The Department of Defense (DOD) requested that the Office of Personnel Management (OPM) change the timing of local wage surveys in the Orleans, LA, nonappropriated fund (NAF) Federal Wage System (FWS) wage area. Full-scale wage surveys currently begin in February of each odd-numbered fiscal year. Full-scale wage surveys will begin in the future in June of each even-numbered fiscal year. Under section 532.207 of title 5, Code of Federal Regulations, the scheduling of wage surveys takes into consideration the best timing in relation to wage adjustments in the principal local private enterprise establishments, reasonable distribution of workload of the lead agency, timing of surveys for nearby or selected wage areas, and scheduling relationships with other pay surveys.

DOD asked OPM to change the starting time for local wage surveys in the Orleans wage area to June of even fiscal years to help spread out its survey workload. In addition, this change will avoid annual Mardi Gras festivities in New Orleans during the month of February. DOD will next conduct a full-scale wage survey in the Orleans wage area in June 2000. DOD will update the data collected in the full-scale wage survey during a “wage change” survey in June 2001.

The Federal Prevailing Rate Advisory Committee, the national labor-management committee responsible for advising OPM on matters concerning the pay of FWS employees, recommended by consensus that we change the full-scale survey cycle for the Orleans NAF wage area from February of odd-numbered fiscal years to June of even-numbered fiscal years.

Under 5 U.S.C. 553(b)(3)(B), I find good cause to waive the general notice of proposed rulemaking. DOD and the local wage survey committee must begin preparations for the Orleans, LA, NAF wage area before a full-scale wage survey begins in June 2000.

I certify that this regulation will not have a significant economic impact on a substantial number of small entities because it will affect only Federal agencies and employees.

The Animal and Plant Health Inspection Service (APHIS) of the U.S. Department of Agriculture (USDA) regulates the importation of animals and animal products into the United States to guard against the introduction of animal diseases not currently present or prevalent in this country. The regulations pertaining to the importation of animals and animal products are set forth in the Code of Federal Regulations (CFR), title 9, chapter I, subchapter D (9 CFR parts 91 through 99).

The regulations in part 94 pertain to, among other things, the importation of meat and other animal products into the United States. Section 94.6 of the regulations governs the importation of carcasses, or parts or products of carcasses, of poultry, game birds, or other birds from regions where exotic Newcastle disease (END) is considered to exist. Specifically, the regulations allow poultry carcasses, or parts or products of poultry carcasses, to be imported for consumption from regions where END is considered to exist if: (1) The poultry is packed in hermetically sealed containers and cooked by a commercial method after such packing to produce articles that are shelf stable without refrigeration; (2) the poultry is thoroughly cooked and appears to have a thoroughly cooked appearance throughout upon APHIS inspection at the port of arrival; or (3) the poultry is imported under permit after APHIS determines the importation as such will not constitute a risk of introducing or disseminating END into the United States.

On May 21, 1999, we published in the Federal Register (64 FR 27711-27717, Docket No. 98-034-1) a proposal to establish a new § 94.22 to allow the importation of poultry meat and other poultry products from the States of Sinaloa and Sonora, Mexico, under conditions less restrictive than provided in § 94.6. We based our proposed rule on information presented to APHIS by the Mexican Government in 1994 in a request to recognize the Mexican States of Sinaloa and Sonora as free of END, and on a site visit that APHIS officials made to Mexico in 1997 to verify that Sinaloa and Sonora had the veterinary infrastructure, disease control programs, diagnostic capabilities, and surveillance programs necessary to diagnose and prevent an introduction of END. Following the site visit, we performed a qualitative risk assessment on the importation of poultry meat and other poultry products from federally inspected slaughtering and processing plants in Sinaloa and Sonora. The qualitative risk assessment indicated that such importations would present a negligible risk of introducing END into the United States.

Based on the finding of negligible risk, we proposed to relieve restrictions on the importation of poultry meat and other poultry products from Sinaloa and Sonora, Mexico. However, we proposed to allow the poultry meat and other poultry products to be imported only under certain conditions, to help prevent the possibility that poultry meat and other poultry products from poultry raised in regions of Mexico other than Sinaloa or Sonora could be exported to the United States via Sinaloa or Sonora. We wanted to prevent the following possibilities: That poultry from regions of Mexico other than Sinaloa or Sonora could be moved to Sinaloa or Sonora for slaughter, processing, and export to the United States; that poultry meat or other poultry products from other regions could be moved to Sinaloa or Sonora for export to the United States; or that, once leaving Sinaloa or Sonora, poultry meat or other poultry products from Sinaloa or Sonora could be commingled with poultry meat or other poultry products from other regions of Mexico in transit to the United States. We stated our belief that the proposed import conditions would provide a higher degree of safety against the occurrence of any of these scenarios.

In the proposed rule, we set forth (1) our reasons for believing that the importation of poultry meat and other poultry products from Sinaloa and Sonora could be accomplished safely under certain conditions; (2) the proposed import conditions for poultry meat and other poultry products from Sinaloa and Sonora; and (3) our basis for the proposed import conditions. The proposed import conditions follow:

1. The poultry meat or other poultry products must be derived from poultry that were born and raised in Sinaloa or Sonora and slaughtered in Sinaloa or Sonora at a federally inspected slaughter plant under the direct supervision of a full-time salaried veterinarian of the Government of Mexico, and the slaughter plant must be approved to export poultry meat and other poultry products to the United States in accordance with 9 CFR 381.196.

2. If processed in any manner, the poultry meat or other poultry products must be processed at a federally inspected processing plant in Sinaloa or Sonora under the direct supervision of a full-time salaried veterinarian of the Government of Mexico.

3. The poultry meat or other poultry products may not have been in contact with poultry from any State in Mexico other than Sinaloa and Sonora or from any other region not listed in § 94.6 as a region where END is not known to exist.

4. The foreign meat inspection certificate for the poultry meat or other poultry products (required by the Food Safety and Inspection Service, USDA, under 9 CFR 381.197) must be signed by a full-time salaried veterinarian of the Government of Mexico. The certificate must include statements that certify the above conditions have been met. The certificate must also show the seal number on the shipping container if a seal is required (see below).

5. In addition, if the poultry meat or other poultry products are going to transit any State in Mexico other than Sinaloa or Sonora, or any other region not listed in § 94.6 as a region where END is not known to exist, en route to the United States, a full-time salaried veterinarian of the Government of Mexico must apply serially numbered seals to the containers carrying the poultry meat or other poultry products at the federally inspected slaughter or processing plant in Sinaloa or Sonora, and the seal numbers must be recorded on the foreign meat inspection certificate.

6. Prior to its arrival in the United States, the shipment of poultry meat or other poultry products may not have been in any State in Mexico other than Sinaloa or Sonora or in any other region not listed in § 94.6 unless the poultry meat or poultry products have remained under seal until arrival at the U.S. port and either (1) the numbers on the seals match the numbers on the foreign meat inspection certificate or (2) if the numbers on the seals do not match the numbers on the foreign meat inspection certificate, an APHIS representative at the port of arrival is satisfied that the poultry meat or poultry products were not contaminated during movement to the United States.

We solicited comments concerning our proposal for 60 days ending July 20, 1999. We received 14 comments by that date. They were from an association representing U.S. veterinarians, three associations representing the U.S. poultry industry, several associations representing the Mexican poultry industry, and one individual. The comments are discussed below by topic.

Nine commenters supported the proposed rule but requested that APHIS clarify under what conditions eggs and egg products from Sinaloa and Sonora are eligible for importation into the United States. They also asked if the proposed rule relieved restrictions on the importation of eggs and egg products from Sinaloa and Sonora. One commenter requested that we include new conditions for importing eggs and egg products from Mexico in our proposal.

The proposed rule did not alter or otherwise affect the restrictions currently in place for eggs and egg products from Mexico. While our use of the term “poultry meat and other poultry products” in our proposal could be construed to include eggs and egg products, it was not our intent to allow eggs and egg products to be imported from Sinaloa and Sonora under conditions less restrictive than those currently in place. Further, our risk assessment did not take into account the risk associated with eggs and egg products, nor did we develop any new conditions specific to the importation of eggs and eggs products for this rule.

Because Salmonella enteriditis phage-type 4 is considered to exist in Mexico, eggs from any Mexican State, including Sinaloa and Sonora, may only be imported into the United States in accordance with the conditions contained in § 94.6(d) of the regulations. We are currently reviewing our S. enteriditis regulations, and should we determine that changes are warranted, we will publish a proposed rule in the Federal Register for comment.

One commenter opposed the proposed rule based on concerns about food safety and the potential for oversaturating the U.S. poultry market. He cited concern about the potential for poultry meat and other poultry products from Sinaloa and Sonora to carry Salmonella, Listeria spp., and Campylobacter. The commenter suggested that poultry from Mexico should be clearly labeled in stores so it is not confused with poultry raised in the United States. The commenter also stated that there is little need for imports of poultry and eggs from Mexico, considering that the United States is experiencing an egg surplus and spent fowl with little or no market.

APHIS regulates the importation of animals and animal products into the United States to guard against the introduction of animal diseases not currently present or prevalent in this country. Our chief responsibility is to safeguard American agriculture from foreign animal diseases. However, no poultry meat or other poultry products from Sinaloa or Sonora are eligible to enter into U.S. commerce until USDA's Food Safety and Inspection Service (FSIS) has approved such imports. Issues related to food safety and poultry imports from Mexico will be addressed by FSIS if and when FSIS approves such imports. Product labeling also falls under the jurisdiction of FSIS.

As stated earlier, we are not amending the restrictions currently in place for eggs from Mexico in this rule. Further, by amending the regulations regarding the importation of poultry meat and other poultry products from Sinaloa and Sonora, Mexico, as requested by the Government of Mexico, APHIS has acted in accordance with trade agreements entered into by the United States, including the North American Free Trade Agreement and the Uruguay Round of the General Agreement on Tariffs and Trade. APHIS is bound under these agreements to relieve restrictions on foreign imports of animals and animal products, if requested to do so, if we determine that decreased restrictions on imports will not result in a significant risk of introducing foreign animal diseases into the United States, regardless of the domestic need for such imports.

Four commenters supported our proposal provided we could ensure compliance with the proposed regulations. In addition, one commenter stated that if APHIS amends the regulations to allow poultry meat and other poultry products from Sinaloa and Sonora to be imported into the United States under the conditions described in our proposal, APHIS should conduct an ongoing monitoring, evaluation, and verification program to ensure compliance with the regulations.

We will inspect shipments of poultry meat and other poultry products from Sinaloa and Sonora, Mexico, upon arrival in the United States to review the foreign meat inspection certificate and to check the seals on containers. However, we do not intend to conduct a more rigorous monitoring, evaluation, and verification program because, as stated in our proposal and in this document, we believe both Sinaloa and Sonora have the veterinary infrastructure, disease control programs, diagnostic capabilities, and surveillance programs necessary to diagnose and prevent an introduction of END. It is in both States' interest to take measures necessary to prevent an outbreak of END and to comply with APHIS regulations. Should APHIS determine that poultry meat or other poultry products from Sinaloa or Sonora have not met all the conditions of this rule, the poultry meat or other poultry products will be refused entry into the United States.

Therefore, for the reasons given in the proposed rule and in this document, we are adopting the proposed rule as a final rule, without change.

This rule has been reviewed under Executive Order 12866. The rule has been determined to be not significant for the purposes of Executive Order 12866 and, therefore, has not been reviewed by the Office of Management and Budget.

In accordance with 5 U.S.C. 604, we have performed a final regulatory flexibility analysis regarding the economic effect of this rule on small entities. This analysis also provides a cost-benefit analysis.

In accordance with 21 U.S.C. 111, the Secretary of Agriculture is authorized to promulgate regulations to prevent the introduction or dissemination of the contagion of any contagious, infectious, or communicable disease of animals from a foreign country into the United States.

This final rule relieves certain restrictions on the importation of poultry meat and other poultry products from the States of Sinaloa and Sonora, Mexico, by establishing new conditions for the importation of poultry meat and other poultry products from Sinaloa and Sonora into the United States.

Currently, no poultry slaughter facilities in the States of Sinaloa or Sonora are approved by the Food Safety and Inspection Service (FSIS) of the U.S. Department of Agriculture to export poultry meat or other poultry products to the United States. Poultry processing facilities in Sinaloa and Sonora will need FSIS approval prior to exporting poultry meat or other poultry products to the United States. Further, based on the following analysis, we anticipate that, if and when Mexican facilities receive FSIS approval to export poultry meat or other poultry products to the United States, the economic effect of those imports on U.S. producers and processors will be minimal.

As part of our analysis, we compared the expected benefits of importing poultry meat and other poultry products from Sinaloa and Sonora to the expected costs resulting from a possible disease outbreak. A qualitative risk assessment prepared by APHIS indicates that the expected costs of disease introduction are likely to be zero, as the imports pose a low probability of causing an outbreak of exotic Newcastle disease (END) in the United States.

The benefits of allowing poultry imports from Sinaloa and Sonora under less restrictive conditions are calculated as the net change in consumer and producer surplus that results from the estimated volume of trade. Assuming that, among other things, poultry meat and other poultry products from Sinaloa and Sonora will be a perfect substitute for domestic poultry meat and other poultry products, it is estimated that the net benefits of the imports will be positive. Allowing importations of poultry meat and other poultry products from Sinaloa and Sonora will cause U.S. farm gate prices to decrease marginally, benefiting U.S. consumers.

Our economic analysis examines the potential economic effects of such imports under low- (100 metric tons per year), medium- (1,000 metric tons per year), and high- (5,000 metric tons per year) volume scenarios. We chose these levels because 5,000 metric tons is the highest volume of poultry meat Mexico has ever exported to the world. Further, recently, there have been years when Mexico has exported no poultry meat. Therefore, we used the above import level scenarios based on Mexico's poultry export history.

For the low-volume scenario, consumer surplus is estimated to increase by $67,172 (1996 dollars) and producer surplus would decrease by $67,166, resulting in a net annual benefit of $6. The price of poultry would fall by $0.006 per metric ton. The medium-volume scenario shows an increase in consumer surplus of $671,734, a decrease in producer surplus of $671,645, and a net benefit of $89. The price of poultry would decrease by $0.063 per metric ton. Under the high-volume scenario, consumer surplus would rise by $3,358,942, and producer surplus would fall by $3,357,902, for a net benefit of $1,040. Poultry prices would decrease by $0.30 per metric ton. It is apparent that expected economic effects are very small for each of the scenarios.

Since the mid-1960s, there have been dramatic changes in the market structure, production technology, and retail marketing of broiler products. Production efficiency has been increased by continuing improvements in genetics, nutrition, housing, equipment, disease control, and management. Improved production efficiency is demonstrated in the reduction of feed and time required for producing a broiler chicken. Growing a 4.5 lb. broiler in 1940 required 14 weeks and 4 pounds of feed per pound of live bird. Today, the same size bird can be produced in 6.5 weeks with less than 2 pounds of feed per pound of bird.

Managerial decisionmaking has shifted from single proprietorship farming operations to vertically integrated poultry producing-processing-marketing firms, in which production and marketing decisions are centralized in a single entity that is either owned directly or controlled through contracts.

Improvement in poultry house technology enables producers to raise chickens in large confinement units throughout the year, resulting in increased production efficiency and consequent reductions in production cost. By 1995, almost all (99 percent) broilers were produced by vertically integrated companies. In 1978, in the United States, the four largest broiler companies controlled 21.4 percent of national production, and the eight largest broiler companies controlled 36 percent. By 1998 the four largest companies produced approximately 47 percent of national production, while the eight largest companies produced about 63 percent.

The potential economic effects of the importation of poultry meat and other poultry products from the Mexican States of Sinaloa and Sonora on national, regional, and local poultry producers are dependent on a number of factors, such as where the products will be consumed in the United States. While it is currently unknown exactly how poultry meat and other poultry products from Sinaloa and Sonora will enter U.S. marketing and distribution channels and where they would ultimately be consumed, it is likely that they will be shipped by truck through Nogales, AZ. Other U.S. States in the region that could receive poultry from Sinaloa and Sonora are California, New Mexico, and Texas. It is unclear whether poultry from Sinaloa and Sonora will be consumed only in these four States. If poultry from Sinaloa and Sonora were purchased by a local retail chain or wholesaler, it would likely be consumed regionally. If it were purchased by a national wholesaler, it could be consumed anywhere in the United States. The effect on small producers will be more pronounced if Sinaloa and Sonora imports affect only California, Arizona, New Mexico, and Texas producers. For the purpose of this analysis, we examined both the possibility that poultry meat and other poultry products from Sinaloa and Sonora will be consumed locally in these four southwestern States and also the possibility that they will enter national distribution channels.

The Small Business Administration (SBA) defines small poultry farms (Standard Industrial Code 0251) as those earning less than $500,000 in annual sales, except for sales of chicken eggs. Industry experts suggest that only those poultry operations producing in excess of 270,000 broiler chickens earn $500,000 or more in sales annually.

According to the SBA definition, at least 99 percent of poultry farms in Arizona, New Mexico, and Texas and 97 percent of poultry farms in California are small entities. There were 1,241 small poultry farms in the four States in 1997, and only 4 farms with estimated annual revenues greater than $500,000. For the United States as a whole, in 1997, there were an estimated 10,289 small poultry farms. Although some structural changes may have occurred among broiler producers since the 1997 Census of Agriculture, it can be assumed that poultry farms remain predominantly small entities.

According to the Census of Agriculture, in 1997, Texas' average sales by small poultry farms ($75,294) were higher than the national average ($62,714), while sales in California were lower ($46,855). There are no comparable data for Arizona's and New Mexico's poultry farmers.

Whether we consider the United States as a whole or only selected southwestern States, the overwhelming majority of poultry farms are small entities. It is reasonable to conclude that, if U.S. poultry producers are affected by this rule, a substantial number will be small entities.

There is no general rule that sets threshold or trigger levels for “significant economic impact;” however, it has been suggested that an economic effect that equals a small business' profit margin—5 to 10 percent of annual sales—could be considered significant. 1

On November 12, 1999, President Clinton signed the Gramm-Leach-Bliley Act (G-L-B Act) (Pub. L. 106-102) into law. Section 121(d) of the G-L-B Act amended the Federal Deposit Insurance Act (FDI Act) (12 U.S.C. 1811 et seq. ) by adding a new section 46 (12 U.S.C. 1831w). New section 46(a) of the FDI Act provides that an insured state bank may control or hold an interest in a subsidiary that engages as principal in activities that would be permissible for a national bank to conduct only through a “financial subsidiary,” subject to certain conditions.

A financial subsidiary is a new type of subsidiary for national banks, governed by new section 5136A of the Revised Statutes as created under section 121(a) of the G-L-B Act. Section 5136A permits a financial subsidiary to engage in specified, newly authorized activities that are financial in nature and in activities that are incidental to financial activities if the bank and the subsidiary meet certain requirements and comply with stated safeguards. A financial subsidiary also may combine these financial subsidiary activities with activities that are permissible for national banks to engage in directly. The financial subsidiary activities include many of the activities which are authorized for the new “financial holding companies” as laid out in new section 4(k) of the Bank Holding Company Act (BHCA) (12 U.S.C. 1841 et seq. ) as created by section 103(a) of the G-L-B Act. Section 5136A also permits the Secretary of the Treasury (in consultation with the Board of Governors of the Federal Reserve System) to determine that additional activities are authorized for a financial subsidiary.

A state bank seeking to engage as principal in a financial subsidiary activity under section 46(a) must comply with four conditions listed in section 46(a) itself. In addition, section 103(a) of the G-L-B Act added a new subsection (4)(l)(2) to the BHCA (12 U.S.C. 1843(l)(2)), which contains a mandatory Community Reinvestment Act (CRA) (12 U.S.C. 2901 et seq. ) requirement enforceable by the FDIC. This differs from the situation before enactment of the G-L-B Act, when some of these activities were impermissible for a national bank and the FDIC reviewed such activities under section 24 of the FDI Act (12 U.S.C. 1831a) as implemented in part 362 of the FDIC's rules and regulations. Among other things, section 24 provides that a state bank subsidiary may not engage as principal in activities which are not permissible for a subsidiary of a national bank, unless the state bank meets its applicable capital requirements and the FDIC determines that the activity does not pose a significant risk to the appropriate deposit insurance fund.

Certain activities which the FDIC has addressed under subpart A of part 362, such as general securities underwriting, are now authorized for a financial subsidiary of a national bank. This means such activities will now be analyzed under section 46(a), and the restrictions the FDIC previously outlined in subpart A of part 362 will not apply to new state bank subsidiaries (or to existing state bank subsidiaries engaging in new financial activities). Existing state bank subsidiaries are grandfathered by section 46(b). 12 U.S.C. 1831w(b).

Where section 5136A of the Revised Statutes specifically prohibits financial subsidiaries from engaging in certain activities as principal, such as real estate development or investment, these activities are outside the scope of section 46(a) and will continue to be dealt with under section 24 and subpart A of part 362. Also, as the Secretary of the Treasury exercises his or her authority in the future to determine that additional activities are authorized for a financial subsidiary, such activities will cease being governed by section 24 or subpart A of part 362, and will begin being governed by section 46(a).

Among other things, subpart B of part 362 creates safety and soundness guidelines for an insured state nonmember bank subsidiary which engages in real estate investment activities that would be permissible for a subsidiary of a national bank but not permissible for a national bank directly. On December 1, 1998, the FDIC proposed an amendment to subpart B that would have added safety and soundness guidelines to govern an insured state nonmember bank subsidiary which engages in the public sale, distribution or underwriting of stocks, bonds, debentures, notes or other securities activity that would be permissible for a subsidiary of a national bank but not permissible for a national bank directly. 1 These real estate and securities provisions were intended to address pending or approved applications under regulations issued by the Office of the Comptroller of the Currency (OCC) which permitted national banks to request OCC approval to engage in certain activities through subsidiaries, even though the activities were not permissible for the national bank itself. 2 In an effort to be proactive in terms of future approvals of activities by the OCC under these regulations, the FDIC also sought comment on a requirement that a notice be filed with the FDIC before an insured state nonmember bank subsidiary engages in any other activity permissible for a subsidiary of a national bank that is not permissible for the parent national bank directly. Now that the OCC is proposing to eliminate its regulations and the G-L-B Act, through section 5136A and section 46(a), has established a new analytical framework, the FDIC will not be pursuing these amendments to subpart B.

The FDIC's December 1, 1998 proposal to amend subpart B also included a proposal to consolidate the remaining provisions of the FDIC's securities activities regulation, § 337.4, into subpart B. In light of the changes made as a result of the G-L-B Act, these revisions will be technical in nature. The FDIC will deal with those aspects of its proposal when the FDIC finalizes the interim final rule adopted in this rulemaking, or at a later time.

