Telecom Decision
CRTC 98-9
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Ottawa, 9 July 1998
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REGULATION UNDER THE TELECOMMUNICATIONS
ACT OF CERTAIN TELECOMMUNICATIONS SERVICES OFFERED BY "BROADCAST CARRIERS"
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Reference: 8697-C12-01/98
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I SUMMARY
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1. A "broadcast
carrier" is a company or other person which is a Canadian carrier under the Telecommunications
Act (the Act) and which also holds a broadcasting distribution undertaking (BDU)
licence under the Broadcasting Act.
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2. The Commission will not
regulate the rates at which broadcast carriers offer retail level Internet services, and
certain other telecommunications services (e.g. security services) to their customers.
However, the Commission will approve the rates and terms on which incumbent cable and
telephone companies provide access to their telecommunications facilities with respect to
competitive providers of retail level Internet services.
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II INTRODUCTION
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3. In this Decision, the
Commission addresses issues on which it sought comment in Regulation of Certain
Telecommunications Services Offered by Broadcast Carriers, Telecom Public
Notice CRTC 96-36, 6 December 1996
(Telecom PN 96-36). The proceeding begun by
Telecom PN 96-36 followed the Commissions determinations in Regulation of
Broadcasting Distribution Undertakings that Provide Non-Programming Services, Telecom
Decision CRTC 96-1, 30 January 1996 (Telecom
Decision 96-1).
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4. Notably, in Telecom
Decision 96-1, the Commission found that companies which
are BDUs may also in certain circumstances be Canadian carriers within the meaning of the
Act when they distribute telecommunications services on their broadcasting distribution
infrastructure. In that Decision, the Commission referred to Canadian carriers which also
hold a BDU licence as "broadcast carriers". This term is used for descriptive
convenience only, and does not appear in either the Telecommunications Act or the Broadcasting
Act.
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5. As used in the Public
Notice which accompanied the Broadcasting Distribution Regulations, Public Notice
CRTC 1997-150, 22 December 1997 (PN
1997-150), the term "cable distribution undertakings" includes incumbent cable
television systems, as well as new wireline distributors. This Decision uses the term
"cable carriers" to refer to such cable distribution undertakings when they are
also Canadian carriers under the Act. In addition to cable distribution undertakings, PN 1997-150 identified two other distinct types of
BDUs: Direct-to-home (DTH) satellite distribution undertakings, and radiocommunication
distribution undertakings (notably, wireless systems using multipoint distribution system
(MDS) technology and local multipoint communications systems (LMCS) technology. This
Decision adopts this categorization of BDUs.
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6. In this Decision the
Commission considers the appropriate regulatory approach under the Act to certain
telecommunications services provided by a broadcast carrier using distribution facilities
it also uses to provide a broadcasting service. Only telecommunications services provided
using these facilities are within the scope of this proceeding.
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7. In this Decision, the
Commission considers retail level Internet services (ISs), security, telemetry,
videoconferencing, local area network (LAN) and wide area network (WAN) services offered
by broadcast carriers and, in particular, by cable companies. The Commission also
considers issues related to the provision of access to the underlying telecommunications
facilities used by cable carriers to provide retail level ISs.
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8. With respect to DTH
satellite undertakings in Regulation of Full Channel TV Services, (e.g. alphanumeric
services), Telecom Decision CRTC 97-2, 5 February 1997, the Commission stated
that it considered a DTH undertaking would be a Canadian carrier to the extent that it
owns or operates the type of facilities included in the definition of "transmission
facilities" in the Act and the undertaking provides non-broadcasting services to the
public for compensation by means of "telecommunications facilities". No DTH
undertaking made submissions in this proceeding, and parties did not discuss the issues
with specific reference to DTH undertakings.
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9. The Commission notes
that its determinations in this proceeding do not apply to a DTH satellite undertaking
that may be found to be a Canadian carrier. The appropriate regulatory approach with
respect to a DTH satellite undertaking to the issues under consideration in this
proceeding will be determined if, and when, the Commission finds such an undertaking to be
a Canadian carrier.
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10. In arriving at the
determinations set out in this Decision, the Commission has taken into account the
submissions of parties responding to Telecom PN 96-36. Submissions were received from: ACC
TelEnterprises Ltd., Association des câblodistributeurs du Québec (ACQ), Cable Regina,
CADVision Development Corporation (CADVision), Consumers Association of
Canada/Fédération nationale des associations de consommateurs du Québec (CAC/FNACQ),
Canadian Association of Internet Providers (CAIP), Canadian Cable Television Association
(CCTA), Canadian Newspaper Association (CNA), Fundy Cable Ltd./Ltée, Information
Technology Association of Canada (ITAC), Interlog Internet Services (Interlog), MaxLink,
Province of Saskatchewan, Shaw Communications Inc. (Shaw), Stentor Resource Centre Inc.
(Stentor), Torstar Corporation, TotalNet Inc. (TotalNet), WIC Connexus Inc. (WIC).
