We invite interested people to participate in this rulemaking by submitting written comments, data, or views. The most helpful comments reference a specific portion of the special conditions, explain the reason for any recommended change, and include supporting data. We ask that you send us two copies of written comments.

We will file in the docket all comments we receive as well as a report summarizing each substantive public contact with FAA personnel concerning these proposed special conditions. You can inspect the docket before and after the comment closing date. If you wish to review the docket in person, go to the address in the ADDRESSES section of this notice between 7:30 a.m. and 4 p.m., Monday through Friday, except Federal holidays.

We will consider all comments we receive on or before the closing date for comments. We will consider comments filed late, if it is possible to do so without incurring expense or delay. We may change the proposed special conditions in light of the comments we receive.

If you want the FAA to acknowledge receipt of your comments on this proposal, include with your comments a pre-addressed, stamped postcard on which the docket number appears. We will stamp the date on the postcard and mail it back to you.

On June 4, 2002, Dassault Aviation, 9 rond Point des Champs Elysees, 75008, Paris, France, applied for an FAA type certificate for its new Model Falcon 7X airplane. The Dassault Model Falcon 7X airplane is a 19 passenger transport category airplane powered by three aft mounted Pratt & Whitney PW307A high bypass ratio turbofan engines. Maximum takeoff weight will be 63,700 pounds, and maximum certified altitude will be 51,000 feet with a range of 5,700 nautical miles. The airplane is operated using a fly-by-wire (FBW) primary flight control system. This will be the first application of a FBW primary flight control system in a private/corporate use airplane.

The Dassault Aviation Model Falcon 7X design incorporates equipment that was not envisioned when part 25 was created. This equipment affects the sudden engine stoppage, operation without normal electrical power, and dive speed definition with speed protection system. Therefore, special conditions are required that provide the level of safety equivalent to that established by the regulations.

Under the provisions of 14 CFR 21.17, Dassault Aviation must show that the Model Falcon 7X airplane meets the applicable provisions of 14 CFR part 25, as amended by Amendments 25-1 through 25-108.

If the Administrator finds that the applicable airworthiness regulations do not contain adequate or appropriate safety standards for the Model Falcon 7X airplane because of novel or unusual design features, special conditions are prescribed under the provisions of § 21.16.

In addition to the applicable airworthiness regulations and special conditions, the Dassault Model Falcon 7X airplane must comply with the fuel vent and exhaust emission requirements of 14 CFR part 34 and the noise certification requirements of 14 CFR part 36. In addition, the FAA must issue a finding of regulatory adequacy under section 611 of Public Law 93-574, the “Noise Control Act of 1972.”

The FAA issues special conditions, as defined in § 11.19, under § 11.38, and they become part of the type certification basis under § 21.17(a)(2).

Special conditions are initially applicable to the model for which they are issued. Should the type certificate for that model be amended later to include any other model that incorporates the same novel or unusual design feature, the special conditions would also apply to the other model under § 21.101.

The Dassault Aviation Model Falcon 7X airplane will incorporate the following novel or unusual design features:

• Sudden engine stoppage.

• Operation without normal electrical power.

• Dive speed definition with speed protection system.

• Side stick controllers;

• Electronic flight control system: lateral-directional and longitudinal stability, low energy awareness.

• Electronic flight control system: flight control surface position awareness, and

• Electronic flight control system: flight characteristics compliance via the handling qualities rating method (HQRM);

• Flight envelope protection: general limiting requirements,

• Flight envelope protection: high incidence protection function,

• Flight envelope protection: normal load factor (g) limiting,

• Flight envelope protection: pitch, roll, and high speed limiting functions.

Final special conditions have been issued for the Model Falcon 7X with the novel or unusual design feature pertaining to Pilot Compartment View-Hydrophobic Coatings in Lieu of Windshield Wipers (January 10, 2007; 72 FR 1135). Special conditions have been proposed for the Model Falcon 7X with the novel or unusual design features pertaining to Interaction of Systems and Structures, Limit Pilot Forces, and High Intensity Radiated Fields (HIRF) (October 18, 2006; 71 FR 61427).

Because of these rapid improvements in airplane technology, the applicable airworthiness regulations do not contain adequate or appropriate safety standards for these design features. Therefore, in addition to the requirements of part 25, subparts C and D, the following special conditions apply.

The Dassault Model Falcon 7X will have high-bypass ratio turbofan engines. Engines of this size were not envisioned when § 25.361, pertaining to loads imposed by engine seizure, was adopted in 1965. Worst case engine seizure events become increasingly more severe with increasing engine size because of the higher inertia of the rotating components.

Section 25.361(b)(1) requires that for turbine engine installations, the engine mounts and the supporting structures must be designed to withstand a “limit engine torque load imposed by sudden engine stoppage due to malfunction or structural failure.” Limit loads are expected to occur about once in the lifetime of any airplane. Section 25.305 requires that supporting structures be able to support limit loads without detrimental permanent deformation, meaning that supporting structures should remain serviceable after a limit load event.

Since adoption of § 25.361(b)(1), the size, configuration, and failure modes of jet engines have changed considerably. Current engines are much larger and are designed with large bypass fans. In the event of a structural failure, these engines are capable of producing much higher transient loads on the engine mounts and supporting structures.

As a result, modern high bypass engines are subject to certain rare-but-severe engine seizure events. Service history shows that such events occur far less frequently than limit load events. Although it is important for the airplane to be able to support such rare loads safely without failure, it is unrealistic to expect that no permanent deformation will occur.

Given this situation, Aviation Rulemaking Advisory Committee (ARAC) has proposed a design standard for today's large engines. For the commonly-occurring deceleration events, the proposed standard would require engine mounts and structures to support maximum torques without detrimental permanent deformation. For the rare-but-severe engine seizure events such as loss of any fan, compressor, or turbine blade, the proposed standard would require engine mounts and structures to support maximum torques without failure, but allows for some deformation in the structure.

The FAA concludes that modern large engines, including those on the Model Falcon 7X, are novel and unusual compared to those envisioned when § 25.361(b)(1) was adopted and thus warrant a special condition. The proposed special condition contains design criteria recommended by ARAC. The ARAC proposal would revise the wording of § 25.361(b), including §§ 25.361(b)(1) and (b)(2), removing language pertaining to structural failures and moving it to a separate requirement that discusses the reduced factors of safety that apply to these failures.

The Dassault Aviation Model Falcon 7X airplane will have electrical and electronic systems which perform critical functions. The Model Falcon 7X airplane is a fly-by-wire control system that requires a continuous source of electrical power for the flight control system to remain operable, since the loss of all electrical power may be catastrophic to the airplane. The airworthiness standards of part 25 do not contain adequate or appropriate standards for the protection of the Electronic Flight Control System from the adverse effects of operations without normal electrical power.

Section 25.1351(d), “Operation without normal electrical power,” requires safe operation in visual flight rule (VFR) conditions for at least five minutes with inoperative normal power. This rule was structured around a traditional design utilizing mechanical control cables for flight control surfaces and the pilot controls. Such traditional designs enable the flightcrew to maintain control of the airplane, while providing time to sort out the electrical failure, re-start the engines if necessary, and re-establish some of the electrical power generation capability.

The Dassault Aviation Model Falcon 7X airplane, however, will utilize an Electronic Flight Control System for the pitch and yaw control (elevator, stabilizer, and rudder). There is no mechanical linkage between the pilot controls and these flight control surfaces. Pilot control inputs are converted to electrical signals, which are processed and then transmitted via wires to the control surface actuators. At the control surface actuators, the electrical signals are converted to an actuator command, which moves the control surface.

To maintain the same level of safety as that associated with traditional designs, the Dassault Model 7X airplanes with electronic flight controls must not be time limited in its operation, including being without the normal source of electrical power generated by the engine or the Auxiliary Power Unit (APU) generated electrical power.

Service experience has shown that the loss of all electrical power generated by the airplane's engine generators or APU is not extremely improbable. Thus, it must be demonstrated that the airplane can continue safe flight and landing—including steering and braking on ground for airplanes using steer/brake-by-wire—after total loss of normal electrical power with the use of its emergency electrical power systems. These emergency electrical power systems must be able to power loads that are essential for continued safe flight and landing.

Dassault Aviation proposes to reduce the speed margin between V C and V D required by § 25.335(b), based on the incorporation of a high speed protection system in the Model Falcon 7X flight control laws. The Falcon 7X is equipped with a high speed protection system which limits nose down pilot authority at speeds above V C /M C and prevents the airplane from actually performing the maneuver required under § 25.335(b)(1).

Section 25.335(b)(1) is an analytical envelope condition which was originally adopted in Part 4b of the Civil Air Regulations to provide an acceptable speed margin between design cruise speed and design dive speed. Freedom from flutter and airframe design loads is affected by the design dive speed. While the initial condition for the upset specified in the rule is 1g level flight, protection is afforded for other inadvertent overspeed conditions as well. Section 25.335(b)(1) is intended as a conservative enveloping condition for all potential overspeed conditions, including non-symmetric ones.

To establish that all potential overspeed conditions are enveloped, the applicant would demonstrate that the dive speed will not be exceeded during pilot-induced or gust-induced upsets in non-symmetric attitudes.

In addition, the high speed protection system in the Falcon 7X must have a high level of reliability.

As discussed above, these special conditions are applicable to the Dassault Aviation Model Falcon 7X airplane. Should Dassault Aviation apply at a later date for a change to the type certificate to include another model incorporating the same novel or unusual design features, these special conditions would apply to that model as well.

This action affects only certain novel or unusual design features of the Dassault Aviation Model Falcon 7X airplane. It is not a rule of general applicability, and it affects only the applicant which applied to the FAA for approval of these features on the airplane.

The authority citation for these special conditions is as follows:

Accordingly, pursuant to the authority delegated to me by the Administrator, the following special conditions are issued as part of the type certification basis for the Dassault Aviation Model Falcon 7X airplane.

In lieu of the requirements of § 25.361(b) the following special condition applies:

(a) For turbine engine installations, the engine mounts, pylons and adjacent supporting airframe structure must be designed to withstand 1g level flight loads acting simultaneously with the maximum limit torque loads imposed by each of the following:

(1) Sudden engine deceleration due to a malfunction which could result in a temporary loss of power or thrust; and

(2) The maximum acceleration of the engine.

(b) For auxiliary power unit installations, the power unit mounts and adjacent supporting airframe structure must be designed to withstand 1g level flight loads acting simultaneously with the maximum limit torque loads imposed by each of the following:

(1) Sudden auxiliary power unit deceleration due to malfunction or structural failure; and

(2) The maximum acceleration of the power unit.

(c) For engine supporting structures, an ultimate loading condition must be considered that combines 1g flight loads with the transient dynamic loads resulting from:

(1) The loss of any fan, compressor, or turbine blade; and separately

(2) where applicable to a specific engine design, any other engine structural failure that results in higher loads.

(d) The ultimate loads developed from the conditions specified in paragraphs (c)(1) and (2) above are to be multiplied by a factor of 1.0 when applied to engine mounts and pylons and multiplied by a factor of 1.25 when applied to adjacent supporting airframe structure. In addition, the airplane must be capable of continued safe flight considering the aerodynamic effects on controllability due to any permanent deformation that results from the conditions specified in paragraph (c), above.

In lieu of the requirements of 14 CFR 25.1351(d), the following special condition applies:

It must be demonstrated by test or combination of test and analysis that the airplane can continue safe flight and landing with inoperative normal engine and APU generator electrical power (i.e., electrical power sources, excluding the battery and any other standby electrical sources). The airplane operation should be considered at the critical phase of flight and include the ability to restart the engines and maintain flight for the maximum diversion time capability being certified.

In lieu of the requirements of § 25.335(b)(1)—if the flight control system includes functions which act automatically to initiate recovery before the end of the 20 second period specified in § 25.335(b)(1)—the following special condition applies.