The interim final rule adopted in this rulemaking establishes conditions and procedures that apply when a subsidiary of a state nonmember bank seeks to engage as principal in financial activities as authorized under section 46(a). The interim rule contains a general provision advising state nonmember banks of the inapplicability of subpart A of part 362, but the FDIC has not published revised regulatory text modifying subpart A provisions addressing those financial activities which are now addresed by section 46(a). When the FDIC adopts a final version of the interim final rule proposed in this rulemaking, the FDIC will revise current subpart A of part 362 to modify treatment of those activities, such as securities underwriting, which will now be treated under section 46(a) rather than section 24 and subpart A. Also, the real estate provisions of subpart B of part 362 are no longer of any effect, and will be removed. The FDIC invites public comment on such revisions.

The implementation of section 46(a) is lodged in a new subpart E of part 362. Section 362.16 sets out the purpose and scope of the subpart, including the scope of the activities covered. Subpart E will apply to any “financial subsidiary activity,” which is defined as an activity which has been authorized for a financial subsidiary of a national bank under section 5136A of the Revised Statutes and which may be conducted by a national bank only through a financial subsidiary. Similar to subpart A of part 362, the purpose and scope section also clarifies what is meant by “as principal” activities, and specifies that the financial subsidiary activity also must be in conformance with other applicable state and federal law.

Sections 362.18(a)-(c) reiterate the four statutory conditions applicable to financial subsidiary activities under section 46(a) as well as the mandatory CRA requirement under section 4(l) of the BHCA. Section 362.18(a) also provides the FDIC with a mechanism which gives the FDIC an opportunity to impose safety and soundness constraints or prudential safeguards on insured state nonmember bank subsidiaries that engage in financial subsidiary activities as principal. If a bank meeting the statuory requirements chooses to engage in such activities, then the bank must file a notice with the FDIC 30 days before the bank's subsidiary may engage in such activities. If the FDIC does not object, the bank's subsidiary may commence the activity. This 30-day advance notice is designed to allow the FDIC time to review the activity and consider whether safety and soundness considerations make it prudent that additional conditions be placed on the conduct of the activity.

The four statutory conditions contained in section 46(a) and reiterated in § 362.18(a) are:

• Each insured depository institution affiliate of the state bank must be well capitalized, and the state bank must be well capitalized after deducting the bank's investment, including retained earnings, in all subsidiaries engaged in financial subsidiary activities as principal.

• The state bank must disclose the capital deduction and the separate assets and liabilities of the subsidiary in any published financial statement.

• The state bank must comply with the financial and operational safeguards required by section 5136A(d) of the Revised Statutes of the United States, which require operational safeguards to separate the bank from the risks of the subsidiary.

• The state bank must comply with sections 23A and 23B of the Federal Reserve Act as amended by section 121(b) of the G-L-B Act, requiring certain transactional restrictions to be observed.

Section 362.18(b) provides that the bank must comply with the above requirements at the time of filing of its notice and continue to comply with these four requirements as long as the bank's subsidiary is engaged in the financial activity. In addition, as specified in § 362.18(c), a subsidiary of an insured state nonmember bank may not commence any financial subsidiary activity as principal if the state bank or any of the state bank's insured depository institution affiliates has received at each one's most recent examination a CRA rating of less than a satisfactory record of meeting community credit needs. 3

The prior notice procedure under § 362.18 will give the FDIC an opportunity to review a state nonmember bank's proposal and, if necessary, impose additional prudential safeguards to insulate the bank from liability for the activities of the subsidiary. The FDIC holds authority to impose such safeguards under the FDIC's supervisory authority in section 8 of the FDI Act (12 U.S.C. 1818). In addition, section 114(c) of the G-L-B Act (12 U.S.C. 1828a(c)) confirms the FDIC's prudential authority to govern the relationships or transactions between a state nonmember bank and its subsidiaries. Although one of the four conditions imposed by section 46(a) itself requires the bank to have financial and operational safeguards to separate the bank from risks of the subsidiary, the FDIC believes that it is still necessary that the FDIC review the activities that state nonmember banks propose to undertake to evaluate whether the bank's financial and operational safeguards are sufficient. The financial and operational safeguard requirement in section 46(a) cross-references to the same requirement as imposed on financial subsidiaries of national banks under section 5136A(d) of the Revised Statutes, but the OCC has not released any guidance or interpretations of these financial and operational safeguards. The FDIC's review is likely to be especially important in the area of securities underwriting. The FDIC has a long history of imposing prudential safeguards to protect the bank from liability from subsidiaries and affiliates that engage in securities underwriting.  4

Section 362.18(d) incorporates the grandfather provided under section 46(b), permitting insured state banks to retain their interests in subsidiaries lawfully held before the date of enactment of the G-L-B Act. Section 362.18(d) also clearly states that state banks may not apply to the FDIC under section 24 or subpart A of part 362 (as well as § 337.4 of the FDIC's rules) for approval to engage in a financial subsidiary activity subject to restrictions different than are contemplated under section 46.

The FDIC also has amended its notice processing rules at 303.122(a) to add a reference to the new notices required by the interim final rule.

The FDIC will make this interim final rule effective on March 11, 2000 without first reviewing public comments. Pursuant to 5 U.S.C. 553, the FDIC finds that it is impracticable to review public comments prior to the effective date of the interim final rule, and that there is good cause to make the interim rule effective on March 11, 2000, due to the fact that the rule sets forth procedures to implement statutory changes that will become effective on March 11, 2000. The FDIC is seeking public comment on all aspects of the interim final rule and will amend the rule as appropriate after reviewing the comments. The FDIC is specifically seeking comment on whether the FDIC should set forth specific standards applicable to activities conducted under the new section 46 of the FDI Act as it has done in subpart A with respect to activities conducted under section 24 of the FDI Act.

In accordance with the Paperwork Reduction Act of 1980 (44 U.S.C. 3501 et seq. ), the FDIC may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid Office of Management and Budget (OMB) control number. The collection of information contained in this rule has been submitted to OMB for review. OMB will take action within 60 days of this Federal Register publication. The FDIC will publish notice if OMB takes an action other than approval of the collection. The FDIC invites comment on:

(1) Whether the collection of information contained in the regulation is necessary for the proper performance of the FDIC's functions, including whether the information has practical utility;

(2) The accuracy of the estimate of the burden of the information collection;

(3) Ways to enhance the quality, utility, and clarity of the information to be collected;

(4) Ways to minimize the burden of the information collections on respondents, including the use of automated collection techniques or other forms of information technology; and

(5) Estimates of capital or start-up costs and costs of operation, maintenance, and purchase of services to provide information.

For further information on the Paperwork Reduction Act aspect of this rule, contact Steven F. Hanft at FDIC Clearance Officer, Office of the Executive Secretary, Federal Deposit Insurance Corporation, 550 17th Street, N.W., Washington, D.C. 20429, (202) 898-3907.

Title of the collection: The interim final rule modifies an information collection previously approved by OMB titled “Activities and Investments of Insured State Banks” under control number 3064-0111.

Summary of the collection: Generally, the collection includes the description of the activity in which an insured state bank or its subsidiary proposes to engage that would be impermissible absent the FDIC's consent or nonobjection, and information about the relationship of the activity to the bank's and/or subsidiary's operation and compliance with applicable laws and regulations.

Need and Use of the information: The FDIC uses the information to determine whether to grant consent or provide a nonobjection for the insured state bank or its subsidiary to engage in the activity that otherwise would be impermissible. The FDIC's uses its authority under section 8 of the FDI Act and 12 CFR part 362.

Changes to the collection: The interim final rule will modify the collection by adding at § 362.18(a) the requirement of a notice to the FDIC before the state nonmember bank engages through a subsidiary in activities that are authorized for a financial subsidiary of a national bank under section 5136A of the Revised Statutes but are not permissible for the national bank itself. The contents of the notice are described at § 303.121(b).

Respondents: Banks or their subsidiaries desiring to engage in activities that would be impermissible absent the FDIC's consent or nonobjection.

Estimated annual burden resulting from this rulemaking:

Frequency of response: Occasional.

Number of responses: 1.

Average number of hours to prepare a response: 8 hours.

Total annual burden: 8 hours.

Pursuant to section 605(b) of the Regulatory Flexibility Act, the FDIC certifies that this interim final rule will not have a significant economic impact on a substantial number of small entities. As noted above in connection with the Paperwork Reduction Act, the FDIC estimates that the incidences in which insured state nonmember banks will be required to file a notice under the rule will be infrequent and will not require significant time to complete. Furthermore, the interim final rule streamlines requirements for insured state nonmember banks. It simplifies the requirements that apply when insured state nonmember banks conduct certain activities through subsidiaries. Whenever possible, the interim final rule clarifies the expectations of the FDIC when it requires notices or applications to consent to activities by insured state banks. The interim final rule also will make it easier for small insured state banks to locate the rules that apply to their investments.

The FDIC has determined that this regulation will not affect family well-being within the meaning of section 654 of the Treasury and General Government Appropriations Act, 1999, enacted as part of the Omnibus Consolidated and Emergency Supplemental Appropriations Act, 1999 (Pub. L. 105-277, 112 Stat. 2681).

The OMB has determined that this interim final rule is not a “major rule” within the meaning of the Congressional Review Act (5 U.S.C. 801 et seq. ). The FDIC will file the appropriate reports with Congress and the General Accounting Office so that this interim final rule can be reviewed.

A proposal to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) by superseding AD 80-22-53, Amendment 39-3995 (45 FR 83202, December 18, 1980) and AD 97-05-11 R1, Amendment 39-10091 (62 FR 41262, August 1, 1997) which are applicable to AlliedSignal Inc. ALF502 and LF507 series turbofan engines was published in the Federal Register on October 14, 1998 (63 FR 55056). That action proposed to require rework or replacement of No. 4 and 5 bearing oil system hardware, initial and repetitive inspections of the oil system, optional installation of an improved oil filter bypass valve, a more stringent oil system inspection of the full flow chip detector, oil filter impending bypass button, oil acid number, oil color, and oil quantity.

The FAA has reviewed and approved the technical contents of the accomplishment instruction paragraphs of AlliedSignal Inc. Service Bulletin (SB) No. ALF/LF 72-1030, Revision 2, dated December 14, 1998, and AlliedSignal Inc. SB No. ALF/LF 72-1040, Revision 1, dated December 14, 1998, that describe procedures for installation of a reworked or modified fourth turbine rotor disk assembly, and that describes procedures for replacement of the existing power turbine bearing housing assembly with a new, improved power turbine bearing housing assembly.

Since an unsafe condition has been identified that is likely to exist or develop on other products of this same type design, this AD supersedes AD's 80-22-53 and 97-05-11 R1 to require replacement of the existing power turbine bearing housing assembly with a new, improved power turbine bearing housing assembly, and installation of a reworked or modified fourth turbine rotor disk assembly as a part of design change to the new No. 4 bearing configuration, that eliminates the requirements for repetitive inspections of oil system and No. 4 and 5 bearing oil inlet tube assembly.

Reference to Avco Lycoming Textron SB No. ALF 502R-72-0160, Revision 2, dated May 26, 1987, which was inadvertently omitted from the NPRM and has been added to Note 2. Revision 2 to SB No. ALF 502R-72-0160, dated May 26, 1987, was an editorial change to the SB and does not affect the technical content of the SB.

Interested persons have been afforded an opportunity to participate in the making of this amendment. No comments were received on the proposal or the FAA's determination of the cost to the public. The FAA has determined that air safety and the public interest require the adoption of the rule with the changes described previously.

There are approximately 1,500 AlliedSignal Inc. ALF502 and LF507 series turbofan engines of the affected design in the worldwide fleet. The FAA estimates that 300 engines installed on airplanes of U.S. registry will be affected by this AD, that it will take approximately 20 work hours per engine to accomplish the required actions, and that the average labor rate is $60 per work hour. Required parts will cost approximately $30,000 per engine. Based on these figures, the total cost impact of the AD on U.S. operators is estimated to be $9,540,000.

This final rule does not have federalism implications, as defined in Executive Order 13132, because it does not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. Accordingly, the FAA has not consulted with state authorities prior to publication of this final rule.

For the reasons discussed above, I certify that this action (1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and (3) will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. A final evaluation has been prepared for this action and it is contained in the Rules Docket. A copy of it may be obtained from the Rules Docket at the location provided under the caption ADDRESSES.

A proposal to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) to include an airworthiness directive (AD) that is applicable to certain Airbus Model A319, A320, A321, A330, and A340 series airplanes was published in the Federal Register on January 10, 2000 (65 FR 1350). That action proposed to require revising the Airplane Flight Manual to provide the flight crew with certain instructions associated with the Global Positioning System (GPS). That action also proposed to require modification of the Global Positioning System Signal Unit (GPSSU) of the satellite navigational system.

Interested persons have been afforded an opportunity to participate in the making of this amendment. No comments were submitted in response to the proposal or the FAA's determination of the cost to the public.

Paragraphs (b)(3) and (b)(3)(i) of this AD have been changed to correct typographical errors that resulted in references to an incorrect service bulletin number. Paragraph (b)(3) of the proposed rule references “Airbus Service Bulletin A30-34-4089, Revision 01, dated September 28, 1999” as the appropriate source of service information for accomplishment of the modification required by paragraph (b) of the AD. Paragraph (b)(3)(i) of the proposed rule incorrectly references “Airbus Service Bulletin A330-34-4089, Revision 01, dated September 28, 1999.” This AD references the appropriate service bulletin as “Airbus Service Bulletin A340-34-4089, Revision 01, dated September 28, 1999, for accomplishment of the modification required by paragraph (b) of this AD.

After careful review of the available data, the FAA has determined that air safety and the public interest require the adoption of the rule with the change described previously. The FAA has determined that this change will neither increase the economic burden on any operator nor increase the scope of the AD.

The FAA estimates that 1 airplane of U.S. registry will be affected by this AD.

It will take approximately 1 work hour per airplane to accomplish the required Airplane Flight Manual (AFM) revision, at an average labor rate of $60 per work hour. Based on these figures, the cost impact of the AFM revision required by this AD on U.S. operators is estimated to be $60, or $60 per airplane.

It will take approximately 1 work hour per airplane to accomplish the required modification, at an average labor rate of $60 per work hour. Based on these figures, the cost impact of the modification required by this AD on U.S. operators is estimated to be $60, or $60 per airplane.

It will take between 3 to 14 work hours per airplane to accomplish the additional modifications required to be accomplished prior to or concurrent with the required modification, at an average labor rate of $60 per work. Required parts will be provided by the vendor or manufacturer at no cost to the operators. Based on these figures, the cost impact of the additional modifications required by this AD on U.S. operators is estimated to be between $180 to $840 per airplane.

The cost impact figures discussed above are based on assumptions that no operator has yet accomplished any of the proposed requirements of this AD action, and that no operator would accomplish those actions in the future if this AD were not adopted.

The regulations adopted herein will not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government. Therefore, it is determined that this final rule does not have federalism implications under Executive Order 13132.

For the reasons discussed above, I certify that this action (1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and (3) will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. A final evaluation has been prepared for this action and it is contained in the Rules Docket. A copy of it may be obtained from the Rules Docket at the location provided under the caption ADDRESSES .

A final rule airworthiness directive applicable to General Electric Company CF34 series turbofan engines, was published in the Federal Register on February 7, 2000 (65 FR 5759). In the compliance section, an omission was made in Table 804 of the Mandatory Inspection Requirements. This correction adds necessary subpart names and inspections to the mandatory inspection requirements:

What caused this AD? This AD is the result of reports of in-flight incidents and an accident that occurred in icing conditions where the airframe pneumatic deicing boots were not activated.

What is the potential impact if the FAA took no action? The information necessary to activate the pneumatic wing and tail deicing boots at the first signs of ice accumulation is critical for flight in icing conditions. If we did not take action to include this information, flight crews could experience reduced controllability of the aircraft due to adverse aerodynamic effects of ice adhering to the airplane prior to the first deicing cycle.

Has the FAA taken any action to this point? Yes. We issued a proposal to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) to include an AD that would apply all Piper PA-31 series airplanes that are equipped with pneumatic deicing boots. This proposal was published in the Federal Register as a notice of proposed rulemaking (NPRM) on October 12, 1999 (64 FR 55204). The NPRM proposed to require revising the Limitations Section of the AFM to include requirements for activating the pneumatic deicing boots at the first indication of ice accumulation on the airplane.

Was the public invited to comment? Yes. Interested persons were afforded an opportunity to participate in the making of this amendment. The following paragraphs present the comments received on the NPRM. Also included is the FAA's response to each comment, including any changes incorporated into the final rule based on the comments.

What is the Commenter's Concern? One commenter states that the FAA should coordinate with the original equipment manufacturer before issuing the AD.

What is the FAA's Response to the Concern? We concur. The FAA coordinates and will continue to coordinate with the manufacturer of any affected airplanes before issuing an AD.

Is it Necessary to Change the AD? No.

What is the Commenter's Concern? One commenter requests that the FAA provide the criteria for determining whether an airplane has an acceptable stall warning margin. The commenter references recent NPRM AD withdrawals in the FAA's Transport Airplane Directorate.

What is the FAA's Response to the Concern? We cannot provide such information because no regulatory basis exists for determining or applying a mandatory stall margin with contamination. We can review manufacturer-provided data to determine what testing was conducted, and then determine the effects of ice accretion on the stall angle and the handling characteristics in the roll axis. This would include reviewing the service history of each airplane. With all of this information, we could determine whether the stall warning margin was acceptable and if the AD action could be withdrawn.

Such was the case with the NPRM withdrawals in the FAA's Transport Airplane Directorate. The airplanes affected were Cessna Models 500, 501, 550, 551, and 560 series airplanes, and British Aerospace Jetstream Model 4101 airplanes. You may find the specific justification for each of these withdrawals in the Federal Register through the following citations:

No specific information was submitted for the Piper PA-31 series airplanes.

Is it Necessary to Change the AD? No.

What is the Commenters' Concern? Two commenters request explanation on the use of the term “modern” in a similar AD action that the FAA's Transport Airplane Directorate initiated.

What is the FAA's Response to the Concern? The FAA's Transport Airplane Directorate addressed the issue of “modern” versus “older” pneumatic boot systems in a recent AD action. That information, in its entirety, follows:

Is it Necessary to Change the AD? No.

What is the Commenter's Concerns? One commenter cites reasons why the proposed AD is not justified. These consist of the following:

1. The original equipment manufacturer installs pneumatic airframe components based on ice impingement and accretion analysis and best engineering judgement. The pneumatic boot manufacturer performed ice tunnel testing of deicers representative of those installed on PA-31 series airplanes and has issued operating instructions for its components. The original equipment manufacturer performs flight test in natural icing conditions where the operating instructions on specific installations (with unique geometry, speeds, etc.) without flight testing to substantiate those procedures. This would seem to violate the current FAA rationale for testing for flight into known icing; and

2. There is no data in the NPRM that pertains to the Piper PA-31 series airplanes to justify AD action.

What is the FAA's Response to the Concerns? We do not concur that the AD is not justified. Our response to each concern is as follows:

1. While the information the commenter presents is accurate, the intent of this AD is to mandate when the pneumatic deicing boots should be activated. As the commenter discusses, the original equipment manufacturer tests the components and issues operating instructions for its components. The type certificate holder works with the original equipment manufacturer to assure that the operating instructions adhere to the original design configuration of the affected airplanes. This AD only provides the information for and mandates when the pneumatic deicing system is activated; and

2. The AD is based upon reports of in-flight incidents and an accident that occurred in icing conditions where the airframe pneumatic deicing boots were not activated. Although Piper PA-31 series airplanes were not among those in the reports, these airplanes incorporate a similar type design. Therefore, the unsafe condition could exist on the Piper PA-31 series airplanes and AD action is appropriate.

Is it Necessary to Change the AD? No.

What is the Commenter's Concern? One commenter states that the deice boot manufacturer should issue any change in the operating instructions of the pneumatic deicing system.

What is the FAA's Response to the Concern? We do not concur that the deice boot manufacturer is responsible for developing the operating instructions for a specific airplane. The original equipment manufacturer or airplane manufacturer should issue changes in the operating instructions of the pneumatic deicing system. As discussed in the previous comment, the original equipment manufacturer tests the components and issues operating instructions for its components. The type certificate holder works with the original equipment manufacturer to assure that the operating instructions adhere to the original design configuration of the affected airplanes. This AD only provides the information for and mandates when the pneumatic deicing system is activated.

Is it Necessary to Change the AD? No.

What is the Commenter's Concern? One commenter suggests that the AD apply to other Piper airplanes that are of a similar type design. The commenter states that the AD should also apply to the following airplane models: PA-31T, PA-31T1, PA-31T2, PA-31T3, PA-42, PA-42-720, PA-42-720R, and PA-42-1000.

What is the FAA's Response to the Concern? We concur that all of these airplane models are of a similar type design and AD action should be taken to address the safety issues. However, the Models PA-31T1, PA-31T2, and PA-31T3 airplanes were included in the NPRM. Rather than hold up the AD, we will initiate a separate AD action (NPRM) for the Piper Models PA-42, PA-42-720, PA-42-720R, and PA-42-1000 airplanes.

Is it Necessary to Change the AD? No. However, as discussed above, we will initiate a separate AD action (NPRM) for the Piper Models PA-42, PA-42-720, PA-42-720R, and PA-42-1000 airplanes.

What is the Commenter's Concern? One commenter requests that the FAA limit the AFM change of operating the boots at the first sign of ice accretion to the approach and hold phases of flight. This commenter references the work that the Ice Protection Harmonization Working Group (IPHWP) is currently doing. The commenter states that the IPHWP believes that the only phases of flight that demonstrate a safety concern are holding patterns and various approach segments. Since these operations occur at lower speeds, ice accumulating on the wing and tail surfaces could cause instability.

What is the FAA's Response to the Concern? We do not concur to limiting the AFM change to the holding and approach phases of flight. We acknowledge that the IPHWG is working on a proposed operations rule. The IPHWG continues to work on this proposed rule and has not reached technical agreement. We have records of in-flight roll upsets in icing during the climb and cruise phases of flight on small airplanes that are of a similar type design to the Piper PA-31 series airplanes.

We concur that the ice protection system should not be operated at times when no ice is accreting. We have changed the description of the atmospheric conditions that the deicing boots must be operated from “icing conditions” to “known or observed/detected icing that the flight crew visually observed on the aircraft or was identified by the on-board sensors.” Is it Necessary to Change the AD? Yes. We have made the change described above in the final rule.

What is the Commenter's Concern? In response to previous NPRM's on this subject, a commenter has requested that the FAA mandate actions to minimize or reduce the ice adhesion characteristics of boot material. The commenter stated that one reason flightcrews see large amounts of residual ice is because residual ice sticks to the boot surface as the boot ages. This may increase if the adhesion qualities of the boot material are not maintained. The commenter suggested the use of certain compounds, such as ICEX TM (an ice-phobic chemical spray), to reduce ice adhesion.

What is the FAA's Response to the Concern? We concur that materials such as ICEX TM could reduce ice adhesion. However, factors such as normal wear and tear, patching, and oxidation of boot material, prevent us from establishing an effective level of application or adequate intervals of application. We included a Note in previous AD's to recommend regular treatment of deicing boots with use of approved ice release agents. This is in addition to the required actions.