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III RETAIL LEVEL
TELECOMMUNICATIONS SERVICES PROVIDED BY BROADCAST CARRIERS
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11. CAC/FNACQ submitted
that, since telecommunications services are changing rapidly and new services are likely
to be developed in the future, it would be premature to categorize services at this time
for the purpose of forbearance. The Commission agrees, and its determinations below are
made only with reference to the specific services described below. The Commission will
consider, on application, the appropriate regulatory treatment for other services.
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12. While the discussion in
this Part focuses on the issues as they apply to cable carriers, the Commissions
findings with respect to retail level telecommunications services apply equally, except
where otherwise stated, to retail level ISs offered by broadcast carriers other than DTH
BDUs.
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Retail Level Internet
Services
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13. A key issue with
respect to retail level ISs is whether the terms on which such services are offered should
continue to be tariffed (including prior Commission approval of rates) or whether the
Commission should forbear from its power to approve rates and other terms. ISs are
currently offered by broadcast carriers pursuant to tariffs which have received interim
approval pending the Commissions determinations in this Decision.
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Definition of the Market
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14. In Review of
Regulatory Framework, Telecom Decision CRTC 94-19,
16 September 1994, the Commission set out its approach to evaluating situations in
which it would be appropriate to refrain, under section 34 of the Act, with respect to
exercising certain of its powers and performing its duties with respect to a service or
class of services. The analysis requires a definition of the relevant market or markets,
taking into account substitutes and other features of the market in question, and an
assessment of whether the service providers have market power in the relevant market.
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15. Many of the comments
submitted with respect to the definition of the IS market focused on whether lower speed
and higher speed retail level ISs represent distinct markets. In general, Internet service
providers (ISPs) which compete with cable carriers submitted that lower and higher speed
ISs are separate markets, whereas cable companies considered that they are not.
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16. Consistent with its
overall approach to telecommunications regulation, the Commission is of the view that it
is not appropriate to define the market for telecommunications services with reference to
technology. Instead, service attributes should be the focus of analysis.
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17. The various retail
level ISs currently available generally permit users to upload and download information
from the Internet, and to use applications such as electronic mail. ISPs differentiate
their services by, for example, pricing strategies, ratio of access lines to modems, and
user support. The Commission considers this to be fully consistent with the workings of a
competitive market, and further considers that lower and higher speed retail level ISs
share sufficient attributes to be considered as reasonable substitutes. The Commission
therefore defines the retail level ISs market to include all ISs, independent of speed,
and the facilities over which the services are carried.
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The Level of Competition
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18. The relative market power of service
providers is a function of a number of variables which affect both the demand and the
supply of the service(s) under consideration.
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19. In a number of
decisions, the Commission has found the ISs market to be highly competitive (for example,
Telecom Orders CRTC 97-471, 8 April 1997
and 97-928, 30 June 1997, the
"NBNet/PLAnet Forbearance Orders"). The Commission notes that at the time the
NBNet/PLAnet Forbearance Orders were made, the cable industry had begun to offer higher
speed retail level ISs. These ISs were therefore competing in the market at the time. The
Commission has considered whether the further penetration of such cable and other
broadcast carrier ISs has altered significantly, or may be expected to alter
significantly, the competitiveness of the retail level ISs market, having particular
reference to the fact that other service providers cannot currently access cable carrier
facilities to offer competitive higher speed ISs.
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20. On the demand side, ISs
customers face a market where switching ISPs is relatively easy, pricing packages are
varied and there are numerous substitutes for this service. On the supply side, the
Commission notes CCTAs submission that cable modem access services currently
represent less than one percent of the ISs market, and further notes that parties did not
dispute this estimate. The Commission accepts that cable companies serve a small
percentage of the total ISs market. It is also the Commissions view that the retail
level ISs market is characterized by rapid and significant innovation, minimal barriers to
entry and minimal restrictions on competitors ability to increase supply in response
to a non-transitory price increase.
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21. In light of the above,
the Commission considers that cable carriers offering ISs do not have substantial power in
the retail level ISs market. The Commission further considers that the more recent entry
of additional service providers into the ISs market has not changed the fundamental
dynamics of that market, and concludes that the market remains rivalrous, innovative and
sufficiently competitive to protect the interests of users. The Commission therefore finds
that retail level ISs are subject to competition sufficient to protect the interests of
users, pursuant to subsection 34(2) of the Act, and that it would be appropriate to
forbear from exercising its powers pursuant to section 25 of the Act with respect to the
rates and terms on which broadcast carriers offer retail level ISs.
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22. However, because access
to cable carriers underlying telecommunications facilities is not yet available to
competitive providers of retail level ISs, the issue arises as to whether, pursuant to
subsection 34(3) of the Act, forbearance from broadcast carriers retail level ISs in
this circumstance would be likely to impair unduly the continuance of a competitive market
for retail level ISs.