The greater of the speeds resulting from the conditions of paragraphs (a) and (b), below, must be used.

(a) From an initial condition of stabilized flight at V C /M C , the airplane is upset so as to take up a new flight path 7.5 degrees below the initial path. Control application, up to full authority, is made to try and maintain this new flight path. Twenty seconds after initiating the upset, manual recovery is made at a load factor of 1.5 g (0.5 acceleration increment) or such greater load factor that is automatically applied by the system with the pilot's pitch control neutral. The speed increase occurring in this maneuver may be calculated, if reliable or conservative aerodynamic data is used. Power, as specified in § 25.175(b)(1)(iv), is assumed until recovery is made, at which time power reduction and the use of pilot controlled drag devices may be used.

(b) From a speed below V C /M C with power to maintain stabilized level flight at this speed, the airplane is upset so as to accelerate through V C /M C at a flight path 15 degrees below the initial path—or at the steepest nose down attitude that the system will permit with full control authority if less than 15 degrees.

(c) Recovery may be initiated three seconds after operation of high speed warning system by application of a load of 1.5g (0.5 acceleration increment) or such greater load factor that is automatically applied by the system with the pilot's pitch control neutral. Power may be reduced simultaneously. All other means of decelerating the airplane, the use of which is authorized up to the highest speed reached in the maneuver, may be used. The interval between successive pilot actions must not be less than one second.

(d) The applicant must also demonstrate that the design dive speed, established above, will not be exceeded during pilot-induced or gust-induced upsets in non-symmetric attitudes.

(e) The occurrence of any failure condition that would reduce the capability of the overspeed protection system must be improbable (less than 10 -5 per flight hour).

We invite you to send any written relevant data, views, or arguments regarding this proposal. Send your comments to an address listed under ADDRESSES . Include “Docket No. FAA-2005-23072; Directorate Identifier 2005-NE-38-AD” in the subject line of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of the proposed AD. We will consider all comments received by the closing date and may amend the proposed AD in light of those comments.

We will post all comments we receive, without change, to http://dms.dot.gov , including any personal information you provide. We will also post a report summarizing each substantive verbal contact with FAA personnel concerning this proposed AD. Using the search function of the DMS Web site, anyone can find and read the comments in any of our dockets, including the name of the individual who sent the comment (or signed the comment on behalf of an association, business, labor union, etc.). You may review the DOT's complete Privacy Act Statement in the Federal Register published on April 11, 2000 (65 FR 19477-78) or you may visit http://dms.dot.gov .

You may examine the docket that contains the proposal, any comments received and any final disposition in person at the Docket Management Facility between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The Docket Office (telephone (800) 647-5227) is located on the plaza level of the Department of Transportation Nassif Building at the street address stated in ADDRESSES . Comments will be available in the AD docket shortly after the DMS receives them.

On December 16, 2005, the FAA issued AD 2005-26-09, Amendment 39-14430 (70 FR 76381, December 27, 2005). That AD requires inspection of the blade root thickness of 1st stage fan blades identified by P/N and SN. That AD was the result of a report of a repair station that created an unapproved repair on 1st stage fan blades. That condition, if not corrected, could result in 1st stage fan blade fracture and uncontained engine failure, resulting in possible damage to the airplane.

Since AD 2005-26-09 was issued, we received comments on the AD requesting clarification. We considered those requests and have changed the compliance section in this proposed AD for clarification. We also found and corrected 12 incorrect P/Ns, and added 10 part SNs of affected 1st stage fan blades to Table 1 of this proposed AD. The comments and affected P/Ns and SNs are also discussed below.

Two air carriers request that we clarify “at the next 1st stage fan blade exposure,” to prevent any in-service disruptions or delays. The commenter further states that the 1st stage fan blades can be exposed when:

• Some 1st stage fan blades are replaced due to in-service foreign object damage;

• A 1st stage fan hub is replaced and the same 1st stage fan blades are reused; and

• At shop visit when 1st stage fan blades are removed from the fan hub for cause or work scope.

We agree with adding a paragraph to the proposed AD which defines next 1st stage fan blade exposure. We have defined it as when any 1st stage fan blade is removed from the engine; or when the 1st stage fan hub is removed from the engine.

Air Canada suggests that operators finding any affected 1st stage fan blades should report back to the FAA. The commenter states that by requiring this reporting, all 520 of the blades can then be accounted for, and the FAA can close the AD. The commenter is also concerned that if some blades cannot be accounted for, such as blades already scrapped, misplaced, or shelved, then the AD will never be closed, and operators will be forced to verify the AD indefinitely at every 1st stage fan blade installation.

We do not agree. This proposed AD requires a onetime inspection for a specific population of 1st stage fan blades. If an operator has inspected and verified a certain set of 1st stage fan blades in accordance with the proposed AD, then at the next 1st stage fan blade exposure, only replacement blades that are listed in Table 1 of the proposed AD will require inspection and verification.

Air Canada states that compliance paragraph (e) mentions that the AD must be performed within the compliance times specified, but there are no times specified. The commenter requests this instruction be removed or clarified.

We partially agree. We revised the compliance times for clarification in the proposed AD.

ABX AIR claims that the “at exposure” limit in the AD is not practical. They said that “at exposure” will require the operators to set up a special inspection schedule to accomplish this onetime inspection which is not suitable for fleet operators.

We partially agree. Inspecting the affected parts at the next 1st stage fan blade exposure is sufficient. It is not necessary for operators to set up a special inspection schedule since this inspection does not impact the FAA-approved maintenance program procedures. However, for clarification, we added a definition for “next first stage fan blade exposure” to the proposed AD.

ABX AIR requests that we clarify “before installing the 1st stage fan blades” in paragraph (f). ABX believes the AD should contain a concise clarifying statement such as: “After the active date of this AD, no person may install, on any airplane, any blade listed in Table 1 of this AD unless the actions of this AD have already been accomplished.”

We agree. We added a prohibition statement that states that after the effective date of this (proposed) AD, do not install any 1st stage fan blades listed in Table 1 of this AD on any airplane, unless the actions of this AD have been done to the 1st stage fan blades.

Since we issued AD 2005-26-09, we found and corrected 12 incorrect P/Ns, and added 10 part SNs of affected 1st stage fan blades in Table 1 of this proposed AD. The corrected numbers are as follows:

The added part SNs are as follows:

We have carefully reviewed the available data, including the comments received, and determined that air safety and the public interest require proposing this AD with the changes described previously. We have determined that these changes will neither increase the economic burden on any operator nor increase the scope of the proposed AD.

We have evaluated all pertinent information and identified an unsafe condition that is likely to exist or develop on other products of this same type design. For that reason, we are proposing this AD, which would require:

• Checking the 1st stage fan blade for a circled, letter I, on the approved marking area of the outboard side of the blade platform. If the blade has this marking, no further action is required.

• Removing 1st stage fan blades without a circled, letter I, on the approved marking area of the outboard side of the blade platform if installed; and

• Inspecting the 1st stage fan blade root thickness; and

• Returning to service 1st stage fan blades that pass the inspection, after properly marking the blade.

We estimate that this proposed AD would affect 531 1st stage fan blades installed on JT9D-7R4 turbofan engines installed on airplanes of U.S. registry. We also estimate that it would take about 0.5 work-hour per 1st stage fan blade to perform the proposed actions, and that the average labor rate is $80 per work-hour. Based on these figures, we estimate the total cost of the proposed AD to U.S. operators to be $21,240.

Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, Section 106, describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the Agency's authority.

We are issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701, “General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.

We have determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would 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.

For the reasons discussed above, I certify that the proposed AD:

1. Is not a “significant regulatory action” under Executive Order 12866;

2. Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and

3. Would not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

We prepared a regulatory evaluation of the estimated costs to comply with this proposed AD. See the ADDRESSES section for a location to examine the regulatory evaluation.

Under the authority delegated to me by the Administrator, the Federal Aviation Administration proposes to amend 14 CFR part 39 as follows:

1. The Federal Energy Regulatory Commission (Commission) is issuing this Notice of Inquiry to seek comments on how it should treat applications for preliminary permits to study hydropower projects involving proposals to utilize wave, current, and instream new technology methods to develop hydropower. 1 The Commission is also seeking comments on how it should oversee any such permits during their terms. Finally, the Commission also sets an interim policy pending the outcome of this proceeding.

2. The Commission has seen increasing interest in new hydroelectric technologies that would utilize ocean waves, tides, and currents from free-flowing rivers, as evidenced by a surge in applications for preliminary permits to study such projects. Commission staff has issued 11 preliminary permits for projects of this type; three are for proposed tidal energy projects (in New York, Washington, and California), and eight are for proposed ocean current energy projects (off the coast of Florida). Over 40 preliminary permit applications for ocean projects are currently pending before the Commission, all of which have been filed since March 2006.

3. These new technologies have significant potential: it has been estimated that the potential for wave and current power could be over 350-terawatt hours per year, which would more than double current hydropower production. 2 The Commission anticipates further exploration of how these technologies can fit within the national energy infrastructure in terms of the amount of potential energy that can be developed, its reliability, environmental and safety implications, and its commercial viability. The Commission wants to reduce regulatory barriers to the development of new technologies, where possible, and has exhibited the maximum flexibility permitted by law in regulating these projects. 3

Temporary regulations in the Rules and Regulations section of this issue of the Federal Register amend 26 CFR part 1. The temporary regulations amend § 1.368-2T(l), which provides guidance regarding the qualification of certain transactions as reorganizations described in section 368(a)(1)(D) where no stock and/or securities of the acquiring corporation are issued and distributed in the transaction. The text of those regulations also serves as the text of these proposed regulations. The preamble to the temporary regulations explains the amendments.

These regulations clarify that the rules in § 1.368-2T(l) are not intended to affect the qualification of related party triangular asset acquisitions as reorganizations described in section 368.

It has been determined that this notice of proposed rulemaking 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 regulations do 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, this notice of proposed rulemaking will be submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business.

Before these proposed regulations are adopted as final regulations, consideration will be given to any written (a signed original and eight (8) copies) or electronic comments that are submitted timely to the IRS. The IRS and Treasury Department request comments on the clarity of the proposed rules and how they can be made easier to understand. All comments will be available for public inspection and copying. A public hearing will be scheduled if requested in writing by any person that timely submits written comments. If a public hearing is scheduled, notice of the date, time, and place for the public hearing will be published in the Federal Register .

The principal author of these regulations is Bruce A. Decker, Office of Associate Chief Counsel (Corporate).

Accordingly, 26 CFR part 1 is proposed to be amended as follows:

This action applies only to the Denver Early Action Compact (EAC) area.

1. Submitting CBI . Do not submit information that you consider to be CBI electronically through http://www.regulations.gov or e-mail. Clearly mark the part or all of the information that you claim to be CBI. For CBI information in a disk or CD ROM that you mail to EPA, mark the outside of the disk or CD ROM as CBI and then identify electronically within the disk or CD ROM the specific information that is claimed as CBI. In addition to one complete version of the comment that includes information claimed as CBI, a copy of the comment that does not contain the information claimed as CBI must be submitted for inclusion in the public docket. Information so marked will not be disclosed except in accordance with procedures set forth in 40 CFR part 2. Also, send an additional copy clearly marked as above not only to the Air docket but to: Roberto Morales, c/o OAQPS Document Control Officer, (C339-03), U.S. Environmental Protection Agency, Research Triangle Park, NC 27711, Attention Docket ID No. EPA-HQ-OAR-2004-0014.

2. Tips for Preparing Your Comments . When submitting comments, remember to:

• Identify the rulemaking by docket number and other identifying information (subject heading, Federal Register date and page number).

• Follow directions—The agency may ask you to respond to specific questions or organize comments by referencing a Code of Federal Regulations (CFR) part or section number.