Is it Necessary to Change the AD? No. However, as discussed above, the FAA included a Note in previous AD's to recommend regular treatment of deicing boots with use of approved ice release agents. We are including this Note in this AD also.

What is the FAA's final determination on this issue? After careful review of all available information related to the subject presented above, we have determined that air safety and the public interest require the adoption of the rule as proposed except for the following:

How does the change, addition, and corrections affect the AD? We have determined that the change, addition, and minor corrections will not change the meaning of the AD and will not add any additional burden upon the public than was already proposed.

How many airplanes does this AD impact? We estimate that 2,314 airplanes in the U.S. registry will be affected.

What is the cost impact of the affected airplanes on the U.S. Register? There is no dollar cost impact. We estimate that to accomplish the AFM revision it will take you less than 1 workhour. You can accomplish this action if you hold at least a private pilot certificate as authorized by § 43.7 of the Federal Aviation Regulations (14 CFR 43.7). You must make an entry into the aircraft records that shows compliance with this AD, in accordance with § 43.9 of the Federal Aviation Regulations (14 CFR 43.9). The only cost impact of this AD is the time it will take you to insert the information into the AFM.

The regulations adopted herein will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. Therefore, it is determined that this final rule does not have federalism implications under Executive Order 13132.

For the reasons discussed above, I certify that this action (1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and (3) will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. A copy of the final evaluation prepared for this action is contained in the Rules Docket. A copy of it may be obtained by contacting the Rules Docket at the location provided under the caption ADDRESSES .

This amendment to part 97 of the Federal Aviation Regulations (14 CFR part 97) establishes, amends, suspends, or revokes SIAP's. The complete regualtory description of each SIAP is contained in official FAA form documents which are incorporated by reference in this amendment under 5 U.S.C. 552(a), 1 CFR part 51, and 14 CFR 97.20 of the Federal Aviation Regulations (FAR). The applicable FAA Forms are identified as FAA Form 8260-5. Materials incorporated by reference are available for examination or purchase as stated above.

The large number of SIAP's, their complex nature, and the need for a special format make their verbatim publication in the Federal Register expensive and impractical. Further, airmen do not use the regulatory text of the SIAPs, but refer to their graphic depiction on charts printed by publishers of aeronautical materials. Thus, the advantages of incorporation by reference are realized and publication of the complete description of each SIAP contained in FAA form documents is unnecessary. The provisions of this amendment, state the affected CFR sections, with the types and effective dates of the SIAPs. This amendment also identifies the airport, its location, the procedure identification and the amendment number.

This amendment to part 97 is effective upon publication of each separate SIAP as contained in the transmittal. The SIAP's contained in this amendment are based on the criteria contained in the United States Standard for Terminal Instrument Procedures (TERPS). In developing these SIAPs, the TERPS criteria were applied to the conditions existing or anticipated at the affected airports.

The FAA has determined through testing that current non-localizer type, non-precision instrument approaches developed using the TERPS criteria can be flown by aircraft equipped with a Global Positioning System (GPS) and or Flight Management System (FMS) equipment. In consideration of the above, the applicable SIAP's will be altered to include “or GPS or FMS” in the title without otherwise reviewing or modifying the procedure. (Once a stand alone GPS or FMS procedure is developed, the procedure title will be altered to remove “or GPS or FMS” from these non-localizer, non-precision instrument approach procedure titles.)

The FAA has determined through extensive analysis that current SIAP's intended for use by Area Navigation (RNAV) equipped aircraft can be flown by aircraft utilizing various other types of navigational equipment. In consideration of the above, those SIAP's currently designated as “RNAV” will be redesignated as “VOR/DME RNAV” without otherwise reviewing or modifying the SIAP's.

Because of the close and immediate relationship between these SIAP's and safety in air commerce, I find that notice and public procedure before adopting these SIAPs are, impracticable and contrary to the public interest and, where applicable, that good cause exists for making some SIAPs effective in less than 30 days.

The FAA has determined that this regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore—(1) Is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. For the same reason, the FAA certifies that this amendment will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

This amendment to part 97 of the Federal Aviation Administration (14 CFR part 97) establishes, amends, suspends, or revokes Standard Instrument Approach Procedures (SIAPs). The complete regulatory description on each SIAP is contained in the appropriate FAA Form 8260 and the National Flight Data Center (FDC)/Permanent (P) Notices to Airmen (NOTAM) which are incorporated by reference in the amendment under 5 U.S.C. 552(a), 1 CFR part 51, and § 97.20 of the Federal Aviation's Regulations (FAR). Materials incorporated by reference are available for examination or purchase as stated above.

The large number of SIAPs, their complex nature, and the need for a special format make their verbatim publication in the Federal Register expensive and impractical. Further, airmen do not use the regulatory text of the SIAPs, but refer to their graphic depiction of charts printed by publishers of aeronautical materials. Thus, the advantages of incorporation by reference are realized and publication of the complete description of each SIAP contained in FAA form documents is unnecessary. The provisions of this amendment state the affected CFR (and FAR) sections, with the types and effective dates of the SIAPs. This amendment also identifies the airport, its location, the procedure identification and the amendment number.

This amendment to part 97 of the Federal Aviation Regulations (14 CFR part 97) establishes, amends, suspends, or revokes SIAPs. For safety and timeliness of change considerations, this amendment incorporates only specific changes contained in the content of the following FDC/P NOTAMs for each SIAP. The SIAP information in some previously designated FDC/Temporary (FDC/T) NOTAMs is of such duration as to be permanent. With conversion to FDC/P NOTAMs, the respective FDC/T NOTAMs have been canceled.

The FDC/P NOTAMs for the SIAPs contained in this amendment are based on the criteria contained in the U.S. Standard for Terminal Instrument Procedures (TERPS). In developing these chart changes to SIAPs by FDC/P NOTAMs, the TERPS criteria were applied to only these specific conditions existing at the affected airports. All SIAP amendments in this rule have been previously issued by the FAA in a National Flight Data Center (FDC) Notice to Airmen (NOTAM) as an emergency action of immediate flight safety relating directly to published aeronautical charts. The circumstances which created the need for all these SIAP amendments requires making them effective in less than 30 days.

Further, the SIAPs contained in this amendment are based on the criteria contained in the TERPS. Because of the close and immediate relationship between these SIAPs and safety in air commerce, I find that notice and public procedure before adopting these SIAPs are impracticable and contrary to the public interest and, where applicable, that good cause exists for making these SIAPs effective in less than 30 days.

The FAA has determined that this regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore—(1) Is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. For the same reason, the FAA certifies that this amendment will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

Air Traffic Control, Airports, Navigation (Air).

Issued in Washington, DC on March 17, 2000.

L. Nicholas Lacey,

Director, Flight Standards Service.

This amendment is part 97 of the Federal Aviation Regulations (14 CFR part 97) establishes, amends, suspends, or revokes Standard Instrument Approach Procedures (SIAPs). The complete regulatory description of each SIAP is contained in official FAA form documents which are incorporated by reference in this amendment under 5 U.S.C. 552(a), 1 CFR part 51, and § 97.20 of the Federal Aviation Regulations (FAR). The applicable FAA Forms are identified as FAA Forms 8260-3, 8260-4, and 8260-5. Materials incorporated by reference are available for examination or purchase as stated above.

The large number of SIAPs, their complex nature, and the need for a special format make their verbatim publication in the Federal Register expensive and impractical. Further, airmen do not use the regulatory text of the SIAPs, but refer to their graphic depiction on charts printed by publishers of aeronautical materials. Thus, the advantages of incorporation by reference are realized and publication of the complete description of each SIAP contained in FAA form documents is unnecessary. The provisions of this amendment state the affected CFR (and FAR) sections, with the types and effective dates of the SIAPs. This amendment also identifies the airport, its location, the procedure identification and the amendment number.

This amendment to part 97 is effective upon publication of each separate SIAP as contained in the transmittal. Some SIAP amendments may have been previously issued by the FAA in a National Flight Data Center (NFDC) Notice to Airmen (NTAM) as an emergency action of immediate flight safety relating directly to published aeronautical charts. The circumstances which created the need for some SIAP amendments may require making them effective in less than 30 days. For the remaining SIAPs, an effective date at least 30 days after publication is provided.

Further, the SIAPs contained in this amendment are based on the criteria contained in the U.S. Standard for Terminal Instrument Procedures (TERPS). In developing these SIAPs, the TERPS criteria were applied to the conditions existing or anticipated at the affected airports. Because of the close and immediate relationship between these SIAPs and safety in air commerce, I find that notice and public procedure before adopting these SIAPs are impracticable and contrary to the public interest and, where applicable, that good cause exists for making some SIAPs effective in less than 30 days.

The FAA has determined that this regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore—(1) Is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. For the same reason, the FAA certifies that this amendment will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

In a notice published in the Federal Register of October 21, 1994 (59 FR 53193), FDA announced that a food additive petition (FAP 4B4430) had been filed by Morton International, Inc., 2000 West St., Cincinnati, OH 45215. The petition proposed to amend the food additive regulations in § 178.2010 Antioxidants and/or stabilizers for polymers (21 CFR 178.2010) to provide for the safe use of methyltin-2-mercaptoethyloleate sulfide mixtures as heat stabilizers for use in PVC pipes intended for transporting water for food contact.

Subsequent to the filing of the petition, FDA determined that methyltin-2-mercaptoethyloleate sulfide is a complex mixture. In addition, FDA determined that the petition also proposed that methyltin-2-mercaptoethyloleate sulfide may be used in combination with certain optional substances. Therefore, in a notice published in the Federal Register of September 7, 1999 (64 FR 48655), FDA announced that it was amending the filing notice of October 21, 1994, to indicate that the petitioner requests that the food additive regulations be amended to provide for the safe use of methyltin-2-mercaptoethyloleate sulfide as a heat stabilizer for use in rigid PVC and rigid vinyl chloride copolymers, complying with §§ 177.1950 and 177.1980 (21 CFR 177.1950 and 177.1980), respectively, intended for use in the manufacture of pipes and pipe fittings that will contact water in food processing plants. For these purposes, methyltin-2-mercaptoethyloleate sulfide is defined as one or more of the following:

1. 9-Octadecenoic acid (Z)-, 2-mercaptoethyl ester, reaction products with dichlorodimethylstannane, sodium sulfide, and trichloromethylstannane (CAS Reg. No. 68442-12-6); or

2. Fatty acids, tall oil, 2-mercaptoethyl esters, reaction products with dichlorodimethylstannane, 2-mercaptoethyl decanoate, 2-mercaptoethyl octanoate, sodium sulfide, and trichloromethylstannane (CAS Reg. No. 151436-98-5); or

3. Fatty acids, tall oil, 2-mercaptoethyl esters, reaction products with dichlorodimethylstannane, sodium sulfide, and trichloromethylstannane (CAS Reg. No. 201687-57-2).

In addition, FDA announced in the September 7, 1999, notice that it was amending the filing notice of October 21, 1994, to indicate that the petitioner requested that the food additive regulations be amended to provide for the safe use of methyltin-2-mercaptoethyloleate sulfide as a heat stabilizer for use in rigid PVC and rigid vinyl chloride copolymers, complying with §§ 177.1950 and 177.1980, respectively, intended for use in the manufacture of pipes and pipe fittings that will contact water in food processing plants, in combination with the following optional substances:

1. 2-Mercaptoethyl oleate (CAS Reg. No. 59118-78-4), or 2-mercaptoethyl tallate (CAS Reg. No. 68440-24-4), or 2-mercaptoethyl octanoate (CAS Reg. No. 57813-59-9), or 2-mercaptoethyl decanoate (CAS Reg. No. 68928-33-6), alone or in combination;

2. 2-Mercaptoethanol (CAS Reg. No. 60-24-2);

3. Mineral oil (CAS Reg. No. 8012-95-1); or

4. Butylated hydroxytoluene (CAS Reg. No. 128-37-0).

FDA has evaluated the data in the petition and other relevant material. Based on this information, the agency concludes that: (1) The proposed use of the additive is safe, (2) the additive will achieve its intended technical effect, and (3) the regulations in 21 CFR 178.2010 should be amended as set forth below.

In accordance with § 171.1(h) (21 CFR 171.1(h)), the petition and the documents that FDA considered and relied upon in reaching its decision to approve the petition are available for inspection at the Center for Food Safety and Applied Nutrition by appointment with the information contact person listed above. As provided in § 171.1(h), the agency will delete from the documents any materials that are not available for public disclosure before making the documents available for inspection.

The agency has previously considered the environmental effects of this rule as announced in the notice of filing for FAP 4B4430 (64 FR 48655). No new information or comments have been received that would affect the agency's previous determination that there is no significant impact on the human environment and that an environmental impact statement is not required.

This final rule contains no collection of information. Therefore, clearance by the Office of Management and Budget under the Paperwork Reduction Act of 1995 is not required.

Any person who will be adversely affected by this regulation may at any time file with the Dockets Management Branch (address above) written objections by April 24, 2000. Each objection shall be separately numbered, and each numbered objection shall specify with particularity the provisions of the regulation to which objection is made and the grounds for the objection. Each numbered objection on which a hearing is requested shall specifically so state. Failure to request a hearing for any particular objection shall constitute a waiver of the right to a hearing on that objection. Each numbered objection for which a hearing is requested shall include a detailed description and analysis of the specific factual information intended to be presented in support of the objection in the event that a hearing is held. Failure to include such a description and analysis for any particular objection shall constitute a waiver of the right to a hearing on the objection. Three copies of all documents shall be submitted and shall be identified with the docket number found in brackets in the heading of this document. Any objections received in response to the regulation may be seen in the Dockets Management Branch between 9 a.m. and 4 p.m., Monday through Friday.

The final regulations that are the subject of this correction are under section 274 of the Internal Revenue Code.

As published, the final regulations (TD 8864) contain an omission in need of correction.

This document contains amendments to the Income Tax Regulations (26 CFR part 1) under section 125. Section 125 generally provides that an employee in a cafeteria plan will not have an amount included in gross income solely because the employee may choose among two or more benefits consisting of cash and “qualified benefits.” A qualified benefit generally is any benefit that is excludable from gross income under an express provision of the Internal Revenue Code, including coverage under an employer-provided accident or health plan under sections 105 and 106, group-term life insurance under section 79, elective contributions under a qualified cash or deferred arrangement within the meaning of section 401(k), dependent care assistance under section 129, and adoption assistance under section 137. 1 Qualified benefits can be provided under a cafeteria plan either through insured arrangements or arrangements that are not insured.

In 1984 and 1989, proposed regulations were published relating to the administration of cafeteria plans. 2 In general, the 1984 and 1989 proposed regulations require that for benefits to be provided on a pre-tax basis under section 125, an employee may make changes during a plan year only in certain circumstances. 3 Specifically, Q&A-8 of § 1.125-1 and Q&A-6(b), (c), and (d) of § 1.125-2 permit participants to make benefit election changes during a plan year pursuant to changes in cost or coverage, changes in family status, and separation from service.

In 1997, temporary and proposed regulations were issued addressing the standards under which a cafeteria plan may permit a participant to change his or her group health coverage election during a period of coverage to conform with the special enrollment rights under section 9801(f) (added to the Internal Revenue Code by the Health Insurance Portability and Accountability Act of 1996 (HIPAA)) and to change his or her group health or group-term life insurance coverage in a variety of change in status situations. 4

These final regulations, which replace the 1997 temporary regulations, clarify the circumstances under which a cafeteria plan may permit an employee to revoke an existing election with respect to accident or health coverage, or group-term life insurance coverage, and make a new election during a period of coverage.

These regulations clarify the circumstances under which a cafeteria plan may permit an employee to change his or her cafeteria plan election with respect to accident or health coverage or group-term life insurance coverage during the plan year. The regulations generally follow the existing temporary regulations, and include a variety of examples illustrating how the rules apply in specific situations.

The final regulations include two principal changes that have been made in response to public comments. First, the regulations differ from the 1997 regulations with respect to change in status events resulting from a change in employment. Commentators requested a loosening of the rules regarding when a cafeteria plan election can be changed. In response, the final rules incorporate a more flexible rule under which any change in the employment status of the employee (or a spouse or dependent of the employee) that affects that individual's eligibility under a cafeteria plan or qualified benefits plan constitutes a change in status for purposes of permitting a mid-year election change. Second, in the event of a change in an employee's marital status or the employment status of the employee's spouse or dependent, the final regulations permit the employee to elect either to increase group-term life insurance coverage or to decrease group-term life insurance coverage. A similar rule applies with respect to disability income plans.

These final regulations were developed as part of an integrated package with proposed regulations that are being published elsewhere in this issue of the Federal Register . Those proposed regulations provide guidance on election changes on account of changes in status with respect to dependent care assistance and adoption assistance and provide guidance on election changes on account of changes in cost or coverage with respect to dependent care assistance, adoption assistance, accident or health coverage, and group-term life insurance coverage. The integrated package of final and proposed regulations is intended to provide clear standards for plan administration and for administration of the tax law. The standards are designed to accommodate the most common types of events of independent significance that do not occur on a regular, periodic basis and that are likely to affect an employee's decisions with respect to qualified benefits coverage.

Commentators on the 1997 temporary and proposed regulations requested that the description of changes in status be expanded to include work-related changes of an employee, the employee's spouse, or the employee's dependent in addition to termination or commencement of employment or change in worksite. In response to these comments, the description of changes in status has been broadened to include a strike or lockout, and a commencement of or return from an unpaid leave of absence. In addition, the final rules incorporate a more flexible rule for other change in employment status events. Specifically, if there is a change in the employment status of the employee (or a spouse or dependent of the employee) that affects that individual's eligibility under a cafeteria plan or qualified benefits plan, then that change constitutes a change in status. For example, if an employee switches from salaried to hourly-paid status, resulting in the employee ceasing to be eligible for coverage under the plan, then that change constitutes a change in status.

Some commentators expressed concern that the 1997 temporary and proposed regulations did not permit an employee to make an election change to cover additional individuals under an accident or health plan when an employer changed its policy (e.g., to permit coverage for a parent or for a domestic partner pursuant to local law requirements). Under the 1997 temporary and proposed regulations, a change in status includes an event that causes an employee's dependent to satisfy or cease to satisfy the eligibility requirements for coverage under a plan. Thus, if an individual who is a dependent of an employee becomes eligible for coverage under the employer's health plan as a result of an amendment made to the plan during the year, that is a change in status event and, accordingly, the cafeteria plan may permit an election change by the employee to cover the individual. These final regulations retain the rule from the 1997 temporary and proposed regulations.

These final regulations do not address when a bona fide termination of employment occurs. However, these regulations retain the example ( Example 8 under paragraph (c)(4) of these final regulations) from the 1997 temporary and proposed regulations addressing the situation in which an employee terminates and resumes employment within 30 days. The effect of this example is to provide a practical safe harbor that generally may be applied by cafeteria plans without regard to other facts and circumstances. Under this example, if an employee terminates and resumes employment within 30 days and the cafeteria plan provides that the employee's election is automatically reinstated, the employer is not required to determine whether a bona fide change in status has occurred with respect to termination of employment. Conversely, the cafeteria plan may permit an employee who resumes employment more than 30 days following termination to be automatically reinstated to the prior election or to make a new election. 5

As under the 1997 temporary and proposed regulations, the final regulations require that an election change as a result of a change in status also satisfy a consistency requirement. In response to comments, the final regulations expand and clarify the consistency requirement with respect to change in status events for group-term life insurance. Under the 1997 regulations, in the case of a commencement of employment, marriage, birth, adoption, or placement for adoption, an employee could elect to increase (but not decrease) group-term life insurance coverage. The 1997 regulations also permitted an employee to elect to decrease (but not to increase) group-term life insurance coverage in the case of divorce, legal separation, annulment, or death of a spouse or dependent. Commentators suggested that these rules were too restrictive. For example, in the case of divorce, an employee may reasonably seek to increase coverage because the employee may become the sole wage-earner for the family unit as a result of the divorce. Accordingly, the final regulations provide flexibility by stating that, in the event of a change in an employee's marital status or the employment status of the employee's spouse or dependent, an employee may elect either to increase group-term life insurance coverage or to decrease group-term life insurance coverage. Also, in response to comments, a similar rule has been added that applies to election changes made with respect to disability income coverage (i.e., accident or health coverage that is neither for medical care as defined under section 213(d) nor for payments described in section 105(c)).

Some commentators requested that the regulations prescribe a period of time by which election changes, as a result of a change in status, should be made. Consistent with the approach taken in the 1997 regulations and in the interest of providing employers and plan administrators flexibility, the final regulations do not prescribe such a period. However, nothing in the final regulations would prevent a cafeteria plan by its terms from requiring that any election change (other than those made in connection with rights for which there are specific minimum election periods, such as under section 9801 (as added by HIPAA) and section 4980B (relating to COBRA coverage)), must be made within a specified period after a change in status event. The consistency rule in the final regulations does require that an election change made pursuant to a change in status be “on account of” a gain or loss of eligibility for coverage. This requirement follows the “on account of” language contained in the 1989 proposed regulations under § 1.125-2, Q&A-6(c), and is intended to add a general condition that the election change not be made so long after the event permitting the election change that the election is not on account of the event.

In accordance with comments, examples in the regulations clarify that if, in accordance with special enrollment rights provided by HIPAA , an employee, spouse, or new dependent is entitled to enroll in a group health plan, a cafeteria plan may permit the employee to elect to enroll pre-existing dependents in the underlying group health plan. 6 Likewise, the examples clarify that if, in accordance with the change in status rules relating to a new spouse or dependent, an employee is entitled to elect family coverage under a group health plan, then other family members are permitted to become covered under the family coverage as a result of the election change. 7

In response to comments, the final regulations also clarify that, in the event of a loss of Medicare or Medicaid entitlement by an employee or by the employee's spouse or dependent, a cafeteria plan may permit the employee to add health coverage under the employer's accident or health plan (and may permit cancellation or reduction in coverage if an employee, spouse, or dependent who is enrolled in an accident or health plan becomes entitled to Medicare or Medicaid).

These final regulations address all of the changes in status for which a cafeteria plan may permit election changes with respect to an accident or health plan or group-term life insurance plan. However, future guidance under the cost or coverage change provision (reserved at paragraph (f) of these final regulations and included in paragraph (f) of the proposed regulations being published elsewhere in this issue of the Federal Register ), rather than the change in status rules, would determine whether a cafeteria plan may permit affected employees to elect a new HMO option that is made available during a period of coverage. Similarly, election changes may be made under the special rules relating to changes in elections by employees taking leave under the Family and Medical Leave Act of 1993 (Public Law 103-3)  8 (as referenced at paragraph (g) of these final regulations).

Finally, these regulations do not override other cafeteria plan requirements. For example, although an employee's termination of employment is a change in status, some election changes made with respect to coverage under a health FSA on account of the termination of employment would fail to be consistent with the requirement that the operation of such arrangements exhibit the risk-shifting and risk-distribution characteristics of insurance under § 1.125-1, Q&A-17 and § 1.125-2, Q&A-7 of the proposed regulations. Thus, a cafeteria plan could not permit individuals terminating employment to change their health FSA elections to match the amount of premiums paid prior to termination (i.e., stop paying premiums), and continue to receive health FSA reimbursements with respect to the remainder of the period of coverage.