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23. In light of the
discussion in Part IV with respect to access to cable carriers underlying
telecommunications facilities and retail level ISs, the Commission concludes pursuant to
subsection 34(3) of the Act that a decision to forbear to the extent noted in this
Decision, in the absence of immediate access to the cable carriers
telecommunications facilities with respect to ISs is not likely to impair unduly the
continuance of a competitive retail level ISs market.
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Security, Telemetry,
Videoconferencing, LAN and WAN Services
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24. There was a general
consensus amongst the parties who commented on this issue that the Commission should
forbear with respect to the regulation of certain other telecommunications services,
specifically security, telemetry, videoconferencing, LAN and WAN services. CCTA, one of
the parties which supported forbearance of non-ISs, submitted that it would be appropriate
to apply the same regulatory treatment to all such services because, in its view, the
market conditions are common for these services. CCTA added that cable companies are
non-dominant in these markets and face competition from the established telephone
companies, other telecommunications carriers and resellers in the provision of these
services. CCTA concluded that, as cable companies do not possess power in these markets,
competition will be sufficient to protect the interests of users and forbearance would not
be likely to impair the development or continuance of competitive markets. Consequently,
CCTA recommended that the Commission forbear pursuant to sections 25, 29 and 31 and
subsections 27(1) and 27(5) of the Act but that it may wish to retain its powers under
section 24 to address privacy concerns as well as under subsections 27(2), (3) and (4) to
adjudicate any access disputes that may arise.
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25. Most parties commenting
on this issue did not dispute the CCTAs comments. Nevertheless, CNA indicated that
forbearance from the regulation of all other telecommunications services offered by
broadcast carriers would be premature, and CAIP submitted that it would be inappropriate
to forbear unconditionally.
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26. In view of the
Commissions historic approach to the regulation of security and telemetry services,
and in view of the fact that the Commission has already forborne with respect to the
regulation of videoconferencing, LAN and WAN services offered by non-dominant carriers
using telecommunications facilities which are not associated with broadcasting facilities,
the Commission finds, pursuant to subsection 34(1) of the Act, that it would be consistent
with Canadian telecommunications policy objectives to forbear to the extent discussed
below from regulating security, telemetry, videoconferencing, LAN and WAN services when
offered by broadcast carriers using facilities which are within the scope of this
proceeding. The Commission further finds, pursuant to subsection 34(3), that a
determination to refrain would not be likely to impair unduly the establishment or
continuance of a competitive market for these classes of services.
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Terms of Forbearance
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Competitive Safeguards
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27. Various parties
requested a number of other safeguards or conditions of forbearance in the context of
cable carriers retail level ISs, including the implementation of price caps and
imputation tests, safeguards to prevent cross-subsidization, predatory pricing and joint
marketing and the cost-justification of rates.
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Competitive Safeguards
at the Corporate Level
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28. Cable industry
interveners were of the view that there was no need for competitive safeguards beyond
those already in place. They submitted that the markets are, or will be, competitive; that
mechanisms are in place under the Broadcasting Act to ensure that
cross-subsidization or predatory pricing do not occur, including price cap regulation of
basic cable rates, cost separation rules and defined circumstances in which basic cable
rates may be increased; and that there are minimal or no barriers to entry.
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29. ISPs generally
disagreed. CADVision proposed that further safeguards were required to prevent the
offering of cable modem service for free, to prevent bundling and to guard against
cross-subsidization. CADVision and TotalNet proposed a safeguard (such as a "carrier
services group") to prevent the passing of confidential information such as client
lists between the broadcast carrier and its ISP operation.
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30. CAIP and TotalNet
requested a separation of telecommunications and broadcasting activities. CADVision and
Interlog further requested that ISs be offered through structurally separate business
units. Interlog considered a price imputation test to be the most important safeguard in
respect of bundled service offerings. TotalNet was of the view that the billing, financing
and marketing conducted for the cable carriers ISP business should be separate from
the cable business. CAIP submitted that the offering of mixed broadcasting and
telecommunications services should be allowed when the telecommunications service is
resold on a wholesale basis, and if no unjust preference is shown by a cable carrier
toward its own IS.
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31. MaxLink supported the
imposition of restrictions on joint marketing and advertising, and on bundling and
proposed restrictions on customer referrals and access to customer information similar to
those imposed on the telephone companies affiliates. MaxLink, along with WIC and
ITAC, also supported the implementation of safeguards to prevent cross-subsidization.
CAC/FNACQ was of the view that an imputation test and price caps should be introduced if
needed. CAC/FNACQ also submitted that structural separation would be the preferred
safeguard, but submitted that it does not appear practical at this time.
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32. Stentor submitted that
there is no need for any safeguard beyond those required to ensure the protection of
confidential customer information and to ensure fair access to inside wire, which, in its
view, is the only essential facility. Stentor further submitted that preventing
cross-subsidization would require the implementation of price caps and an imputation test
to telecommunications services. However, in Stentors view, the resources required
would outweigh the benefits, and the risk is best addressed by eliminating regulatory
barriers to entry in the broadcast market and relying on the remedies available under the Competition
Act.