• Explain why you agree or disagree; suggest alternatives and substitute language for your requested changes.

• Describe any assumptions and provide any technical information and/or data that you used.

• If you estimate potential costs or burdens, explain how you arrived at your estimate in sufficient detail to allow for it to be reproduced.

• Provide specific examples to illustrate your concerns, and suggest alternatives.

• Explain your views as clearly as possible, avoiding the use of profanity or personal threats.

• Make sure to submit your comments by the comment period deadline identified.

The information presented in this preamble is organized as follows:

The purpose of this document is to propose extending the deferred effective date of the 8-hour ozone nonattainment designation for the Denver EAC area from July 1, 2007 to April 15, 2008.

This section discusses EPA's actions to date with respect to deferring the effective date of nonattainment designations for certain areas of the country that are participating in the EAC program. The EPA's April 30, 2004 air quality designation rule (69 FR 23858) provides a description of the compact approach, the requirements for areas participating in the program and the impacts of the program on those areas.

On December 31, 2002, we entered into compacts with 33 communities. To receive the first deferral, these EAC areas agreed to reduce ground-level ozone pollution earlier than the CAA would require. The EPA agreed to provide an initial deferral of the nonattainment designations for those EAC areas that did not meet the 8-hour ozone National Ambient Air Quality Standards (NAAQS) as of April 30, 2004, and to provide subsequent deferrals contingent on performance vis-à-vis certain milestones. On December 16, 2003 (68 FR 70108), we published our proposed rule to defer until September 30, 2005, the effective date of designation for EAC areas that did not meet the 8-hour ozone NAAQS. Fourteen of the 33 compact areas did not meet the 8-hour ozone NAAQS.

Our final designation rule published April 30, 2004 (69 FR 23858), as amended June 18, 2004 (69 FR 34080), included the following actions for compact areas: deferred the effective date of nonattainment designation for 14 compact areas until September 30, 2005; detailed the progress compact areas had made toward completing their milestones; described the actions/milestones required for compact areas in order to remain eligible for a deferred effective date for a nonattainment designation; detailed EPA's schedule for taking further action to determine whether to further defer the effective date of nonattainment designations; and described the consequences for compact areas that do not meet a milestone.

In the April 2004 action, we also discussed three compact areas which did not meet the March 31, 2004 milestone; Knoxville, Memphis, and Chattanooga, Tennessee. Knoxville and Memphis were designated nonattainment effective June 15, 2004. Chattanooga was later determined to have met the March 31, 2004 milestone, and we deferred the designation date until September 30, 2005 (69 FR 34080). This brought the number of participating compact areas to 31. Since then, two additional areas, Haywood and Putnam Counties, Tennessee have withdrawn from the program leaving the participating number of compact areas at 29.

On August 29, 2005, we published a final rule extending the deferred effective date of designation from September 30, 2005, to December 31, 2006, for the same 14 compact areas. In order to receive this second deferral, EAC areas needed to submit a State Implementation Plan with locally adopted measures and a modeled attainment demonstration by December 31, 2004. The EPA approved the State Implementation Plan (SIP) revisions as meeting the EAC Protocol and EPA's EAC regulations at 40 CFR 81.300, and these approvals were the basis for extending the deferred effective date until December 31, 2006. Information on local measures, SIP submittals and background on the EAC program may be found on EPA's Web site at http://www.epa.gov/ttn/naaqs/ozone/eac/ .

On November 29, 2006, we published a final rule extending the deferred effective date of designation for 13 EAC areas from December 31, 2006 to April 15, 2008, and for the Denver EAC area until July 1, 2007. All compact areas were required to submit two progress reports, one by December 30, 2005, and the other by June 30, 2006. In these progress reports, the States provided information on progress towards implementing local control measures that were incorporated in their SIPs. Each of the EAC areas submitted the required progress reports and these reports are available at http://www.epa.gov/ttn/naaqs/ozone/eac/ . Issues were noted by the State of Colorado with the Denver EAC area regarding emissions from oil and gas exploration and production condensate tanks. In a report and action plan submitted by the State of Colorado to EPA, dated June 2, 2006, the State provided information that indicated volatile organic compound (VOC) emissions from oil and gas operations within the Denver EAC area were higher than had been estimated in the attainment demonstration modeling. In response to this issue, the State of Colorado initiated public rulemaking activities to amend Colorado's Regulation No. 7 to require additional emissions reductions from oil and gas exploration and production condensate tanks to achieve the level of reductions relied on in the EPA-approved modeled attainment demonstration. However, an issue arose because the State's rulemaking efforts before the Colorado Air Quality Commission (AQCC) in the latter part of 2006 would not be completed before EPA needed to publish a final rule for the last deferral of the effective date of the nonattainment designations for all of the EAC areas (see 71 FR 69022, November 29, 2006).

Based on the above information, EPA decided to defer the effective date of the nonattainment designation for the Denver EAC area only until July 1, 2007. This decision was designed to accommodate the necessary State rulemaking activities and to also ensure that continued progress was made on the Regulation No. 7 rulemaking actions as they proceeded before the AQCC and State Legislature. In our November 29, 2006 final rulemaking, we detailed a timeline for subsequent rulemaking action for the Denver EAC area which is discussed below.

On December 31, 2006, the State of Colorado submitted their progress report for the Denver EAC area to EPA indicating that progress had been made in several areas. On September 21, 2006 the Colorado Department of Public Health and Environment's (CDPHE) Air Pollution Control Division (APCD) presented proposed revisions to Colorado's Regulation No. 7, before the Colorado AQCC, for a more stringent regulatory scheme to control VOC's from oil and gas exploration and production condensate tanks located in the Denver EAC area. These proposed revisions to Section XII of Regulation No. 7 were amended and adopted by the AQCC on December 17, 2006 along with associated revisions to the EPA-approved Denver EAC Ozone Action Plan. These AQCC rulemaking actions will achieve the required VOC emissions reductions from the oil and gas exploration and production condensate tanks that are located within the Denver EAC area boundary. In addition, the State continues working with all parties to reduce emissions of ozone and its precursors.

The EPA's proposed deferral of the effective date of the nonattainment designation of the Denver EAC area to April 15, 2008, is based upon the actions of the AQCC on December 17, 2006 to approve revisions to Colorado's Regulation No. 7 and also in consideration of the review of those AQCC-approved revisions, from January 15, 2007 to February 15, 2007, by the Colorado State Legislature. In view of Colorado's Legislative process for reviewing SIP revisions, we note that as of February 15, 2007 the State Legislature did not object or seek further review of the December 17, 2006 actions of the AQCC. Based on the above, we were advised by the State on February 16, 2007, that the December 17, 2006 actions of the AQCC to adopt changes to its Regulation No. 7 are, therefore, directed by State statute to be submitted to EPA for final approval and incorporation into the State Implementation Plan. We also note that before we take final action on the proposed deferral, we will consider any additional actions of the State, as well as comments received.

The EPA has determined that sufficient progress has been made by the Denver EAC area in order to propose extending the deferral of the nonattainment designation from July 1, 2007, until April 15, 2008. Based on comments received on this proposal and the actions of the State Legislature, EPA will make a determination on finalizing this extension.

All EAC areas have one remaining milestone which is to demonstrate attainment with the 8-hour ozone NAAQS by December 31, 2007. No later than April 15, 2008, we will determine whether the compact areas that received a deferred effective date of April 15, 2008, attained the 8-hour ozone NAAQS by December 31, 2007, and met all compact milestones. If the area did not attain the standard, the nonattainment designation will take effect. If the compact area attained the standard, EPA will designate the area as attainment. Any compact area that did not attain the NAAQS and thus has an effective nonattainment designation will be subject to the full planning requirements of title I, part D of the CAA, and the area will be required to submit a revised attainment demonstration SIP within 1 year of the effective date of designation. As described above, the Colorado Air Quality Control Commission has undertaken rulemaking to address shortfalls in VOC emissions reductions for the Denver EAC. These rule revisions are designed to achieve greater VOC emission reductions from the oil and gas industry. We note the rule revisions contain a compliance date of May 1, 2007, which is just before the beginning of the Colorado high ozone season.

As noted above, the Colorado Legislature considered these rule revisions from January 15, 2007 to February 15, 2007 and did not object or seek further review of the December 17, 2006 actions of the AQCC to approve these revisions to Colorado's Regulation No. 7. Therefore, pursuant to Colorado State statute and the State Legislative process for considering SIP revisions, as of February 16, 2007 these Regulation No. 7 revisions will be forwarded to the Governor for his submittal to EPA for our approval.

A likely schedule for EPA's subsequent rulemaking action for the deferral of the effective date of the designation of the Denver EAC area to April 15, 2008 is:

The above schedule will allow EPA appropriate time to complete a final deferral of the Denver EAC area nonattainment effective date to April 15, 2008, if EPA determines that is the appropriate action to take. As with the other EAC areas with a deferred nonattainment designation, if we extend the deferral of the Denver EAC area's nonattainment designation until April 15, 2008, the area will be designated nonattainment if it doesn't show attainment by December 31, 2007.

This action is not a “significant regulatory action” under the terms of Executive Order (E.O.) 12866 (58 FR 51735; October 4, 1993) and is therefore not subject to review under the E.O.

This action does not impose an information collection burden under the provisions of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. This proposed rule does not require the collection of any information.

Burden means the total time, effort, or financial resources expended by persons to generate, maintain, retain, or disclose or provide information to or for a Federal agency. This includes the time needed to review instructions; develop, acquire, install, and utilize technology and systems for the purposes of collecting, validating, and verifying information, processing and maintaining information, and disclosing and providing information; adjust the existing ways to comply with any previously applicable instructions and requirements; train personnel to be able to respond to a collection of information; search data sources; complete and review the collection of information; and transmit or otherwise disclose the information.

An agency 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 OMB control numbers for EPA's regulations in 40 CFR are listed in 40 CFR part 9.

The Regulatory Flexibility Act (RFA) generally requires an Agency to prepare a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements under the Administrative Procedures Act or any other statute unless the Agency certifies the rule will not have a significant economic impact on a substantial number of small entities. Small entities include small businesses, small organizations, and small governmental jurisdictions.

For purposes of assessing the impacts of this proposed rule on small entities, small entity is defined as: (1) A small business that is a small industrial entity as defined in the Small Business Administration's (SBA) regulations at 13 CFR 121.201; (2) a small governmental jurisdiction that is a government of a city, county, town, school district or special district with a population of less than 50,000; and (3) a small organization that is any not-for-profit enterprise which is independently owned and operated and is not dominant in its field.

After considering the economic impacts of this proposed rule on small entities, I certify that this rule will not have a significant economic impact on a substantial number of small entities. This proposed rule will not impose any requirements on small entities. Rather, this rule would extend the deferred effective date of the nonattainment designation for the Denver area to implement control measures and achieve emissions reductions earlier than otherwise required by the CAA in order to attain the 8-hour ozone NAAQS.

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public Law 104-4, establishes requirements for Federal agencies to assess the effects of their regulatory actions on State, local, and Tribal governments and the private sector. Under section 202 of the UMRA, EPA generally must prepare a written statement, including a cost-benefit analysis, for proposed and final rules with “Federal mandates” that may result in expenditures to State, local, and Tribal governments, in the aggregate, or to the private sector, of $100 million or more in any 1 year. Before promulgating an EPA rule for which a written statement is needed, section 205 of the UMRA generally requires EPA to identify and consider a reasonable number of regulatory alternatives and adopt the least costly, most cost-effective or least burdensome alternative that achieves the objectives of the rule. The provisions of section 205 do not apply when they are inconsistent with applicable law. Moreover, section 205 allows EPA to adopt an alternative other than the least costly, most cost-effective or least burdensome alternative if the Administrator publishes with the final rule an explanation why that alternative was not adopted. Before EPA establishes any regulatory requirements that may significantly or uniquely affect small governments, including Tribal governments, it must have developed under section 203 of the UMRA a small government agency plan. The plan must provide for notifying potentially affected small governments, enabling officials of affected small governments to have meaningful and timely input in the development of EPA regulatory proposals with significant Federal intergovernmental mandates, and informing, educating, and advising small governments on compliance with the regulatory requirements.