These regulations are applicable for cafeteria plan years beginning on or after January 1, 2001. Until the beginning of the first plan year beginning on or after January 1, 2001, taxpayers may rely on these regulations. In addition, until the beginning of the first plan year beginning on or after January 1, 2001, taxpayers may continue to rely on the change in status rules in the 1997 regulations, as well as the change in family status rules in the pre-1997 proposed regulations.

Pursuant to section 7805(e), the 1997 temporary regulations § 1.125-4T will expire within three years of the date of issuance (November 7, 2000). This Treasury decision amends the 1997 temporary regulations to add this expiration in the text of the regulations (§ 1.125-4T(l)).

It has been determined that this Treasury decision is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It also has been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations, and because the regulation does not impose a collection of information on small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply. Pursuant to section 7805(f) of the Internal Revenue Code, these regulations will be submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business.

Drafting Information: The principal authors of these regulations are Janet A. Laufer and Christine L. Keller, Office of the Associate Chief Counsel (Employee Benefits and Exempt Organizations). However, other personnel from the IRS and Treasury Department participated in their development.

On July 30, 1982, the Secretary of the Interior conditionally approved the Pennsylvania program. Background information on the Pennsylvania program including the Secretary's findings, the disposition of comments, and a detailed explanation of the conditions of approval of the Pennsylvania program can be found in the July 30, 1982, Federal Register (47 FR 33050). Subsequent actions concerning the conditions of approval and program amendments are identified at 30 CFR 938.11, 938.12, 938.15 and 938.16.

By letter dated November 8, 1999, (Administrative Record Number PA 846.02), Pennsylvania submitted an amendment to the Pennsylvania program. The amendment resulted from regulations the Pennsylvania Department of Environmental Protection (PADEP) published in the Pennsylvania Bulletin (28 Pa. B. 15, January 3, 1998). The regulations were published to revise Pennsylvania's existing SOAP regulations to be consistent with the federal SOAP revisions and because of the Department's Regulatory Basics Initiative (RBI). Under the RBI, regulations are revised because they were considered unclear, unnecessary or were more stringent than the corresponding federal regulations. Pennsylvania also published the regulations to address an amendment required by OSM [see 30 CFR 938.16(ooo)].

The proposed amendment was published in the Federal Register (64 FR 66598, November 29, 1999), and in the same notice, OSM opened the public comment period and provided opportunity for a public hearing on the adequacy of the proposed amendment. The comment period closed on December 29, 1999. No public hearings were requested or held.

Set forth below, pursuant to SMCRA and the federal regulations at 30 CFR 732.15 and 732.17, are the Director's findings concerning the proposed amendment to the Pennsylvania program.

The definition of the phrase, “qualified consultant and qualified laboratory” was moved to this newly created section from 25 PA Code 86.91. There was only a slight wording change when it was moved. The use of the term “qualified consultant” was discussed and approved in a previous Pennsylvania amendment regarding SOAP (60 FR 16789 and 16791, April 3, 1995). In approving that amendment, the Director found that use of the term “qualified consultant” was consistent with the intent of the federal regulations and did not render the Pennsylvania program less effective than the counterpart regulations at 30 CFR part 795. With regard to the current amendment, the Director finds that moving of the definition and the slight wording change to the definition of “qualified consultant and qualified laboratory” is no less effective than the federal definition found at 30 CFR 795.3.

The first change proposed to 25 PA Code 86.81 is the deletion of the phrase “for qualified small operators who request assistance” in subsection (a) when describing the Department's duties. A new subsection (1) which requires the Department to, “Review requests for assistance” is proposed to be added. While there is no direct federal counterpart to this regulation, the Director finds the amendment to be consistent with 30 CFR 795.9 regarding administration of the SOAP program and data requirements and therefore approves the change.

PADEP further changed this section by moving the referenced regulations of subsection (a)(1)(iii) to newly created subsections (a)(2)(iii)(A), (B), and (C) and by stating that the Department will select and pay a qualified consultant to provide a description of the existing resources within and adjacent to the proposed permit area in accordance with one of those subsections. In moving the referenced regulations, PADEP dropped references to 25 PA Code §§ 87.48, 87.49, 87.52, 87.53, 88.28, 88.29, 88.30, 88.32, 88.33, 89.37, 89.38, 89.71, 89.72, 89.73, 89.102, 89.121, 89.122, 89.141, and 89.142(a). The remaining references are: (A) Sections 87.41-87.47, 87.50 and 87.54, (B) 88.21-88.27 and 88.31, and (C) 89.33-89.36, 89.38 and 89.74. The cross references listed in (C) that in 1995 (60 FR 16788) were approved previously remain approved except as noted later in the discussion regarding § 89.34.

Similarly, the Department changed subsection (a)(1)(iv) by moving referenced regulations to newly created subsections (a)(2)(iv)(A), (B), and (C) and by stating that the Department will select and pay a qualified consultant to provide a detailed description, to include maps, plans, and cross sections, of the proposed coal mining activities showing the manner in which the proposed permit area will be mined and reclaimed in accordance with one of those subsections. In moving the referenced regulations, PADEP dropped references to 25 PA Code §§ 87.68, 87.70-87.76 (inclusive), and 87.78-87.83 (inclusive), 88.41-88.44 (inclusive), 88.46, 88.48, 88.50-88.55 (inclusive), 88.57-88.61 (inclusive). The remaining references are: (A) Sections 87.69, 87.77 and 87.84 and (B) Sections 88.49, 88.56 and 88.62.

For Chapter 89 references to subsection (a)(2)(iv)(C), PADEP added §§ 89.33, 89.34, and 89.35 while deleting references to §§ 89.31, 89.32, 89.37, 89.71-89.73 (inclusive), 89.102, 89.122(b), 89.141, and 89.142(a). Two of the added Chapter 89 references (§§ 89.33 and 89.35) deal with geology and prediction of the hydrologic consequences for underground mines and coal preparation facilities. The information required by these sections will be used to determine the probable hydrologic consequences and the geology information as provided for in 30 CFR 795.9(b)(1) and (2). Therefore, the Director finds the addition of these references makes this portion of the amendment to be no less effective than the federal rule and approves the change.

The third Chapter 89 reference, § 89.34, deals with hydrology for underground mines and coal preparation facilities. Subsections (a)(1)(i)and (ii), (a)(2)(i), and (b) deal with collection of groundwater and surface water information for the proposed permit and adjacent areas. The information required by these subsections will be used to determine the probable hydrologic consequences information as provided for in 30 CFR 795.9(b)(1). However, subsections (a)(1)(iii) and (a)(2)(ii) deal respectively with groundwater and surface water monitoring plans. The information required by these subsections is not of the nature that would be funded under federal SOAP guidelines. In 1995, OSM had inadvertently approved in 86.81 (a)(1)(iii), the cross reference to § 89.34(a)(1)(iii) and (a)(2)(ii). Now, however, the Director is approving incorporation of the reference to § 89.34 at 86.81(a)(2)(iii)(C) and 86.81(a)(2)(iv)(C) to the extent that Pennsylvania implements this provision consistent with the SOAP funding provisions of SMCRA section 507(c)(1)(A) and the implementing regulations at 30 CFR 795.9(b)(1). The Director is not approving the incorporation of this references into subsections 86.81(a)(2)(iii)(C) and 86.81(a)(2)(iv)(C) to the extent that the proposed subsections would authorize the expenditure of Pennsylvania SOAP funds under the subsections listed above for services that are not fundable under section 507(c)(1)(A) of SMCRA or 30 CFR 795.9(b)(1).

PADEP changed the references to the regulations at 86.81(a)(2)(iii) and 86.81(a)(2)(iv) in response to OSM's comments to Pennsylvania's previous SOAP amendment (60 FR 16788). In reviewing that amendment, OSM required PADEP to correct regulatory citations that are beyond the scope of services authorized by 30 CFR 795. While PADEP deleted most of the regulatory citations OSM felt were beyond the scope of services authorized by 30 CFR 795, there are still several that remain including references in 25 PA Code 86.81(a)(2)(iii)(A) and (B) to §§ 87.41, 87.42(1), 88.21, and 88.22(1). Sections 25 PA Code 87.41 and 88.21 correspond to 30 CFR 779.11, (description in permit application of existing, premining environmental resources that may be affected or impacted) and 25 PA Code 87.42(1) and 88.22(1) correspond to 30 CFR 779.12(a) (description and identification of lands, etc.). Neither the requirements noted in 30 CFR 779.11 nor 779.12(a) are referenced in federal regulations as being authorized for payment under the SOAP program. The Director is approving subsections 86.81(a)(2)(iii)(A) and (B) to the extent that Pennsylvania implements these provisions consistent with the SOAP funding provisions of SMCRA section 507(c) and the implementing regulations at 30 CFR 795.9(b). The Director is not approving proposed subsections 86.81(a)(2)(iii)(A) and (B) to the extent that the proposed subsections would authorized the expenditure of Pennsylvania SOAP funds under the subsections listed above for services that are not fundable under section 507(c)(1) of SMCRA or 30 CFR 795.9(b).

In the 1995 SOAP amendment, OSM also noted that the permitting requirements at 25 PA Code 87.77, 88.56 and 89.38 are not authorized for SOAP funding to the extent that they apply to public parks (60 FR 16790). The references to public parks remain in subsections 86.81(a)(2)(iv)(A), (B) and (C). The Director is approving the reference of §§ 87.77, 88.56 and 89.38 in subsections 86.81(a)(2)(iv)(A), (B) and (C) to the extent that Pennsylvania implements these provisions consistent with the SOAP funding provisions of SMCRA section 507(c)(1)(D) and the implementing regulations at 30 CFR 795.9(b)(4). The Director is not approving the incorporation of these references into subsections 86.81(a)(2)(iv)(A), (B) and (C) to the extent that the proposed subsections would authorize the expenditure of Pennsylvania SOAP funds under the subsections listed above for services that are not fundable under section 507(c)(1)(D) of SMCRA or 30 CFR 795.9(b)(4).

Finally, PADEP added subsection (b) which provides that the applicant is responsible for costs exceeding the amount of funds allocated for the services to the applicant. This requirement was moved from 25 PA Code 86.94(c). While there is no direct federal counterpart to subsection (b), the Director finds this proposal is consistent with the federal requirements at 30 CFR 795.11(b) regarding allocation of funds and approves this change.

This subsection removes language that states the Department will review requests for assistance and determine qualified operators. This change does not significantly impact the Department's procedures and does not diminish the duties of the program administrator as required in 30 CFR §§ 795.8 and 795.9 since the authority by the Department to approve or deny an application for assistance is still provided for in 25 PA Code 86.85. Accordingly, the Director finds that the deletion does not render the Pennsylvania program less effective than the federal program and therefore approves this change.

The previous language of this section read that an applicant is eligible for assistance if the probable total and attributed production from the applicant's operations during the 12-month period immediately following the date on which the applicant is issued the mining activities permit will not exceed 300,000 tons. Subsection 25 PA Code 86.83(a)(2) now reads, “establishes that the probable total attributed annual production from all locations on which the applicant is issued the mining activities permit will not exceed 300,000 tons.” PADEP included the phrase “all locations” in this subsection to make clear the extent of operations to be included in the tonnage requirements.

A second change was made to this subsection to address a program amendment required by OSM in the 1995 SOAP approval (60 FR 16790). The required regulatory program amendment at 30 CFR 938.16(ooo) required Pennsylvania to amend 25 PA Code 86.83(a)(2) to provide that the applicant must establish that the operator's probable total attributed annual production following permit issuance will remain under 300,000 tons for all years, not just the first year. The current proposed amendment removed the phrase, “the applicant's operations during the 12-month period immediately following the date.” This removal makes it clear that the 300,000 ton limit as required by the federal regulations now applies in Pennsylvania for all years following permit issuance. The Director finds that the changes are no less effective than the federal requirements of 30 CFR 795.6(a)(2) and can be approved. The required regulatory program amendment at 30 CFR 938.16 (ooo) is removed and reserved.

The final change to 25 PA Code 86.83 is the addition of subsection (c) which states, “For the purpose of this subchapter, measurement of coal production will be based on the production reported to the Office of Surface Mining Reclamation and Enforcement for the purpose of the reclamation fee payment.” This section was formerly located in 25 PA Code 86.95 which was previously approved by OSM. There were no substantive changes in the language. Therefore, the Director finds that this section is no less effective than the federal regulations and approves the change.

Pennsylvania proposed to delete subsection (a) which provides, “Persons wishing to receive assistance shall file a Small Operator Assistance Program application with the Department at any time after initiation of the program.” Former subsection (b) is now designated as subsection (a).

Subsection (b)(2)(iii) which required applicants for SOAP benefits to submit a surface mining operator's license as part of the application was also deleted. The requirement to submit information regarding a mine operator's license was added as subsection (a)(7). This subsection requires the mine operator's license number to be submitted as part of the application.

The final change to this subsection was made to former subsection (c) which is now designated as subsection (b). Previously, this subsection required two copies of the application for assistance to be submitted, one of which was to be attested by a notary public or district justice. The subsection now reads, “The application shall be attested by a notary public or district justice.”

There are no specific federal counterparts to the deleted language. The deletions do not render the Pennsylvania program less effective than the federal requirements and therefore are approved.

This section was amended by adding subsection (a)(3) which requires PADEP to provide the applicant a copy of the contract or other appropriate work order for the qualified consultant's services and the consultants' report within 15 Days of the Department's final approval. Subsection (c) was added which requires the Department to inform the applicant in writing of a decision to deny the application with 45 days of receipt of an application for assistance. The regulations require the Department to state the reason for the denial.

The federal rules at 30 CFR 795.8 require written notification to the applicant when the program administrator finds the applicant either eligible or ineligible for assistance. They do not specify how many days before a decision must be made on the application for assistance. The Director finds 45 days is a reasonable time period and finds that these subsections are no less effective than the federal regulations at 30 CFR 795.8 (a) and (b) and can be approved.

Subsection (b) was modified to make it clear that granting of assistance under the SOAP program does not imply that the Department will approve a subsequent permit action. While there is no federal counterpart to this requirement, the Director finds that this change is not inconsistent with SMCRA and the federal regulations.

This provision is being deleted in its entirety. The provisions requiring the Department to notify the applicant of decisions regarding the application are now found in 25 PA Code 86.85(a) and (c).

The Director finds that this proposed deletion does not render the Pennsylvania program less effective than the federal program and approves the deletion.

Subsection (a) was rewritten by moving a phrase to clarify the section. No language was deleted or added. This section provides that the Department will determine the data collection requirements to meet the objectives of the program. Development of information on environmental resources, operation plans and reclamation plans may proceed concurrently with data collection and analyses required for the determination of the probable hydrologic consequences of the proposed mining activities if specifically authorized by the Department in an approved work order.

While there is no direct counterpart in the federal regulations, the Director finds the provision is consistent with the SOAP provision at 30 CFR 795.9(c) which allow data collection and analysis to proceed concurrently with the development of mining and reclamation plans and approves the change.

This provision is being deleted in its entirety. This section contained the definitions for the terms “qualified consultant” and “qualified laboratory.” These definitions are found in the newly created section 25 PA Code 86.80.

Subsection (b) contained the procedures people who desired to be included in the list of qualified consultants or qualified laboratories must follow. These requirements are now found at newly created 25 PA Code 86.92(c).

Finally, subsection (c) which required the Department to designate and maintain a list of qualified consultant and qualified laboratories is eliminated. There is no federal requirement that a list of qualified consultants or laboratories be maintained by Pennsylvania. Pursuant to 25 PA Code 86.92, Pennsylvania still determines which laboratories or consultants can provide services under the SOAP program.

The Director finds that the moving of subsections (a) and (b) and the deletion of subsection (c) does not render the Pennsylvania program less effective than the federal regulations and approves the changes.

As stated in the discussion regarding 25 PA Code 86.91 above, subsection (c) was added to define the procedures people must follow to be included in PADEP's list of qualified consultants or qualified laboratories.

This requirement was formerly found at 25 PA Code 86.91(b) which was previously approved by OSM. There were no substantive changes in the language of the requirement. Therefore, the Director finds that this section is no less effective than the federal regulations and approves the change.

Subsection (a) describes the circumstances under which an operator will be liable for reimbursing the cost of services performed. One of those circumstances as found in Subsection (a)(3) was changed from failing to mine within three years after obtaining a permit to failure to commence mining within three years after obtaining a permit.

The federal regulation at 30 CFR 795.12 does not specify what stage of mining an operator must be in before he or she is liable for reimbursement to the SOAP program. Pursuant to 30 CFR 773.19(e) and 25 PA Code 86.40(b), a permit is terminated for failing to start mining within three years of permit issuance. Accordingly, it is a reasonable interpretation that the SOAP program should be reimbursed for any funds distributed to that terminated permit. Thus, the Director finds that this subsection is consistent with the federal regulations at 30 CFR 795.12 and can be approved.

Subsection (c) was deleted and moved to 25 PA Code 86.81(b). This subsection provided that the applicant was responsible for costs exceeding the amount of funds allocated for the services to the applicant. The Director finds that moving this subsection does not render the Pennsylvania program less effective than the federal regulations and therefore approves the change.

This section was deleted in its entirety. The requirement to use coal production as reported to the Office of Surface Mining Reclamation and Enforcement for fee payment purposes also for eligibility for participating in SOAP was moved to 86.83(c). The Director finds that deletion of this subsection does not render the Pennsylvania program less effective than the federal requirements and is approved.

Pursuant to 503(b) of SMCRA and 30 CFR 732.17(h)(11)(i), the Director solicited comments on the proposed amendment from various federal agencies with an actual or potential interest in the Pennsylvania program.

The U.S. Department of Labor, Mine Safety and Health Administration (MSHA) commented that the word “either” after the phrase “in accordance with” found at 86.81(a)(2)(iii) should be deleted. The Director agrees that this typographical error should be deleted but its inclusion does not render the program less effective nor does it cause confusion. MSHA also commented that the agency reference at 86.84(a)(3)(ii) to “Mining Enforcement and Safety Administration” should be replaced with the “Mine Safety and Health Administration.” The Director agrees that this is an incorrect reference. However, subsection 86.84(a)(3)(ii) is outside the scope of the amendment since it was not amended by the proposed submission. Pennsylvania should correct this reference in future amendments.

A public comment period and opportunity to request a public hearing was announced in the November 29, 1999, Federal Register (64 FR 66598). The comment period closed on December 29, 1999. No one requested an opportunity to testify at a public hearing, so no hearing was held.

The only written comments received were from the Pennsylvania Historical and Museum Commission. The Commission stated that it will continue to assist operators qualifying under the SOAP program to identify impacts to cultural resources within the proposed project areas.

The proposed amendment does not modify this relationship and therefore the Commission had no substantive comments about the amendment.

Pursuant to 30 CFR 732.17(h)(11)(ii), OSM is required to obtain the written concurrence of the EPA with respect to those provisions of the proposed program amendment that relate to air or water quality standards promulgated under the authority of the Clean Water Act (33 U.S.C. 1251 et seq. ) or the Clean Air Act (42 U.S.C. 7401 et seq. ).

On November 16, 1999, OSM solicited EPA's concurrence and comments on the proposed amendment (Administrative Record No. PA-864.03). EPA responded on November 29, 1999, (Administrative Record No. PA 846.05) by stating it had no specific comments.

Based on the findings above the Director is approving, except as noted below, Pennsylvania's SOAP amendment as submitted by Pennsylvania on November 8, 1999.

As noted in section III. B. above, the Director is approving incorporation of the reference to § 89.34 at 86.81(a)(2)(iii)(C) and 86.81(a)(2)(iv)(C) concerning fundable program services to the extent that Pennsylvania implements this provision consistent with the SOAP funding provisions of SMCRA section 507(c)(1)(A) and the implementing regulations at 30 CFR 795.9(b)(1). The Director is not approving the incorporation of this references into subsections 86.81(a)(2)(iii)(C) and 86.81(a)(2)(iv)(C) to the extent that the proposed subsections would authorize the expenditure of Pennsylvania SOAP funds under the subsections listed above for services that are not fundable under section 507(c)(1)(A) of SMCRA or 30 CFR 795.9(b)(1).

Also noted in III. B. above there are several regulatory citations in the 1995 SOAP approval that OSM felt were beyond the scope of services authorized by 30 CFR 795 that still remain in this amendment including: 25 PA Code §§ 87.41, 87.42(1), 88.21, and 88.22(1). These requirements are not referenced in federal regulations as being authorized for payment under the SOAP program. The Director is approving subsections 86.81(a)(2)(iii)(A) and (B) to the extent that Pennsylvania implements these provisions consistent with the SOAP funding provisions of SMCRA section 507(c) and the implementing regulations at 30 CFR 795.9(b). The Director is not approving proposed subsections 86.81(a)(2)(iii)(A) and (B) to the extent that the proposed subsections would authorize the expenditure of Pennsylvania SOAP funds under the subsections listed above for services that are not fundable under section 507(c)(1) of SMCRA or 30 CFR 795.9(b).

Finally, also discussed in III. B. above, OSM noted in the 1995 SOAP amendment approval that the permitting requirements at 25 PA Code 87.77, 88.56 and 89.38 are not authorized for SOAP funding to the extent that they apply to public parks. The references to public parks remain in subsections 86.81(a)(2)(iv)(A), (B) and (C). The Director is approving the reference of §§ 87.77, 88.56 and 89.38 into subsections 86.81(a)(2)(iv)(A), (B) and (C) to the extent that Pennsylvania implements these provisions consistent with the SOAP funding provisions of SMCRA section 507(c)(1)(D) and the implementing regulations at 30 CFR 795.9(b)(4). The Director is not approving the incorporation of these references into subsections 86.81(a)(2)(iv)(A), (B) and (C) to the extent that the proposed subsections would authorize the expenditure of Pennsylvania SOAP funds under the subsections listed above for services that are not fundable under section 507(c)(1)(D) of SMCRA or 30 CFR 795.9(b)(4).

The Federal regulations at 30 CFR 938 codifying decisions concerning the Pennsylvania program are being amended to implement this decision. This final rule is being made effective immediately to expedite the State program amendment process and to encourage States to bring their programs into conformity with the Federal standards without undue delay. Consistency of State and Federal standards is required by SMCRA.

Section 503 of SMCRA provides that a State may not exercise jurisdiction under SMCRA unless the State program is approved by the Secretary. Similarly, 30 CFR 732.17(a) requires that any alteration of an approved State program be submitted to OSM for review as a program amendment. Thus, any changes to the State program are not enforceable until approved by OSM. The federal regulations at 30 CFR 732.17(g) prohibit any unilateral changes to approved State programs. In oversight of the Pennsylvania program, the Director will recognize only the statutes, regulations and other materials approved by OSM, together with any consistent implementing policies, directives and other materials, and will require the enforcement by Pennsylvania of only such provisions.