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33. Parties comments
on the issue of competitive safeguards generally focused on the issue as it applies to
incumbent cable companies. With respect to broadcast carriers which are incumbent
telephone companies, the Commission notes that it has established, under the Act, a
regulatory framework to deal with competitive safeguards, including issues relating to the
potential for cross-subsidization from services in markets in which such carriers have
market power. The Commission further notes that, with respect to broadcast carriers which
are not incumbent telephone companies or cable companies, concerns do not arise in this
area because of their non-dominance.
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34. Cable companies that
provide retail level telecommunications services are non-dominant providers of these
services. The Commission notes that it has not required other companies which are
non-dominant providers of retail level telecommunications services to offer such services
on a structurally separate basis, and that it has not put accounting separations in place
for such service providers. The Commission does not consider that cable companies
market position in the broadcasting distribution market warrants different regulatory
treatment for such carriers in this respect under the Act. The Commission further notes
that this determination is consistent with the regulatory treatment described in Local
Competition, Telecom Decision CRTC 97-8, 1 May 1997
(Telecom Decision 97-8), for a cable distribution undertaking which is a competitive local
exchange carrier (CLEC).
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35. Under the Broadcasting
Act, the Commission has established a regulatory framework for cable carriers,
including those which are incumbent cable distribution undertakings. The Commission
considers it appropriate to continue to address issues relating to the market power of
such undertakings in broadcasting distribution under the Broadcasting Act. The
Commission further notes that it has already stated, in PN 1997-150, its intention to conduct a general
review of the Broadcasting Distribution Regulations after two years. At that time, the
Commission will consider whether further refinements to its broadcasting regulatory
framework are appropriate, having regard to the objectives of the Broadcasting Act.
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36. The Commission notes
certain parties proposals that a Carrier Services Group should be established to act
as an interface between customers for cable carrier facilities in the areas of access and
interconnection. In Regulation Under the Telecommunications Act of Cable Carriers
Access Services, Telecom PN CRTC 98-14, 9
July 1998 (Telecom PN 98-14), the Commission seeks comments on, amongst other things, the
appropriate way to address competitive concerns that may be expected to exist in this
area.
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Competitive Safeguards
at the Retail Service Level
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37. In Joint Marketing
and Bundling, Telecom Decision CRTC 98-4, 24 March 1998
(Telecom Decision 98-4), the Commission set out its conclusions with respect to bundling
of telecommunications and non-telecommunications services by a Stentor telephone company.
The Commission concluded that the Stentor telephone companies may continue to bundle
services, subject to the conditions respecting tariffing and costing set out in that
Decision.
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38. In this proceeding, the
Commission considered the regulatory requirements, if any, that should be put in place in
connection with: (a) the bundling of telecommunications and non-telecommunications
services by broadcast carriers which are not Stentor telephone companies, and (b) the
joint marketing of telecommunications and non-telecommunications services offered by all
broadcast carriers.
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39. The Commission notes
that, with its determinations in this Decision, retail level telecommunications services
offered by broadcast carriers which are not incumbent telephone companies will not be
tariffed: the Commission has previously decided it will not regulate, under the Act,
retail rates for toll and local telephone services and most other telecommunications
services offered by non-dominant carriers (Forbearance - Services Provided by
Non-Dominant Canadian Carriers, Telecom Decision CRTC 95-19,
8 September 1995 (Telecom Decision 95-19) and Telecom Decision 97-8). This would include a cable company which offers a
local or toll service. As set out in this Decision, a broadcast carrier which is not an
incumbent cable company or an incumbent telephone company (e.g. BDUs which use MDS
technology) will not be required to file tariffs for its telecommunications services.
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40. CCTA, ACQ and certain
individual cable companies argued that bundling or joint marketing safeguards are not
required because cable companies cannot cross-subsidize, have little market power in
broadcast distribution, and there is no strong link in customers minds between ISs
and entertainment services.
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41. ISPs generally
expressed strong concerns that cable companies should not be allowed to bundle or engage
in cross-service pricing and promotions, particularly in the absence of access to their
telecommunications facilities by other ISPs. CAC/FNACQ indicated that conditions on
bundling do not appear to be necessary at this time, but that the Commission should be
prepared to impose them if required. Stentor submitted that no additional condition need
be imposed on the telecommunications service elements in bundled packages beyond those
applied to those services when offered separately.
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42. The Commission
considers that, consistent with its approach in its Telecom Decision 98-4,
all broadcast carriers should be permitted to bundle ISs with cable services.
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43. However, until a
broadcast carrier which is an incumbent cable company or an incumbent telephone company
provides tariffed access to its underlying telecommunications facilities with respect to
competitive ISPs, as discussed in this Decision, the Commission requires, pursuant to
section 24 of the Act as a condition of the provision of telecommunications services, such
a carrier to provide customers with specific rate information. The carrier is to provide
the following information on each bill to a customer of both telecommunications and
broadcasting services: (a) the rate charged for any IS in the package, and (b) the total
rate charged for all other forborne telecommunications services in the package. This
information will assist all parties in making better-informed decisions until tariffed
access is available.