The EPA has determined that this proposed rule does not contain a Federal mandate that may result in expenditures of $100 million or more for State, local, and Tribal governments, in the aggregate, or the private sector in any 1 year. In this proposed rule, EPA is deferring the effective date of nonattainment designations for certain areas that have entered into compacts with us. Thus, this proposed rulemaking is not subject to the requirements of sections 202 and 205 of the UMRA.

Executive Order 13132, entitled “Federalism” (64 FR 43255, August 10, 1999), requires EPA to develop an accountable process to ensure “meaningful and timely input by State and local officials in the development of regulatory policies that have federalism implications.” “Policies that have federalism implications” is defined in the E.O. to include regulations that have “substantial direct effects 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.”

This proposed rule does not have federalism implications. It will not have substantial direct effects 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, as specified in Executive Order 13132. The CAA establishes the scheme whereby States take the lead in developing plans to meet the NAAQS. This proposed rule would not modify the relationship of the States and EPA for purposes of developing programs to implement the NAAQS. Thus, E.O. 13132 does not apply to this proposed rule.

Executive Order 13175, entitled “Consultation and Coordination with Indian Tribal Governments” (65 FR 67249, November 9, 2000), requires EPA to develop an accountable process to ensure “meaningful and timely input by tribal officials in the development of regulatory policies that have tribal implications.” This proposed rule does not have “Tribal implications” as specified in E.O. 13175. It does not have a substantial direct effect on one or more Indian Tribes, since no Tribe has implemented a CAA program to attain the 8-hour ozone NAAQS at this time or has participated in a compact.

Executive Order 13045: “Protection of Children From Environmental Health and Safety Risks” (62 FR 19885, April 23, 1997) applies to any rule that (1) is determined to be “economically significant” as defined under E.O. 12866, and (2) concerns an environmental health or safety risk that EPA has reason to believe may have disproportionate effect on children. If the regulatory action meets both criteria, the Agency must evaluate the environmental health or safety effects of the planned rule on children, and explain why the planned regulation is preferable to other potentially effective and reasonably feasible alternatives considered by the Agency.

The EPA interprets E.O. 13045 as applying only to those regulatory actions that are based on health or safety risks, such that the analysis required under section 5-501 of the Order has the potential to influence the regulation.

This proposed rule is not subject to E.O. 13045 because it does not establish an environmental standard intended to mitigate health or safety risks.

This rule is not subject to E.O. 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355; May 22, 2001 because it is not a significant regulatory action under E.O. 12866.

Section 12(d) of the National Technology Transfer Advancement Act of 1995 (NTTAA), Public Law No. 104-113, section 12(d) (15 U.S.C. 272 note) directs EPA to use voluntary consensus standards (VCS) in its regulatory activities unless to do so would be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standards (e.g., materials specifications, test methods, sampling procedures, and business practices) that are developed or adopted by VCS bodies. The NTTAA directs EPA to provide Congress, through OMB, explanations when the Agency decides not to use available and applicable VCS.

This proposed rule does not involve technical standards. Therefore, EPA is not considering the use of any VCS. The EPA will encourage States that have compact areas to consider the use of such standards, where appropriate, in the development of their SIPs.

Executive Order 12898 (59 FR 7629; Feb. 16, 1994 establishes Federal executive policy on environmental justice. Its main provision directs Federal agencies, to the greatest extent practicable and permitted by law, to make environmental justice part of their mission by identifying and addressing, as appropriate, disproportionately high and adverse human health or environmental effects of their programs, policies, and activities on minority populations and low-income populations in the United States.

The EPA has determined that this proposed rule will not have disproportionately high and adverse human health or environmental effects on minority or low-income populations because it does not affect the level of protection provided to human health or the environment.

The health and environmental risks associated with ozone were considered in the establishment of the 8-hour, 0.08 ppm ozone NAAQS. The level is designed to be protective with an adequate margin of safety.

This is a summary of the Commission's NPRM of Proposed Rulemaking, FCC 07-7, adopted on February 7, 2007, and released on February 20, 2007. The full text of this document is available for public inspection and copying during regular business hours in the FCC Reference Center, Federal Communications Commission, 445 12th Street, SW., CY-A257, Washington, DC 20554. These documents will also be available via ECFS ( http://www.fcc.gov/cgb/ecfs/ ). (Documents will be available electronically in ASCII, Word 97, and/ or Adobe Acrobat.) The complete text may be purchased from the Commission's copy contractor, 445 12th Street, SW., Room CY-B402, Washington, DC 20554. To request this document in accessible formats (computer diskettes, large print, audio recording, and Braille), send an e-mail to fcc504@fcc.gov or call the Commission's Consumer and Governmental Affairs Bureau at (202) 418-0530 (voice), (202) 418-0432 (TTY).

This document does not contain proposed information collection requirements subject to the Paperwork Reduction Act of 1995, Public Law 104-13. In addition, therefore, it does not contain any proposed information collection burden “for small business concerns with fewer than 25 employees,” pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4).

1. We issue this NPRM of Proposed Rulemaking (“NPRM”) pursuant to Section 628(c)(5) of the Communications Act of 1934, as amended (“Communications Act”) and Section 76.1002(c)(6) of the Commission's rules. In areas served by a cable operator, Section 628(c)(2)(D) generally prohibits exclusive contracts for satellite cable programming or satellite broadcast programming between vertically integrated programming vendors and cable operators. Section 628(c)(5) directed that this prohibition on exclusive programming contracts would cease to be effective on October 5, 2002, unless the Commission found that such prohibition “continues to be necessary to preserve and protect competition and diversity in the distribution of video programming.” In a proceeding commenced prior to the sunset date specified by Congress, the Commission examined whether the prohibition should sunset or be extended; see Implementation of the Cable Television Consumer Protection and Competition Act of 1992—Development of Competition and Diversity in Video Programming Distribution: Section 628(c)(5) of the Communications Act: Sunset of Exclusive Contract Prohibition, 66 FR 54972-02 (2001) (“NPRM”). The Commission concluded that the prohibition remained necessary to preserve and protect competition and diversity in the distribution of video programming and extended the term of the prohibition on exclusive contracts between cable operators and vertically integrated programmers for five years (i.e., through October 5, 2007); see Implementation of the Cable Television Consumer Protection and Competition Act of 1992—Development of Competition and Diversity in Video Programming Distribution: Section 628(c)(5) of the Communications Act: Sunset of Exclusive Contract Prohibition , 67 FR 49247-01 (2002) (“Sunset Report and Order”) . The Commission provided that, during the year before the expiration of the 5-year term, a review would again be undertaken to determine whether the exclusivity prohibition continues to be necessary to preserve and protect competition and diversity in the distribution of video programming. This NPRM initiates that review. Further, this NPRM also seeks comment on whether and how our procedures for resolving program access disputes under Section 628 should be modified.

2. The focus of Congress in enacting the program access provisions, adopted as part of the Cable Television Consumer Protection and Competition Act of 1992 (“1992 Cable Act”), was to encourage entry into the multichannel video programming distribution (“MVPD”) market by existing or potential competitors to traditional cable systems by making available to those entities the programming necessary to enable them to become viable competitors. The 1992 Cable Act and its legislative history reflect congressional findings that increased horizontal concentration of cable operators, combined with extensive vertical integration, created an imbalance of power, both between cable operators and program vendors and between incumbent cable operators and their multichannel competitors. Vertical integration means the combined ownership of cable systems and suppliers of cable programming. Congress concluded at that time that vertically integrated program suppliers had the incentive and ability to favor their affiliated cable operators over other multichannel program distributors, such as other cable systems, home satellite dish (“HSD”) distributors, direct broadcast satellite (“DBS”) providers, satellite master antenna television (“SMATV”) systems, and wireless cable operators; see Implementation of Sections 12 and 19 of the Cable Television Consumer Protection and Competition Act of 1992: Development of Competition and Diversity in Video Programming Distribution and Carriage , 58 FR 27658-02 (1993) (“ First Report and Order ”), recon ., 59 FR 66255-01 (1994), further recon ., 60 FR 3099-01 (1994); see 47 U.S.C. 522(13) (“multichannel video programming distributor” means “a person such as, but not limited to, a cable operator, a multichannel multipoint distribution service, a direct broadcast satellite service, or a television receive-only satellite program distributor, who makes available for purchase, by subscribers or customers, multiple channels of video programming”).

3. When the Commission promulgated regulations implementing the program access provisions of Section 628, it recognized that Congress placed a higher value on new competitive entry into the MVPD marketplace than on the continuation of exclusive distribution practices when such practices impede this entry. Congress absolutely prohibited exclusive contracts for satellite cable programming or satellite broadcast programming between vertically integrated programming vendors and cable operators in areas unserved by cable, and generally prohibited exclusive contracts within areas served by cable. The term “satellite cable programming” means video programming which is transmitted via satellite and which is primarily intended for direct receipt by cable operators for their retransmission to cable subscribers, except that such term does not include satellite broadcast programming. The term “satellite broadcast programming” means broadcast video programming when such programming is retransmitted by satellite and the entity retransmitting such programming is not the broadcaster or an entity performing such retransmission on behalf of and with the specific consent of the broadcaster. Specifically, the prohibition with regard to served areas, Section 628(c)(2)(D), states that:

4. The Commission's factual findings, analysis, and rationale for retaining the prohibition on exclusivity are fully set forth in the Sunset Report and Order and need not be reiterated here, other than to note that the Commission concluded that:

5. Congress based the program access provisions on its concern that in the absence of regulation, vertically integrated programmers have the incentive and ability to favor affiliated cable operators over nonaffiliated cable operators and programming distributors using other technologies such that competition and diversity in the distribution of video programming would not be preserved and protected. We ask whether this concern has diminished or increased in today's marketplace.

6. In the Sunset Report and Order , the Commission examined the status of the MVPD market over the decade between the adoption of the program access provisions and the sunset review. The Commission observed that cable's overall market share declined from 95 percent in 1992 to 78 percent at the time of the Sunset Report and Order. The Commission also considered DBS, which at the time served 18 percent of MVPD households. Finally, the Commission noted that other competitors such as multichannel multipoint distribution service (“MMDS”), SMATV, and HSD, had not fared as well, comprising less than four percent of all MVPD subscribers. As of June 2005, basic cable subscribers comprised approximately 69 percent of all MVPD households and DIRECTV and EchoStar Communications Corporation (“EchoStar”) (marketed as the DISH Network) served approximately 27.7 percent of all MVPD households nationwide. As of June 2005, MMDS, SMATV and HSD operators served less than three percent of all MVPD subscribers. How has the exclusivity prohibition impacted the general state of competition among MVPD operators? We seek comment on the current status of all these current MVPD competitors to cable and their continued viability should the prohibition on exclusivity be permitted to sunset. In addition, how would the absence of an exclusivity prohibition affect the likelihood that potential MVPD competitors will enter the market?