This rule is exempted from review by the Office of Management and Budget [*19820] (OMB) under Executive Order 12866 (Regulatory Planning and Review).

The Department of the Interior has conducted the reviews required by section 3 of Executive Order 12988 (Civil Justice Reform) and has determined that, to the extent allowed by law, this rule meets the applicable standards of subsections (a) and (b) of that section. However, these standards are not applicable to the actual language of State regulatory programs and program amendments since each such program is drafted and promulgated by a specific State, not by OSM. Under sections 503 and 505 of SMCRA (30 U.S.C. 1253 and 1255) and 30 CFR 730.11, 732.15, and 732.17(h)(10), decisions on proposed State regulatory programs and program amendments submitted by the States must be based solely on a determination of whether the submittal is consistent with SMCRA and its implementing federal regulations and whether the other requirements of 30 CFR parts 730, 731, and 732 have been met.

No environmental impact statement is required for this rule since section 702(d) of SMCRA (30 U.S.C. 1292(d)) provides that agency decisions on proposed State regulatory program provisions do not constitute major federal actions within the meaning of section 102(2)(C) of the National Environmental Policy Act (42 U.S.C. 4332(2)(C)).

This rule does not contain information collection requirements that require approval by OMB under the Paperwork Reduction Act (44 U.S.C. 3507 et seq. ).

The Department of the Interior has determined that this rule will not have a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ). The State submittal which is the subject of this rule is based upon corresponding federal regulations for which an economic analysis was prepared and certification made that such regulations would not have a significant economic effect upon a substantial number of small entities. Accordingly, this rule will ensure that existing requirements previously promulgated by OSM will be implemented by the State. In making the determination as to whether this rule would have a significant economic impact, the Department relied upon the date and assumptions for the corresponding federal regulations.

This rule will not impose a cost of $ 100 million or more in any given year on any governmental entity or the private sector.

The U.S. Naval Academy Sailing Squadron will sponsor the 21st Annual Safety at Sea Seminar on the waters of the Severn River and Spa Creek at Annapolis, Maryland. Waterborne activities will include demonstrations of life rafts, pyrotechnics, man overboard procedures, and a helicopter rescue. In order to ensure the safety of participants, spectators and transiting vessels, 33 CFR 100.511 will be in effect for the duration of the event. Under provisions of 33 CFR 100.511, vessels may not enter the regulated area without permission from the Coast Guard Patrol Commander. Spectator vessels may anchor outside the regulated area but may not block a navigable channel. Because these restrictions will only be in effect for a limited period, they should not result in a significant disruption of maritime traffic.

This is a summary of the Commission's Order in GN Docket No. 93-252, FCC 00-66, adopted February 25, 2000, and released March 10, 2000. The complete text of this document is available on the Commission's Internet site, at www.fcc.gov. It is also available for inspection and copying during normal business hours in the FCC Reference Information Center, Courtyard Level, 445 12th Street, SW, Washington, DC, and may be purchased from the Commission's copy contractor, International Transcription Services, Inc., CY-B400, 445 12th Street, SW, Washington, DC.

1. On February 3, 1994, the Commission adopted the CMRS Second Report and Order (59 FR 18493, April 19, 1994), which implemented revisions to sections 3(n) and 332 of the Communications Act of 1934, which were enacted in the Omnibus Budget Reconciliation Act of 1993. These revisions created a comprehensive framework for the regulation of mobile radio services, including existing common carrier mobile services, private land mobile services, and new services such as Personal Communications Services. Between May 19 and July 1, 1994, the Commission received 15 petitions for reconsideration of the CMRS Second Report and Order, 19 oppositions, and 12 reply comments addressing a broad range of issues. (A list of parties filing petitions for reconsideration, oppositions and comments, and reply comments to the oppositions may be found in Appendix A of the full text of this Order.)

2. Some issues raised by petitioners on reconsideration are outside the scope of the CMRS Second Report and Order and are dismissed on that basis. ( see , for example, footnote 3 of the full text of the Order.) Many of the issues raised on reconsideration have subsequently given rise to, or been addressed in, separate proceedings. ( see footnote 4 of the full text of the Order.) Still others, including several requests for clarification, have been rendered moot by other subsequent events or Commission actions. (See footnote 5 of the full text of the Order.) The Commission in the CMRS Second Report and Order addressed several of the remaining issues previously. Because none of the petitioners has presented new information or argument that would warrant reversal, the Commission denies these petitions.

3. The two remaining issues, raised by McCaw Cellular Communications, Inc., concern requests that the Commission preempt states from requiring CMRS providers to file informational tariffs and from imposing their own interconnection requirements on CMRS providers. In the absence of evidence in the record that states are attempting to exercise jurisdiction with respect to informational tariffs and CMRS interconnection requirements, there appears to be neither a reason to address these issues nor a record sufficient to support substantive decisions with respect to them. Consequently, the Commission denies this petition.

4. The petitions for reconsideration, or portions thereof, filed by the American Mobile Telecommunications Association, McCaw Cellular Communications, Inc., MCI Telecommunications Corporation, the Personal Communications Industry Association, and the National Cellular Resellers Association with respect to the CMRS Second Report and Order in GN Docket No. 93-252 are denied on the merits. The remaining petitions, or portions thereof, filed by the American Mobile Telecommunications Association, Ameritech, CUE Network Corporation, GTE Service Corporation, McCaw Cellular Communications, Inc., MCI Telecommunications Corporation, the National Association of Regulatory Utility Commissioners, the National Cellular Resellers Association, the New York Department of Public Service, Pacific Bell, the Pennsylvania Public Utility Commission, SEIKO Telecommunications Systems, Inc., and the Waterway Communications System, Inc. are dismissed because the issues raised are either moot or beyond the scope of this proceeding.

This is a summary of the Commission's First Report and Order, FCC 00-99, adopted March 14, 2000; released March 16, 2000. The full text of the Commission's First Report and Order is available for inspection and copying during normal business hours in the FCC Reference Center (Room CY-A257) at its headquarters, 445 12th Street, SW, Washington DC 20554, or may be purchased from the Commission's copy contractor, International Transcription Service, Inc., (202) 857-3800, 1231 20th Street, NW, Washington, DC 20036, or may be reviewed via Internet at http://www.fcc.gov/csb/.

1. In this First Report and Order (“Order”), we adopt rules implementing certain aspects of the Satellite Home Viewer Improvement Act of 1999 (“SHVIA”). SHVIA authorizes satellite carriers to add more local and national broadcast programming to their offerings, and to make that programming available to subscribers who previously have been prohibited from receiving broadcast fare via satellite under compulsory licensing provisions of the copyright law. The legislation generally seeks to place satellite carriers on an equal footing with local cable operators when it comes to the availability of broadcast programming, and thus give consumers more and better choices in selecting a multichannel video program distributor (“MVPD”).

2. Among other things, section 325(b)(3)(C) of the Communications Act requires satellite carriers to obtain retransmission consent for the local broadcast signals they carry, requires broadcasters, until 2006, to negotiate in good faith with satellite carriers and other MVPDs with respect to their retransmission of the broadcasters' signals, and prohibits broadcasters from entering into exclusive retransmission consent agreements. Section 325(b)(3)(C) required the Commission to commence a rulemaking within 45 days of the enactment of SHVIA and to complete all actions necessary to prescribe regulations within 1 year after such date of enactment. The Commission issued a Notice of Proposed Rulemaking (“Notice”) on December 22, 1999 (64 FR 72985). The Commission received numerous comments and reply comments to the Notice. We conclude the good faith negotiation and exclusivity portion of this rulemaking well ahead of our statutory deadlines for doing so because of the importance of implementing these provisions to MVPD competition and the growth of satellite service.

3. In 1988, Congress passed the Satellite Home Viewer Act (“1988 SHVA”) in order to provide people in unserved areas of the country with access to broadcast programming via satellite. The 1988 SHVA enabled satellite carriers to provide broadcast programming to those satellite subscribers who were unable to obtain broadcast network programming over-the-air. As a general matter, however, the 1988 SHVA did not permit satellite carriers to retransmit local broadcast television signals directly to consumers.

4. The Cable Television Consumer Protection and Competition Act of 1992 (“1992 Cable Act”) amended the Communications Act, inter alia, to include section 325, which provides television stations with certain carriage rights on local market cable television systems. Within local market areas, commercial television stations may elect cable carriage under either the retransmission consent or mandatory carriage requirements. Section 325 as initially enacted contained no standards pursuant to which broadcasters were required to negotiate with MVPDs. The Commission established rules related to the retransmission/mandatory carriage election cycle, but did not adopt rules governing the negotiation process of retransmission consent.

5. SHVIA revises the 1988 SHVA and reflects changes not only involving the satellite industry and subscribers, but television broadcast stations and terrestrial MVPDs. SHVIA adopts changes in several areas, including retransmission consent, must-carry, and retransmission of local broadcast signals. In particular, SHVIA addresses several limitations previously placed on satellite carriers, including the issue of satellite carrier retransmission of local broadcast programming.

6. The Order determines that the statute does not intend to subject retransmission consent negotiation to detailed substantive oversight by the Commission. Instead, the order concludes that Congress intended that the Commission follow established precedent, particularly in the field of labor law, in implementing the good faith retransmission consent negotiation requirement. Consistent with this conclusion, the Order adopts a two-part test for good faith. The first part of the test consists of a brief, objective list of negotiation standards. First, a broadcaster may not refuse to negotiate with an MVPD regarding retransmission consent. Second, a broadcaster must appoint a negotiating representative with authority to bargain on retransmission consent issues. Third, a broadcaster must agree to meet at reasonable times and locations and cannot act in a manner that would unduly delay the course of negotiations. Fourth, a broadcaster may not put forth a single, unilateral proposal. Fifth, a broadcaster, in responding to an offer proposed by an MVPD, must provide considered reasons for rejecting any aspects of the MVPD's offer. Sixth, a broadcaster is prohibited from entering into an agreement with any party conditioned upon denying retransmission consent to any MVPD. Finally, a broadcaster must agree to execute a written retransmission consent agreement that sets forth the full agreement between the broadcaster and the MVPD.

7. The second part of the good faith test is based on a totality of the circumstances standard. Under this standard, an MVPD may present facts to the Commission which, even though they do not allege a violation of the specific standards enumerated above, given the totality of the circumstances constitute a failure to negotiate in good faith.

8. The Order concludes that it is not practicably possible to discern objective competitive marketplace factors that broadcasters must discover and base any negotiations and offers on, and that it is the retransmission consent negotiations that take place that are the market through which the relative benefits and costs to the broadcaster and MVPD are established. The Order provides examples of negotiation proposals that presumptively are consistent and inconsistent with “competitive marketplace considerations.” At the same time, the Order provides that it is implicit in section 325(b)(3)(C) that any effort to further anti-competitive ends through the negotiation process would not meet the good faith negotiation requirement. Considerations that are designed to frustrate the functioning of a competitive market are not “competitive marketplace considerations.” Conduct that is violative of national policies favoring competition—that is, for example, intended to gain or sustain a monopoly, is an agreement not to compete or to fix prices, or involves the exercise of market power in one market in order to foreclose competitors from participation in another market—is not within the competitive marketplace considerations standard included in the statute. The Commission's rules regarding the good faith negotiation requirement sunset on January 1, 2006.

9. As for the prohibition on exclusivity, the Order interprets the phrase “engaging in” broadly. Thus, the Order would prohibit not only entering into exclusive retransmission consent agreements, but also negotiating exclusive agreements that would take effect after the sunset of the prohibition. The Commission's rules regarding exclusive retransmission consent agreements sunset on January 1, 2006.

10. An MVPD believing itself to be aggrieved under section 325(b)(3)(C) may file a complaint with the Commission. The Order provides that the procedural provisions of 47 CFR 76.7 will govern good faith and exclusivity complaints. The Order directs Commission staff to expedite resolution of good faith and exclusivity complaints. The Order provides that the burden of proof with regard to such complaints is on the MVPD complainant.

11. In SHVIA, Congress amended section 325(b) of the Communications Act, requiring the Commission to revise its regulations so that they shall:

* * * until January 1, 2006, prohibit a television broadcast station that provides retransmission consent from * * * failing to negotiate in good faith, and it shall not be a failure to negotiate in good faith if the television broadcast station enters into retransmission consent agreements containing different terms and conditions, including price terms, with different multichannel video programming distributors if such different terms and conditions are based on competitive marketplace considerations.

12. At the outset of our discussion, we note that section 325(b)(2)(E) of the Communications Act grants satellite carriers a six-month period during which they may retransmit the signals of local broadcasters without a broadcaster's express retransmission consent. As discussed in further detail below, section 325 also requires strict enforcement of, and severe penalties for, satellite carrier retransmission of local broadcast signals without consent after this six-month period expires. We have adopted these rules before the end of the six-month period provided by section 325(b)(2)(E) so that MVPDs, particularly satellite carriers, and broadcasters understand their rights and obligations under section 325(b)(3)(C) before that period expires. These rules will provide a framework under which broadcasters and satellite carriers can achieve retransmission consent before the expiration of the six-month period set forth in section 325(b)(2)(E) so as to avoid the highly undesirable interruption of local broadcast signals that satellite carriers have begun to provide to their subscribers in many cities across the nation. On an ongoing basis, we intend these rules to govern the negotiation of retransmission consent between broadcasters and all MVPDs.

13. The statute does not appear to contemplate an intrusive role for the Commission with regard to retransmission consent. Section 325(b)(3)(C) instructs the Commission to “revise the regulations governing the exercise by television broadcast stations of the right to grant retransmission consent under this subsection. . . .” The fact that Congress instructed the Commission to “revise” its existing retransmission consent regulations, coupled with the determinedly brief discussion of section 325(b)(3)(C) in the Conference Report, leads us to conclude that, in addition to the guidance that can be gleaned from SHVIA, we should also look for guidance in the legislative history of the retransmission consent provisions of the 1992 Cable Act. When Congress first applied retransmission consent to MVPDs in 1992, it stated that “it is the Committee's intention to establish a marketplace for the disposition of the rights to retransmit broadcast signals; it is not the Committee's intention in this bill to dictate the outcome of the ensuing marketplace negotiations.”

14. Based on this language, the Commission concluded in the Broadcast Signal Carriage Order that Congress did not intend that the Commission should intrude in the negotiation of retransmission consent. We do not interpret the good faith requirement of SHVIA to alter this settled course and require that the Commission assume a substantive role in the negotiation of the terms and conditions of retransmission consent. We note that Congress considered and explicitly rejected a comprehensive regime that required the Commission to:

15. In support of the position that intrusive Commission action is unnecessary to implement the good faith negotiation requirement, commenters point to the fact that thousands of retransmission consent agreements have been successfully concluded between local broadcasters and MVPDs since adoption of the 1992 Cable Act. In addition, commenters note that within days after enactment of SHVIA, DIRECTV and EchoStar announced that they had entered into retransmission consent agreements with the owned-and-operated affiliates of several of the major television networks. As a result, these commenters argue that it would be wholly inappropriate to impose “shotgun wedding” style regulations on a marketplace that is already functioning. DIRECTV, however, argues that the existence of these agreements does not ensure that agreements that have yet to be completed will progress as smoothly.

16. One commenter maintains that the purpose of the good faith requirement is merely to bring the parties to the bargaining table, stating that “Congress signaled its desire only that broadcasters, having once made the decision to provide retransmission consent, should be required to negotiate with all interested MVPDs and not engage in an outright refusal to deal.” Several broadcast commenters assert that Congress merely intended the Commission to revise its existing regulations to account for retransmission consent agreements between broadcasters and satellite carriers that now qualify for compulsory copyright license to provide local television stations to satellite subscribers.

17. ALTV advises the Commission to focus on Congress' overarching purpose in enacting section 325 in the 1992 Cable Act—assuring broadcasters the opportunity to secure compensation for the value of the retransmission of their signals by MVPDs. Conversely, other commenters assert that Congress intended the Commission to begin with the premise that television broadcast programming is an indispensable component of any MVPD's service package and that alternative MVPDs cannot compete effectively with incumbent cable operators if they are denied full and fair access to that programming in local markets.

18. We find instructive the legislative history of a previous version of SHVIA that was considered, but not enacted, by Congress. During the consideration of the House version of SHVIA, Representative Tauzin explained to Representative Dingell that the House bill, which included a detailed, anti-discrimination provision, would permit:

19. Commenters argue that the statutory imposition of a good faith negotiation requirement is in derogation of the long-standing common law right to contract and therefore the duty, though statutorily imposed, must be narrowly construed. Commenters assert that even a statutory duty to negotiate in good faith does not require parties to do anything contrary to their own self-interest or make any particular concessions. Accordingly, argues Disney, the Commission is not empowered to become involved in the substance of retransmission consent negotiations.

20. We agree with those commenters that assert that section 325(b)(3)(C) should be narrowly construed. As commenters indicate, congressional language in derogation of the common law should be interpreted to implement the express directives of Congress and no further. The United States Supreme Court has reiterated this rule of statutory construction on several occasions, holding that [s]tatutes which invade the common law* * * are to be read with a presumption favoring the retention of long-established and familiar principles, except when a statutory purpose to the contrary is evident.” In addition, the Court has stated that, when a statutory provision does derogate from the common law, it “must be strictly construed for no statute is to be construed as altering the common law, farther [sic] than its words import.”

21. Commenters state that, in other contexts, the good faith standard has a well understood meaning that Congress must be presumed to have intended, particularly, where, as here, nothing in the statute or the legislative history suggests that Congress intended the Commission to develop its own definition of good faith. These commenters argue that SHVIA cannot be read to grant the Commission new, wholesale authority to define good faith or engage in a detailed case-by-case review of the retransmission terms offered to one MVPD as compared to another. These commenters assert that the most appropriate statutory example to follow is that of the good faith requirement of section 8(d) of the Taft-Hartley Act.

22. Given the dearth of guidance in the statute and legislative history, we believe that Congress signaled that the good faith negotiation requirement adopted in section 325(b)(3)(C) was sufficiently well understood that further explication was unnecessary. In such situations, we believe that Congress intends the Commission look to analogous statutory standards from which to draw guidance. While commenters offer various sources on which to rely, we agree with those commenters suggesting that the good faith bargaining requirement of section 8(d) of the Taft-Hartley Act is the most appropriate source of guidance. Section 8(d) of the Taft-Hartley Act details the collective bargaining duty of both employers and labor representatives, providing that:

There are significant parallels between the congressional policy goal of good faith negotiation underlying both section 325(b)(3)(C) and section 8(d) of the Taft-Hartley Act. In this regard, there is substantial National Labor Relations Board (“NLRB”) precedent that the good faith negotiation requirement applies solely to the process of the negotiations and does not permit the NLRB to require agreement or impose terms or conditions on collective bargaining agreements. The Supreme Court has made this determination with force and clarity, stating that:

23. Congress clearly did not intend the Commission to sit in judgement of the terms of every retransmission consent agreement executed between a broadcaster and an MVPD. Even if the Commission had the resources to accomplish such a delegation, we can divine no intent in either the statute or its legislative history to achieve such a result. As commenters indicated, when Congress intends the Commission to directly insert itself in the marketplace for video programming, it does so with specificity. Despite the arguments of the satellite industry and other MVPDs, we find nothing supporting a construction of section 325(b)(3)(C) that would grant the Commission authority to impose a complex and intrusive regulatory regime similar to the program access provisions or the interconnection requirements of section 251 of the Communications Act. While the Commission generally will not intrude into the substance of particular retransmission consent negotiations and agreements, we note that section 325(b)(3)(C) sanctions only those retransmission consent agreements containing different terms and conditions, including price terms, with different MVPDs if such different terms and conditions are based upon competitive marketplace considerations.

24. Having reached this conclusion, we do not interpret section 325(b)(3)(C) as “largely hortatory” as suggested by some commenters. As we stated in the Notice, “Congress has signaled its intention to impose some heightened duty of negotiation on broadcasters in the retransmission consent process.” In other words, Congress intended that the parties to retransmission consent have negotiation obligations greater than those under common law. Absent fraudulent intent, common law imposes no obligation on parties to negotiate in good faith prior to the formation of a contract. We believe that, by imposing the good faith obligation, Congress intended that the Commission develop and enforce a process that ensures that broadcasters and MVPDs meet to negotiate retransmission consent and that such negotiations are conducted in an atmosphere of honesty, purpose and clarity of process.

25. As a preliminary matter, we must determine to whom the “good faith” negotiation obligation applies. The Notice requested comment on whether the duty of good faith negotiation applies equally to the broadcaster and MVPD negotiating a retransmission consent agreement. Several commenters assert that the good faith negotiation requirement is a mutual obligation and that the Commission must consider and weigh the conduct of the MVPD in assessing whether the broadcaster has failed to satisfy the good faith negotiation requirement. Only DIRECTV asserts that the good faith negotiation requirement applies solely to broadcasters. DIRECTV argues that the language of section 325(b)(3)(C) applies solely to “broadcast television stations” and in no way, express or implied, is imposed on MVPDs.

26. We agree with DIRECTV that the language of section 325(b)(3)(C) on its face applies only to “television broadcast station[s].” To read the provision as a mutual obligation would contradict the express language of the statute and controvert Congress' intent. Moreover, Congress has demonstrated its ability to expressly impose a good faith negotiation obligation on both parties in other provisions of the Communications Act. Accordingly, we conclude that the good faith negotiation requirement in section 325(b)(3)(C) was intended to apply only to broadcasters. However, we caution MVPDs that seek retransmission consent that their conduct is relevant in determining whether a broadcaster has complied with its obligation to negotiate retransmission consent in good faith. Insistence by an MVPD on unreasonable terms and conditions or negotiating procedures will be taken into account by the Commission in assessing a broadcaster's observance of its good faith negotiation obligations.

27. The Notice sought comment on the criteria that should be employed to define “good faith” and sought comment on whether the Commission should explicitly define what constitutes good faith under section 325(b)(3)(C). The Notice requested comment on whether to adopt a two-part test for good faith similar to that embraced by the NLRB and by the Commission pursuant to section 251 of the Communications Act. The Commission also sought comment on any other specific legal precedent upon which we should rely and any other regulatory approach that might appropriately implement the good faith negotiation requirement of section 325(b)(3)(C) of the Communications Act.

28. Several commenters argue that both the NLRB and the section 251 good faith negotiation regimes are based upon the premise that one party to the negotiation may not have an interest in reaching an agreement. These commenters argue that, because broadcasters want their programming transmitted to the widest possible audience to increase advertising revenue and MVPDs desire valuable broadcast programming, both broadcasters and MVPDs have strong incentives for reaching retransmission consent. Several commenters support a two-part test to determine good faith similar to that suggested in the Notice. Fox asserts that, if the Commission adopts a two-part test for determining good faith, the specific actions that would constitute lack of good faith should be “narrowly drawn to encompass only the most obvious and egregious breaches of good faith negotiating practices, and the Commission should always examine the factual context in which each alleged prohibition occurred.”