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44. There is currently no
restriction in place under the Act with respect to joint marketing by broadcast carriers
of telecommunications and non-telecommunications services (e.g. broadcasting). The issue
therefore is whether it would be appropriate to impose such restrictions, as certain
parties requested.
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45. The Commission
considers that joint marketing and advertising will permit broadcast carriers to meet
consumer demand, including demands for one-stop shopping and integrated service offerings,
and that it will lead to more innovation and cost effective provisioning of
telecommunications services through economies of scale and scope. The Commission also
notes that the market for ISs and forborne telecommunications services is competitive, and
that competition has been introduced into the market for cable services. Further,
incumbent cable companies do not have market power in terms of advertising vehicles and,
in the Commissions view, consumers are generally aware that there are competing ISPs
and emerging competitors for cable. The Commission is therefore of the view that it is not
appropriate to impose joint marketing restrictions with respect to broadcast
carriers forborne telecommunications and their non-telecommunications services. The
Commission further considers that joint marketing of such services would not generally
result in the granting of an undue preference under subsection 27(2) of the Act.
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46. The Commission notes
CADVisions submission, made in respect of Shaw, to the effect that Shaws
ownership of advertising media and fibre networks, as well as Shaws relationships
with its customers are sources of market power. The question of whether Shaw derives an
undue advantage from its relationship with its existing cable clients involves a
consideration of the issues of joint marketing and bundling. These issues have been
addressed above.
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Resale
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47. A related issue is
whether the Commission should require resale of retail level ISs as a condition of
forbearance. CCTA, among others, opposed the request put forward by certain ISPs for the
right to resell cable carriers ISs. CCTA submitted that, in the past, the Commission
has mandated resale of a carriers services only as a means of stimulating
competition in a monopolistic environment, where the barriers to facilities-based entry
were considered to be great. CCTA considered that such circumstances do not exist here.
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48. The Commission notes
that, in previous decisions in which it forbore with respect to the regulation of retail
level ISs, it did not mandate resale of these services. The Commission considers that the
supply of access services has continued to increase, and has contributed to create a
workably competitive market for retail level ISs. In all the circumstances, the Commission
declines to mandate resale of retail level ISs as a condition of forbearance.
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Privacy
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49. Certain parties
proposed that the Commission retain its authority under section 24 of the Act to address
privacy concerns. The Commission agrees and considers that broadcast carriers must enforce
privacy policies which adequately protect the customer information they collect, and, on a
going forward basis, should include their policy with respect to the confidentiality of
customer information in all ISs customer contracts.
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Summary of Conclusions
with respect to Retail Level Telecommunications Services
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50. Pursuant to subsection
34(1) of the Act, in relation to broadcast carriers retail level ISs, security,
telemetry, videoconferencing, LAN and WAN services: the Commission finds as a question of
fact that to refrain from exercising powers and performing duties with respect to sections
25, 29, and 31 and subsections 27(1), 27(5) and 27(6) of the Act would be consistent with
the Canadian telecommunications policy objectives.
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51. With respect to
broadcast carriers retail level ISs, the Commission further finds, pursuant to
subsection 34(2) of the Act, that these services are subject to competition sufficient to
protect the interests of users.
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52. However, the Commission
considers it would not be appropriate to refrain from exercising all of its powers and
duties under section 24 and subsections 27(2), 27(3) and 27(4) of the Act with respect to
these services.
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53. The Commission
considers it necessary to retain powers with respect to section 24 of the Act in order to
maintain and impose certain conditions on the offering and provision of underlying
telecommunications services to competitive service providers, to provide rate information
as set out below, to ensure that appropriate provisions regarding confidential information
apply and to retain the power to impose conditions on the offering and provision of these
services as may be necessary in the future.
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54. A broadcast carrier
which is an incumbent cable company or an incumbent telephone company and which cannot
provide tariffed access to its underlying telecommunications facilities with respect to
competitive service providers, as discussed below in this Decision, must provide customers
with specific rate information. The carrier is to provide the following information on
each bill to a customer of both telecommunications and broadcasting services: (a) the rate
charged for any IS in the package, and (b) the total rate charged for all other forborne
telecommunications services in the package.
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55. The Commission is of
the view that it is important to retain subsections 27(2) and 27(4) of the Act in regard
to issues related to access to the underlying network components of the services forborne
from in this proceeding. The Commission is further of the view that retaining these
subsections will provide an additional safeguard against broadcast carriers granting any
undue preference to their own services.
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56. The Commission directs
broadcast carriers to include, on a going forward basis, their policy with respect to the
confidentiality of customer information in all ISs customer contracts.
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57. Pursuant to subsection
34(3) of the Act, the Commission finds that to refrain from exercising the powers and
performing the duties to the extent set out in this Decision would not be likely to impair
unduly the establishment or the continuance of a competitive market for the services to
which this Decision applies.