7. We request information as to whether developments in the marketplace since the passage of the 1992 Cable Act and our 2002 sunset review have diminished or increased the need for the exclusivity prohibition. In this regard, we seek comment on three events which have occurred in the multichannel programming market since our 2002 sunset review. First, we seek comment on the increase in the provision of MVPD service by local exchange carriers (“LECs”). For example, AT&T is moving forward with its IP-enabled broadband network called “Project Lightspeed,” using both Fiber to the Node (“FTTN”) and Fiber to the Home (“FTTH”) to deliver video and other services to residential customers. AT&T states that it currently has approximately 3,000 customers, with more projected once it launches beyond San Antonio, Texas. In addition, Verizon is deploying a FTTH network that delivers video, telephony, and high-speed Internet access service. Verizon estimates that it had 100,000 video subscribers at the end of the 3rd quarter, 2006, and that they will have 175,000 video subscribers and pass 1.8 million households by the end of 2006. Second, we seek comment on the impact of the acquisition of control of the assets of Hughes Electronics Corporation by The News Corporation Limited (“News Corp.”). Through this transaction, News Corp. placed under common control DIRECTV, the nation's second largest MVPD, and the broadcast and multichannel programming assets of the Fox Entertainment Group. We note that in this decision, the Commission placed certain conditions on News Corp. and DIRECTV in order to ensure that the access and non-discrimination requirements of the program access rules would continue to apply to News Corp.'s national and regional cable programming, and to obtain additional protections encompassed by the parties' related commitments. Further, the Commission stated that these conditions would continue to apply as long as it deemed News Corp. to have an attributable interest in DIRECTV and the Commission's program access rules relating to satellite cable programming vendors affiliated with cable operators are in effect. If the Commission's program access rules are modified, then the Commission determined that these conditions would be modified to conform to the Commission's revised rules. We note that News Corp. recently proposed an $11 billion asset swap with Liberty Media to trade News Corp.'s 38 percent stake in DIRECTV and some other assets for Liberty's shareholding in News Corp. This proposal, if approved, would give Liberty control of DIRECTV. Finally, we seek comment on the recent acquisition by Comcast Corporation and Time Warner, Inc. of the assets of Adelphia Communications Corporation. We seek comment on the extent, if any, to which these specific events should inform our analysis of whether to retain the prohibition on exclusivity. In addition, we seek comment on any other relevant developments in the MVPD market since our 2002 sunset review that we should consider in deciding whether to retain the prohibition on exclusivity.

8. We ask whether competitive MVPDs' access to what some refer to as “marquee” or “must have” vertically integrated programming, such as CNN, HBO, TNT, Discovery and others, remains essential to successful implementation of competitive services. Does satellite-delivered vertically integrated programming remain necessary to the viability of competitive MVPDs because there is no good substitute programming available? We also ask whether the retention of the exclusivity prohibition affects access to national and regional sports programming networks. We seek comment on the effects that the exclusivity prohibition has had on the development and production of programming for the current MVPD marketplace. We concluded in the Sunset Report and Order that the retention of the exclusivity prohibition would not reduce incentives to create new or diverse programming. In support, we noted that the number of national programming services increased from the exclusivity prohibition's inception in 1992 from 87 to 294 in 2001. We also noted that the number of vertically integrated programming services nearly doubled from 56 in 1994 to 104 in 2001 and concluded that the ban did not serve as a disincentive for cable MSOs to develop new cable networks. Since the extension of the exclusivity ban in 2002, has there been a significant overall increase or decrease in the development, promotion, and launch of new and diverse programming services? We note that, our most recent report on the status of video competition found that, as of June 2005, there were 531 satellite-delivered national programming networks. How has the exclusivity prohibition affected investment incentives in the current marketplace for both vertically integrated and independent programming? We also ask if there has been any change in the resources of nonaffiliated cable operators and competitive MVPDs and their ability to develop their own programming, thereby limiting their dependence on “must have” vertically integrated programming. Finally, we ask what effect the retention of the exclusivity ban has had on the launch of local origination programming that may have a more limited geographic appeal.

9. We also ask how the current state of cable system clusters and distribution of regional video programming services affiliated with cable operators should affect our decision regarding the exclusivity prohibition. As the Commission concluded in the Sunset Report and Order , “[w]e believe that clustering, accompanied by an increase in vertically integrated regional programming networks affiliated with cable MSOs that control system clusters, will increase the incentive of cable operators to practice anticompetitive foreclosure of access to vertically integrated programming.” We seek comment on the continuing validity of this conclusion and whether events since the Sunset Report and Order mitigate or exacerbate the impact of clustering. In particular, we seek comment on what impact our recent approval of the acquisition of the assets of Adelphia Communications by Comcast and Time Warner has on this topic. We also seek comment on whether the current state of horizontal consolidation in the cable industry increases incentives for anticompetitive foreclosure of access to vertically integrated programming.

10. We seek comment on whether the exclusivity prohibition continues to be necessary to preserve and protect diversity in the distribution of programming. Our focus in this area is not on programming diversity, but rather on “preserving and protecting diversity in the distribution of video programming—i.e., ensuring that as many MVPDs as possible remain viable distributors of video programming.” As the Commission observed in the Sunset Report and Order , “[o]ther than the two largest non-cable MVPDs, DirecTV and EchoStar, nonaffiliated cable operators and competitive MVPDs * * * assert that they lack the resources and ability to develop their own programming and are thus dependent on access to the programming of others, including ‘must have' vertically integrated programming.” Does this continue to be true for nonaffiliated cable operators and competitive MVPDs in today's marketplace? We seek comment on whether retention of the exclusivity prohibition in the current climate helps to ensure that as many MVPDs as possible remain viable distributors of video programming. One of Congress' express findings in enacting the 1992 Cable Act was that “[t]here is a substantial governmental and First Amendment interest in promoting a diversity of views provided through multiple technology media.” Would the sunset of the exclusivity prohibition in the current state of the market limit or foreclose access to vertically integrated programming so as to jeopardize a diverse market of existing and potential competitors?

11. Congress initially set a 10-year period for Commission review of Section 628(c)(2)(D) in order to determine whether the exclusive contract prohibition continued to be necessary to preserve and protect competition and diversity in the distribution of video programming. After completing its review, the Commission determined in the Sunset Report and Order that a five-year term provided a sufficient period in which to initiate a subsequent sunset review. If we determine in this proceeding that Section 628(c)(2)(D) should be retained and extended for another period of years, we seek comment on what time frame would be appropriate, taking into consideration the current and potential future competitive environment. We also seek comment on whether the exclusivity prohibition, if retained, should be automatically abolished depending on the triggering of a specific event or events in the marketplace.

12. We also seek comment on any new trends in the industry that would indicate that the MVPD distribution and program production sectors are moving toward the type of market structure that would support the sunset of the exclusivity prohibition. Finally, we seek comment on any other issues appropriate to our inquiry in accordance with Section 628(c)(5).

13. This NPRM also seeks comment on whether and how our procedures for resolving program access disputes under Section 628 should be modified. Our rules provide that any MVPD aggrieved by conduct that it believes constitutes a violation of Section 628 and the Commission's program access rules may file a complaint at the Commission in accordance with 47 CFR 76.7 and 76.1003. The Commission's rules provide that before an MVPD may file such a complaint, it must first notify the cable operator or satellite programming vendor that it intends to file the complaint. The complaining MVPD must allow the cable operator or vendor 10 days to respond to the prefiling NPRM prior to filing its complaint with the Commission. The necessary contents of the complaint are specified in the rules, including a requirement that any damages sought must be clearly stated in the complaint. Once a complaint is filed, the cable operator or satellite programming vendor shall answer within 20 days of service of the complaint. Replies to the answer are due 10 days thereafter. Any program access complaint must be filed within one year of the date on which the MVPD enters into a contract with the programming vendor, the programming vendor offers the programming to the MVPD, or the MVPD notifies the cable operator or programming vendor that it intends to file a complaint with the Commission. The rules also address the determination of the proper damages to be assessed, including a recognition that the parties be given an opportunity to reach agreement on damages. In addition, the Commission has stated its goals for resolution of program access complaints which are: five months from the submission of a complaint for denial of programming cases, and nine months for all other program access complaints, such as price discrimination cases.

14. We seek comment on whether and how our procedures for resolving program access disputes should be modified. The scope of our inquiry is limited to our rules governing the program access complaint process. In particular, we seek comment on the costs associated with the complaint process and whether the pre-filing NPRM , pleading requirements, evidentiary standards, timing, and potential remedies are appropriate and effective. In addition, we seek comment on whether additional time limits would improve the existing process. For instance, we seek comment on whether specific time limits on the Commission, the parties, or others would promote a speedy and just resolution of these disputes.

15. Are the Commission's program access complaint rules and procedures adequate? We seek comment on these issues and on additional procedures that would address infirmities. For example, are complaints resolved in a timely manner? Are our rules governing discovery and protection of confidential information adequate? Should the Commission adopt alternative procedures or remedies such as mandatory standstill agreements and/or arbitration, as it has done in two recent mergers? Commenters that favor these alternative procedures should address the Commission's authority to adopt them.

16. Ex Parte Rules. This is a permit-but-disclose NPRM and comment rulemaking proceeding. Ex parte presentations are permitted, except during the Sunshine Agenda period, provided that they are disclosed as provided in the Commission's rules. See generally 47 CFR 1.1202, 1.1203, and 1.1206(a).

17. Comment Information. Pursuant to sections 1.415 and 1.419 of the Commission's rules, 47 CFR 1.415, 1.419, interested parties may file comments and reply comments on or before the dates indicated on the first page of this document. Comments may be filed using: (1) The Commission's Electronic Comment Filing System (ECFS), (2) the Federal Government's eRulemaking Portal, or (3) by filing paper copies. See Electronic Filing of Documents in Rulemaking Proceedings , 63 FR 24121 (1998).

• Electronic Filers: Comments may be filed electronically using the Internet by accessing the ECFS: http://www.fcc.gov/cgb/ecfs/ or the Federal eRulemaking Portal: http://www.regulations.gov. Filers should follow the instructions provided on the website for submitting comments.

• For ECFS filers, if multiple docket or rulemaking numbers appear in the caption of this proceeding, filers must transmit one electronic copy of the comments for each docket or rulemaking number referenced in the caption. In completing the transmittal screen, filers should include their full name, U.S. Postal Service mailing address, and the applicable docket or rulemaking number. Parties may also submit an electronic comment by Internet e-mail. To get filing instructions, filers should send an e-mail to ecfs@fcc.gov , and include the following words in the body of the message, “get form.” A sample form and directions will be sent in response.

• Paper Filers: Parties who choose to file by paper must file an original and four copies of each filing. If more than one docket or rulemaking number appears in the caption of this proceeding, filers must submit two additional copies for each additional docket or rulemaking number.

Filings can be sent by hand or messenger delivery, by commercial overnight courier, or by first-class or overnight U.S. Postal Service mail (although we continue to experience delays in receiving U.S. Postal Service mail). All filings must be addressed to the Commission's Secretary, Office of the Secretary, Federal Communications Commission.

• The Commission's contractor will receive hand-delivered or messenger-delivered paper filings for the Commission's Secretary at 236 Massachusetts Avenue, NE., Suite 110, Washington, DC 20002. The filing hours at this location are 8 a.m. to 7 p.m. All hand deliveries must be held together with rubber bands or fasteners. Any envelopes must be disposed of before entering the building.

• Commercial overnight mail (other than U.S. Postal Service Express Mail and Priority Mail) must be sent to 9300 East Hampton Drive, Capitol Heights, MD 20743.

• U.S. Postal Service first-class, Express, and Priority mail should be addressed to 445 12th Street, SW., Washington DC 20554.

People with Disabilities: To request materials in accessible formats for people with disabilities (braille, large print, electronic files, audio format), send an e-mail to fcc504@fcc.gov or call the Consumer & Governmental Affairs Bureau at 202-418-0530 (voice), 202-418-0432 (tty).

18. Initial Paperwork Reduction Act Analysis. This document does not contain proposed information collection(s) subject to the Paperwork Reduction Act of 1995 (PRA), Public Law 104-13. In addition, therefore, it does not contain any new or modified “information collection burden for small business concerns with fewer than 25 employees,” pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4).