29. Time Warner proposes that the Commission adopt a “zone of reasonableness” standard for good faith in which, even if the broadcaster satisfies all of the procedural indicia of good faith, the Commission could determine that it violated its duty to negotiate in good faith “if it insists [on] a level of consideration that is so plainly uneconomic that an MVPD would suffer greater financial harm from accepting the broadcaster's terms than from refusing to carry the station.” NBC maintains that the Commission should contrive no standards before the fact. Instead, to the extent standards are appropriate, they should be developed out of actual experience in adjudicated controversies. Several commenters argue that the Commission should judge the conduct of the parties only by examining the totality of the circumstances.

30. We will adopt a two part test for good faith negotiation as proposed in the Notice. We believe that this test best implements Congress' intent in adopting the good faith negotiation requirement. A two-part test follows well established precedent in the field of labor law. In addition, the Commission has used a similar test in implementing its statutory obligations under section 251 of the Communications Act. Through the objective standards, this approach gives immediate guidance to the parties to retransmission consent negotiations that certain conduct will not be tolerated. Through the broader, totality of the circumstances test, the Commission will have the ability to prohibit conduct that, while not constituting a failure of good faith in all circumstances, does violate the good faith negotiation requirement in the context of a given negotiation. The totality of the circumstances test will also enable the Commission to continue refining and clarifying the responsibilities of parties to retransmission consent negotiations.

31. The first part of the test will consist of a brief, objective list of negotiation standards. Because the list consists of per se standards, of necessity, the standards must be concise, clear and constitute a violation of the good faith standard in all possible instances. Should an MVPD demonstrate to the Commission that a broadcaster, in the conduct of a retransmission consent negotiation, has engaged in actions violative of an objective negotiation standard, the Commission would find that the broadcaster has breached its duty to negotiate in good faith. We disagree with those commenters who assert that the Commission should only define violations on a prospective adjudicatory basis. Given the short, six-month, period in which satellite carriers have to negotiate retransmission consent before expiration of the compulsory license of section 325(b)(2)(E), we believe it incumbent upon us to provide as much initial guidance as possible through which the parties may pursue negotiations.

32. The second part of the test is a totality of the circumstances standard. Under this standard, an MVPD may present facts to the Commission which, even though they do not allege a violation of the objective standards, given the totality of the circumstances reflect an absence of a sincere desire to reach an agreement that is acceptable to both parties and thus constitute a failure to negotiate in good faith. We do not intend the totality of the circumstances test to serve as a “back door” inquiry into the substantive terms negotiated between the parties. While the Commission will not ordinarily address the substance of proposed terms and conditions or the terms of actual retransmission consent agreements, we will entertain complaints under the totality of the circumstances test alleging that specific retransmission consent proposals are sufficiently outrageous, or evidence that differences among MVPD agreements are not based on competitive marketplace considerations, as to breach a broadcaster's good faith negotiation obligation. However, complaints which merely reflect commonplace disagreements encountered by negotiating parties in the everyday business world will be promptly dismissed by the Commission.

33. The Commission sought comment on specific actions or practices that would constitute per se violations of the duty to negotiate in good faith in accordance with section 325(b)(3)(C). In addition to any other actions or practices, the Commission asked commenters to address whether it would be appropriate to include in any such list provisions similar to the violations of the obligation to negotiate interconnection agreements in good faith set forth in 47 CFR 51.301. The Commission acknowledged, however, that the good faith standard of SHVIA is different in significant respects to that contained in 47 CFR 51.301.

34. Commenters proposed numerous standards that the Commission should consider in adopting rules to enforce the good faith negotiation requirement. Broadcasters generally argue that, to the extent it does anything, the Commission should adopt streamlined rules that apply only to the process of the negotiations between broadcasters and MVPDs. The other group, consisting of satellite carriers, small cable operators and alternative MVPDs, argues that the only way the Commission can effectively enforce the good faith negotiation requirement is to involve itself in the substantive terms of retransmission consent agreements as well as the process of negotiations. These commenters propose that the Commission adopt an extensive list of substantive terms and conditions that should be prohibited as violations of the obligation to negotiate retransmission consent agreements in good faith.

35. Broadcast commenters propose several standards based on experience gathered in the NLRB field, the absence of which indicates a lack of good faith, including: (1) a party must have a sincere desire to reach agreement, (2) a party's negotiator must have authority to conclude a deal, (3) a party must offer to meet at reasonable times and convenient places, and (4) a party must agree to execute a written agreement once all terms have been agreed on. NBC proposes that extrinsic evidence that a party never intended to reach agreement, or extrinsic evidence of an understanding with a third party that the negotiating party will not enter into a retransmission consent agreement, should also evidence violations of the good faith negotiation requirement. Other commenters would prohibit a broadcaster from insisting on terms so unreasonable that they are tantamount to a refusal to deal. EchoStar argues that such procedural violations are meaningless because “no bad faith actor would be so inept or so artless as to display its bad faith by not agreeing to a convenient time and place to meet, not appointing a representative to negotiate, and not committing to writing a retransmission agreement once a deal has been reached.”

36. DIRECTV proposes the following list of good faith negotiation standards based upon examples from labor law precedent, the Commission's program access rules, the interconnection provisions of the 1996 Act, and recognized marketplace dynamics. DIRECTV, supported by other commenters, proposes that, during the negotiation of a retransmission consent agreement, a broadcaster may not:

(a) Intentionally seek to mislead or coerce the MVPD into reaching an agreement it would not otherwise have made;

(b) Unreasonably obstruct or delay negotiations or resolutions of disputes;

(c) Refuse to designate a representative with authority to make binding representations if such refusal significantly delays resolution of issues;

(d) Refuse to negotiate in fact;

(e) Refuse to provide the satellite carrier with a high quality, direct feed of the broadcast signal;

(f) Engage in discrimination in the price, terms or conditions of retransmission consent afforded an MVPD relative to any other MVPD, unless such discrimination is related to “competitive marketplace conditions” as defined by the Commission * * *;

(g) Offer unreasonable positions, including, but not limited to:

1. a unilateral requirement that retransmission consent for a given broadcast station be conditioned on carriage under retransmission consent of another broadcast station, either in the same or a different geographic market;

2. A unilateral requirement that retransmission consent be conditioned on the exclusion of carriage under retransmission consent of other broadcast channels in a given market;

3. A unilateral requirement that retransmission consent be conditioned on a broadcaster obtaining channel positioning rights on the satellite carrier's system;

4. A unilateral requirement that the satellite carrier (i) commit to purchase advertising on the broadcast station or broadcaster affiliated media, or (ii) that a specified share of advertising dollars spent in a broadcaster's market be spent on that broadcaster;

5. A unilateral requirement that retransmission consent be conditioned on a satellite carrier not retransmitting distant network signals to qualified subscribers in the market, or a satellite carrier “capping” the number of qualified subscribers in the market who may receive distant network signals, thus depriving eligible subscribers of their statutory right to subscribe to distant network signals;

6. A unilateral requirement that retransmission consent be conditioned on the satellite carrier's carriage of digital signals.

To this list EchoStar, would add: (i) Insisting on an unreasonably short contract duration; (ii) threatening to run anti-satellite advertising; and (iii) refusal to deal, whether explicit or disguised under requests for extortionate terms. Several commenters would include the imposition of non-optional tying arrangements requiring an MVPD to carry the affiliated programming of the broadcaster in exchange for retransmission consent. Other commenters suggest a standard requiring parties to provide information necessary to reach agreement.

37. Several commenters propose a standard prohibiting instances in which a broadcaster seeks higher consideration from an MVPD for any affiliated cable network programming in exchange for retransmission consent than it obtains from the incumbent cable operator, unless the broadcaster justifies that such higher consideration is cost-based or does not produce anti-competitive market conditions. In addition, BellSouth urges the Commission to find a violation when a broadcaster ties retransmission consent to minimum subscriber penetration levels. Another commenter would also brand as a good faith violation a demand of a nondisclosure agreement, a demand that the MVPD attest that the agreement complies with all applicable laws, or the refusal to include a provision permitting the agreement to be amended to reflect subsequent changes in the law.

38. Several broadcast commenters assert that the list of violations proposed by DIRECTV, EchoStar and others is so extensive and one-sided as to render any notion of equality at the bargaining table meaningless. Other commenters assert that, since the adoption of the 1992 Cable Act, carriage of additional programming as compensation for retransmission consent is most often the compensation agreed upon by broadcasters and MVPDs in their retransmission consent agreements. Disney argues that the legislative history of the 1992 Cable Act expressly endorsed such compensation and that, had Congress wished to prohibit the practice, it would have done so expressly. Disney further argues that no commenter offers a sustainable legal basis for presuming on a blanket basis that a request for additional programming carriage as consideration for retransmission consent would be illegal under current law or anti-competitive.

39. Consistent with our determination that Congress intended that the Commission should enforce the process of good faith negotiation and that the substance of the agreements generally should be left to the market, we will not adopt the suggestions of certain commenters that we prohibit proposals of certain substantive terms, such as offering retransmission consent in exchange for the carriage of other programming such as a cable channel, another broadcast signal, or a broadcaster's digital signal. Instead, we believe that the good faith negotiation requirement of SHVIA is best implemented through the following standards derived from NLRB precedent, commenter's proposals and the section 251 interconnection requirements. These standards are intended to identify those situations in which a broadcaster did not enter into negotiations with the sincere intent of trying to reach an agreement acceptable to both parties.

40. First, a broadcaster may not refuse to negotiate with an MVPD regarding retransmission consent. Section 325(b)(3)(C) affirmatively requires that broadcasters negotiate retransmission consent in good faith. This requirement goes to the very heart of Congress' purpose in enacting the good faith negotiation requirement. Outright refusal to negotiate clearly violates the requirement of section 325(b)(3)(C). Broadcasters must participate in retransmission consent negotiations with the intent of reaching agreement. Provided that the parties negotiate in good faith in accordance with the Commission's standards, failure to reach agreement does not violate section 325(b)(3)(C). Given the economic incentive for each side to reach agreement, we are hopeful that such impasses will be rare and short-lived.

41. Second, a broadcaster must appoint a negotiating representative with authority to bargain on retransmission consent issues. Failure to appoint a negotiating representative vested with authority to bargain on retransmission consent issues indicates that a broadcaster is not interested in reaching an agreement. This standard is the norm in NLRB precedent as well as our interconnection rules implementing section 251. This requirement does not empower MVPDs to demand that specific officers or directors of a broadcaster attend negotiation sessions. Provided that a negotiating representative is vested with the authority to make offers on behalf of the broadcaster and respond to counteroffers made by MVPDs to the broadcaster, this standard is satisfied.

42. Third, a broadcaster must agree to meet at reasonable times and locations and cannot act in a manner that would unduly delay the course of negotiations. Refusal to meet at reasonable times and locations belies a good faith intent to negotiate. This requirement does not preclude negotiations conducted via telephone, facsimile, or by letter. Reasonable response times and unreasonable delays will be gauged by the breadth and complexity of the issues contained in an offer. The Commission is aware that, in many cases, time will be of the essence in retransmission consent negotiations, particularly as we approach the end of the six-month period provided for in section 325(b)(2)(E)—May 29, 2000. We advise broadcasters that, in examining violations of this standard, we will consider the proximity of the termination of retransmission consent and the consequent service disruptions to consumers. At the same time, we caution MVPDs that waiting until the eleventh hour to initiate negotiations will also be taken into account in enforcing this standard.

43. Fourth, a broadcaster may not put forth a single, unilateral proposal and refuse to discuss alternate terms or counter-proposals. “Take it, or leave it” bargaining is not consistent with an affirmative obligation to negotiate in good faith. For example, a broadcaster might initially propose that, in exchange for carriage of its signal, an MVPD carry a cable channel owned by, or affiliated with, the broadcaster. The MVPD might reject such offer on the reasonable grounds that it has no vacant channel capacity and request to compensate the broadcaster in some other way. Good faith negotiation requires that the broadcaster at least consider some form of consideration other than carriage of affiliated programming. This standard does not, in any way, require a broadcaster to reduce the amount of consideration it desires for carriage of its signal. This standard only requires that broadcasters be open to discussing more than one form of consideration in seeking compensation for retransmission of its signal by MVPDs.

44. Fifth, a broadcaster, in responding to an offer proposed by an MVPD, must provide reasons for rejecting any aspects of the MVPD's offer. Blanket rejection of an offer without explaining the reasons for such rejection does not constitute good faith negotiation. This provision merely ensures that MVPDs are not negotiating in a vacuum and understand why certain terms are unacceptable to the broadcaster so that the MVPD can respond to the broadcaster's concerns. We reiterate that good faith negotiation requires a broadcaster's affirmative participation. However, this standard is not intended as an information sharing or discovery mechanism. Broadcasters are not required to justify their explanations by document or evidence.

45. Sixth, a broadcaster is prohibited from entering into an agreement with any party a condition of which is to deny retransmission consent to any MVPD. For example, Broadcaster A is prohibited from agreeing with MVPD B that it will not reach retransmission consent with MVPD C. It is impossible for a broadcaster to engage in good faith negotiation with an MVPD regarding retransmission consent when it has a contractual obligation not to reach agreement with that MVPD.

46. Finally, once the parties reach agreement on the terms of retransmission consent, the broadcaster must agree to execute a written retransmission consent agreement that sets forth the full agreement. Because the Commission may be called upon in certain instances to determine whether the totality of the circumstances involved in the negotiation of a particular retransmission consent agreement complies with section 325(b)(3)(C), it is vital that the parties reduce their entire agreement to writing. In addition, this requirement also minimizes subsequent misunderstandings between the parties related to their respective obligations.

47. We do not believe that we should at this time adopt further objective standards as proposed by the commenters. In appropriate instances, we will consider the conduct at the heart of such proposed standards when we examine a particular retransmission consent negotiation under the totality of the circumstances test.

48. The Notice further observed that section 325(b)(3)(C) provides that: it shall not be a failure to negotiate in good faith if the television broadcast station enters into retransmission consent agreements containing different terms and conditions, including price terms, with different multichannel video programming distributors if such different terms and conditions are based on competitive marketplace considerations.

The Notice sought comment on what constitutes a competitive marketplace consideration. The Notice also observed that the Commission has adopted non-discrimination standards in both the program access and open video system contexts and sought comment on the relevance, if any, of these standards to what constitutes a “competitive market consideration.” In addition, the Notice sought comment on any other factors or approaches to determining what constitutes competitive marketplace considerations under section 325(b)(3)(C).

49. A number of commenting parties urge that the competitive marketplace considerations language be interpreted as a requirement that the Commission judge the good faith of all retransmission consent offers based on whether they are based on “competitive marketplace considerations.” DIRECTV and EchoStar, for example, claim that competitive marketplace considerations would permit a broadcaster to discriminate between providers only in scenarios where Congress and the Commission have recognized that certain variance in price, terms or conditions correspond to legitimate behavior that may occur in the marketplace for video programming.

50. EchoStar asserts that, generally where a broadcaster has received any consideration for retransmission consent, it has been non-monetary, carriage of cable networks affiliated with the broadcaster, and argues that:

51. NAB argues that satellite carriers are not nascent businesses that need government protection, but instead are well-financed, powerfully-backed competitors in the multichannel marketplace. Commenters argue that satellite companies not only use local stations to increase the attractiveness of their overall product, but also sell the stations to viewers at substantial prices. One commenter notes that the fact that satellite carriers are able to charge a fee for retransmitted local signals demonstrates that these signals have value for which broadcasters must be compensated. EchoStar counters that “the only reason * * * consumers purchase a satellite carrier's local signal offering is for value that the satellite carrier provides, including increased quality, convenience, and aesthetics ( i.e. , lack of off-air antenna).”

52. Commenters assert that, in the early 1990s, when the retransmission consent provisions of the 1992 Cable Act first became effective, cable systems were effectively the only distributors from whom broadcasters could seek consideration through retransmission consent. Broadcasters assert that they were at a tremendous disadvantage because only a single buyer was prepared to bid for their product. Broadcast commenters state that, today, the existence of multiple MVPDs in at least some markets creates a more competitive marketplace for the sale of retransmission rights, and one that provides more opportunity for stations seeking to obtain compensation for granting these valuable rights. NAB states that the existence of multiple buyers is obviously a very important competitive marketplace consideration in this market, as in any market. EchoStar counters that multiple competitors in a market only serve to increase a broadcaster's ability to play one MVPD distributor against another in retransmission negotiations, an ability Congress sought to restrain by imposing the good faith and competitive marketplace considerations requirements on retransmission consent.

53. As discussed above, we do not believe, as a general matter, that section 325(b)(3)(C) was intended to subject retransmission consent negotiation to detailed substantive oversight by the Commission or indeed that there exist objective competitive marketplace factors that broadcasters must ascertain and base any negotiations and offers on. Indeed, in the aggregate, retransmission consent negotiations are the market through which the relative benefits and costs to the broadcaster and MVPD are established. Although some parties earnestly suggest, for example, that broadcasters should be entitled to zero compensation in return for retransmission consent or that the forms of compensation for carriage should be otherwise limited, this seems to us precisely the judgment that Congress generally intended the parties to resolve through their own interactions and through the efforts of each to advance its own economic self interest.

54. EchoStar suggests an economic paradigm against which retransmission terms might be compared to determine if they are based on “competitive marketplace considerations.” It suggests that in the ideal competitive market setting, revenues will be just sufficient to compensate providers for the costs of program creation, duplication, and distribution so that all participants are earning a fair rate of return. Further, having already noted that the marketplace may be distorted through the exercise of market power by cable operators, EchoStar urges that retransmission consent term outcomes for the cable industry provide a benchmark or threshold that should not be exceeded in the case of satellite carriage of broadcast signals. Further, it asserts that considerations extracted from certain cable operators (for example carriage of digital signals) would be inappropriate and not based on competitive marketplace consideration if they were significantly costlier to accede to for satellite carriers.

55. In our view this type of regulatory analysis and comparison is not what was intended through the enactment of section 325(b)(3)(C). It is both internally inconsistent and not capable of administration in any reasonably timely fashion. The proposal is internally inconsistent in that it acknowledges that among the market participants, cable operators might be the most likely to have market power. If this were the case, using their negotiations as a proxy for a competitive market setting would not be logical. Under this analysis, broadcasters, already the hypothesized victims of an exercise of market power, would be obligated to continue in that role with other participants in the market. Further, EchoStar finds one of the most common features of these agreements—payment for carriage through the devotion of channel capacity to other affiliated services—presumptively a measure of bad faith. Acceptance of the cash rate but not the other currency of the negotiation could hardly be a replication of a competitive market. Even if these problems could be overcome, however, it seems unlikely that the data needed to measure a transaction against the economic model proposed would be available either to the parties in the course of their negotiations or to the Commission in the course of trying to judge their compliance with the standard of review proposed.

56. We also believe that to arbitrarily limit the range or type of proposals that the parties may raise in the context of retransmission consent will make it more difficult for broadcasters and MVPDs to reach agreement. By allowing the greatest number of avenues to agreement, we give the parties latitude to craft solutions to the problem of reaching retransmission consent. The comments filed in this proceeding have called into question the legitimacy of a number of bargaining proposals as reflecting a failure of good faith or as presumptively not based on competitive marketplace considerations. As discussed, it is important that we provide the parties with as much initial guidance as possible. We believe that the following examples of bargaining proposals presumptively are consistent with competitive marketplace considerations and the good faith negotiation requirement:

1. Proposals for compensation above that agreed to with other MVPDs in the same market;

2. Proposals for compensation that are different from the compensation offered by other broadcasters in the same market;

3. Proposals for carriage conditioned on carriage of any other programming, such as a broadcaster's digital signals, an affiliated cable programming service, or another broadcast station either in the same or a different market;

4. Proposals for carriage conditioned on a broadcaster obtaining channel positioning or tier placement rights;

5. Proposals for compensation in the form of commitments to purchase advertising on the broadcast station or broadcast-affiliated media; and 6. Proposals that allow termination of retransmission consent agreement based on the occurrence of a specific event, such as implementation of SHVIA's satellite must carry requirements.

Each of the proposals reflect presumptively legitimate terms and conditions or forms of consideration that broadcasters may find impart value in exchange for the grant of retransmission consent to an MVPD. We do not find anything to suggest that, for example, requesting an MVPD to carry an affiliated channel, another broadcast signal in the same or another market, or digital broadcast signals is impermissible or other than a competitive marketplace consideration. Prior to passage of the 1992 Cable Act, the compensation paid by MVPDs for broadcast signal programming carriage was established under the copyright laws through a governmental adjudicatory process. After passage of the 1992 Cable Act, Congress left the negotiation of retransmission consent to the give and take of the competitive marketplace. In SHVIA, absent conduct that is violative of national policies favoring competition, we believe Congress intended this same give and take to govern retransmission consent. In addition, we point out that these are bargaining proposals which an MVPD is free to accept, reject or counter with a proposal of its own.

57. We find it more difficult to develop a similar list of proposals that indicate an automatic absence of competitive marketplace considerations. Because the size and relative bargaining power of broadcasters and MVPDs range from satellite master antenna television (“SMATV”) operators and low power television broadcast stations to national cable entities and major-market, network affiliate broadcast television stations, the dynamics of specific retransmission consent negotiations will span a considerable spectrum. In these instances, we will generally rely on the totality of the circumstances test to determine compliance with section 325(b)(3)(C).

58. At the same time, it is implicit in section 325(b)(3)(C) that any effort to stifle competition through the negotiation process would not meet the good faith negotiation requirement. Considerations that are designed to frustrate the functioning of a competitive market are not “competitive marketplace considerations.” Conduct that is violative of national policies favoring competition—that is, for example, intended to gain or sustain a monopoly, is an agreement not to compete or to fix prices, or involves the exercise of market power in one market in order to foreclose competitors from participation in another market—is not within the competitive marketplace considerations standard included in the statute. Following this reasoning, we believe that the following examples of bargaining proposals presumptively are not consistent with competitive marketplace considerations and the good faith negotiation requirement:

1. Proposals that specifically foreclose carriage of other programming services by the MVPD that do not substantially duplicate the proposing broadcaster's programming;

2. Proposals involving compensation or carriage terms that result from an exercise of market power by a broadcast station or that result from an exercise of market power by other participants in the market ( e.g., other MVPDs) the effect of which is to hinder significantly or foreclose MVPD competition;

3. Proposals that result from agreements not to compete or to fix prices; and

4. Proposals for contract terms that would foreclose the filing of complaints with the Commission.

59. Several MVPD commenters argue that where a MVPD shows a willingness to negotiate for continued carriage of a local broadcast station, the station should have an affirmative duty to negotiate terms for such carriage and should not be permitted to withhold retransmission consent while such negotiations are pending. Other commenters assert that the Commission should prohibit a broadcaster from withdrawing existing retransmission consent given to an MVPD until an exclusivity or good faith complaint is denied by the Cable Services Bureau and, if reconsideration is requested, the full Commission. These commenters note that local television stations enjoy similar protection when a cable operator seeks to drop the broadcaster via the Commission's market modification process. NAB and Network Affiliates assert that Congress expressly rejected this approach in SHVIA by requiring that upon the expiration of the six-month grace period outlined in section 325(b)(2)(E), satellite carriers must obtain consent prior to retransmitting any programming or face stiff penalties, including mandatory civil liability of $25,000 per station, per day.

60. Two equally unambiguous provisions of SHVIA foreclose the approach advanced by MVPD commenters. First, section 325(b)(1) of the Communications Act provides that “No cable system or other multichannel video programming distributor shall retransmit the signal of the broadcasting station, or any part thereof, except * * * with the express authority of the originating station * * * .” This language clearly prohibits an MVPD, except during the six-month period allowed under section 325(b)(2)(E), from retransmitting a broadcasters signal if it has not obtained express retransmission consent. Second, section 325(e) of the Communications Act establishes a streamlined complaint procedure through which broadcasters may seek redress for allegedly illegal retransmission of local broadcast signals by satellite carriers. The procedures established by section 325(e) provide only four defenses that a satellite carrier may raise: (1) the satellite carrier did not retransmit the broadcaster's signal to any person in the local market of the broadcaster during the time period specified in the complaint; (2) the broadcaster had in writing expressly allowed the satellite carrier to retransmit the broadcaster's signal to the broadcaster's local market for the entire period specified in the complaint; (3) the retransmission was made after January 1, 2002 and the broadcaster elected to assert the right to must carry against the satellite carrier under section 338 for the entire period specified in the complaint; and (4) the station being retransmitted is a noncommercial television broadcast station. Against the backdrop of the express language of these provisions, we see no latitude for the Commission to adopt regulations permitting retransmission during good faith negotiation or while a good faith or exclusivity complaint is pending before the Commission where the broadcaster has not consented to such retransmission.

61. Having reached this conclusion, we must also express our concern regarding the service disruptions and consumer outrage that will inevitably result should MVPDs that are entitled to retransmit local signals subsequently lose such authorization. Because the market has functioned adequately since the advent of retransmission consent in the early 1990's, we expect such instances to be the exception, rather than the norm. We are encouraged by the retransmission consent agreements that have been reached between broadcasters and satellite carriers prior to the enactment of our rules. In addition, we strongly encourage that broadcasters and MVPDs that are engaged in protracted retransmission consent negotiations agree to short-term retransmission consent extensions so that consumers' access to broadcast stations will not be interrupted while the parties continue their negotiations.

62. In the Notice, the Commission acknowledged the existence of retransmission consent agreements between satellite carriers and television broadcast stations that predate enactment of section 325(b)(3)(C). In addition, the Notice acknowledged that agreements have been executed since the enactment of SHVIA. The Notice sought comment on the impact of these agreements on the duty to negotiate in good faith.

63. Network Affiliates state that the fact that broadcasters and satellite carriers have already reached arms length retransmission consent agreements is an indication that they were negotiated in good faith. Otherwise, in the face of impending legislation and Commission action, they assert the parties would not have finalized such agreements. Another commenter argues that the rules adopted by the Commission should have prospective effect applying only to retransmission consent negotiations that occur after the effective date of the Commission's rules. One commenter urges the Commission to give its rules retroactive application to preexisting retransmission consent agreements.

64. We will not apply the rules adopted herein to retransmission consent agreements that predate the effective date of this Order. Section 325(b)(3)(C) provides that:

As the quoted language indicates, section 325 is not a self-effectuating provision. It has substance and structure only after the Commission has concluded its rulemaking to implement the good faith and exclusivity limitations of section 325(b)(3)(C). Moreover, we need not apply SHVIA retroactively to ensure that such preexisting agreements do not contain impermissible exclusivity provisions. 47 CFR 76.64(m) has been in effect since 1993 and expressly prohibits exclusive retransmission consent agreements. If any MVPD believes that a broadcaster and an MVPD entered into a prohibited exclusive retransmission consent agreement prior to adoption of SHVIA, that party may file a petition for special relief alleging that a broadcaster and MVPD have violated 47 CFR 76.64(m). Accordingly, the rules applicable to good faith and exclusivity adopted herein will apply only to retransmission consent agreements adopted after the effective date of this Order.

65. SHVIA amends section 325(b) of the Communications Act by directing the Commission to promulgate rules that would

66. In the Notice, we sought to determine what activities would constitute “engaging in exclusive contracts.” We also sought to determine whether there was significance to the difference between the language in the statute (prohibiting “engaging in”) and the language in the Conference Report (prohibiting “entering into”). We sought to determine whether parties were prohibited from negotiating exclusive contracts that would take effect after the date of January 1, 2006. We also sought comment on whether any such contracts already existed, and if so, what effect the statute would have on such contracts. Finally, we sought comment on how to effectively enforce such a prohibition, and how to determine whether such agreements existed.

67. SHVIA prohibits a television broadcast station that provides retransmission consent from “engaging in” exclusive contracts until January 1, 2006. The Conference Report refers to a prohibition on “entering into” exclusive retransmission consent agreements. Several commentators argue that the phrases “entering into” and “engaging in” are synonymous. Representatives of the satellite industry argue that the Commission should rely on the broader language of the statute (“engaging in”) rather than the arguably narrower Conference Report language. Commenters supporting this interpretation posit that the use of the language “engaging in” demonstrates an intent to prohibit a broad range of practices. SBCA believes that the use of the phrase “engaging in” prohibits “both express and implied, de jure and de facto, exclusionary conduct, including literal or effective refusals to deal with a particular MVPD distributor.” Two other commenters argue that broadcasters can impose unaffordable demands on smaller MVPDs, and that these demands can result in prohibited de facto exclusivity. Thus, according to this argument, the Commission should expand its prohibition to explicitly forbid these types of arrangements. LTVS supports an expansive definition of exclusive practices and argues that a broad range of actions should be prohibited.

68. While the satellite industry supports a broad reading of the statute, broadcast commenters argue that Congress intended to prohibit exclusive contracts, not “undefined exclusive ‘exercise practices’ nor . . . of any de facto exclusivity.” Network Affiliates assert that the use of the phrase “engaging in” does not demonstrate Congressional intent to “increase the number of prohibited activities.” Indeed, these commenters argue that by using the phrase “engaging in” as opposed to the phrase “entering in,” Congress “intended to allow parties to negotiate and enter into exclusive retransmission consent agreements as long as those agreements are not effective until after the sunset of this prohibition on January 1, 2006.” Under this theory, the statute only prohibits “engaging in exclusive contracts.” Thus, according to broadcasting representatives, SHVIA does not prohibit undefined exclusive practices or the exercise of de facto exclusivity.

69. In determining the intended scope of the prohibition on exclusive retransmission consent agreements, we believe that Congress intended that all activity associated with exclusive retransmission consent agreements be prohibited until January 1, 2006. Absent such a comprehensive prohibition, marketplace distortions could occur that would adversely influence the continuing development of a competitive marketplace for multichannel video programming services. For example, if an MVPD negotiates an exclusive retransmission consent agreement with a television broadcaster that will take effect after January 1, 2006, such MVPD undoubtedly would use that agreement in advertising or marketing strategies during the prohibition on exclusive retransmission consent agreements. The MVPD could market its services by stating that it will be the only MVPD providing a particular television broadcast station or stations after January 1, 2006. Given the overall pro-competitive mandate of SHVIA, we believe that Congress did not intend that we permit this type of market distortion while the section 325(b)(3)(C) prohibitions are in effect. As such, we interpret the phrase “engaging in” to proscribe not only entering into exclusive agreements, but also negotiation and execution of agreements granting exclusive retransmission consent after the prohibition expires.

70. As for the exercise of de facto exclusivity, we believe that the statute's good faith requirement sufficiently addresses concerns voiced by commenters. The good faith requirements of the statute and the Commission's rules adopted in this Order should adequately address behavior that would lead to de facto exclusivity.

71. On its face, the prohibition on exclusive retransmission consent agreements appears to have immediate effect. The Commission sought comment on the existence of exclusive satellite carrier retransmission consent agreements that either predate the enactment of SHVIA or under the Commission's rules implementing section 325(b)(3)(C)(ii). One commenter argues that the Commission should nullify any exclusive retransmission consent agreements that existed prior to SHVIA. The commenter suggests that the Commission's authority to nullify any such agreements stems from the requirements of the Commission's rules. Another commenter argues that the Commission should apply rules implementing the SHVIA prohibition on exclusive retransmission consent agreements retroactively. Some commenters from the broadcasting industry argue that any such agreements that were in existence prior to the enactment of SHVIA should be grandfathered.

72. Prior to the enactment of SHVIA, 47 CFR 76.64(m) prohibited all exclusive retransmission consent agreements. After its enactment, SHVIA prohibits all exclusive retransmission consent agreements prior to January 1, 2006. Thus, to the extent that any prohibited exclusive retransmission consent agreements exist between television broadcast stations and MVPDs, such agreements are prohibited either by Commission rule prior to SHVIA, or by SHVIA's express terms thereafter.

73. The Notice sought comment on whether there are circumstances in which the use of alternative dispute resolution (“ADR”) services would assist in determining whether a television broadcast station negotiated in good faith as defined by section 325(b)(3)(C) and the Commission's rules adopted thereunder. Several commenters argue that a dispute resolution mechanism is not necessary and contrary to the goal of swift resolution of such complaints. By contrast, Time Warner supports a mediation requirement that must be satisfied prior to the filing of a complaint with the Commission. Under Time Warner's proposal, the parties would have 60 days to negotiate in good faith. If an agreement has not been reached 30 days or less prior to the termination of retransmission consent, either party can require that the matter be submitted to mediation.

74. We will not, at this time, adopt Time Warner's mandatory mediation proposal. There has not been a sufficient demonstration that such a measure is necessary to implement the good faith provision of section 325(b)(3)(C). We believe, however, that voluntary mediation can play an important part in the facilitation of retransmission consent and encourage parties involved in protracted retransmission consent negotiations to pursue mediation on a voluntary basis. The Commission would favorably consider a broadcaster's willingness to participate in a mediation procedure in determining whether such broadcaster complied with its good faith negotiation obligations. We emphasize, however, that refusal to engage in voluntary mediation will not be considered probative of a failure to negotiate in good faith. We will revisit the issue of mandatory retransmission consent mediation if our experience in enforcing the good faith provision indicates that such a measure is necessary.

75. The Notice sought comment on what procedures the Commission should employ to enforce the provisions adopted pursuant to section 325(b)(3)(C). We asked commenters to state whether the same set of enforcement procedures should apply to both the exclusivity prohibition and the good faith negotiation requirement, or whether the Commission should adopt different procedures tailored to each prohibition. Specifically, we sought comment regarding whether special relief procedures of the type found in 47 CFR 76.7 provide an appropriate framework for addressing issues arising under section 325(b)(3)(C).

76. There is general consensus among the commenters that the general pleading provisions of 47 CFR 76.7 provide appropriate procedural rules for good faith and exclusivity complaints. No commenters justified a departure from the Commission's general pleading rules for matters filed with the Cable Services Bureau. We agree with these commenters urging the use of the 47 CFR 76.7 provisions and direct complainants to follow these provisions in filing retransmission consent complaints. Consistent with the requirements of 47 CFR 76.7, complaints alleging violations of the prohibition on exclusive retransmission consent agreements should: (1) identify the broadcaster and MVPD alleged to be parties to the prohibited exclusive agreement; (2) provide evidence that the complainant can or does serve the area of availability, or portions thereof, of the signal of the broadcaster named in the complaint; and (3) provide evidence that the complainant has requested retransmission consent to which the broadcaster has refused or failed to respond. Following the filing of a complaint, the defendant broadcaster must file an answer that specifically admits or denies the complainants allegation of the existence of an exclusive retransmission consent agreement.

77. We agree with those commenters who argue that some aspects of the program access procedural rules would assist the Commission in effectively processing and resolving retransmission consent complaints. We believe that it is necessary to impose a limitations period on the filing of retransmission consent complaints. In the program access, program carriage and open video system contexts, the Commission has established a one-year limitations period within which an aggrieved party must file a complaint with the Commission. Given that retransmission consent complaints are likely to be highly fact-specific and dependent on individual recollection, a similar limitations period is fair and appropriate with regard to retransmission consent complaints. Moreover, a limitations period lends finality and certainty to retransmission consent agreements after affording MVPDs an appropriate interval to challenge alleged violations of section 325(b)(3)(C). Accordingly, a complaint filed pursuant to section 325(b)(3)(C) must be filed within one year of the date any of the following occur: (a) a complainant MVPD enters into a retransmission consent agreement with a broadcaster that the complainant MVPD alleges violate one or more of the rules adopted herein; or (b) a broadcaster engages in retransmission consent negotiations with a complainant MVPD that the complainant MVPD alleges violate one or more of the rules adopted herein, and such negotiation is unrelated to any existing contract between the complainant MVPD and the broadcaster; or (c) the complainant MVPD has notified the broadcaster that it intends to file a complaint with the Commission based on a request to negotiate retransmission consent that has been denied, unreasonably delayed, or unacknowledged in violation of one or more of the rules adopted herein.

78. Several commenters urge the Commission to provide discovery as-of-right in retransmission consent complaint proceedings. Disney observes that since there is no automatic right to discovery in the more procedurally complex program access regime—a fortiori there should be no discovery in the context of retransmission consent proceedings. One commenter asserts that retransmission consent agreements and the negotiations surrounding them constitute confidential business information that must be protected by strong nondisclosure agreements if subject to Commission-directed discovery procedures. This commenter offers three limitations on Commission-directed discovery: (1) the complainant must have made a prima facie showing of evidence supporting its claim that a violation has taken place; (2) the Commission's discovery order must be narrowly-tailored to avoid fishing expeditions; and (3) the Commission must permit mutual discovery.

79. We decline the invitation of several commenters to apply discovery as-of-right to the retransmission complaint procedures. Interested parties should not interpret our decision as meaning that discovery will play no part in the section 325 complaint process. Because MVPDs will be present at negotiations, we generally anticipate that evidence of a violation of the good faith standard will be accessible by the MVPD complainant. Where complainants can demonstrate that such information is not available ( e.g., agreements entered into with other MVPDs) and that discovery is necessary to the proper conduct and resolution of a proceeding, the Commission will consider, where necessary, the imposition of discovery to develop a more complete record and resolve complaints. In this regard, parties are free to raise appropriate discovery requests in their pleadings. We will protect proprietary information, where necessary, pursuant to 47 CFR 76.9. Accordingly, we will employ Commission-controlled discovery as contemplated in the 47 CFR 76.7 procedures.

80. With regard to the appropriate measures for the Commission to take after a finding that a broadcaster has violated the good faith negotiation requirement, several commenters argue that the sole remedy is a Commission directive to engage in further negotiation consistent with the Commission's decision. In this regard, other commenters note that, in the labor law context, the Supreme Court has determined that the NLRB has no power to order parties to enter into a particular agreement, or even agree to individual terms. EchoStar argues that this is not the limit of the Commission's remedial authority and that the Commission should order a broadcaster that has been found to violate the Commission's prohibitions to conclude a retransmission consent agreement that “does not include any discriminatory terms not based on competitive marketplace considerations.” Other commenters argue that the Commission should adopt a liberal policy of allowing damages, both as a deterrent to unlawful conduct and as compensation to injured parties. Commenters opposing the imposition of damages note that, while Congress granted the Commission express authority to order appropriate remedies in the program access context, Congress did not grant such express authority in the context of the good faith negotiation requirement.

81. Congress did not empower the Commission to sit in judgement of the substantive terms and conditions of retransmission consent agreements. Therefore, in situations in which a broadcaster is determined to have failed to negotiate in good faith, the Commission will instruct the parties to renegotiate the agreement in accordance with the Commission's rules and section 325(b)(3)(C). We reiterate, however, that the Commission will not require any party to a retransmission consent agreement to offer or accept a specific term or condition or even to reach agreement as part of such renegotiation.

82. Although several commenters strongly favor the imposition of damages for adjudicated violations of section 325(b)(3)(C), we can divine no statutory grant of authority to take such action. Congress instructed the Commission to revise its regulations governing retransmission consent to prohibit exclusive agreements and require good faith negotiation. We can divine no intent in section 325(b)(3)(C) to impose damages for violations thereof. This is especially true where later in the same statutory provision, Congress expressly granted the District Courts of the United States the authority to impose statutory damages of up to $25,000 per violation, per day following a Commission determination of a retransmission consent violation by a satellite carrier. Commenters' reliance on the program access provisions as support for a damages remedy in this context is misplaced. The Commission's authority to impose damages for program access violations is based upon a statutory grant of authority. We note, however, that, as with all violations of the Communications Act or the Commission's rules, the Commission has the authority to impose forfeitures for violations of section 325(b)(3)(C).

83. The Notice requested comment on whether expedited procedures are necessary to the appropriate resolution of either exclusivity or good faith proceedings. Several commenters argue that, in section 325(e) of the Communications Act, Congress expressly required expedited processing of broadcasters' complaints that satellite carriers have illegally retransmitted local broadcaster signals without consent. Given this express directive by Congress, these commenters argue that the lack of an express directive to expedite good faith negotiation complaints indicates Congress' decision that such complaints should not receive expedited treatment. U S West, however, notes that the Commission has wide discretion to manage its procedures “as will best conduce to the proper dispatch of business and to the ends of justice.” Disney asserts that the Commission must ensure that good faith negotiation complaints are resolved expeditiously. In this regard, several commenters suggest various time limits within which the Commission should resolve complaints related to the good faith negotiation requirement and the exclusivity prohibition.

84. Commenters generally favor expedited action by the Commission regarding complaints filed pursuant to section 325(b)(3)(C). Because we conclude that, upon expiration of an MVPD's carriage rights under the section 325(b)(2)(E) six-month compulsory license period or an existing retransmission consent agreement, an MVPD may not continue carriage of a broadcaster's signal while a retransmission consent complaint is pending at the Commission, it is incumbent upon the Commission to expedite the resolution of these claims. We are mindful that Congress has imposed no express time limits for Commission resolution of retransmission consent complaints, whereas it has done so in other provisions of SHVIA and the Communications Act. We believe, however, that expeditious resolution of section 325(b)(3)(C) complaints is entirely consistent with Congress' statutory scheme. We believe that, to ensure efficient functioning of the retransmission consent process, and to avoid protracted loss of service to subscribers, expedited action on these claims is necessary.

85. While commenters propose various time periods within which the Commission should resolve retransmission consent complaints, we believe the spectrum of issues that may be involved in these proceedings does not lend itself to selecting one time period by which the Commission should resolve all complaints brought under section 325(b)(3)(C). For example, it would be inefficient and arbitrary to apply the same time period to a clear violation, such as outright refusal to negotiate, and a violation of the test involving analysis of the totality of the circumstances. Bearing in mind that the Commission must give maximum priority to matters involving statutory time limits, we instruct Commission staff to give priority to section 325(b)(3)(C) complaints and resolve them in an expeditious manner, considering the complexity of the issues raised. We will monitor the resolution times of individual retransmission consent complaints and, if necessary, we will revisit this issue in the future.

86. The Notice sought comment on how the burden of proof should be allocated. In this regard, we asked for comment on whether the burden should rest with the complaining party until it has made a prima facie showing and then shift to the defending party and what would constitute a prima facie showing sufficient to shift the burden to the defending party.

87. Arguing that, consistent with NLRB cases in which the party claiming bad faith bears the burden of proof, several commenters counsel the Commission to provide that the burden of proof should always be on the MVPD complainant. Indeed, several commenters assert that the Commission should adopt procedural rules that permit it to dismiss retransmission consent complaints summarily if the MVPD fails to satisfy a specified threshold standard.

88. Other commenters support a shifting of the burden of proof after a prima facie demonstration. Commenters assert that such a shifting is appropriate because of the difficulty of conclusively establishing the existence of an exclusive agreement or lack of good faith. For exclusivity complaints, DIRECTV and EchoStar suggest that a complaining party only provide affidavits or other documentary evidence to support its belief that a prohibited exclusive contract exists, and the burden of proof then shifts to the defendant to refute the existence of such agreement. For good faith complaints, DIRECTV and EchoStar suggest that the complaining party should provide a description of the conduct complained of, including conduct alleged to violate any of the good faith negotiation standards supported by any documentary evidence or an affidavit signed by an officer of the complaining MVPD setting forth the basis for the complainant's allegations. After the burden has shifted to the broadcaster, commenters urge the Commission to require the broadcaster to include with its answer a copy of any retransmission consent agreement the complainant alleges to contain unlawfully different terms and conditions, subject to Commission confidentiality protections. Several commenters maintain that the Commission should impose sanctions against filers of frivolous complaints. Network Affiliates argue that the adoption of a shifting burden mechanism will encourage the filing of frivolous complaints during the negotiation period in order to intimidate broadcasters.

89. Commenters advance cogent arguments both for and against shifting the burden to the broadcaster after a prima facie showing by a complaining MVPD. However, as in labor law context, we believe the burden should rest with the MVPD complainant to establish a violation of section 325(b)(3)(C). This conclusion is also consistent with our belief that generally the evidence of a violation of the good faith standard will be accessible by the complainant. This should not be interpreted as permitting a broadcaster to remain mute in the face of allegations of a section 325(b)(3)(C) violation. After service of a complaint, a broadcaster must file an answer as required by 47 CFR 76.7, which advises the parties and the Commission fully and completely of any and all defenses, responds specifically to all material allegations of the complaint, and admits or denies the averments on which the party relies. In addition, where necessary, the Commission has discretion to impose discovery requests on a defendant to a section 325(b)(3)(C) complaint. However, in the end, the complainant must bear the burden of proving that a violation occurred.

90. Section 325(b)(3)(C) directs that the regulations adopted by the Commission prohibit exclusive carriage agreements and require good faith negotiation of retransmission consent agreements “until January 1, 2006.” The Commission sought comment on whether the Commission's rules regarding exclusive carriage agreements and good faith negotiation should automatically sunset on this date. On its face, this provision would seem to sunset the prohibition on exclusive retransmission consent agreements and good faith negotiation for all MVPDs. Under this reading of the statute, the Commission's rule prohibiting exclusive retransmission consent agreements for cable operators would be deemed abrogated as of January 1, 2006.

91. The broadcast industry argues that this is the correct interpretation of SHVIA. One commenter states that “[b]ecause the statutory language is plain on its face, and because Congress acted with knowledge of the existing regulatory prohibition, it is clear that Congress intended to abrogate the Commission's existing rule prohibiting exclusive retransmission consent agreements with cable operators.” This commenter additionally argues that the prohibition on exclusive retransmission consent agreements was meant to correct imbalances in the marketplace, and thus was established as a temporary solution.

92. The satellite industry and other MVPD representatives disagree with this interpretation of the statute. Two commenters argue that the date set out in the statute establishes a minimum time frame on the prohibition of exclusive retransmission consent agreements and the good faith negotiation requirement. Others state that interpreting the statute as sunsetting the Commission's prohibitions on exclusive retransmission consent agreements runs contrary to the intent of Congress. Specifically, they argue that nothing in the legislative history demonstrates an intent to sunset section 325(b)(3)(C), and without an affirmative statement of intent, no such intent may be inferred. Commenters argue that to sunset the prohibition would result in anti-competitive behavior, and would thus undermine the goals of SHVIA. Finally, many commenters from the satellite industry and the MVPD industry argue that the Commission has authority to extend the prohibition on exclusive retransmission consent agreements beyond January 1, 2006, if the Commission determines that such an extension would be in the public interest.