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58. The Commission
declares, pursuant to subsection 34(4) of the Act, that sections 25, 27, 29 and 31 of the
Act do not apply to a Canadian carrier to the extent these sections are inconsistent with
the determinations of the Commission in this Decision.
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59. The Commission grants
final approval, under section 25 of the Act, to all broadcast carrier tariffs for ISs
which have been granted interim approval pending the Commissions determinations in
this proceeding. In view of its determinations herein, the Commission further directs the
carriers in question to issue forthwith tariff pages withdrawing the tariffs for their
retail level ISs and, if applicable, for their telemetry, security, videoconferencing, LAN
and WAN services.
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IV ACCESS TO UNDERLYING
TELECOMMUNICATIONS FACILITIES
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60. Various ISPs that are
not associated with cable carriers expressed their interest in this proceeding in offering
retail level services, in this case higher speed ISs, in competition with cable carriers.
In order to do so, they stated that they require access to cable carriers
telecommunications facilities.
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61. Through the CCTA and in
individual submissions, certain cable companies stated that they propose to provide access
to their facilities to competitive retail level providers as soon as possible. The
industry proposes to do so using a "source-based" routing approach. This
approach to access would mean, for example, that an ISPs "home page", not
the home page associated with any retail level IS offered by the cable company, would
appear on the customers screen. However, software must be developed to implement
this approach and, while work is ongoing in this area, it has not yet been concluded.
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62. Generally, the cable
industry and Stentor submitted that forbearance, not tariffing, is appropriate with
respect to the rates and other terms on which access to underlying telecommunications
facilities is provided. ISPs and certain other parties submitted that access should be
made available on a tariffed basis.
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63. IS customers access
ISPs in various ways, including through the use of switched voice grade services, cable
modems, asymmetrical digital subscriber line (ADSL) services and dedicated access
services. For example, most residential IS customers currently use switched voice grade
services to access their ISP.
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64. For the purpose of this
Decision, "access services" refer to services which connect customers to a
network through which they may reach the service provider of their choice. The Commission
considers that there are two markets for access services: the lower and higher speed
access service markets. In the Commissions view, lower speed and higher speed access
services are not substitutes, given the limited availability of the latter, the fact that
higher speed access services are in the earlier stages of development, and the price
differential between lower and higher speed service offerings.
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Lower Speed Access
Services
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65. "Lower speed
access" allows for data access using a voice grade line (currently, up to 56 Kbps
capability) and various modem technologies. Integrated services digital network (ISDN)
services provide capacity in 64 Kbps increments, and each increment can be used
individually for voice or data, or grouped to achieve higher speeds. The Commission
defines the lower speed access market as including those services that provide
transmission at speeds no greater than 64 Kbps. The higher speed access market therefore
consists of services which offer transmission at speeds above 64 Kbps.
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66. The incumbent telephone
companies are currently the dominant suppliers of lower speed access services. The
Commission approves, through tariffs, the terms on which such services are provided. The
Commission also regulates and approves tariffs, as appropriate, for elements relating to
access provided by incumbent telephone companies to competitive providers of switched
local telephony services. In contrast, the Commission has not required new entrants into
the switched local voice market to file tariffs for access to their underlying facilities
(Telecom Decision 97-8). The Commission also regulates
wireless service providers as non-dominant service providers, and does not require them to
obtain prior approval of tariffs for the provision of access to their underlying
facilities (Regulation of Mobile Wireless Telecommunications Services, Telecom
Decision CRTC 96-14, 23 December 1996). Further,
the Commission has forborne from exercising its power to approve tariffs with respect to
most other services offered by non-dominant carriers (Telecom Decision 95-19).
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Higher Speed Access
Services
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67. As noted, ADSL and ISDN
services above 64 Kbps are higher speed access services. Currently, incumbent telephone
companies offer such services using traditional copper facilities. The Commissions
description of the lower speed and higher speed access markets does not alter the current
regulatory treatment of such services.
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68. With respect to the
market for higher speed access services, the Commission considers that different demand
and supply conditions prevail than in the market for lower speed access services.
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69. There are various
higher speed access service options (for example, cable modem and ADSL services) which are
still evolving, and are only now becoming more widely available to IS customers. The
incumbency of both telephone and cable companies in their respective core businesses also
provides them with the infrastructure to continue to establish themselves in the higher
speed access market.
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70. On the other hand,
companies offering higher speed access services using wireless technology (such LMCS or
MDS) are not in this position. Two holders of LMCS spectrum licences from Industry Canada,
MaxLink and WIC, made submissions in this proceeding. They noted that the outcome of this
proceeding will not apply to them because they do not hold BDU licences. MaxLink requested
that the Commission forbear unconditionally from regulating its services, given its lack
of market power.
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Access to Underlying
Telecommunications Facilities and Forbearance from Cable Carrier Retail Level IS
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71. The Commission notes
the position of companies whose services compete against cable carriers higher speed
retail level ISs that it would not be appropriate to forbear with respect to the
regulation of such services before access to the underlying facilities used to offer these
services is available. The Commission also notes the comments made by certain interveners
to the effect that, by failing to implement access before offering their own ISs, cable
companies are conferring an undue advantage upon themselves, contrary to subsection 27(2)
of the Act.
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72. The Commission notes
that currently cable-modem based retail level ISs are not ubiquitously available in urban
areas, and that such services are not expected to be available in rural areas in the short
term. With respect to the issue of access to facilities required to offer retail level ISs
at lower speeds, the Commission notes that lower speed access service availability is
currently ensured through tariffed access to incumbent telephone company facilities, and
that higher speed access services offered by such carriers are available on a tariffed
basis as they are rolled-out. The Commission further notes that cable companies have
undertaken to implement access to the telecommunications facilities which are the subject
to this Decision as soon as possible.
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73. The Commission notes
the position of various parties that cable carriers should not be permitted to continue to
offer higher speed retail level ISs until such time as access to their telecommunications
facilities is available to competitive service providers. In light of its conclusions
respecting the market in which such ISs are offered, the Commission considers that it
would not be in the public interest to restrict the development of higher speed ISs in
this way. The Commission also does not consider that it would be in the public interest to
tariff cable carriers higher speed retail level ISs on a cost-justified basis, in
circumstances in which it would not otherwise do so, solely for the purpose of addressing
access issues.
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74. Finally, the Commission
notes competitive ISPs concerns that, if the Commission forbears from regulation of
broadcast carriers ISs rates, a cable company might charge a rate for its retail
level higher speed IS that is less than the rate it charges to competitive suppliers of
such services for access to its telecommunications facilities. The Commission considers
that, given developing competition in the cable companies core business, and the
existing competitive safeguards applicable to cable distribution undertakings under the Broadcasting
Act, it would be uneconomic for cable carriers to engage in such activity. Therefore,
in the Commissions view, it would be more appropriate to deal with such issues as
they may arise in the context of undue preference under subsection 27(2) of the Act.
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Summary of Conclusions
with Respect to Access to Underlying Telecommunications Facilities
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75. Notwithstanding that
competitors to incumbent cable companies and incumbent telephone companies may be poised
to provide such higher speed access services, or have begun to do so, higher speed access
services are now supplied almost exclusively by these carriers. The Commission considers
that incumbent telephone companies and incumbent cable companies have substantial market
power with respect to higher speed access services, and that this market is not yet
sufficiently competitive to justify forbearance with respect to the rates and terms on
which these carriers provide higher speed access services.
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76. Moreover, the Commission considers that
a potential increase in competitive supply should not be accepted as a basis for
forbearance with respect to higher speed access services given the current state of
technological development with respect to the provision by cable companies of higher speed
access services, and the importance of higher speed access services to the continued
development of retail level telecommunications services. The Commission finds that to
forbear from exercising its power to approve tariffs with respect to higher speed access
services offered by a broadcast carrier which is an incumbent telephony company or an
incumbent cable company would unduly impede the development of a competitive market for
these services. With respect to Stentors submission that facilities which provide
similar functionality should be treated symmetrically with incumbent cable carrier
services from a regulatory perspective, the Commission notes that ADSL services are
currently tariffed.
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77. The Commission
therefore concludes, with respect to higher speed access services provided by a broadcast
carrier which is an incumbent cable company or an incumbent telephone company, that it is
appropriate to tariff the rates and other terms on which such services are provided, once
the carrier has the ability to provide such access in respect of competitive service
providers. Broadcast carriers which are affiliates of incumbent carriers will not be
required to provide such access on a tariffed basis. The Commission further considers that
a competitive retail level service provider should not be restricted with respect to the
company it selects to deliver its service to the incumbent cable or telephone carriers.
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78. With respect to the provision of higher
speed access services by non-dominant service providers using wireless technology such as
MDS and LMCS, the Commission notes that in Telecom Decision 95-19
it forbore from exercising certain of its powers in respect of such services when they are
provided using telecommunications facilities which are not also used to provide a
broadcasting service.
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79. With respect to higher
speed access services provided using the facilities of a non-dominant broadcast carrier
licensed as a BDU to provide a broadcasting service using wireless technology, the
Commission finds, pursuant to subsections 34(1) and 34(2) of the Act, that to forbear to
the extent set out in Telecom Decision 95-19 would be
consistent with the Canadian telecommunications policy objectives, and that the services
offered by these carriers are subject to competition sufficient to protect the interests
of users. Pursuant to subsection 34(3) of the Act, the Commission finds that to refrain
from exercising the powers and performing the duties to the extent set out in Telecom
Decision 95-19 would not be likely to impair unduly the
establishment of the continuance of a competitive market for higher speed access services
offered by these carriers. The Commission notes that it will therefore retain, amongst
other powers, its powers under subsection 27(2) of the Act to deal with issues relating to
network access. The Commission declares, pursuant to subsection 34(4) of the Act, that
sections 25, 27, 29 and 31 do not apply, to the extent these sections are inconsistent
with the determinations of the Commission in this Decision.
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80. The Commission notes
that distribution facilities used by a broadcast carrier to provide a broadcasting service
may also be used to provide a telecommunications service which falls within the scope of,
Telecom Decision 97-8. Telecom PN 96-36 excluded issues relating to such local
telecommunications services, including local public switched voice services, from
consideration in this proceeding. The Commissions determinations in this Decision do
not, therefore, alter its determinations with respect to local competition.
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81. CCTA is to report to
the Commission, within 30 days of the date of this Decision, on the status of the
implementation of access, including a detailed report on issues of a technological nature.
CCTA is to continue to report quarterly, or more frequently as required, as significant
developments occur on the status of the implementation of access.
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82. CCTA is to provide a
detailed report, within 45 days, on the feasibility of alternative methods of providing
access, including a discussion of the advantages and disadvantages of these alternative
approaches to the provision of access.
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83. The Commission also
notes its intention to initiate a proceeding under the Act to consider issues relating to
the methodology by which rates for access to facilities should be developed. Other issues
relating to access will also be considered in that proceeding (e.g. confidentiality of
competitor information).
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84. The Commission
requested comments in Telecom PN 96-36 with
respect to "the appropriate approach to interconnection between the
telecommunications facilities of broadcast carriers and those of other facilities based
providers, including points of interconnection and other technical aspects". Parties
did not provide detailed comments on this issue. In light of this and given that technical
issues associated with access generally are still under development, the Commission
considers it is premature to pursue this issue further at this time.
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85. The Commission agrees
with the submission of the CNA that carriers should not grant an undue preference to
themselves in providing navigation through the Internet or in providing gateways through
which customers can gain access to remote databases and networks.
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86. Certain parties requested that the
Commission require resale of access. With respect to CAIPs request that its members
be permitted to resell cable carriers access service so as to retain a complete
relationship with their ISP customers, the Commission considers that there may be benefits
from such an arrangement.
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87. The issue of whether
the Commission should mandate resale and sharing of carriers higher speed access
services will be addressed in Telecom PN 98-14.
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88. With respect to the
submission of Interlog that cable carriers should be required to make sufficient technical
disclosure, including terminal to network interface, in order that third parties may
provide competing ISs (in accordance with Telecom Letter Decision CRTC 94-11), the
Commission agrees that this issue must be addressed once technical arrangements have been
developed further.
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V BROADCAST CARRIER
INVOLVEMENT IN TELECOMMUNICATIONS CONTENT
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89. Section 36 of the Act
states that "Except where the Commission approves otherwise, a Canadian carrier shall
not control the content or influence the meaning or purpose of telecommunications carried
by it for the public."
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90. Pending the completion
of this proceeding, in Telecom Decision 96-1, the
Commission granted interim approval under section 36 of the Act to any such broadcast
carrier involvement in the content of the non-programming services other than full channel
TV services (e.g. alphanumeric services); that is, the Commission granted interim approval
to carrier involvement in the content of ISs and other telecommunications services.
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91. Parties
submissions in this proceeding did not focus on, or raise concerns with respect to,
ongoing broadcast carrier involvement in these service offerings. The Commission
understands this involvement to include selection of any content for a carriers own
IS. The retail level services which are the subject of this Decision are offered in a
competitive market, and markets for access services are subject to regulation.
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92. The Commission
therefore grants final approval, under section 36 of the Act, to broadcast carrier
involvement in the content of the telecommunications services in respect of which it has
forborne from exercising certain of its powers in this Decision.
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VI RELATIONSHIP BETWEEN THE
BROADCASTING ACT AND THE TELECOMMUNICATIONS ACT WITH RESPECT TO USE OF THE COMMUNITY
CHANNEL
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93. In the context of
resolving certain complaints against Cogéco Câble Canada (Cogéco) filed by QuébecTel
Communications (QuébecTel), in which QuébecTel alleged that Cogéco was advertising its
IS on one of its community channels, the Commission indicated it would address this issue
in its Decision in this proceeding (Application of Telecom Decision CRTC 96-1: QuébecTel Communications and Cogéco Câble Canada
Inc., Telecom Decision CRTC 96-8 dated 18 September
1996). Cogéco took the position that its practice was in conformity with the Broadcasting
Act, and that the Broadcasting Act is the relevant legislation with respect to
such issues. In Telecom PN 96-36 the
Commission sought comment on whether, where a broadcast carrier packages a
telecommunications and broadcasting service or uses a broadcasting service in conjunction
with its telecommunications service, such activities could be examined pursuant to the Act
and, in particular, pursuant to subsection 27(2).
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94. The Commission intends
to address the issue of advertising ISs on a community channel under the Broadcasting
Act. It would be the Commissions intention to issue a public statement in this
regard in the near future.
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This document is available in
alternative format upon request.
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Laura M. Talbot-Allan
Secretary General
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