19. Initial Regulatory Flexibility Analysis. As required by the Regulatory Flexibility Act, the Commission has prepared an Initial Regulatory Flexibility Analysis (IRFA) of the possible significant economic impact on a substantial number of small entities of the proposals addressed in this NPRM of Proposed Rulemaking. The IRFA is set forth in the Appendix. Written public comments are requested on the IRFA. These comments must be filed in accordance with the same filing deadlines for comments on the Further NPRM , and they should have a separate and distinct heading designating them as responses to the IRFA.

20. Additional Information. For additional information on this proceeding, please contact Karen Kosar, Policy Division, Media Bureau at (202) 418-1053.

21. As required by the Regulatory Flexibility Act of 1980, as amended (the “RFA”) the Commission has prepared this Initial Regulatory Flexibility Analysis (“IRFA”) of the possible significant economic impact of the policies and rules proposed in this NPRM of Proposed Rulemaking (“NPRM”) on a substantial number of small entities. Written public comments are requested on this IRFA. Comments must be identified as responses to the IRFA and must be filed by the deadlines for comments on the NPRM indicated on the first page of this document. The Commission will send a copy of the NPRM , including this IRFA, to the Chief Counsel for Advocacy of the Small Business Administration (“SBA”). In addition, the NPRM and IRFA (or summaries thereof) will be published in the Federal Register .

22. The focus of the enactment of the program access provisions contained in Section 628 of the Communications Act of 1934, as amended, adopted as part of the Cable Television Consumer Protection and Competition Act of 1992, was to encourage entry into the multichannel video programming distribution market (“MVPD”) by existing or potential competitors to traditional cable systems by making available to those entities the programming necessary to empower them to become viable competitors. Specifically, this proceeding involves Section 628(c)(2)(D), which prohibits, in areas served by a cable operator, exclusive contracts for satellite cable programming or satellite broadcast programming between vertically integrated programming vendors and cable operators unless the Commission determines that such exclusivity is in the public interest.

23. Section 628(c)(5) directed that the prohibition contained in Section 628(c)(2)(D) should cease to be effective on October 5, 2002, unless the Commission found that such prohibition “continues to be necessary to preserve and protect competition and diversity in the distribution of video programming.” The Commission initiated its proceeding in the matter by issuing a NPRM of Proposed Rulemaking seeking comment on the possible sunset of Section 628(c)(2)(D) in October 2001. The Commission's Report and Order , issued in June 2002, concluded that the term of the prohibition on exclusive contracts between cable operators and vertically integrated programmers should be extended for five (5) years from October 5, 2002. The prohibition on exclusivity is therefore set to expire on October 5, 2007, unless circumstances in the video programming marketplace indicate that the prohibition continues to be necessary within the meaning of the statute. The Commission has stated during the year before the expiration of the 5-year term, a review again will be undertaken to determine whether the exclusivity prohibition continues to be necessary to preserve and protect competition and diversity in the distribution of video programming. This NPRM initiate this review.

24. The authority for the action proposed in the rulemaking is contained in Section 4(i), 303 and 628 of the Communications Act of 1934, as amended, 47 U.S.C. 154(i), 303 and 548.

25. The RFA directs agencies to provide a description of, and where feasible, an estimate of the number of small entities that may be affected by the proposed rules, if adopted. The RFA generally defines the term “small entity” as having the same meaning as the terms “small business,” “small organization,” and “small governmental jurisdiction.” In addition, the term “small business” has the same meaning as the term “small business concern” 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”).

26. Cable and Other Program Distribution. The Census Bureau defines this category as follows: “This industry comprises establishments primarily engaged as third-party distribution systems for broadcast programming. The establishments of this industry deliver visual, aural, or textual programming received from cable networks, local television stations, or radio networks to consumers via cable or direct-to-home satellite systems on a subscription or fee basis. These establishments do not generally originate programming material.” The SBA has developed a small business size standard for Cable and Other Program Distribution, which is: all such firms having $13.5 million or less in annual receipts. According to Census Bureau data for 2002, there were a total of 1,191 firms in this category that operated for the entire year. Of this total, 1,087 firms had annual receipts of under $10 million, and 43 firms had receipts of $10 million or more but less than $25 million. An additional 61 firms had annual receipts of $25 million or more. Thus, under this size standard, the majority of firms can be considered small.

27. Cable Companies and Systems. The Commission has also developed its own small business size standards, for the purpose of cable rate regulation. Under the Commission's rules, a “small cable company” is one serving 400,000 or fewer subscribers, nationwide. The Commission determined that this size standard equates approximately to a size standard of $100 million or less in annual revenues. Industry data indicate that, of 1,076 cable operators nationwide, all but eleven are small under this size standard. In addition, under the Commission's rules, a “small system” is a cable system serving 15,000 or fewer subscribers. Industry data indicate that, of 7,208 systems nationwide, 6,139 systems have under 10,000 subscribers, and an additional 379 systems have 10,000-19,999 subscribers. Thus, under this second size standard, most cable systems are small.

28. Cable System Operators. The Communications Act of 1934, as amended, also contains a size standard for small cable system operators, which is “a cable operator that, directly or through an affiliate, serves in the aggregate fewer than 1 percent 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 an operator serving fewer than 677,000 subscribers shall be deemed a small operator, if its annual revenues, when combined with the total annual revenues of all its affiliates, do not exceed $250 million in the aggregate. Industry data indicate that, of 1,076 cable operators nationwide, all but ten are small under this size standard. We note that the Commission neither requests nor collects information on whether cable system operators are affiliated with entities whose gross annual revenues exceed $250 million, and therefore we are unable to estimate more accurately the number of cable system operators that would qualify as small under this size standard. The Commission does receive such information on a case-by-case basis if a cable operator appeals a local franchise authority's finding that the operator does not qualify as a small cable operator pursuant to section 76.901(f) of the Commission's rules.

29. Direct Broadcast Satellite (“DBS”) Service. DBS service is a nationally distributed subscription service that delivers video and audio programming via satellite to a small parabolic “dish” antenna at the subscriber's location. Because DBS provides subscription services, DBS falls within the SBA-recognized definition of Cable and Other Program Distribution. This definition provides that a small entity is one with $13.5 million or less in annual receipts. Currently, only four operators hold licenses to provide DBS service, which requires a great investment of capital for operation. All four currently offer subscription services. Two of these four DBS operators, DIRECTV and EchoStar Communications Corporation (“EchoStar”), report annual revenues that are in excess of the threshold for a small business. A third operator, Rainbow DBS, is a subsidiary of Cablevision's Rainbow Network, which also reports annual revenues in excess of $13.5 million, and thus does not qualify as a small business. The fourth DBS operator, Dominion Video Satellite, Inc. (“Dominion”), offers religious (Christian) programming and does not report its annual receipts. The Commission does not know of any source which provides this information and, thus, we have no way of confirming whether Dominion qualifies as a small business. Because DBS service requires significant capital, we believe it is unlikely that a small entity as defined by the SBA would have the financial wherewithal to become a DBS licensee. Nevertheless, given the absence of specific data on this point, we acknowledge the possibility that there are entrants in this field that may not yet have generated $13.5 million in annual receipts, and therefore may be categorized as a small business, if independently owned and operated.

30. Private Cable Operators (PCOs) also known as Satellite Master Antenna Television (SMATV) Systems. PCOs, also known as SMATV systems or private communication operators, are video distribution facilities that use closed transmission paths without using any public right-of-way. PCOs acquire video programming and distribute it via terrestrial wiring in urban and suburban multiple dwelling units such as apartments and condominiums, and commercial multiple tenant units such as hotels and office buildings. The SBA definition of small entities for Cable and Other Program Distribution Services includes PCOs and, thus, small entities are defined as all such companies generating $13.5 million or less in annual receipts. Currently, there are approximately 135 members in the Independent Multi-Family Communications Council (IMCC), the trade association that represents PCOs. Individual PCOs often serve approximately 3,000-4,000 subscribers, but the larger operations serve as many as 15,000-55,000 subscribers. In total, PCOs currently serve approximately 1.1 million 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 PCOs, we believe that a substantial number of PCO may qualify as small entities.

31. Home Satellite Dish (“HSD”) Service. Because HSD provides subscription services, HSD falls within the SBA-recognized definition of Cable and Other Program Distribution, which includes all such companies generating $13.5 million or less in revenue annually. HSD or the large dish segment of the satellite industry is the original satellite-to-home service offered to consumers, and involves the home reception of signals transmitted by satellites operating generally in the C-band frequency. Unlike DBS, which uses small dishes, HSD antennas are between four and eight feet in diameter and can receive a wide range of unscrambled (free) programming and scrambled programming purchased from program packagers that are licensed to facilitate subscribers' receipt of video programming. There are approximately 30 satellites operating in the C-band, which carry over 500 channels of programming combined; approximately 350 channels are available free of charge and 150 are scrambled and require a subscription. HSD is difficult to quantify in terms of annual revenue. HSD owners have access to program channels placed on C-band satellites by programmers for receipt and distribution by MVPDs. Commission data shows that, between June 2003 and June 2004, HSD subscribership fell from 502,191 subscribers to 335,766 subscribers, a decline of more than 33 percent. The Commission has no information regarding the annual revenue of the four C-Band distributors.

32. Wireless Cable Systems. Wireless cable systems use the Multipoint Distribution Service (“MDS”) and Instructional Television Fixed Service (“ITFS”) frequencies in the 2 GHz band to transmit video programming and provide broadband services to subscribers. Local Multipoint Distribution Service (“LMDS”) is a fixed broadband point-to-multipoint microwave service that provides for two-way video telecommunications. As previously noted, the SBA definition of small entities for Cable and Other Program Distribution, which includes such companies generating $13.5 million in annual receipts, appears applicable to MDS, ITFS and LMDS. In addition, the Commission has defined small MDS and LMDS entities in the context of Commission license auctions.

33. In the 1996 MDS auction, the Commission defined a small business as an entity that had annual average gross revenues of less than $40 million in the previous three calendar years. This definition of a small entity in the context of MDS auctions has been approved by the SBA. In the MDS auction, 67 bidders won 493 licenses. Of the 67 auction winners, 61 claimed status as a small business. At this time, the Commission estimates that of the 61 small business MDS auction winners, 48 remain small business licensees. In addition to the 48 small businesses that hold BTA authorizations, there are approximately 392 incumbent MDS licensees that have gross revenues that are not more than $40 million and are thus considered small entities. We also note that MDS licensees and wireless cable operators that did not participate in the MDS auction must rely on the SBA definition of small entities for Cable and Other Program Distribution, which is: Such entities do not generate revenue in excess of $13.5 million annually. We estimate that the majority of these entities are small.

34. While SBA approval for a Commission-defined small business size standard applicable to ITFS is pending, educational institutions are included in this analysis as small entities. There are currently 2,032 ITFS licensees, and all but 100 of these licenses are held by educational institutions. Thus, the Commission estimates that at least 1,932 ITFS licensees are small businesses.

35. In the 1998 and 1999 LMDS auctions, the Commission defined a small business as an entity that had annual average gross revenues of less than $40 million in the previous three calendar years. Moreover, the Commission added an additional classification for a “very small business,” which was defined as an entity that had annual average gross revenues of less than $15 million in the previous three calendar years. These definitions of “small business” and “very small business” in the context of the LMDS auctions have been approved by the SBA. In the first LMDS auction, 104 bidders won 864 licenses. Of the 104 auction winners, 93 claimed status as small or very small businesses. In the LMDS re-auction, 40 bidders won 161 licenses. Based on this information, we believe that the number of small LMDS licenses will include the 93 winning bidders in the first auction and the 40 winning bidders in the re-auction, for a total of 133 small entity LMDS providers as defined by the SBA and the Commission's auction rules.

36. Open Video Systems (“OVS”). The OVS framework provides opportunities for the distribution of video programming other than through cable systems. Because OVS operators provide subscription services, OVS falls within the SBA-recognized definition of Cable and Other Program Distribution Services, which provides that a small entity is one with $13.5 million or less in annual receipts. The Commission has certified 25 OVS operators with some now providing service. Broadband service providers (BSPs) are currently the only significant holders of OVS certifications or local OVS franchises, even though OVS is one of four statutorily-recognized options for local exchange carriers (LECs) to offer video programming services. As of June 2003, BSPs served approximately 1.4 million subscribers, representing 1.49 percent of all MVPD households. Among BSPs, however, those operating under the OVS framework are in the minority, with approximately eight percent operating with an OVS certification. Serving approximately 460,000 of these subscribers, Affiliates of Residential Communications Network, Inc. (“RCN”) is currently the largest BSP and 11th largest MVPD. RCN received approval to operate OVS systems in New York City, Boston, Washington, D.C. and other areas. The Commission does not have financial information regarding the entities authorized to provide OVS, some of which may not yet be operational. We thus believe that at least some of the OVS operators may qualify as small entities.

37. Cable and Other Subscription Programming. The Census Bureau defines this category as follows: “This industry comprises establishments primarily engaged in operating studios and facilities for the broadcasting of programs on a subscription or fee basis * * *. These establishments produce programming in their own facilities or acquire programming from external sources. The programming material is usually delivered to a third party, such as cable systems or direct-to-home satellite systems, for transmission to viewers.” The SBA has developed a small business size standard for firms within this category, which is: firms with $13.5 million or less in annual receipts. According to Census Bureau data for 2002, there were 270 firms in this category that operated for the entire year. Of this total, 217 firms had annual receipts of under $10 million and 13 firms had annual receipts of $10 million to $24,999,999. Thus, under this category and associated small business size standard, the majority of firms can be considered small.

38. A “small business” under the RFA is one that, inter alia , meets the pertinent small business size standard ( e.g. , a telephone communications business having 1,500 or fewer employees), and “is not dominant in its field of operation.” The SBA's Office of Advocacy contends that, for RFA purposes, small incumbent local exchange carriers are not dominant in their field of operation because any such dominance is not “national” in scope.

39. Incumbent Local Exchange Carriers (“LECs”). Neither the Commission nor the SBA has developed a small business size standard specifically for incumbent local exchange services. The appropriate size standard under SBA rules is for the category Wired Telecommunications Carriers. Under that size standard, such a business is small if it has 1,500 or fewer employees. According to Commission data, 1,303 carriers have reported that they are engaged in the provision of incumbent local exchange services. Of these 1,303 carriers, an estimated 1,020 have 1,500 or fewer employees and 283 have more than 1,500 employees. Consequently, the Commission estimates that most providers of incumbent local exchange service are small businesses.

40. Competitive Local Exchange Carriers, Competitive Access Providers (CAPs), “Shared-Tenant Service Providers,” and “Other Local Service Providers. ” Neither the Commission nor the SBA has developed a small business size standard specifically for these service providers. The appropriate size standard under SBA rules is for the category Wired Telecommunications Carriers. Under that size standard, such a business is small if it has 1,500 or fewer employees. According to Commission data, 769 carriers have reported that they are engaged in the provision of either competitive access provider services or competitive local exchange carrier services. Of these 769 carriers, an estimated 676 have 1,500 or fewer employees and 93 have more than 1,500 employees. In addition, 12 carriers have reported that they are “Shared-Tenant Service Providers,” and all 12 are estimated to have 1,500 or fewer employees. In addition, 39 carriers have reported that they are “Other Local Service Providers.” Of the 39, an estimated 38 have 1,500 or fewer employees and one has more than 1,500 employees. Consequently, the Commission estimates that most providers of competitive local exchange service, competitive access providers, “Shared-Tenant Service Providers,” and “Other Local Service Providers” are small entities.

41. Electric Power Generation, Transmission and Distribution. The Census Bureau defines this category as follows: “This industry group comprises establishments primarily engaged in generating, transmitting, and/or distributing electric power. Establishments in this industry group may perform one or more of the following activities: (1) Operate generation facilities that produce electric energy; (2) operate transmission systems that convey the electricity from the generation facility to the distribution system; and (3) operate distribution systems that convey electric power received from the generation facility or the transmission system to the final consumer.” The SBA has developed a small business size standard for firms in this category: “A firm is small if, including its affiliates, it is primarily engaged in the generation, transmission, and/or distribution of electric energy for sale and its total electric output for the preceding fiscal year did not exceed 4 million megawatt hours.” According to Census Bureau data for 2002, there were 1,644 firms in this category that operated for the entire year. Census data do not track electric output and we have not determined how many of these firms fit the SBA size standard for small, with no more than 4 million megawatt hours of electric output. Consequently, we estimate that 1,644 or fewer firms may be considered small under the SBA small business size standard.

42. The NPRM seeks comment on the possible sunset or the retention of Section 628(c)(2)(D) of the Communications Act. The NPRM also seeks comment on whether and how our procedures for resolving program access disputes under Section 628 should be modified. The NPRM does not propose any specific reporting, recordkeeping or other compliance requirements.

43. The RFA requires an agency to describe any significant alternatives that it has considered in proposing regulatory approaches, which may include the following four alternatives (among others): (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. The NPRM again seeks comment on whether Section 628(c)(2)(D) should cease to be effective, pursuant to the sunset provision in Section 628(c)(5), or whether Section 628(c)(2)(D) should be retained. Thus, the NPRM invites comment on issues that may impact some small entities. The NPRM seeks comment on what impact the retention of the exclusivity prohibition has had on the multichannel video programming distribution market (“MVPD”) overall. More specifically, the NPRM inquires what impact the provision has had on the entry of new competitive MVPDs into the marketplace. It further inquires about access by competitive MVPDs to “marquee” or “must have” programming and whether these services still remain essential to the successful implementation of competitive services. The NPRM also seeks information on what impact cable system clusters, the distribution of regional programming services, and horizontal consolidation have on the programming marketplace. The NPRM also inquires about whether there has been any change in the resources and ability of nonaffiliated cable operators and competitive MVPDs to develop their own programming. In addition, comment is sought on what effect the prohibition has had on preserving and protecting diversity in the distribution of video programming.

None.

44. Accordingly, it is ordered that, pursuant to the authority contained in Sections 4(i), 303 and 628 of the Communications Act of 1934, as amended, 47 U.S.C. 154(i), 303 and 548, notice is hereby given of the proposals described in this NPRM of Proposed Rulemaking.

45. It is further ordered that the Commission's Consumer and Governmental Affairs Bureau, Reference Information Center, will send a copy of this NPRM of Proposed Rule Making, including the IRFA, to the Chief Counsel for Advocacy of the Small Business Administration, in accordance with the Regulatory Flexibility Act.

Based upon documented sea turtle interactions with pound net leaders, NMFS issued a final rule on May 5, 2004 (69 FR 24997), that prohibited the use of offshore pound net leaders from May 6 to July 15 in an area now referred to as “Pound Net Regulated Area I”. Pound Net Regulated Area I is defined as the Virginia waters of the mainstem Chesapeake Bay, south of 37°19.0′ N. lat. and west of 76°13.0′ W. long., and all waters south of 37°13.0′ N. lat. to the Chesapeake Bay Bridge Tunnel (extending from approximately 37°05′ N. lat., 75°59′ W. long. to 36°55′ N. lat., 76 08′ W. long.) at the mouth of the Chesapeake Bay, and the portion of the James River downstream of the Hampton Roads Bridge Tunnel (I-64; approximately 36°59.55′ N. lat., 76° 18.64′ W. long.) and the York River downstream of the Coleman Memorial Bridge (Route 17; approximately 37°14.55′ N. lat, 76°30.40′ W. long.). An offshore pound net leader refers to a leader with the inland end set greater than 10 horizontal feet (3 m) from the mean low water line. The May 2004 rule also placed restrictions on nearshore pound net leaders in Pound Net Regulated Area I and on all pound net leaders employed in “Pound Net Regulated Area II.” Pound Net Regulated Area II refers to Virginia waters of the Chesapeake Bay, outside of Pound Net Regulated Area I as defined above, extending to the Maryland-Virginia State line (approximately 37°55′ N. lat., 75°55′ W. long.), the Great Wicomico River downstream of the Jessie Dupont Memorial Highway Bridge (Route 200; approximately 37°50.84′ N. lat, 76°22.09′ W. long.), the Rappahannock River downstream of the Robert Opie Norris Jr. Bridge (Route 3; approximately 37°37.44′ N. lat, 76°25.40′ W. long.), and the Piankatank River downstream of the Route 3 Bridge (approximately 37°30.62′ N. lat, 76°25.19′ W. long.) to the COLREGS line at the mouth of the Chesapeake Bay. According to the 2004 rule, nearshore pound net leaders in Pound Net Regulated Area I and all pound net leaders in Pound Net Regulated Area II must have mesh size less than 12 inches (30.5 cm) stretched mesh and may not employ stringers.

In 2004 and 2005, NMFS implemented a coordinated research program with pound net industry participants and other interested parties to develop and test a modified pound net leader design with the goal of eliminating or reducing sea turtle interactions while retaining an acceptable level of fish catch. The modified pound net leader design used in the experiment consisted of a combination of mesh and stiff vertical lines. The mesh size was equal to or less than 8 inches (20.3 cm). The mesh was positioned at a depth that was no more than one-third the depth of the water. The vertical lines were 5/16 inch (0.8 cm) in diameter strung vertically at a minimum of every 2 feet (61 cm) and attached to a top line. The vertical lines rose from the top of the mesh up to a top line to which they were attached. In 2005, hard lay line was used for the vertical lines in order to make them stiffer. The hard lay lines used in 2005 were made of 5/16 inch (0.8 cm) sinking line, and were polyester-wrapped around Polysteel, which is a blend of polypropylene and polyethylene. The design was based on the premise that the sea turtles would pass through the upper two-thirds of the leader, through the stiff vertical lines, without entangling in or impinging on the leader.

During the 2-year study, the modified leader was found to be effective in reducing sea turtle interactions as compared to the unmodified leader. The final results of the 2004 study found that out of eight turtles impinged on or entangled in the leaders of pound nets, seven were impinged on or entangled in an unmodified leader. One leatherback turtle was found entangled in a modified leader. In response to the leatherback entanglement, the gear was further modified by increasing the stiffness of the vertical lines for the 2005 experiment. The 2005 experiment found that 15 turtles entangled in unmodified leaders, but no turtles were impinged on or entangled in modified leaders. Furthermore, results of the finfish catch comparison suggest that the modified leader caught similar quantities and size compositions as the unmodified leader.

Based upon these results, on June 23, 2006, NMFS issued a final rule (71 FR 36024) that required any offshore pound net leader in Pound Net Regulated Area I during the time period from May 6 through July 15 to meet the definition of a modified pound net leader. A modified pound net leader was defined as a pound net leader that is affixed to or resting on the sea floor and made of a lower portion of mesh and an upper portion of only vertical lines such that (a) the mesh size is equal to or less than 8 inches (20.3 cm) stretched mesh; (b) at any particular point along the leader the height of the mesh from the seafloor to the top of the mesh must be no more than one-third the depth of the water at mean lower low water directly above that particular point; (c) the mesh is held in place by vertical lines that extend from the top of the mesh up to a top line, which is a line that forms the uppermost part of the pound net leader; (d) the vertical lines are equal to or greater than 5/16-inch (0.8-cm) in diameter and strung vertically at a minimum of every 2 feet (61 cm); and (e) the vertical lines are hard lay lines with a level of stiffness equivalent to the stiffness of a 5/16 inch (0.8 cm) diameter line composed of polyester wrapped around a blend of polypropylene and polyethylene and containing approximately 42 visible twists of strands per foot of line.