93. A third approach to this issue is advanced by some representatives of the satellite industry and the cable industry. Time Warner argues that the Commission should make no determination at this point over whether to sunset the prohibition, but rather should make a decision closer to the expiration date set out in the statute.

94. We believe that the statute is clear on its face, and that the correct interpretation of the language “until January 1, 2006” is that the prohibitions on exclusive retransmission consent agreements and the good faith negotiation requirement terminate on that date. We agree with commentators who argue that the provisions of section 325(b)(3)(C) are meant to foster competition. However, in the absence of guidance from Congress as to the Commission's authority after this date, we can not assume that Congress was establishing a minimum time frame and that the Commission has authority to promulgate rules prohibiting exclusive retransmission consent agreements and requiring good faith negotiation beyond January 1, 2006. Congress has demonstrated its ability to craft legislation that established a sunset date which the Commission has express authority to extend. Such language is not contained in SHVIA. The statute clearly states that the provisions would last “until January 1, 2006.” The legislative history does not express any intent to extend such provisions. Thus, we must interpret section 325(b)(3)(C) as written and that January 1, 2006 is meant to be the sunset date for the prohibition of exclusive retransmission consent agreements and the rules on good faith retransmission consent negotiations.

95. Final Regulatory Flexibility Analysis. As required by the Regulatory Flexibility Act (“RFA”), see 5 U.S.C. 603, an Initial Regulatory Flexibility Analysis (“IRFA”) was incorporated in the Notice. The Commission sought written public comments on the possible significant economic impact of the proposed policies and rules on small entities in the Notice, including comments on the IRFA. Pursuant to the RFA, see 5 U.S.C. 604, a Final Regulatory Flexibility Analysis is contained in this document.

96. Paperwork Reduction Act of 1995 Analysis. The actions herein have been analyzed with respect to the Paperwork Reduction Act of 1995 and found to impose no new or modified reporting and recordkeeping requirements or burdens on the public.

97. Effective Date. As discussed, section 325(b)(2)(E) of the Communications Act grants satellite carriers a six-month period during which they may retransmit the signals of local broadcasters without a broadcaster's express retransmission consent. We have adopted these rules before the end of the six-month period provided by section 325(b)(2)(E) so that MVPDs, particularly satellite carriers, and broadcasters understand their rights and obligations under section 325(b)(3)(C) before that period expires. To afford parties the maximum amount of time to negotiate retransmission consent in good faith and to file complaints pursuant to section 325(b)(3)(C) before the expiration of the six-month period, this First Report and Order will be effective upon publication in the Federal Register . We find good cause exists under the Administrative Procedure Act (“APA”) to have the rules adopted in this First Report and Order be effective March 23, 2000 pursuant to section 553(d)(3) of the APA. Prompt effectiveness of these rules will provide a framework under which broadcasters and satellite carriers can achieve retransmission consent before the expiration of the six-month period set forth in section 325(b)(2)(E).

a. As required by the Regulatory Flexibility Act (“RFA”), an Initial Regulatory Flexibility Analysis (“IRFA”) was incorporated in the Notice of Proposed Rulemaking (“Notice”) in CS Docket No. 99-363, FCC 99-406. The Commission sought written public comments on the proposals in the Notice, including comment on the IRFA. This Final Regulatory Flexibility Analysis (“FRFA”) conforms to the RFA.

b. Need for, and Objectives of, this Report and Order. Section 1009 of the Satellite Home Viewer Improvement Act (“SHVIA”), codified as section 325 of the Communications Act of 1934, as amended (“Act”), 47 U.S.C. 325, instructs the Commission to revise the regulations governing the exercise by television broadcast stations of the right to grant retransmission consent. Congress directed the Commission to devise regulations, procedures, and standards implementing a good faith requirement in the negotiation of agreements in connection with the transmission of television broadcast station signals by multichannel video programming distributors (“MVPDs”). This Report and Order adopts rules governing negotiation of retransmission consent between broadcasters and all MVPDs which will help to ensure that negotiations are conducted in an atmosphere of honesty, clarity of process and good faith. In particular, this proceeding provides a clear framework under which broadcasters and satellite carriers can achieve retransmission consent before expiration and interruption of local broadcast signals that satellite carriers have begun to provide their subscribers in many cities across the nation since the enactment of the SHVIA. Further, pursuant to the SHVIA, this proceeding also addresses implementing rules prohibiting exclusive retransmission consent agreements. Finally, the Report and Order adopts a complaint process to assist the Commission in enforcing the statutory obligations related to section 325(b)(3)(C).

c. Summary of Significant Issues Raised by Public Comments in Response to the IRFA. We received one comment in direct response to the IRFA. The American Cable Association (“ACA”) argues that smaller cable systems play an important role in the distribution of local signals in rural America and smaller communities and that competitive imbalances from broadcaster abuses relating to retransmission consent threatens this role. In particular, ACA states that the “IFRA remains devoid of any meaningful analysis of how any retransmission consent rules that may result would impact smaller cable businesses and their systems, nor does it propose alternative relief to accommodate the unique needs of those businesses. Instead, the Commission generally believes that entity size has no bearing on the issues raised in the Notice.” We note, however, that in the IFRA we discussed the retransmission consent election process and the possibility that differences among MVPDs might justify different election schemes. We stated that we had not proposed to treat small entities differently in this regard, but sought comment on the possibility. We also sought comment on four specific alternatives that might lessen the compliance burden on small entities: (1) the establishment of differing compliance or reporting requirements or timetables that take into account the resources available to small entities; (2) the clarification, consolidation, or simplification of compliance or reporting requirements under the rule for small entities; (3) the use of performance, rather than design standards: and (4) an exemption from coverage of the rule, or any part thereof, for small entities. None of the other parties in this proceeding filed comments on how issues raised in the Notice would impact small entities. Below, in the section of the FRFA titled, “Steps Taken to Minimize Significant Impact on Small Entities, and Significant Alternatives Considered,” we discuss further ACA's comment concerning the possible impact on small entities.

d. Description and Estimate of the Number of Small Entities To Which the Rules Will Apply. The RFA directs the Commission to provide a description of and, where feasible, an estimate of the number of small entities that will be affected by the proposed rules. The RFA defines the term “small entity” as having the same meaning as the terms “small business,” “small organization,” and “small business concern” under Section 3 of the Small Business Act. Under the Small Business Act, a small business concern is one which: (1) is independently owned and operated; (2) is not dominant in its field of operation; and (3) satisfies any additional criteria established by the Small Business Administration (“SBA”). The rules we adopt as a result of the Report and Order will affect television station licensees, cable operators, and other MVPDs.

e. Television Stations. The Small Business Administration defines a television broadcasting station that has no more than $10.5 million in annual receipts as a small business. Television broadcasting stations consist of establishments primarily engaged in broadcasting visual programs by television to the public, except cable and other pay television services. Included in this industry are commercial, religious, educational, and other television stations. Also included are establishments primarily engaged in television broadcasting and which produce taped television program materials. Separate establishments primarily engaged in producing taped television program materials are classified under another SIC number. There were 1,509 television stations operating in the nation in 1992. That number has remained fairly constant as indicated by the approximately 1,579 operating full power television broadcasting stations in the nation as of May 31, 1998.

f. Thus, the rules will affect many of the approximately 1,579 television stations; approximately 1,200 of those stations are considered small businesses. These estimates may overstate the number of small entities since the revenue figures on which they are based do not include or aggregate revenues from non-television affiliated companies.

g. In addition to owners of operating television stations, any entity that seeks or desires to obtain a television broadcast license may be affected by the rules contained in this item. The number of entities that may seek to obtain a television broadcast license is unknown.

h. Small MVPDs: SBA has developed a definition of small entities for cable and other pay television services, which includes all such companies generating $11 million or less in annual receipts. This definition includes cable system operators, direct broadcast satellite services, multipoint distribution systems, satellite master antenna systems and subscription television services. According to the Census Bureau data from 1992, there were 1,758 total cable and other pay television services and 1,423 had less than $11 million in revenue. We address below services individually to provide a more precise estimate of small entities.

i. Cable Systems: The SBA has developed a definition of small entities for cable and other pay television services under Standard Industrial Classification 4841 (SIC 4841), which covers subscription television services, which includes all such companies with annual gross revenues of $11 million or less. This definition includes cable systems operators, closed circuit television services, direct broadcast satellite services, multipoint distribution systems, satellite master antenna systems and subscription television services. According to the Census Bureau, there were 1,323 such cable and other pay television services generating less than $11 million in revenue that were in operation for at least one year at the end of 1992.

j. The Commission has developed, with SBA's approval, its own definition of a small cable system operator for the purposes of rate regulation. Under the Commission's rules, a “small cable company” is one serving fewer than 400,000 subscribers nationwide. Based on our most recent information, we estimate that there were 1439 cable operators that qualified as small cable companies at the end of 1995. Since then, some of those companies may have grown to serve over 400,000 subscribers, and others may have been involved in transactions that caused them to be combined with other cable operators. The Commission's rules also define a “small system,” for the purposes of cable rate regulation, as a cable system with 15,000 or fewer subscribers. We do not request nor do we collect information concerning cable systems serving 15,000 or fewer subscribers and thus are unable to estimate at this time the number of small cable systems nationwide.

k. The Communications Act also contains a definition of a small cable system operator, which is “a cable operator that, directly or through an affiliate, serves in the aggregate fewer than 1% of all subscribers in the United States and is not affiliated with any entity or entities whose gross annual revenues in the aggregate exceed $250,000,000.” The Commission has determined that there are 61,700,000 subscribers in the United States. Therefore, an operator serving fewer than 617,000 subscribers shall be deemed a small operator, if its annual revenues, when combined with the total annual revenues of all of its affiliates, do not exceed $250 million in the aggregate. Based on available data, we find that the number of cable operators serving 617,000 subscribers or less totals approximately 1450. Although it seems certain that some of these cable system operators are affiliated with entities whose gross annual revenues exceed $250,000,000, we are unable at this time to estimate with greater precision the number of cable system operators that would qualify as small cable operators under the definition in the Communications Act. It should be further noted that recent industry estimates project that there will be a total 64,000,000 subscribers and we have based our fee revenue estimates on that figure.

l. Open Video System (“OVS”): The Commission has certified eleven OVS operators. Of these eleven, only two are providing service. Affiliates of Residential Communications Network, Inc. (“RCN”) received approval to operate OVS systems in New York City, Boston, Washington, D.C. and other areas. RCN has sufficient revenues to assure us that they do not qualify as small business entities. Little financial information is available for the other entities authorized to provide OVS that are not yet operational. Given that other entities have been authorized to provide OVS service but have not yet begun to generate revenues, we conclude that at least some of the OVS operators qualify as small entities.

m. Multichannel Multipoint Distribution Service (“MMDS”): The Commission refined the definition of “small entity” for the auction of MMDS as an entity that together with its affiliates has average gross annual revenues that are not more than $40 million for the proceeding three calendar years. This definition of a small entity in the context of the Commission's Report and Order concerning MMDS auctions that has been approved by the SBA.

n. The Commission completed its MMDS auction in March, 1996 for authorizations in 493 basic trading areas (“BTAs”). Of 67 winning bidders, 61 qualified as small entities. Five bidders indicated that they were minority-owned and four winners indicated that they were women-owned businesses. MMDS is an especially competitive service, with approximately 1,573 previously authorized and proposed MMDS facilities. Information available to us indicates that no MDS facility generates revenue in excess of $11 million annually. We conclude that there are approximately 1,634 small MMDS providers as defined by the SBA and the Commission's auction rules.

o. DBS: There are four licenses of DBS services under part 100 of the Commission's Rules. Three of those licensees are currently operational. Two of the licensees which are operational have annual revenues which may be in excess of the threshold for a small business. The Commission, however, does not collect annual revenue data for DBS and, therefore, is unable to ascertain the number of small DBS licensees that could be impacted by these proposed rules. DBS service requires a great investment of capital for operation, and we acknowledge that there are entrants in this field that may not yet have generated $11 million in annual receipts, and therefore may be categorized as a small business, if independently owned and operated.

p. HSD: The market for HSD service is difficult to quantify. Indeed, the service itself bears little resemblance to other MVPDs. HSD owners have access to more than 265 channels of programming placed on C-band satellites by programmers for receipt and distribution by MVPDs, of which 115 channels are scrambled and approximately 150 are unscrambled. HSD owners can watch unscrambled channels without paying a subscription fee. To receive scrambled channels, however, an HSD owner must purchase an integrated receiver-decoder from an equipment dealer and pay a subscription fee to an HSD programming package. Thus, HSD users include: (1) viewers who subscribe to a packaged programming service, which affords them access to most of the same programming provided to subscribers of other MVPDs; (2) viewers who receive only non-subscription programming; and (3) viewers who receive satellite programming services illegally without subscribing. Because scrambled packages of programming are most specifically intended for retail consumers, these are the services most relevant to this discussion.

q. According to the most recently available information, there are approximately 30 program packages nationwide offering packages of scrambled programming to retail consumers. These program packages provide subscriptions to approximately 2,314,900 subscribers nationwide. This is an average of about 77,163 subscribers per program package. This is substantially smaller than the 400,000 subscribers used in the commission's definition of a small MSO. Furthermore, because this is an average, it is likely that some program packages may be substantially smaller.

r. SMATVs: Industry sources estimate that approximately 5,200 SMATV operators were providing service as of December, 1995. Other estimates indicate that SMATV operators serve approximately 1.05 million residential subscribers as of September, 1996. The ten largest SMATV operators together pass 815,740 units. If we assume that these SMATV operators serve 50% of the units passed, the ten largest SMATV operators serve approximately 40% of the total number of SMATV subscribers. Because these operators are not rate regulated, they are not required to file financial data with the Commission. Furthermore, we are not aware of any privately published financial information regarding these operators. Based on the estimated number of operators and the estimated number of units served by the largest ten SMATVs, we tentatively conclude that a substantial number of SMATV operators qualify as small entities.

s. Description of Projected Reporting, Recordkeeping and other Compliance Requirements. This Report and Order establishes a series of rules implementing good faith guidelines in connection with retransmission consent agreements between television broadcast stations and all MVPDs. The good faith negotiation requirement applies only to broadcasters, however the conduct of MVPDs that seek retransmission consent is not irrelevant to the Commission in determining whether a broadcaster has complied with its obligation to negotiate retransmission consent in good faith. During the process of developing and negotiating retransmission consent, parties will be guided by the principles and provisions established in this Report and Order. While the substance of the agreements should be left to the market, the Commission is responsible for enforcing the process of good faith negotiation. We have established standards, practices, and conduct, derived principally from NLRB precedent, that will be applicable to all retransmission consent negotiations. First among the negotiation standards is that a broadcaster may not refuse to negotiate with an MVPD regarding retransmission consent. Additional standards outline broadcaster conduct required to meet the good faith standard in retransmission consent negotiation.

t. Pursuant to the directive by Congress, this proceeding also describes and explains the limits relating to exclusivity agreements and implements rules in that regard. Specifically, the SHVIA prohibits all exclusive retransmission agreements for television broadcast stations and MVPDs prior to January 1, 2006. We interpret the phrase “engaging in” to proscribe not only entering into exclusive agreements, but also negotiation and execution of agreements granting exclusive retransmission consent. The Commission also establishes complaint procedures and sets forth the requirements of complainants to address situations where there is evidence of exclusive retransmission consent agreements.

u. In the event that the good faith negotiation obligation provisions are not adhered to, enforcement procedures also have been established to report concerns and complaints and address disputes between parties. An MVPD believing itself aggrieved, may file a complaint with the Commission. Based upon pleadings filed, a determination will be made by the Commission on the issue of good faith.

v. Steps Taken to Minimize Significant Impact on Small Entities, and Significant Alternatives Considered. In this Report and Order, of major importance is the principle of sustaining an environment where there will be fairness, fair dealings, and true competition between parties in the process of developing agreements on retransmission consent. This proceeding develops a definite framework for retransmission consent agreements so that television broadcast stations and MVPDs are aware of their rights and obligations under section 325(b)(3)(C).

w. As noted, American Cable Association (“ACA”) asserts that because retransmission consent agreements have been largely unrestricted, broadcasters have tried to extract unreasonable concessions in return for retransmission consent from smaller cable systems and will continue to do so. It states that the Commission must establish sufficient safeguards to protect individual smaller cable businesses. ACA suggests that the Commission should articulate its expectations regarding good faith negotiations and extend those obligations to all retransmission consent negotiations, including cable. We do not believe it necessary to develop specific rules for particular subsets of the MVPD market. The good faith negotiation requirement applies to a broadcaster's negotiations with all MVPDs, including small cable operators. The Report and Order adopts rules to implement this obligation with regard to all broadcaster negotiations with all MVPDs. For example, we set forth good faith negotiations standards, which proscribe the actions or practices that would violate a broadcast television station's duty to negotiate retransmission consent agreements in good faith. Further, procedures to address exclusivity complaints are also established. Small businesses are subject to these provisions and will benefit from the protection provided. We believe this sufficiently ameliorates ACA's concerns.

x. Report to Congress: The Commission will send a copy of this Report and Order, including this FRFA, in a report to Congress pursuant to the Small Business Regulatory Enforcement Fairness Act of 1996, 5 U.S.C. 801(a)(1)(A). A copy of this Report and Order and FRFA (or summary thereof) will also be published in the Federal Register , pursuant to 5 U.S.C. 604(b), and will be sent to the Chief Counsel for Advocacy of the Small Business Administration.

98. Pursuant to authority found in sections 4(i) 4(j), 303(r) and 325 of the Communications Act of 1934, as amended, 47 U.S.C. 154(i), 154(j), 303(r) and 325, the Commission's rules are hereby amended as set forth.

99. The rule amendments set forth will become effective March 23, 2000.

100. The Consumer Information Bureau, Reference Information Center shall send this First Report and Order, including the Final Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of the Small Business Administration.

Soon after the passage of the Fishery Conservation and Management Act in 1976, the Secretary designated species-specific management responsibilities to the Councils. The skate species were not among those designated for management. In April 1999, the NEFMC requested the Secretary to grant the NEFMC sole authority to manage seven species of skate found in the Northeast—namely the barndoor, clearnose, little, rosette, smooth, thorny, and winter skate. In August 1999, the Mid-Atlantic Fishery Management Council agreed that it would be appropriate for the NEFMC to manage the Northeast skate fisheries. On March 14, 2000, NMFS informed the NEFMC that the Assistant Administrator for Fisheries, NMFS, on behalf of the Secretary, designated the NEFMC as the Council responsible for developing an FMP for seven species of skate found in Federal waters off the coast of the New England and Mid-Atlantic states.

The determination of the status of a stock relative to overfishing and overfished condition is based on both the rate of removal of fish from the population through fishing (the exploitation rate) and the current stock size. When the exploitation rate jeopardizes the capacity of a stock to produce its maximum sustainable yield (MSY) on a continuing basis, overfishing is occurring. Exploitation rates are usually expressed in terms of an instantaneous fishing mortality rate (F).

Another important factor for classifying the status of a resource is the current stock level. If a stock's biomass falls below its minimum biomass threshold, the capacity of the stock to produce MSY on a continuing basis is jeopardized and the stock is said to be in an overfished condition.

NMFS' Northeast Fisheries Science Center assessed the Northeast skate stocks at the 30th Northeast Regional Stock Assessment Workshop (SAW 30), in January 2000. Results of SAW 30 indicate that barndoor, smooth, thorny, and winter skate are overfished as discussed below.

The abundance of barndoor skate declined continuously through the 1960s to historic lows during the early 1980s. Since 1990, the abundance of barndoor skate has increased slightly on Georges Bank, the western Scotian Shelf, and in southern New England. However, the 1999 NEFMC autumn survey biomass index was less than 5 percent of the peak observed in 1963. F could not be estimated for the stock, nor could an F reference point be determined. However, the 1996-98 NEFMC autumn survey biomass index of 0.08 kg/tow was below the proposed biomass threshold of 0.81 kg/tow. Therefore, barndoor skate is overfished.

The abundance of smooth skate was highest during the early 1960s and late 1970s. F could not be estimated for the stock, nor could an F reference point be determined. However, the 1996-1998 NEFMC autumn survey biomass index of 0.15 kg/tow was below the proposed biomass threshold of 0.16 kg/tow. Therefore, smooth skate is overfished.

The abundance of thorny skate has declined to historic lows. Current abundance is about 10-15 percent of the peak observed in the late 1960s and early 1970s. F could not be estimated for the stock, nor could an F reference point be determined. However, the 1996-1998 NEFSC autumn surgery biomass index of 0.77 kg/tow was below the proposed biomass threshold of 2.20 kg/tow. Therefore, thorny skate is overfished.

Winter skate abundance is currently about the same as in the early 1970s, at about 25 percent of the peak observed during the mid-1980s. Comparison of the current F(0.39), based on the NEFSC spring survey, to the proposed threshold F(0.1) indicates that overfishing is occurring. The 1996-1998 NEFSC autumn survey biomass index average of 2.83 kg/tow was below the proposed biomass threshold of 3.23 kg/tow. Therefore, winter skate is also overfished.

Section 304(e) of the Magnuson-Stevens Fishery Conservation and Management Act requires that within 1 year of being notified of the identification of a stock as being overfished, the affected Council must develop measures to end overfishing and rebuild the stock. On March 14, 2000, the NEFMC was informed that it had been designated as the Council having responsibility for the management of the Northeast skate fisheries and was notified of the overfished status of the barndoor, winter, thorny, and smooth skate stocks. The letter to the NEFMC reads as follows:

The emergency interim rule that implemented major provisions of the American Fisheries Act (65 FR 4520, January 28, 2000) established AFA inshore processor and AFA mothership crab processing sideboard limits at § 679.64. NMFS did not intend for these crab processing sideboard limits to be applicable to the processing of CDQ crab. The AFA contains language that would cap crab processing in the directed crab fisheries, under the authority of the North Pacific Fishery Management Council, but does not contain language as to whether CDQ crab is part of the directed crab fisheries. To include the CDQ crab counts toward the cap would be highly disruptive to this entity because the CDQ crab fishery is not a directed fishery and comes after the open access crab fisheries. Therefore, NMFS has made a policy judgement to exclude CDQ crab from the processing caps and is correcting the AFA emergency rule by incorporating its interpretation of this policy in the emergency rule.

In the emergency interim rule To Implement Major Provisions of the American Fisheries Act, published in the Federal Register on January 28, 2000 (65 FR 4520), the following corrections are made in the regulatory text.

1. On page 4544, in § 679.64, paragraphs (a) and (b), the first sentence of paragraph (d), and paragraph (e) are corrected to read as follows: