretionary basis,
regardless of whether the subscriber receives a completely analog
service, a hybrid analog and digital service, or a fully digital
service. |
18. |
In Call for comments on a proposed framework
for the licensing and distribution of high definition pay and specialty
services, Broadcasting Public Notice CRTC 2004-58,
6 August 2004 (Public Notice 2004-58),
the Commission set out its preliminary view concerning the framework
that should apply to Canadian pay and specialty services as they move
toward the broadcast of programming in high definition. |
19. |
The policy framework set out in Public
Notice 2004-58
anticipates the complete conversion of television transmission and
distribution systems from analog to high definition digital technology.
In Public Notice 2004-58,
the Commission noted that it would issue a second public notice related
to the migration of analog pay and specialty services to a digital
distribution environment. It encouraged those filing comments in response
to Public Notice 2004-58,
in particular those addressing the steps by which broadcasters and
distributors would make the transition to the high definition framework,
also to consider the issues set out in that second public notice.
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20. |
In light of the above, the Commission
considers it appropriate to call for proposals concerning a framework to
govern the migration of analog pay and specialty services to digital
distribution in a manner that will contribute to the attainment of the
objectives of the Act and advance, rather than compromise, the
transition to high definition digital technology. |
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Toward a framework to govern the migration of analog programming
services to digital distribution
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21. |
In establishing a framework to govern the
migration of analog pay and specialty programming services to digital
distribution, the Commission must seek to contribute to the attainment
of the various policy objectives set out in section 3 of the Act. The
Commission considers that digital technology can contribute to the
attainment of those objectives in a number of ways. Among other things,
digital technology will permit more efficient delivery of programming
services, consistent with section 3(1)(t)(ii) of the Act, provide
increased flexibility for distributors, facilitate the development of
new types of services and related revenue sources for both programmers
and distributors, and expand the choice of services for subscribers. The
Commission therefore wishes to encourage the rollout of digital
distribution technology, and seeks to maximize its contribution to the
attainment of the objectives set out in section 3(1) of the Act. |
22. |
To consider issues surrounding the migration
of analog pay and specialty services to digital distribution, the
Commission has, to date, relied chiefly on an industry working group
process. In Establishment of an industry working group to examine
the digital distribution of existing pay and specialty services,
Public Notice CRTC 2000-113,
4 August 2000, the Commission called on the industry to develop
proposals to govern the migration of existing services from analog
to digital distribution. The Digital Migration Working Group (the
working group) filed its report in February 2001. The report highlighted
some common ground with respect to the need for more flexibility for
smaller cable BDUs. However, distributors and programmers were unable
to come to a consensus with respect to larger cable BDUs, and therefore
set out their respective positions separately. |
23. |
A second working group process with respect
to large cable systems was established in Digital migration issues
– Reconvening of working group regarding large cable systems; and
Call for comments regarding small cable systems, Public Notice
CRTC 2001-58,
25 May 2001 (Public Notice 2001-58),
and For the attention of the participants in the Digital Migration
Working Group and other interested parties, Circular No. 446,
2 November 2001. The process with respect to smaller cable
BDUs resulted in Small cable systems – Digital migration policy,
Public Notice CRTC 2001-130,
21 December 2001 (the small cable digital migration policy). The reconvening
of the working group did not result in any further consensus, and
the working group was adjourned indefinitely in March 2003. |
24. |
Parties to the present proceeding suggested
that a working group was not the most appropriate way to deal with the
important policy issues that surround the migration of analog services
to digital distribution, and argued that such matters would best be
dealt with by the Commission. |
25. |
The Commission notes that broadcasters and
distributors share common interests in maximizing the penetration of
programming services generally. These common interests provide a basis
for the successful cooperation of broadcasters and distributors through
the transition from analog to digital distribution, and should
ultimately lead to an environment defined by less detailed regulation. |
26. |
In considering the most appropriate
framework for the migration of specialty and pay services from analog to
digital distribution, the Commission will continue to be guided by the
considerations set out above. The Commission also considers that several
principles and requirements that have been enunciated in a number of
recent public notices and decisions could form an appropriate basis for
a framework to govern the transition from analog to digital
distribution. These are set out below. |
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Consent
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27. |
Broadcasters have emphasized the importance
of requiring cable distributors to obtain the consent of analog
programming services before distributing such services on a digital
basis. For their part, distributors have expressed concern that
programmers of analog services may unreasonably withhold such consent,
thus slowing the pace of the transition to digital distribution. |
28. |
In Public Notice 2001-58,
the Commission stated the following: |
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In order to clarify the terms on which digital tiers will be
launched in the near future, the Commission considers it appropriate
to establish an interim approach with regard to the question of
consent. Pending final resolution of this issue (as discussed below),
the Commission considers that, as a matter of broadcasting policy, the
duplicate distribution of existing analog services on digital tiers
must have the prior consent of the programmer. Such consent could take
the form of (a) explicit terms relating to digital carriage in
existing (or renegotiated) affiliation agreements, or (b) a separate
agreement or consent relating solely to digital carriage.
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29. |
In the small cable digital migration
policy, the Commission stated that: |
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… consent for carriage generally is fundamental to the programmer’s
right and ability to control its product. Accordingly, in the case of
small cable systems as herein defined, the Commission finds that the
programmer’s consent is required for the digital distribution of
existing analog services. However, in the case of such systems, there
are circumstances in which the Commission will expect consent to be
provided.
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30. |
In the small cable migration policy, the
Commission also noted that it had interpreted the access rules in
section 18(5) of the Broadcasting Distribution Regulations as
requiring analog distribution. As a result, the distribution by a Class
1 cable operator of an analog service only via digital technology would
require authorization from the Commission, while duplication on digital
would not raise the same concern with regard to section 18(5). In the
circumstances where the Commission expected the programmer’s consent to
be given for the distribution of its service via digital technology, the
Commission stated that it would be inclined to approve applications from
small cable systems for the necessary conditions of licence, provided
that the system was otherwise in compliance with the carriage rules. |
31. |
As the industry moves toward the digital
distribution environment, different packaging and marketing arrangements
will continue to evolve. The Commission invites comment on whether
programmer consent should be required for the migration of analog
services to digital distribution on all cable BDUs, and, if so, under
what circumstances. The Commission also invites comment on the
circumstances under which it should expect programmers to provide
consent to cable BDUs. |
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Provision of a basic service
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32. |
It is the Commission’s view that the
concept of a basic service that is available to all subscribers remains
relevant in both an analog and digital distribution environment. As
noted above, the Commission has maintained the requirement for cable
BDUs to provide a basic service, regardless of whether the subscriber
receives service on a totally analog basis, a hybrid analog and digital
basis, or a fully digital basis. The Commission also notes that DTH BDUs,
MDS BDUs and DSL BDUs, which already offer fully digital services, are
required to provide a basic service. |
33. |
The principle of a digital basic service is
set out in a number of the Commission’s recent decisions regarding the
transition to digital broadcasting, most notably in Public Notice
2003-61, in which the Commission determined that the signals of
licensed, priority, digital television stations must be distributed as
part of the digital basic service. |
34. |
The Commission invites proposals that
reflect the continued relevance of a basic service. |
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Distribution and linkage rules
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35. |
In Public Notice 2004-58,
the Commission proposed a less restrictive set of distribution and
linkage rules for high definition transitional pay and specialty services,
particularly for cable BDUs. Specifically, the Commission considered
that rules similar to those currently applicable to DTH BDUs would
be appropriate for all large BDUs. In proposing this approach, the
Commission noted that a number of factors favour a more flexible model,
including consumer demand for more purchasing options and distributors’
desire to exercise the flexibility that digital distribution affords
in order to satisfy that demand. |
36. |
In proposing less restrictive distribution
and linkage rules for high definition transitional pay and specialty
services, one of the key changes advanced by the Commission was
elimination of the dual and modified dual status provisions for high
definition services distributed by cable BDUs. |
37. |
Consistent with the above, the Commission
invites parties to submit proposals that envisage less restrictive
distribution and linkage rules for the migration of the analog services
to digital distribution. |
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Wholesale rates
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38. |
In Public Notice 2004-58,
the Commission noted that relatively few of the larger cable BDUs
remain rate regulated, and thus are free to raise their rates within
the limits set by the competitive marketplace. Given these and other
considerations, the Commission was of the view that it would be preferable
if the wholesale rates for the high definition versions of specialty
services were set by negotiation between the parties, in which any
wholesale rate approved by the Commission in respect of a current
analog or low definition digital service would be but one consideration.
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39. |
The Commission notes that, in an environment
where BDUs are largely rate deregulated, any wholesale rate established
by the Commission can have only an indirect impact on the retail prices
paid by consumers. Accordingly, consistent with the view expressed
in Public Notice 2004-58,
the Commission invites comment on whether it would be also appropriate
that wholesale rates for the digital distribution of analog pay and
specialty programming services be set by negotiation between the parties. |
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Call for proposals
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40. |
In addition to commenting on the above
principles, the Commission invites parties to submit proposals on a
framework to guide the migration of analog pay and specialty services
through the transition to a digital distribution environment in a manner
that will contribute to the attainment of the objectives of the Act and
advance, rather than compromise, the transition to high definition
digital technology. Parties are requested to be as specific and as
comprehensive as possible on the elements of that framework. Parties
should also support their framework proposals with realistic business
scenarios based on the packaging, distribution, marketing and wholesale
rates of analog pay and specialty services during the transition, in
both the English- and French-language markets. |
41. |
For each scenario, an analysis should be
provided of the impact of the proposed framework on the overall business
models of both programmers and distributors, including the current
revenue bases and profitability, as well as their costs associated with
the transition to digital distribution. The proposed framework should
also seek to balance the concerns of programmers and distributors, while
ensuring an attractive and affordable service for consumers. |
42. |
As indicated in the preceding paragraphs,
the issues raised by this public notice are related to those raised
by Public Notice 2004-58.
Accordingly, the Commission’s determinations in the present proceeding
may be influenced by its determinations in the proceeding initiated
by Public Notice 2004-58. |
43. |
The Commission will accept
proposals that it receives on or before 7 March 2005. |
44. |
Parties may file replies
commenting on the proposals on or before 29 March 2005. |
45. |
The Commission will not
formally acknowledge comments. It will, however, fully consider all
comments and they will form part of the public record of the proceeding,
provided that the procedures for filing set out below have been
followed. |
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Procedures for filing proposals
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46. |
Interested parties can file
their proposals to the Secretary General of the Commission by using ONE
of the following formats: |
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- Intervention/Comments form
available from the Commission’s web site by indicating and
selecting the public notice number under the Decisions, Notices and
Orders section
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OR
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OR
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- by mail to
CRTC, Ottawa, Ontario K1A 0N2
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OR
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47. |
Submissions longer than five
pages should include a summary. |
48. |
Please number each paragraph of
your submission. In addition, please enter the line ***End of
document*** following the last paragraph. This will help the Commission
verify that the document has not been damaged during transmission. |
49. |
The Commission will make
comments filed in electronic form available on its web site at
www.crtc.gc.ca but only in the
official language and format in which they are submitted. Such comments
may be accessed in the Public Proceedings section of the CRTC web
site. Copies of all comments, whether filed on paper or in electronic
form, will also be placed on the public examination file. |
50. |
The Commission encourages
interested parties to monitor the public examination file and the
Commission’s web site for additional information that they may find
useful when preparing their comments. |
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Examination of public comments and related documents at the
following Commission offices during normal business hours
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Central Building
Les Terrasses de la Chaudière
1 Promenade du Portage, Room G-5
Gatineau, Quebec K1A 0N2
Tel: (819) 997-2429 - TDD: 994-0423
Fax: (819) 994-0218 |
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Metropolitan Place
99 Wyse Road
Suite 1410
Dartmouth, Nova Scotia B3A 4S5
Tel: (902) 426-7997 - TDD: 426-6997
Fax: (902) 426-2721 |
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205 Viger Avenue West
Suite 504
Montréal, Quebec H2Z 1G2
Tel: (514) 283-6607 |
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55 St. Clair Avenue East
Suite 624
Toronto, Ontario M4T 1M2
Tel: (416) 952-9096 |
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Kensington Building
275 Portage Avenue
Suite 1810
Winnipeg, Manitoba R3B 2B3
Tel: (204) 983-6306 - TDD: 983-8274
Fax: (204) 983-6317 |
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Cornwall Professional Building
2125 - 11th Avenue
Room 103
Regina, Saskatchewan S4P 3X3
Tel: (306) 780-3422 |
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10405 Jasper Avenue
Suite 520
Edmonton, Alberta T5J 3N4
Tel: (780) 495-3224 |
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530-580 Hornby Street
Vancouver, British Columbia V6C 3B6
Tel: (604) 666-2111 - TDD: 666-0778
Fax: (604) 666-8322 |
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Secretary General |
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This document is available
in alternative format upon request and may also be examined at the
following Internet site:
http://www.crtc.gc.ca |
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Footnotes:
A service having dual status, if carried by a BDU, must be distributed
as part of the basic service, unless the programming service agrees in
writing to be carried on a discretionary tier. |