Existing mesh size and stringer restrictions on nearshore pound net leaders in Pound Net Regulated Area I and all pound net leaders in Pound Net Regulated Area II remain in place from May 6 through July 15 each year. However, the June 2006 rule created an exception to those restrictions by allowing the use of modified pound net leaders during that period in nearshore pound net leaders in Pound Net Regulated Area I and all pound net leaders in Pound Net Regulated Area II. The year-round reporting and monitoring requirements for this fishery and the framework mechanism under the existing regulations (May 5, 2004, 69 FR 24997) also remained in effect.

After the 2006 final rule was published, NMFS determined that an onshore inspection program that examines a modified leader ready for deployment would help ensure the protection of sea turtles, while avoiding the difficulties of and potential costs to fishermen associated with post-deployment inspections at-sea. For example, most of the pound net leader is typically set under the water, the water clarity in the Chesapeake Bay is generally poor, and there may be debris in the water that could endanger the inspector. In addition, if a fisherman was asked to haul the leader for an inspection once it was deployed, there would be a loss in fishing time. The modified leader configuration was developed to protect sea turtles, and it is important that the leaders deployed in this fishery meet the same standards as those tested in 2004 and 2005 and now embodied in the regulations. NMFS proposes an inspection program that would: (1) Provide fishermen with the assurance that their leaders meet the definition of a modified pound net leader before setting their gear, thereby avoiding the costs associated with having to haul their gear during the fishing season, fix any parts of the leader determined by an authorized officer during an at-sea inspection to be non-compliant with the regulation, and reset the gear; (2) provide managers with the knowledge that the offshore leaders in Pound Net Regulated Area I are configured in a “turtle-safe” manner; and (3) aid in enforcement efforts.

If a pound net fisherman intends to use a modified pound net leader anywhere in Pound Net Regulated Area I or Pound Net Regulated Area II at any time during the period from May 6 through July 15, he or she would adhere to the following requirements of the inspection program. First, the pound net fisherman, or his/her representative, would call NMFS at 757-414-0128 at least 72 hours before the modified leaders are to be deployed. During this call, the fisherman or representative and NMFS would discuss a meeting date, time, and location, as well as the fisherman's plans for setting his/her gear. While NMFS realizes that setting pound net gear is dependent upon weather conditions, allotting a window of 72 hours or more enables the fishermen and NMFS to arrange a mutually agreeable meeting time to examine the modified leaders. The second component of the inspection program involves a meeting between NMFS and the fisherman at the dock or place of leader fabrication, or another mutually agreeable place, to allow NMFS to examine the gear. This inspection may include, but is not limited to, measuring the mesh size, the spacing and diameter of the vertical lines, and the height of the mesh in relation to the entire leader height, as well as examining the hard lay line, to help ensure the modified leader meets the definition of a modified leader as established in the June 2006 final rule. During the inspection, the fisherman must inform NMFS of the specific location of deployment of his or her inspected pound net leader. If the modified leader meets the regulatory requirements, NMFS will tag the leader with one or more tamperproof tags (provided by NMFS) each of which will be marked with a unique identification number. Additionally, the fisherman will receive a letter from NMFS at the time of inspection noting that the leader has been inspected, the date of the inspection, the license holder's name for the site at which the leader will be set, the tag numbers of the attached tags, and the location of the inspected pound net leader. This letter must remain with the fisherman during fishing activities. The fisherman could then set his or her inspected leaders at any time after the dockside check, but the tags must remain on the gear. After tagging by NMFS, the tags may not be tampered with or removed from the inspected nets. Any modification to the tags on the leader, or their removal, is prohibited and voids the inspection information in the letter. If such occurs and the inspection information in the letter becomes void, the fisherman would not be in compliance with the regulations and be subject to law enforcement action. If the onshore inspection indicates that the gear does not meet the requirements, then the fisherman would be told how to make his or her gear compliant with the regulation before setting it in the water for the season.

Compared to other gear types and fisheries, the pound net fishery in Virginia has several characteristics that make an inspection program such as this necessary, and possible, to implement. The gear is only deployed once during a season (unless later damaged), and the fact that the leaders are below the surface combined with the low water clarity and visibility in Chesapeake Bay make inspection of the gear during the season virtually impossible. The number of pound nets for which the gear modification is required is relatively small (<50), which makes the inspection program feasible to implement.

Current regulations require any offshore pound net leader in Pound Net Regulated Area I to meet the definition of a modified pound net leader, and allow the use of modified pound net leaders in nearshore pound net leaders in Pound Net Regulated Area I and on all pound net leaders in Pound Net Regulated Area II. This inspection program applies to all modified pound net leaders that will be in the Virginia Chesapeake Bay waters at any time during the period from May 6 through July 15. All modified pound net leaders must be inspected by NMFS prior to deployment, regardless of whether it is in Pound Net Regulated Area I or Pound Net Regulated Area II. NMFS can inspect a net at any time during the year, but all modified pound net leaders in Virginia Chesapeake Bay waters during the period from May 6 through July 15 must have been inspected by NMFS. If a tag is damaged, destroyed or lost by debris, vessel traffic, marine life, or any other cause, the fisherman must call NMFS within 48 hours of discovery to report this incident. Pound net fishermen are required to have their modified leaders inspected annually, within one year from the previous date of inspection. Note that if a modified leader is set prior to the issuance of a final rule, the modified leader would be allowed to remain in the water during the 2007 season, but it would need to be inspected if it will be in either Pound Net Regulated Area I or II at any time during the period from May 6 through July 15, in any subsequent year.

According to this proposed rule, if a fisherman chooses to use a modified pound net leader, anywhere in Pound Net Regulated Area I or Pound Net Regulated Area II, at any time during the period from 12:01 a.m. local time on May 6 through 11:59 p.m. local time on July 15 in any year, the pound net leader must be inspected on land by NMFS. This action would be implemented under the authority of the ESA sections 4(d) and 11(f) and is necessary and appropriate to conserve threatened sea turtles and to enforce the provisions of the ESA, including the prohibition on takes of endangered sea turtles.

All of the previously established NMFS regulations affecting sea turtles and pound net leaders in the Chesapeake Bay remain in effect.

This proposed rule has been determined to be not significant for purposes of Executive Order 12866.

NMFS has prepared an initial regulatory flexibility analysis that describes the economic impact this proposed rule, if adopted, would have on small entities. A description of the action, why it is being considered, and the legal basis for this action are contained in the preamble and in the SUMMARY section. A summary of the analysis follows:

The fishery affected by this proposed rule is the Virginia pound net fishery in the Chesapeake Bay. The proposed action would establish an inspection program for modified pound net leaders in the Virginia waters of the mainstem Chesapeake Bay.

The Final Environmental Assessment (EA) and Regulatory Impact Review Regulatory Flexibility Act Analysis of Sea Turtle Conservation Measures for the Pound Net Fishery in Virginia Waters of the Chesapeake Bay (June 2006) analyzed the economic impacts of requiring the use of the modified leader for offshore pound nets in Regulated Area I and allowing the use of the modified leader by all other pound nets in the Virginia waters of Chesapeake Bay between May 6 and July 15. The analysis found the rule would increase net revenues for five fishermen in the lower Bay by allowing them to fish offshore pound nets during the regulated time period, compared to the previous 2004 rule that prohibited leaders. The cost of fabricating and deploying the modified leader was more than offset by the increase in revenues. Additionally, the EA noted that the public benefits from turtle protection using the modified leader were indistinguishable from the leader prohibition. This rule does not change those conclusions; rather, it would help to support the benefits identified. If the compliance rate for use of the modified leader for offshore pound nets in Regulated Area I is not 100 percent, there is potential for a reduction in the benefits from turtle protection. The economic incentives for a fisherman to decide not to comply with the existing regulations are minor; however, fishermen may not comply with the modified leader design specifications due to an inadvertent error in construction. In either case, benefits from the existing regulation could be reduced.

The cost to a fisherman of undergoing a land based inspection is small. Assuming that fishing is not impeded by the regulation  1 , and the inspection is arranged at a location convenient to the fisherman, the principal cost to fishermen would be the opportunity cost of their time to arrange and undergo the inspection estimated at $21.50 per leader. Assuming telephone costs of $1.25 to arrange the meeting, the total cost would be $22.75 per leader. Fishermen are also required to notify NMFS by telephone if a tag is lost, damaged or destroyed. It is estimated such a call, should it be necessary, would take approximately 5 minutes for an estimated cost of $2.90 per lost/damaged/destroyed tag (considering telephone charges and opportunity cost of time).

The number of fishermen and leaders affected by this proposed rule will depend on how many fishermen adopt the modified leader. At the low end, if we assume that only those fishermen required to use the modified leader in order to fish do so, the estimate is five fishermen in the lower Bay with seven offshore leaders would incur inspection costs. Depending on the number of leaders a fisherman deploys, the cost per fisherman would range from $22.75 to $45.50 or 0.03 to 0.06 percent of average annual revenues per fisherman. A mid-range estimate suggests fishermen would replace all offshore pound net leaders with the modified leader. At the end of five years, 21 fishermen with 32 pound nets would incur costs between $22.75 to $45.50 or 0.03 to 0.08 percent of average annual revenues. At the high end, we can assume that during the normal leader replacement cycle, all fishermen adopted the modified leader for all pound nets used in Pound Net Regulated Areas I and II during May 6 to July 15, the estimate at the end of five years would be 21 fishermen and 46 pound nets. The annual cost per fisherman would range from $22.75 to $91.00, or 0.04 to 0.11 percent of average annual revenues. The total annual cost to the pound net industry would be $159.25 at the low level of adoption, or $1,046.50 under full adoption, which are 0.0073 to 0.0479 percent of industry revenues. Note that the cost of reporting lost, damaged, or destroyed tags is not included in the individual fisherman or industry estimates because there is no verifiable estimate of expected rate of tag loss. If one assumes three tags per leader and a 10-percent loss rate, the total industry cost would increase by $5.80 to $40.60 per year depending on the level of adoption and the year. The alternative to the proposed action is no action, for which there would not be any economic impacts on small entities.

To achieve compliance, the proposed rule would require those fishermen who wish to deploy a modified leader during the period of May 6 through July 15, to make their modified leaders available for inspection and tagging. Additionally, fishermen would be required to retain a letter that the leader is in compliance for the relevant period. Under existing regulations fishermen had to be familiar with the design requirements for the modified leader; this knowledge continues to be required under the proposed rule. In the event that a tagged leader is damaged or destroyed, fishermen would be required to report the loss to NMFS personnel. To access the inspection program and report lost or damaged tags, fishermen would need access to a telephone. No new skills would be required for compliance.

This proposed rule does not duplicate, overlap or conflict with other Federal rules.

This proposed rule contains a collection-of-information requirement subject to review and approval by OMB under the Paperwork Reduction Act (PRA). This requirement has been submitted to OMB for approval. Public reporting burden for the modified pound net leader certification program is estimated to average a maximum of 2 and one half hours per fisherman (or 51 hours for all Virginia pound net fishermen), including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information.

Public comment is sought regarding: whether this proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; the accuracy of the burden estimate; ways to enhance the quality, utility, and clarity of the information to be collected; and ways to minimize the burden of the collection of information, including through the use of automated collection techniques or other forms of information technology. Send comments on these or any other aspects of the collection of information to NMFS in one of the formats listed in the ADDRESSES section above, and e-mail to David_Rostker@omb.eop.gov , or fax to (202) 395-7285.

Notwithstanding any other provision of the law, no person is required to respond to, nor shall any person be subject to a penalty for failure to comply with, a collection of information subject to the requirements of the PRA, unless that collection of information displays a currently valid OMB Control Number.

For the reasons set forth in the preamble, 50 CFR part 223 is proposed to be amended as follows:

1. The authority citation for part 223 continues to read as follows:

2. In § 223.205, paragraphs (b)(16) and (b)(17) are redesignated as (b)(21) and (b)(22), respectively, and paragraphs (b) (16) - (20) are added to read as follows:

3. In § 223.206, paragraph (d)(10)(vii) is added to read as follows: