Your written comments on the proposed rule should be specific, should be confined to issues pertinent to the proposed rule, and should explain the reason(s) and/or provide supporting information for any change you recommend or proposal(s) you oppose. Where possible, you should reference the specific section or paragraph of the proposal you are addressing. Comments received after the close of the comment period (see DATES ) will not be considered or included in the Administrative Record for the final rule.

Executive Order 12866 requires each agency to write regulations that are simple and easy to understand. We invite your comments on how to make the proposed regulations easier to understand, as well as comments and information that could help us make the programs as effective as practical, including answers to questions such as the following:

(1) Are the requirements in the proposed regulations clearly stated?

(2) Does the proposed rule contain technical language or jargon that interferes with its clarity?

(3) Does the format of the proposed rule ( e.g., grouping and order of sections, use of headings, and paragraphing) make it clearer or less clear?

(4) Would the proposed rule be easier to understand if it was divided into more (but shorter) sections?

(5) Is the description of the proposed rule in the preamble section entitled “Background and Discussion of the Proposed Rule” helpful in understanding the proposed rule? How could this description be more helpful in making the proposed rule easier to understand?

(6) What could be done to minimize the burdens and/or improve outcomes of the program, consistent with program objectives? Costs and benefits include both quantifiable measures (to the fullest extent that these can be usefully estimated) and qualitative measures of costs and benefits that are difficult to quantify, but nevertheless essential to consider. Please provide information that would help quantitatively asses the benefits and costs of this proposed rule.

(7) What could be done to foster incentives for innovation, flexibility, consistency, predictability, the costs of enforcement and compliance (to the government, regulated entities, and the public)?

This rulemaking sets forth proposed revisions to implement amendments made to Section 17 of the Richard B. Russell National School Lunch Act (NSLA), 42 U.S.C. 1766, by section 221 of Public Law 111-296, the Healthy, Hunger-Free Kids Act of 2010 (HHFKA), for day care institutions participating in the Child and Adult Care Food Program (CACFP), schools serving infants and young children, ages four and under, who participate in the School Breakfast Program (SBP) or National School Lunch Program (NSLP), and schools and institutions serving children of all ages who participate in the Special Milk Program (SMP).

The amendments made by the HHFKA require the Department of Agriculture (USDA) through its CACFP to promote health and wellness in child care settings through guidance and technical assistance that focuses on nutrition, physical activity, and limiting electronic media use. More specifically, the amendments to the NSLA made by the HHFKA require USDA to review the CACFP meal patterns and make them consistent with (a) the most recent version of the Dietary Guidelines for Americans, (b) the most recent relevant nutrition science, and (c) appropriate authoritative scientific agency and organization recommendations. These updates should occur no less frequently than every 10 years. As the Dietary Guidelines and science evolve, USDA will continue to provide guidance, as needed, to support CACFP's nutrition and wellness goals. In formulating this proposed rule, the USDA relied primarily on recommendations included in the Dietary Guidelines for Americans, 2010, and Child and Adult Care Food Program: Aligning Dietary Guidance for All, a 2010 report prepared for USDA by the Institute of Medicine (IOM) of the National Academies, http://www.iom.edu/Reports/2010/Child-and-Adult-Care-Food-Program-Aligning-Dietary-Guidance-for-All.aspx. In reviewing the recommendations, USDA recognized that changes to the meal pattern must be sensitive to cost and practical application. With this in mind, a number of revisions to the meal pattern have been proposed, as well as optional best practices that facilities may choose to implement.

The HHFKA redefined the purpose of the CACFP as a program that provides aid to child and adult care institutions and family or group day care homes for the provision of nutritious foods that contribute to the wellness, healthy growth, and development of young children, and the health and wellness of older adults and chronically impaired disabled persons.

Under the proposed rule, the age groups for infants would be 0 through 5 months, and 6 through 11 months. These proposed changes would allow us to better meet the recommendations of the American Academy of Pediatrics (AAP) and make the age groups consistent with the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC). Additionally, to better meet the nutritional needs of infants, this proposed rule would revise the infant meal patterns to allow service of only breastmilk and/or infant formula to infants through 5 months of age, allow the introduction of additional meal components at 6 months of age (as developmentally appropriate), prohibit the service of fruit juice to infants through 11 months, and require the service of a fruit or vegetable in the infant snack pattern. In addition, as an incentive for encouraging breastfeeding and to better align program rules, this proposed rule would allow reimbursement for meals served to infants under six months of age when the mother directly breastfeeds her child at the child care facility. Meals containing breastmilk or iron-fortified infant formula supplied by the parent or the facility are already eligible for CACFP reimbursement.

To address the nutritional needs of older children, this proposed rule would include the addition of a new age group for children: 13 through 18 years old. Additionally, to more closely align the meals served in CACFP with the 2010 Dietary Guidelines, the IOM's 2010 report, Child and Adult Care Food Program: Aligning Dietary Guidance for All, and other USDA Child Nutrition Programs, this proposed rule would require that:

• The currently combined fruits and vegetables component be divided into a separate fruit component and vegetable component;

• At least one serving per day, across all eating occasions, of grains be whole grain-rich as described in the new definition of “whole grains” under 7 CFR 226.2;

• Breakfast cereals conform to requirements as outlined by WIC, under Table 4 of 7 CFR 246.10(e)(1212);

• Grain-based desserts be excluded from being used to meet the grain component requirement;

• A meat or meat alternate be allowed as a substitute for up to one-half of the required grains at breakfast meals;

• Tofu be allowed as a meat alternate;

• Unflavored whole milk be served to children one year of age (12 through 23 months) and 1 percent or fat-free milk be served to children two and older and adults;

• Flavored milk served is fat-free only;

• Non-dairy milk substitutions, flavored or unflavored, that are nutritionally equivalent to milk, as outlined by the NSLP under 7 CFR 210.10(d), may be served in lieu of fluid milk, if requested in writing by a child's parent or guardian or an adult participant;

• For adult participants only, yogurt be permitted as a fluid milk alternate up to one time per day across all eating occasions; and

• Frying be disallowed as an onsite preparation method for day care institutions.

Additionally, as required by the HHFKA, this proposed rule would require that day care institutions make drinking water available throughout the day to all children upon their request.

This proposed rule also includes best practices that day care facilities may choose to follow to further improve the nutritional quality of meals served. These proposed changes are intended to provide options for participants that will further improve the overall health and wellness of children and adults in day care settings.

This proposed rule includes alternatives for the service of flavored milk and yogurt and seeks public comment on these options. It proposes to prohibit the service of flavored milk or, alternatively, limit the sugar content in flavored milk served to children 2 through 4 years of age. The rule also seeks public comment on whether provisions limiting sugar in flavored milk served to children 5 years of age and older should be a required part of the CACFP meal patterns or a best practice that facilities may choose to adopt. The proposed rule's sugar limit for flavored milk is no more than 22 grams per 8 fluid ounces. Similarly, the rule invites public comment on whether sugar limits for yogurt should be a required part of the CACFP meal patterns or a best practice that facilities may choose to adopt. The proposed sugar limit for yogurt is no more than 30 grams of sugar per 6 ounces. The proposed rule presents these as Alternatives A1 and A2 for flavored milk for children 2 through 4 years of age; B1 and B2 for flavored milk for children 5 years of age and older; and C1 and C2 for yogurt for all age groups.

To maintain consistency across programs, this proposed rule would revise the SBP and NSLP meal patterns for infants and children under 5 years of age to reflect the respective meal patterns proposed for CACFP. Additionally, this proposed rule would revise the fluid milk requirements and approved non-dairy milk substitutions for the SMP.

The proposed rule adopts a cost-neutral subset of recommendations from the 2010 IOM report because no additional meal reimbursement has been provided to institute the proposed changes. Due to the structure of the CACFP, day care institutions are sensitive to even modest increases in Program operation cost; therefore it is important to propose cost-neutral changes that do not discourage participation in the CACFP. Without increasing net costs to CACFP center and day care home providers, the proposed changes will increase the availability of key food groups in program meals, reduce the amount of solid fats and sugars offered, and give providers additional flexibility to offer meals that meet participants' nutritional requirements as well as their dietary preferences.

This rule proposes to revise the nutritional aspects of the CACFP based on statutory requirements and recommendations from a variety sources. The statutory requirements are in Section 17 of the NSLA, as amended by section 221 of the HHFKA. The recommendations are derived from the Dietary Guidelines for Americans, 2010, a 2010 report from the Institute of Medicine of the National Academies, and stakeholders. In addition, USDA exercised discretion in implementing these recommendations based on cost and operational issues. Throughout this preamble, the term “providers” refer to centers and day care homes that operate the Program.

To assist the reader, the preamble that follows is organized to discuss the following topics:

• Background, which includes an overview of CACFP and the current meal patterns;

• HHFKA, which includes a discussion of the statutory provisions pertinent to the nutritional aspects of the CACFP;

• Updating the CACFP Meal Patterns, which includes a discussion of the recommendations of the Dietary Guidelines, the Institute of Medicine, and stakeholders;

• Proposed Meal Pattern Changes for CACFP;

• Best Practices;

• Flavored Milk and Yogurt;

• Proposed Miscellaneous Changes;

• Proposed Corresponding Changes to Other Child Nutrition Programs; and

• Technical Assistance.

The predecessor to the CACFP, the Child Care Food Program, was authorized as a pilot program in 1968 and became permanent in 1975. It provides cash assistance to States to assist child and adult care institutions and family or group day care homes in providing nutritious foods that contribute to the wellness, healthy growth, and development of children, and the health and wellness of older adults and functionally impaired adults. CACFP generally provides for more vulnerable populations: Children from birth through 18 years of age, adults 60 years of age or older, and functionally impaired adults of any age. In fiscal year 2013, the Program served over 3.67 million children and adults.

As with the NSLP and SBP, in CACFP, the USDA establishes meal patterns with minimum food component and quantity requirements to facilitate the planning of well-balanced meals. Participating centers and day care homes providing meals meeting the minimum requirements are eligible for reimbursement for the meals served to eligible children and adults.

Under current regulations found at 7 CFR 226.20, the daily meal patterns for children and adults require that minimum amounts of four food components be served. For example, lunches must contain:

• Fluid milk;

• Two or more vegetables or fruits, or a combination of both. Full-strength vegetable or fruit juice may be counted to meet not more than one-half of the fruit/vegetable component for lunch and supper meals;

• Whole grain or enriched bread; cornbread, biscuits, rolls, muffins, etc., made with whole grain or enriched meal or flour; whole grain or enriched pasta or noodle products such as macaroni, cereal grains such as rice, bulgur, or corn grits; or any combination of these foods; and

• Lean meat, poultry or fish; alternate protein products (as defined in Appendix A of 7 CFR part 226); cheese; an egg; cooked dry beans or peas; peanut butter; or any combination of these foods. These foods must be served in a main dish, or in a main dish and one other menu item, to meet this requirement. Cooked dry beans or dry peas may be used as the meat alternate requirement or as part of the vegetable/fruit component but not as both in the same meal. Generally, nuts and seeds and their butters may be used to meet no more than one-half of the meat/meat alternative component.

Existing Program regulations permit substitutions of foods if individual participants are unable, because of medical or other special dietary needs, to consume such foods. Substitutions because of medical needs are permissible only when supported by a statement from a recognized medical authority which includes recommended alternate foods.

The CACFP meal patterns have not been significantly revised since the inception of the Program, and in that time nutritional concerns have shifted from those of malnutrition, to the overconsumption of calories, saturated fats, added fats, added sugar, and sodium and the under consumption of fiber and other essential vitamins. Such overconsumption has contributed to an epidemic of overweight, obesity, and other major health concerns affecting children, adolescents, and adults. The meal pattern revisions seek to address this new set of concerns regarding the health of America's children.

In recognition of advances in nutritional science, section 221 of the HHFKA amended section 17 of the NSLA (42 U.S.C. 1766) to make a number of changes designed to improve the nutrition and wellness of children and adults participating in the CACFP.

Purpose of the Program —Section 17(a) of the NSLA (42 U.S.C. 1766(a)), as amended by the HHFKA, significantly expands the focus of CACFP from initiating and maintaining nonprofit food service programs to ensuring those programs provide nutritious foods that contribute to the wellness, healthy growth and development of young children and the health and wellness of adults in care. Section 17(a) also directs the USDA to encourage health and wellness and to provide guidance and technical assistance in a number of related areas including nutrition, physical activity, and limiting electronic media use.

Meal Pattern Updates —Section 17(g)(2) of the NSLA (42 U.S.C. 1766(g)(2)), requires USDA to review and, as appropriate, update the CACFP meal patterns to ensure that meals are consistent with the goals of the most recent Dietary Guidelines for Americans and promote the health of the populations served as indicated by the most recent and relevant nutrition science and appropriate authoritative scientific agency and organization recommendations. These updates must be made within 18 months of the review of the meal patterns and no less frequently than every 10 years thereafter. Section 17(g)(2) further directs the USDA to conduct a review of the cost of any changes to child care centers and family day care homes.

Exceptions for Special Dietary Needs/Emergency Shelters —While amendments made by the HHFKA will update meal pattern requirements in CACFP, the provisions also accommodate the need for exceptions to the requirements. As a result, Section 17(g)(2)(C) of the NSLA (42 U.S.C. 1766(g)(2)(C)), now makes it clear that the minimum nutritional requirements established through this rulemaking process are not to prohibit participating institutions from substituting foods to accommodate individual participants who do not have disabilities, but who are medically certified as having special medical or dietary needs. Further, this paragraph allows the USDA to waive all or part of the meal pattern requirements for emergency shelters.

Prohibition on Using Food as Reward or Punishment —Section 17(g)(3) of the NSLA (42 U.S.C. 1766(g)(3)), now explicitly reaffirms the USDA's long-standing policy that reimbursable meals must contribute to the development and socialization of children by providing food that is not used as a punishment nor a reward.

Fluid Milk Requirement —Section 17(g)(4) of the NSLA, as amended by the HHFKA (42 U.S.C. 1766(g)(4)), requires that fluid milk served in the CACFP be consistent with the most recent version of the Dietary Guidelines for Americans and in cases of medical or special dietary needs allows the substitution of non-dairy beverages that are nutritionally equivalent to fluid milk ( i.e., meet the nutritional standards of fortification for calcium, protein, vitamin A, vitamin D and other nutrients to levels found in cow's milk). The 2010 Dietary Guidelines recommend that persons two years of age and older consume low-fat (1 percent) or fat-free (skim) fluid milk. Therefore, fluid milk served in CACFP to participants two years of age and older must be: fat-free or low-fat milk, fat-free or low-fat lactose reduced milk, fat-free or low-fat lactose free milk, fat-free or low-fat buttermilk, or fat-free or low-fat acidified milk.

Nondiscrimination Policy and Use of Donated Foods —Sections 17(g)(5) and (g)(6) of the NSLA, as amended by the HHFKA (42 U.S.C. 1766(g)(5) and (g)(6)), restate two long-standing statutory provisions. Section 17(g)(5) prohibits physical segregation or other discrimination against any person because of inability to pay and any overt identification by special tokens, tickets, etc. Section 17(g)(6) requires participating institutions to use foods donated by the Secretary, to the maximum extent practicable.

Promoting Health and Wellness —Section 221 of the HHFKA also amended section 17 by adding a new paragraph (u) (42 U.S.C. 1766(u)), which requires USDA to encourage centers and family day care homes to provide daily opportunities for structured and unstructured age-appropriate physical activity and to limit the use of electronic media. In addition, paragraph (u) requires participating institutions to make available to children, as nutritionally appropriate, potable water as an acceptable fluid for consumption throughout the day, including at meal times. While drinking water must be made available to children during meal times, the changes made to the NSLA by HHKFA do not include water as part of the reimbursable meal and thus, water may not be served in lieu of fluid milk.

Technical Assistance —Finally, section 17(u) directs the USDA to assist participating centers and homes in complying with the nutritional and wellness recommendations through training, education materials, guidance, and technical assistance.

Implementation of these statutory requirements is discussed in more detail in this preamble and in the proposed regulatory language. To assist the reader, the following table directs the reader to further discussions of these provisions in this proposed rule.

Prior to the enactment of the HHFKA, the USDA commissioned the IOM to review the current CACFP meal patterns and provide recommendations that would improve the nutritional quality of meals and align them with the 2005 Dietary Guidelines, the most recent version available at the time. In the past, the IOM has also provided recommendations for WIC, and the NSLP and SBP.

In November 2010, the IOM issued the report Child and Adult Care Food Program: Aligning Dietary Guidance for All ( http://www.iom.edu/Reports/2010/Child-and-Adult-Care-Food-Program-Aligning-Dietary-Guidance-for-All.aspx ). The IOM's recommendations encompass two distinct elements: Meal patterns and food specifications.

The meal pattern recommendations are intended to align the meal patterns with the Dietary Guidelines and nutrient targets and allow the identification of meals that qualify for reimbursement. The IOM developed three meal pattern recommendations:

1. Revise the meal pattern requirements for healthy infants up to one year of age to include only breastmilk or formula for infants under 6 months of age; the gradual introduction of baby meats, cereals, fruits and vegetables beginning at age 6 months; and the omission of fruit juice at any time before the age of 1 year.

2. Revise the meal pattern requirements for children 1 year and older and adults to increase the variety of fruits and vegetables, increase the proportion of whole grains, and decrease solid fats, added sugars, trans fats, and sodium.

3. Allow CACFP facilities the option of serving one enhanced snack in the afternoon in place of a smaller snack in both the morning and the afternoon.

In addition to the meal pattern recommendations, the IOM also recommended including overall food specifications in the meal patterns. Food specifications were intended to restrict certain types of foods and food preparation methods, increase the minimum amounts of food required to be served at each meal, and increase the amounts of whole grains, lean meats, and dark green, red, and orange vegetables served.

The IOM concluded that implementation of all of its recommendations would increase the cost of meals by an average of 27 percent to 44 percent for all age groups, except infants. The IOM acknowledged that the increased cost and the need for extensive technical assistance due to the complexity of the new meal patterns would present challenges to the successful implementation of the recommended meal pattern changes.

To address these issues, the IOM recommended that the USDA consult with stakeholders regarding their ability to implement and monitor the recommendations. The IOM also recommended that USDA conduct additional research on the overall CACFP population to determine the foods currently served in CACFP in order to establish a baseline on which cost implications could be more accurately calculated.

Upon release of the IOM's report and recommendations for changes to the CACFP meal pattern, the USDA consulted at national meetings and other venues with a number of CACFP stakeholders, including State agencies, professional organizations, and advocacy groups, to discuss the recommendations. The stakeholders expressed concerns centered primarily on the complexity of the recommendations and possible changes, the anticipated large increase in meal cost, and the expected result of increased difficulty in monitoring such changes. Concerns and alternative recommendations expressed by stakeholders were considered when drafting these proposed changes.

After careful thought and consideration of the recommendations in the 2010 Dietary Guidelines, the IOM's recommendations, and stakeholder concerns, the USDA concluded that any proposed changes to the meal pattern must be implemented by providers without undue difficulty and be sensitive to cost.

Thus, this proposed rule would adopt the following recommendations:

• Revise the infant age groups from three age groups to two age groups;

• Introduce solid foods to infants beginning at 6 months of age;

• Eliminate the service of fruit juice to infants of any age;

• Allow reimbursement for infant meals when the mother directly breastfeeds her child at the child care facility;

• Require a fruit or vegetable serving in the snack meal pattern for the 6 to 11 month infant age group;

• Allow additional grain options for infant snacks;

• Add a fourth age group (13 through 18 years) to the meal pattern for children;

• Separate the fruit and vegetable component for children and adults;

• Require that at least one grain serving per day, across all eating occasions, be whole grain or whole grain-rich;

• Require breakfast cereals to conform to WIC requirements;

• Prevent grain-based desserts from counting towards the grains component;

• Allow an optional meat or meat alternate to be served at breakfast in lieu of some grains;

• Allow tofu to be counted as a meat alternate;

• Allow yogurt to be used to meet the fluid milk requirement for adults only, no more than once per day; and

• Disallow frying as an onsite preparation method for day care institutions and facilities.

These proposed changes are discussed in more detail under the section entitled, Proposed Meal Pattern Requirements for CACFP.

Additionally, this rule seeks public comment on a number of provisions related to the service of flavored milk and yogurt in the CACFP meal pattern. It proposes to prohibit the service of flavored milk or, alternatively, limit the sugar content in flavored milk served to children 2 through 4 years of age. The rule also seeks public comment on whether provisions limiting sugar in flavored milk served to children 5 years of age and older should be a required part of the CACFP meal patterns or a best practice that facilities may choose to adopt. The proposed rule's sugar limit for flavored milk is no more than 22 grams per 8 fluid ounces. Similarly, the rule invites public comment on whether sugar limits for yogurt should be a required part of the CACFP meal patterns or a best practice that facilities may choose to adopt. The proposed sugar limit for yogurt is no more than 30 grams of sugar per 6 ounces. The proposed rule presents these as Alternatives A1 and A2 for flavored milk for children 2 through 4 years of age; B1 and B2 for flavored milk for children 5 years of age and older; and C1 and C2 for yogurt for all age groups. These alternatives are discussed in more detail under the section entitled Flavored Milk and Yogurt.

As discussed below, the proposed rule does not adopt the IOM recommendations relating to weekly meal patterns, specifications for certain foods, and enhanced snacks for reasons related to the increased cost and efficient operation of the Program.

The IOM recommended many food specifications which would limit or prohibit certain types of foods and/or how foods may be prepared. Food specifications included such things as limiting fruit juice and highly processed meats throughout the week and prohibiting cheese products/foods and deep fried or pre-fried vegetables. While some food specifications were adopted, others were deemed overly complicated to implement at this time and/or challenging to monitor. For example, the IOM recommended limiting processed meats. The proposed rule does not adopt this recommendation at this time due to the difficulty involved in clearly defining processed meats. However, comments on how processed meats could be defined and the feasibility, practicality, and challenges associated with implementing such a limitation are encouraged.

In addition, the IOM recommended weekly meal patterns, similar in nature to the NSLP. Many stakeholders expressed concern over the weekly meal pattern because it would increase recordkeeping and monitoring complexity. Additionally, many children are not in full-time child care and therefore, weekly meal patterns and certain food specifications would not achieve the anticipated benefit. Further, implementing these recommendations would likely have a negative impact on the administration of the Program. CACFP is offered in diverse types of facilities, mostly small or very small, with varying degrees of staffing, training in meal planning and preparation, and resources. Adding weekly menus was determined to add unnecessary complexity. Therefore, it is important that the CACFP meal patterns are easy to understand, implement, and monitor in a wide variety of settings.

The recommendation to give facilities the option of serving one enhanced snack in the afternoon in place of a smaller snack in both the morning and afternoon was not adopted for inclusion in this proposed rule. The IOM suggested that the enhanced snack option would be particularly appropriate for older children in afterschool programs and for adults because the size of a normal snack may not be sufficient to meet their nutritional needs. However, we determined that an enhanced snack with larger components would prove more costly than snacks currently approved. Additionally, because the USDA does not have the authority to change the reimbursement structure for meals served, the enhanced snack option would place an increased economic burden on institutions and facilities. Lastly, section 122 of the HHFKA (which was enacted after the IOM report was completed) extended the at-risk afterschool meals option to all States, thus providing an immediate solution to the need for larger meals in the late afternoon or evening for older children.

The USDA realizes many facilities may want to go further when it comes to providing healthy meals to CACFP participants. Therefore, we have outlined some best practices based on both the IOM recommendations and the Dietary Guidelines that facilities may strive for when choosing to serve healthier options. A number of these best practices represent recommendations or food specifications not adopted as requirements for reasons of cost or complexity. USDA applauds those facilities that find ways to incorporate these best practices into their meal service and requests comments on how to encourage more facilities to implement the best practices.

Lastly, comments on other ways to improve the meals served to children in care without negatively impacting Program participation are encouraged. Specifically, comments on the reasonableness of implementing separate meal pattern requirements for day care centers and day care homes are requested. Centers would include those providing outside-school-hours-care, at-risk afterschool care, and adult day care, as well as homeless shelters. Comments on whether such an approach would be beneficial and the feasibility, practicality, and challenges of implementing separate requirements are encouraged.

The field of pediatric nutrition has increased greatly in recent years and with it, a better understanding of what is necessary to meet the needs of growing and developing infants. Because the Dietary Guidelines do not address children under the age of two, the AAP serves as the leading authority for children's developmental needs from birth through 23 months. The IOM recommendations pertaining to infants took the AAP recommendations into consideration. IOM recommendations for the infant meal pattern would require fewer components than the current meal pattern for lunch and supper meals, but more components for snacks.

Infant Age Groups and the Introduction of Solid Foods —Current regulations establish three infant age groupings: 0 through 3 months, 4 through 7 months, and 8 through 11 months (7 CFR 226.20(b)). These age groups permit the introduction of solid foods in breakfasts, lunches or suppers as early as 4 months, if the infant is developmentally ready.

The IOM noted that the first Feeding Infants and Toddlers Study (FITS), 2002, a comprehensive assessment of food and nutrient intakes of infants and toddlers, found that almost 30 percent of infants were fed complementary foods before the age of 4 months, when infants should be consuming only breastmilk or formula. The AAP advises delaying the introduction of complementary foods until after 6 months of age. To accommodate these concerns, the IOM recommended that infant age groupings be revised from the current three age groups to two age groups. Under the recommended 0 through 5 month age group, infants under 6 months of age would receive only breastmilk or infant formula. The 6 month through 11 month age group would allow for the gradual introduction of solid foods beginning at 6 months of age. This change would also ensure the CACFP age groupings are consistent with infant age groups established by WIC.

Accordingly, the proposed rule would consolidate the CACFP age groups for infants into the two recommended age groups and would allow for the gradual introduction of solid foods beginning at 6 months of age. These changes are found at § 226.20(b).

Breastfeeding —Current meal patterns only allow day care home providers who breastfeed their own infants to claim reimbursement for the meal if the provider is eligible to claim her own children's meals at the time of the feeding. The IOM recommended that additional incentives be developed to support breastfeeding. USDA agrees with the IOM's recommendation. Therefore, this proposed rule would allow any child care facility to receive reimbursement for meals when the mother directly breastfeeds her child at the child care facility. Facilities are encouraged to make available a quiet, private area for mothers who come to the facility to breastfeed.

Fruits and Vegetables —The IOM made two recommendations relating to the service of fruits and vegetables to infants. First, the IOM recommended eliminating the service of fruit juice to infants of any age. Current regulations permit fruit juice to be served in the snack meal pattern for infants 8 through 11 months. The second recommendation would require a fruit or vegetable serving in the snack meal pattern for the 6 through 11 month age group. These recommendations ensure infants are provided more access to fruits and vegetables without the consumption of sugars and low-nutrient dense calories that fruit juice provides. These recommendations would bring the CACFP meal patterns into alignment with the food packages for infants in the WIC Program.

Accordingly, the proposed rule would require a fruit or vegetable serving in the snack meal pattern for the 6 through 11 month age group and eliminate fruit juice from the meal patterns for infants. These proposed changes are found at § 226.20(b).

Grains —Feedback from CACFP stakeholders and providers included a request to allow additional grain options, as developmentally appropriate, for infant snacks, primarily ready-to-eat cereals which are often served but not counted towards the grain requirement. The IOM recommended limiting grain options for infants to bread and/or crackers only. To better meet the needs of child care providers and because allowing additional grain alternatives would not result in an increased cost to the provider, this proposed rule also would allow ready-to-eat cereal as a grain for older infants. Accordingly, this provision is included in § 226.20(b) of the proposed rule.

Meat and Meat Alternates —Current meal patterns allow infants to be served cheese, cottage cheese, or a cheese food or spread beginning at the age of 8 months. Stakeholders requested that the proposed meal pattern also allow yogurt to be served to infants. However, the IOM recommends that no cow's milk or cow's milk byproducts be introduced to infants until 12 months of age. We concur with the IOM's recommendation. This proposed rule would eliminate the option of serving cheese, cottage cheese, or cheese food or spread to infants and will continue to prohibit serving yogurt to infants.

Summary —The proposed changes to the infant meal patterns are reflected in the following chart and are found at § 226.20(b)(5) of this proposed rule.

Age Groups —Current regulations establish CACFP meal patterns for three age groups for children: 1 through 2 years, 3 through 5 years, and 6 through 12 years (§ 226.20(c)). Children older than 12 years of age are not addressed directly, though providers are directed to follow the 6 through 12 year old meal pattern when serving older children.

To remain consistent with age groups used by NSLP and SBP, the IOM recommended that the children's age groups be revised from the current three age groups to four age groups: 1 year, 2 through 4 years, 5 through 13 years, and 14 through 18 years.

This proposed rule would retain the existing three age groups (1 through 2 years, 3 through 5 years, and 6 through 12 years). As noted above, revising the age groups would result in some children being moved into the next age group, thus requiring larger minimum amounts of foods to be served. Because the meal reimbursement would remain unchanged, requiring larger amounts of food to be served would likely increase the cost of operating the Program for child care institutions and facilities. However, the proposal would adopt the IOM's recommendation to add a fourth age group (13 through 18 years). While creating a 13 through 18 year age group better reflects the characteristics of the population served by CACFP, USDA is not proposing to modify the meal pattern requirements for these children at this time because doing so would increase the cost of operating the Program. Instead, the meal pattern for children ages 13 through18 is the same as the meal pattern for children ages 6 through 12. Recognizing that the nutritional needs of this age group may vary, recommended accommodations will be addressed through guidance. Accordingly, the age group modification can be found at § 226.20(c) of this proposed rule.

Fruits and Vegetables —Current breakfast and lunch meal patterns, found at § 226.20(a) and (c), include one combined fruit and vegetable component, which allows providers to meet the minimum quantities by providing fruits, vegetables, or a combination of both. In addition, full-strength fruit juice may be counted to meet the breakfast requirement and, in the case of lunch and supper, it may be counted towards no more than one-half of the minimum quantity required for the fruit and vegetable component. Finally, two different fruits and/or vegetables are required to be served at lunch and supper meals.

The Dietary Guidelines recommends that all Americans consume more fruits and vegetables, because they are a major contributor of vitamins and minerals, including vitamin A, vitamin C, vitamin K, potassium, folate, and magnesium, all of which are under consumed in the American population as a whole. Additionally, the increased consumption of fruits and vegetables is associated with a reduced risk of cardiovascular disease and can be protective against certain types of cancer.

For these reasons, the IOM determined that it is important to not only increase the amount of fruits and vegetables offered in meals, but also to increase the variety of those served and limit the servings of those high in solid fats and added sugars. To accomplish these goals, the IOM also recommended that fruit and vegetables be split into two separate components and recommended food specifications which included limiting how fruits and vegetables can be prepared and served.

This proposed rule would adopt the IOM's recommendation to separate the current fruit and vegetable component into two separate components for lunch and supper meals and snacks. To maintain consistency with the SBP, the recommendation to separate the fruit and vegetable component for breakfast meals was not adopted. Additionally, to maintain cost neutrality, the total amount of fruits and vegetables required at each meal would remain the same as under the current regulations. In order to remain consistent with SBP, for breakfast meals, the provider may choose to serve the fruit component, the vegetable component, or a combination of both.

Additionally, this proposed rule would no longer require providers to serve two different types of vegetables or fruits at lunch and supper meals, as currently required, because the fruit and vegetable component would be split into two components.

The proposed rule also would allow fruit juice or vegetable juice to comprise the entire fruit or vegetable component for all meals. With the fruit and vegetable component separated into two components with no increase in the total serving size, requiring that juice comprise no more than half of the component would result in very small servings. However, this proposed rule would not allow fruit juice and vegetable juice to be served at the same meal, and would allow only one beverage (fluid milk, fruit juice, or vegetable juice) to be served at snacks.

Accordingly, the proposed rule changes to the vegetable component are found at § 226.20(a)(2), the fruit component at § 226.20(a)(3), and the meal pattern at § 226.20(c).

Grains —Current meal patterns for all age groups, found at § 226.20(a) and § 226.20(c), require that all grains served are whole grain or enriched and/or fortified.

The Dietary Guidelines state that half of the recommended total grain intake should be whole grains. Whole grains are an excellent source of nutrients, including magnesium, selenium, iron, B vitamins, and dietary fiber. Additionally, whole grain consumption may reduce the risk of cardiovascular disease. Recognizing concerns such as whole grain product availability and the difficulty in identifying whole grain products based on product labeling, however, the IOM recommended that at least one-half of all grains served over the course of the day be whole grain or whole grain-rich. Other grains must be enriched. The IOM's recommendation that a portion of the grains served be whole grain or whole grain-rich is consistent with requirements in the NSLP, SBP, and WIC.

Based on these recommendations, this proposed rule would require that at least one grain serving per day, across all eating occasions, be whole grain or whole grain-rich. The proposed rule would adopt the definition of whole grain used in the NSLP at § 210.2, which defines whole grain to mean foods that consist of the intact, ground, cracked, or flaked grain seed and whose principal anatomical components—the starchy endosperm, germ and bran—are present in the same relative proportions as they exist in the intact grain seed. Whole grain-rich foods are those that are not 100 percent whole grain but generally contain at least 50 percent whole grains, while the remaining grains are enriched. Because the whole grain content of food products is not always easily identifiable on a product label, the Food and Nutrition Service (FNS) will provide additional guidance on evaluation of grain products as needed.

Additionally, in order to reduce the amount of sugars consumed, the IOM recommended prohibiting breakfast cereals containing more than 21.2 grams of sugar per 100 grams (less than or equal to 6 grams of sugar per dry ounce of cereal) from being served. WIC has already adopted similar requirements for breakfast cereals, and WIC State agencies maintain State-specific lists of breakfast cereals that meet these requirements. For these reasons, implementing this recommendation should be relatively straightforward. Therefore, this proposed rule would require that breakfast cereals meet the WIC requirements. This means that breakfast cereals must: Contain a minimum of 28 mg of iron per 100 grams of dry cereal; contain no more than 21.2 grams of sucrose and other sugars per 100 grams of dry cereal (no more than 6 grams per dry ounce); contain a minimum of 51 percent whole grains (using dietary fiber as an indicator); meet the regulatory definitions for “low saturated fat” at 21 CFR 101.62 (no more than one gram of saturated fat per Reference Amount Customarily Consumed (RACC)) and “low cholesterol” (less than 20 mg cholesterol per RACC); bear quantitative trans fat labeling; and contain no more than 6.5 grams of total fat per RACC and no more than 0.5 grams of trans fat per RACC. Breakfast cereals will be defined by the Food and Drug Administration (FDA) definition in 21 CFR 170.3(n)(4) for ready-to-eat, instant, and regular hot cereals.

Finally, the IOM recognized that many grain-based dessert products are a source of solid fats and added sugar. Therefore, the IOM recommended that such products be limited to no more than one serving per week across all eating occasions. Because weekly meal patterns will not be implemented, the proposed rule would not allow grain-based desserts to be counted towards the grains component. More information regarding what would be considered a grain-based dessert will be provided by FNS as needed during implementation. Accordingly, the proposed grain changes are found at § 226.20(a)(4) and § 226.20(c) of this proposed rule.

Meat and Meat Alternates —Current regulations, found at § 226.20(a) and § 226.20(c), require a meat or meat alternate component in lunches and suppers only; there is no meat or meat alternate component requirement in the breakfast or snack meal pattern. The meat or meat alternate requirement can be met by serving age-appropriate quantities of lean meat, poultry, or fish; alternate protein products; cheese; eggs; cooked dry beans or peas; peanut butter, soy nut butter, or other nut or seed butters; peanuts, soy nuts or seeds; or yogurt. Tofu is not currently credited as a meat alternate in CACFP, although it is for school programs.

In recognition that meat and meat alternates are good sources of a host of vitamins and minerals, including B vitamins, vitamin E, zinc, magnesium, and iron, the IOM recommended that a meat or meat alternate be required at breakfast a minimum of three times per week, in lieu of additional grains. The IOM also recommended allowing tofu to be served as a meat alternate. To address concerns about meats as a source of solid fats, the IOM outlined a number of food specifications including: Serving only lean meats, legumes, and nuts; limiting processed, fried, pre-fried, and higher fat meats; serving only natural cheeses; and restricting the preparation methods (for example, requiring that the skin be removed from poultry before serving).

The proposed rule generally adopts the recommendation to include a meat or meat alternate in the breakfast meal pattern; however, to maintain cost neutrality, this proposed rule would not require that the breakfast meal include a meat or meat alternate at least three times a week, as recommended. Rather, the proposal would allow a meat or meat alternate to be served in lieu of up to one-half of the grains requirement at breakfast. This option would provide more flexibility to providers, especially those providing care for older adults, who may have to limit their consumption of carbohydrates due to medical reasons such as diabetes.

This rule also would allow tofu to be used to meet all or part of the meat or meat alternate components in accordance with FNS guidance. Tofu would be defined to mean a commercially prepared soy-bean derived food made by a process in which soybeans are soaked, ground, mixed with water, heated, filtered, coagulated, and formed into cakes. Basic ingredients are whole soybeans, one or more food-grade coagulates (typically a salt or an acid), and water. Accordingly, the proposed meat and meat alternate changes are found at § 226.2 and § 226.20(a)(5) and (c) of this proposed rule.

Fluid Milk —Section 221 of the HHFKA amended section 17(g)(4) of the NSLA (42 U.S.C. 1766(g)(4)) to require that all milk served in the CACFP be consistent with the most recent version of the Dietary Guidelines. The Dietary Guidelines recommends low-fat (1 percent) and fat-free milk (skim) for children over the age of two and adults. Section 17(g)(4) of the NSLA also allows non-dairy milk substitutions in the case of children and adults who cannot consume fluid milk due to medical or other special dietary needs other than a disability. Such substitutions must be nutritionally equivalent to fluid milk and meet specified nutritional standards. Providers may, but are not required to, provide beverages identified by the State as acceptable substitutions based on a written statement of a medical authority or the parent or legal guardian or adult participant that identifies the medical or special dietary need that requires the substitution. Finally, section 17(g)(4) of the NSLA makes it clear that day care facilities are responsible for any expenses incurred in exercising this option that exceed Program reimbursement. It should be noted that this authority applies to children and adults with medical or special dietary needs other than a disability. In accordance with Federal law, day care facilities serving handicapped children or adults with one or more disabilities that restrict their diets under 7 CFR 15b.3, continue to be required to make appropriate substitutions based on a written statement by a licensed physician.

Because the Dietary Guidelines do not address children under the age of two, the IOM was tasked with providing appropriate recommendations based on other current nutritional science for this population. The IOM recommended that children 1 year of age (12 through 23 months) are served whole milk only, which is consistent with the most recent recommendation of the AAP.

Additionally, to allow flexibility in menu planning, the IOM recommended that yogurt be allowed as an alternate to either fluid milk or meat/meat alternates no more than once per day for children older than 2 years of age and adults.

To implement these provisions of the HHFKA, the USDA issued a memorandum entitled “Child Nutrition Reauthorization 2010: Nutrition Requirements for Fluid Milk and Fluid Milk Substitutions in the Child and Adult Care Food Program, Questions and Answers” (CACFP 21-2011 REVISED, September 15, 2011, http://www.fns.usda.gov/sites/default/files/CACFP-21-2011.pdf ). The memorandum advised State agencies that milk served in the CACFP must be consistent with the most recent version of the Dietary Guidelines for Americans as noted above. Therefore, fluid milk served in CACFP to participants 2 years of age and older must be: Fat-free or low-fat milk, fat-free or low-fat lactose reduced milk, fat-free or low-fat lactose free milk, fat-free or low-fat buttermilk, or fat-free or low-fat acidified milk.

This proposed rule reflects the provisions set forth in the memorandum. In addition, this proposed rule would require children 1 year of age (12 through 23 months) to be served unflavored whole milk only. Furthermore, to ensure consistency with the NSLP and the SBP, this proposed rule would require flavored milk served be fat-free only.

The memorandum discussed above further advised State agencies that in the case of children and adults who cannot consume fluid milk due to medical or other special dietary needs, other than a disability, non-dairy beverages may be served in lieu of fluid milk. Non-dairy beverages must be nutritionally equivalent to milk and meet the nutritional standards for fortification of calcium, protein, vitamin A, vitamin D, and other nutrients to levels found in cow's milk, as outlined in the NSLP regulations at § 210.10(m)(3). CACFP State agencies have the discretion to identify appropriate substitutions that meet these requirements. Based on the memorandum, parents or guardians may now request in writing non-dairy milk substitutions, as described above, without providing a medical statement. The written request must identify the medical or other special dietary need that restricts the diet of the child. Such substitutions are at the option and the expense of the facility. One-year-old children who require a beverage other than whole milk must follow the individual and fluid milk substitution requirements as outlined in the memorandum described above and now found in § 226.20(i) introductory text and (i)(1) of this proposed rule.

To summarize these changes, the proposed rule would:

• Require only unflavored whole milk to be served to children 1 year of age;

• Require low-fat or fat-free milk to be served to children 2 years and older and adults;

• Require that flavored milk served be fat-free only; and

• Allow non-dairy beverages that are nutritionally equivalent to milk to be served in lieu of fluid milk for participants with medical or other special dietary needs.

Lastly, this proposed rule would adopt the IOM's recommendation to allow yogurt to be used to meet the fluid milk requirement for adults only, no more than once per day. Additionally, yogurt may still be used as a meat alternate no more than once per day for all ages. At this time, the USDA will not extend the allowance of yogurt as a fluid milk substitute for children. Milk provides a wealth of nutrients growing children need such as vitamins A and D; comparable quantities of these nutrients are not found in commercially available yogurts at this time.

Additionally, there is concern about the types of beverages that will be served at meals if yogurt is served as the milk component ( i.e. sugary beverages, soft drinks, etc). Comments from the general public regarding this recommendation are encouraged. For additional discussion of sugar limits on flavored milk and yogurt, please see the section of this preamble entitled Flavored Milk and Yogurt. Accordingly, the proposed milk and milk substitution changes are found at §§ 226.20(a), 226.20(c), and 226.20(i).

Food Preparation —The IOM provided a number of recommendations that would restrict or eliminate certain foods in the meal patterns, or limit how foods could be prepared. Because current CACFP meal patterns do not include nutrient specifications, this was seen as a way to limit the amount of saturated fats and sodium contained in meals. USDA has decided not to adopt various restrictions on individual foods due to the complexity of implementation. However, this proposed rule would prohibit facilities from frying foods ( i.e., cooking in added fat or oil) as a method of onsite preparation. Purchased foods that are pre-fried, flash-fried, or par-fried by the manufacturer may still be served, but must be reheated using a method other than frying. This approach is being taken because prohibiting all fried, pre-fried, flash-fried, and par-fried foods from being served would lead to increased food and preparation costs. Additional guidance on what constitutes “frying” would be provided by FNS prior to implementation. Comments are requested regarding the feasibility, practicality, and any challenges associated with such a restriction.

Summary —The proposed changes to the child and adult meal patterns are reflected in the following charts and are found at § 226.20(c) of this proposed rule.

A proposed rule was published in the Federal Register on December 16, 2014 (79 FR 75006). The proposed rule would expand the organic assessment exemption, currently only available to entities that produce or market solely 100 percent organic products, to cover all “organic” and “100 percent organic” products certified under the National Organic Program regardless of whether the person requesting the exemption also produces, handles, markets, or imports conventional or nonorganic products. The action is authorized by the Agricultural Act of 2014. The comment period established in the proposed rule closes January 15, 2015.

USDA received comments from affected programs and industry members requesting that the comment period be extended beyond January 15, 2015. The comments expressed concern that the original December 16 to January 15 comment period was insufficient given the numerous holidays that occurred during that timeframe. The commenters requested the extension to provide additional time for interested persons to analyze the proposal and to submit written comments.

After reviewing the requests, USDA is extending the comment period to February 17, 2015. This will provide interested persons over 60 days to review the proposed rule, perform a complete analysis, and submit written comments.

EGRPRA  1 directs the Agencies, along with the Federal Financial Institutions Examination Council (Council), not less frequently than once every ten years, to conduct a review of their regulations to identify outdated or otherwise unnecessary regulations. The Agencies are holding a series of at least five outreach meetings to provide an opportunity for bankers, consumer and community groups, and other interested persons to present their views directly to senior management and staff of the Agencies on any of 12 specific categories of regulations, as further described below. The Agencies held the first of these outreach meetings on December 2, 2014, in Los Angeles, California. 2

The second outreach meeting will be held on February 4, 2015, in Dallas, Texas. Senior agency staff from the OCC, FDIC and Board are scheduled to attend. Video of this meeting will be streamed live at http://egrpra.ffiec.gov/. The meeting will consist of panels of bankers and consumer and community groups who will present particular issues. There will be limited time after each panel for comments from meeting attendees. In addition, there will be a session at the end of the meeting during which audience members may present views on any of the regulations under review. The Agencies reserve the right to limit the time of individual commenters, if needed, in order to accommodate the number of persons desiring to speak.

Comments made by panelists and audience members at this meeting will be reflected in the public comment file. Audience members who do not wish to comment orally may submit written comments at the meeting. In addition, any interested individual may submit comments through the EGRPRA Web site during open comment periods at: http://egrpra.ffiec.gov/submit-comment/submit-comment-index.html. Further outreach meetings are scheduled for Boston on May 4, 2015; Chicago on October 19, 2015; and Washington, DC, on December 2, 2015. The Agencies also plan to hold an outreach meeting this summer that will focus on rural banks.

All participants should register for the Dallas outreach meeting at http://egrpra.ffiec.gov/outreach/outreach-index.html. Because of space constraints, on-site attendance will be limited. Online registrations will be accepted through January 28, 2015, or until all seats are filled, whichever is earlier. If seats are available, individuals may register in person at the Federal Reserve Bank of Dallas on the day of the meeting. Registration is not required to view the live-stream broadcast.

Further details about the first outreach meeting, including the agenda, are published on the EGRPRA Web site at http://egrpra.ffiec.gov/outreach/outreach-index.html.

Section 2222 of EGRPRA directs the Agencies, along with the Council, to conduct a review of their regulations not less frequently than once every ten years to identify outdated or otherwise unnecessary regulatory requirements imposed on insured depository institutions. In conducting this review, the Agencies are required to categorize their regulations by type and, at regular intervals, provide notice and solicit public comment on categories of regulations, requesting commenters to identify areas of regulations that are outdated, unnecessary, or unduly burdensome. The statute requires the Agencies to publish in the Federal Register a summary of the comments received, identifying significant issues raised and commenting on these issues. The statute also directs the Agencies to eliminate unnecessary regulations to the extent that such action is appropriate. Finally, section 2222 requires the Council, of which the Agencies are members, to submit a report to Congress that summarizes any significant issues raised in the public comments and the relative merits of such issues. The report also must include an analysis of whether the Agencies are able to address the regulatory burdens associated with such issues by regulation or whether these burdens must be addressed by legislative action.

For purposes of this review, the Agencies have grouped our combined regulations into 12 categories: Applications and Reporting; Banking Operations; Capital; Community Reinvestment Act; Consumer Protection; Directors, Officers and Employees; International Operations; Money Laundering; Powers and Activities; Rules of Procedure; Safety and Soundness; and Securities. On June 4, 2014, we published a Federal Register notice asking for public comment on three of these categories—Applications and Reporting, Powers and Activities, and International Operations regulations. 3 We also published a chart listing all of the regulations included in the EGRPRA review. Over the next year, we will publish additional notices, seeking comment on the remaining categories.

On July 19, 2013, at 78 FR 43709, HUD published in the Federal Register rulemaking that proposed a new fair housing planning process to assist program participants in carrying out their duty to affirmatively further fair housing, a duty required under the authority of the Fair Housing Act (title VIII of the Civil Rights Act of 1968, 42 U.S.C. 3601-3619). 1 Section 808(e)(5) of the Fair Housing Act (42 U.S.C. 3608(e)(5)) requires that HUD programs and activities be administered in a manner that affirmatively furthers the policies of the Fair Housing Act. The proposed rule presented a proposed definition of the term “affirmatively furthering fair housing” for purposes of program participants' planning processes and an approach to fair housing planning that HUD believes would better aid program participants fulfill their statutory obligation to affirmatively further fair housing in accordance with Fair Housing Act requirements.

As noted in the Summary of this supplemental notice of proposed rulemaking, HUD received over 1,000 comments in response to the proposed rule. 2 While HUD continues to review and consider the helpful and thoughtful questions, recommendations, and concerns raised by the public commenters, this document seeks comment on the limited issue of a delayed submission of the first AFH for certain entities.

As more fully discussed below, HUD is considering providing a later submission date for the first AFH to be completed by qualified PHAs, and entitlement jurisdictions that receive small CDBG grants (as defined below), States, and Insular Areas.

In the July 19, 2013, proposed rule, HUD specifically sought public comment on issues pertaining to the subject matter of this document. Question 12 of the proposed rule, at 78 FR 43724, solicited comment on whether there are any AFH requirements that should be modified for States. Question 13 of the proposed rule, at 78 FR 43724, solicited comment on whether there are any AFH requirements that should be modified for small program participants, such as small units of general local government and small public housing agencies (PHAs).

HUD appreciates the comments specifically directed to these issues, and solicits further comment on these issues as modified and elaborated upon in this supplemental notice of proposed rulemaking.

HUD takes the opportunity in this document to assure all program participants that HUD intends to provide all program participants with sufficient time to prepare and submit their first AFH. HUD agrees with commenters that not all program participants are the same; that they vary in such aspects as size, capacity, the amount of HUD resources generally received annually, the scope of responsibilities under various HUD programs; and any or all of such aspects may factor in their ability to timely respond to new regulatory requirements. To address this concern, HUD is considering providing the following categories of program participants with a later submission date for their first AFH.

Along with the consideration to provide certain entities additional time to complete their AFHs, as described in this supplemental notice of proposed rulemaking, HUD is considering a staggered AFH submission approach, as recommended by many commenters.

States and Insular Areas: HUD acknowledges the comments stating that the AFH process proposed in the July 19, 2013, rulemaking is better suited for local jurisdictions, and not States and Insular Areas. In the 60-day notice on the AFFH Assessment Tool that HUD published in the Federal Register on September 26, 2014, at 79 FR 57949, in accordance with the Paperwork Reduction Act, HUD advised that the Assessment Tool that is the subject of the 60-day notice is primarily designed for use by entitlement jurisdictions, other than States, and for joint submissions by entitlement jurisdictions and public housing agencies (PHAs). (See 79 FR 57950-57951.)  3 The notice also stated that HUD is considering developing program participant-specific Assessment Tools, such as one specifically for States and Insular Areas, and that: “It is HUD's intention to have any program-participant-specific Assessment Tools developed by HUD available for public comment at the 30-day notice required under the Paperwork Reduction Act.”

Upon further consideration, HUD has decided to design a separate Assessment Tool for States and Insular Areas. HUD believes that a separate Assessment Tool for States and Insular Areas would address commenters' concerns about the AFH approach being better suited for entitlement jurisdictions. This separate Assessment Tool will not be provided for public comment as part of the 30-day notice for the Assessment Tool presented in the September 26, 2014, notice. Rather, HUD will have the Assessment Tool for States and Insular Areas separately undergo the full notice and comment process (a 60-day notice and a 30-day notice) under the Paperwork Reduction Act.

Specific solicitation of comment #1: HUD welcomes public comment on the proposal to delay submission of the first AFH for States and Insular Areas.

Qualified PHAs: HUD is also considering delaying the date of submission of the first AFH for PHAs that meet the criteria of a “qualified PHA,” as defined in section 2702 of title VII of the Housing and Economic Recovery Act (HERA). 4 Section 2702 of HERA defines “qualified PHA” as a PHA: (1) For which the sum of (i) the number of public housing dwelling units administered by PHA, and (ii) the number of vouchers under section 8(o) of the United States Housing Act of 1937 (42 U.S.C. 1437f(o)) administered by the PHA is 550 or fewer; and (2) that is not designated under section 6(j)(2) of the United States Housing Act as a troubled PHA, and does not have a failing score under the Section 8 Management Assessment Program during the prior 12 months. HUD codified this statutory definition in its regulations on Public Housing Agency Plans at 24 CFR part 903, and the definition of “qualified PHA” is found at § 903.3(c).

HERA defined qualified PHAs to exempt such PHAs, which are small PHAs, from the burden of preparing and submitting an annual PHA Plan. Given that Congress has determined that qualified PHAs should have reduced administrative burdens, HUD believes it is appropriate to provide these agencies with more time to submit their first AFH.

Specific solicitation of comment #2: HUD seeks comment on a delayed submission date of the first AFH due for qualified PHAs.

Entitlement Jurisdictions Receiving Small CDBG Grants (Grants of Approximately $350,000 or Less): In addition to recognizing the burdens faced by small entities, such as small PHAs, HUD recognizes that the amount of HUD funding that many entitlement jurisdictions receive is not substantial. HUD has discussed the challenges faced by entitlement jurisdictions receiving small CDBG grants in HUD's Congressional Justifications (CJ) provided for Fiscal Years 2014 and 2013. 5

In the two CJs, HUD discussed that the median CDBG grant size for entitlement communities in FY 2012 was just under $800,000, but that almost 15 percent of CDBG entitlement grantees received an allocation of less than $300,000 in 2012. HUD advised that given the very limited amount of money the grantees can use for planning and administrative costs ($60,000 for a $300,000 grant), HUD expressed concern about the ability of grantees to effectively sustain their programs with such small dollar-amount grants. In response to such concern and in order to assist entitlement jurisdictions receiving small CDBG grants, in October 4, 2012, HUD hosted a webinar for “Small Grantees (CDBG Grantee < $350,000 Per Year).” The purpose of the webinar was to invite small CDBG grantees to express their concerns, and to address certain topics posed by HUD. 6

Although the focus in the CJs and the webinar have been on dollar amounts in the range of $300,000 to $350,000, HUD proposes that delineation of which entitlement jurisdictions are defined as those receiving small CDBG grants should be based on a percentage of the CDBG formula appropriation, and HUD proposed such delineation in the FY 2014 CJ. HUD proposed to establish a minimum grant threshold of 0.0125 percent of the CDBG formula appropriation amount in order for a jurisdiction to receive a direct CDBG entitlement allocation. HUD stated that based on the requested funding level of $2.798 billion in FY 2014, and jurisdictions that received fiscal year 2012 CDBG entitlement allocations, HUD estimated that 239 local governments would fall below the 0.0125 percent minimum grant threshold ($348,875). The percentage proposed by HUD in the FY 2014 CJ, reaches the same result as a dollar threshold, approximately $350,000, but is a better measure of a small grant that a strict dollar amount threshold. Accordingly, HUD is proposing that entitlement jurisdictions receiving a grant of 0.0125 of the CDBG formula appropriation or less are designated as small CDBG grantees and, similar to qualified PHAs, HUD would delay the submission date of the first AFFH by small CDBG grantees.

Specific solicitation of comment #3: HUD seeks comment on whether the proposed percentage of 0.0125 of the CDBG formula appropriation is an appropriate threshold to set for entitlement jurisdictions that would be provided a later first AFH submission date. HUD welcomes any alternative thresholds that would better capture those entitlement jurisdictions that have capacity challenges. HUD asks that commenters offering alternative thresholds explain the basis for any alternative threshold suggested.

This solicitation of public comment is solely on the specific questions pertaining to whether there should be a delayed submission date for certain entities as provided in this supplemental notice of proposed rulemaking. This notice is not re-opening public comment on any other issues related to HUD's July 19, 2013, proposed rule, and HUD will not review or consider public comments that address issues other than the specific questions in this document directed to delayed submission of the first AFH.

On September 4, 2014, the National Park Service (NPS) published in the Federal Register (79 FR 52595) a proposed rule to amend its regulations for sport hunting and trapping in National Preserves in Alaska The proposed rule also includes updates to procedures for closing an area or restricting an activity in National Park Service Areas in Alaska and other minor changes. The 90-day public comment period for this proposal closed on December 3, 2014. In order to give the public additional time to review and comment on the proposal, we are reopening the public comment period from January 15, 2015 through February 15, 2015. If you already commented on the proposed rule you do not have to resubmit your comments.

To view comments received through the Federal eRulemaking portal, go to http://www.regulations.gov and enter 1024-AE21 in the search box. Before including your address, phone number, email address, or other personal identifying information in your comment, you should be aware that your entire comment—including your personal identifying information—may be made publicly available at any time. While you can ask us in your comment to withhold your personal identifying information, we cannot guarantee that we will be able to do so.

The Copyright Royalty Judges (“Judges”) received a joint motion from SoundExchange, Inc. and Sirius XM Radio Inc. to adopt a settlement of their interests regarding royalty rates and terms for 2016-2020 applicable to music services available on cable and satellite television. Sirius XM Radio is a creator of music programming for DiSH satellite television. SoundExchange, Inc. represents the interests of sound recording copyright owners. SoundExchange and Sirius XM Radio propose regulatory language that, in part, simplifies the existing rate structure found in 37 CFR part 383. The Judges hereby publish the proposed revision to the regulation and request comments from the public.

Section 114(f)(2)(A) of the Copyright Act, title 17 of the United States Code, provides that, prior to the expiration of a rate term, the Judges shall commence a proceeding to determine reasonable royalty terms and rates for a new subscription service ( i.e., a subscription service that was established after July 1, 1998, or is using a different transmission medium from what it used prior to July 1, 1998) on which sound recordings are performed. 17 U.S.C. 114(f)(2)(A). Section 112(e)(3) provides for proceedings to be commenced to determine rates and terms for licenses to make ephemeral reproductions to facilitate certain digital audio transmissions including those made by new subscription services. 17 U.S.C. 112(e)(3). The Judges have conducted two prior proceedings for five-year rate terms pursuant to these provisions. See 72 FR 72253 (December 20, 2007) and 75 FR 14074 (March 24, 2010). The current rate term ends December 31, 2015.

Pursuant to section 803(b)(1)(A)(i)(III) of the Copyright Act, the Judges published in the Federal Register a notice commencing the rate determination proceeding for the license period 2016-2020 for the new subscription services defined in 37 CFR 383.2(h) and requesting interested parties to submit petitions to participate. See 79 FR 410 (January 3, 2014). Petitions to Participate in this proceeding were received from Music Reports, Inc., National Music Publishers Association, Sirius XM Radio Inc. (“Sirius XM”), Spotify USA Inc., and SoundExchange, Inc.

The Judges announced the three-month negotiation period, see 17 U.S.C. 803(b)(3), and directed the participants to submit their written direct statements no later than December 1, 2014. On December 1, 2014, the remaining participants  1 filed a motion asking the Judges to stay the filing of written direct statements in light of the parties' impending settlement. The Judges granted the motion and extended the deadline for filing written direct statements to December 12, 2014. See Order Granting Extension of Time for Filing Written Direct Statements, Docket No. 14-CRB-0002-NSR (2016-2020). On December 12, 2014, SoundExchange and Sirius XM filed the settlement that is the subject of this notice.

Section 801(b)(7)(A) authorizes the Judges to adopt rates and terms negotiated by “some or all of the participants in a proceeding at any time during the proceeding” provided the settling parties submit the negotiated rates and terms to the Judges for approval. This section provides that in such event:

The public may comment and object to any or all of the proposed regulations contained in this notice. Comments and objections must be submitted no later than February 17, 2015.

Interested members of the public must submit comments to only one of the following addresses. If not commenting by email or online, commenters must submit an original of their comments, five paper copies, and an electronic version on a CD.

Email: crb@loc.gov; or

Online: http://www.regulations.gov; or

U.S. mail: Copyright Royalty Board, P.O. Box 70977, Washington, DC 20024-0977; or

Overnight service (only USPS Express Mail is acceptable): Copyright Royalty Board, P.O. Box 70977, Washington, DC 20024-0977; or

Commercial courier: Address package to: Copyright Royalty Board, Library of Congress, James Madison Memorial Building, LM-403, 101 Independence Avenue SE., Washington, DC 20559-6000. Deliver to: Congressional Courier Acceptance Site, 2nd Street NE. and D Street NE., Washington, DC; or

Hand delivery: Library of Congress, James Madison Memorial Building, LM-401, 101 Independence Avenue SE., Washington, DC 20559-6000.

For the reasons set forth in the preamble, the Copyright Royalty Judges propose to amend 37 CFR part 383 as follows:

Add the word “CERTAIN” before “NEW SUBSCRIPTION SERVICES”.

(1) For Stand-Alone Contracts, the following monthly payment per Subscriber to the Service of such Licensee:

(i) 2016: $0.0179;

(ii) 2017: $0.0185;

(iii) 2018: $0.0190;

(iv) 2019: $0.0196;

(v) 2020: $0.0202;

(2) For Bundled Contracts, the following monthly payment per Subscriber to the Service of such Licensee:

(i) 2016: $0.0299;

(ii) 2017: $0.0308;

(iii) 2018: $0.0317;

(iv) 2019: $0.0326;

(v) 2020: $0.0336; and

In paragraph (a), Remove “2007-2013” and add in its place “2013-2017 and remove “”2015” and add in its place “2020”.

After considering a request to extend the public comment period, the EPA has decided to extend the public comment period for an additional 15 days. Therefore, the public comment period will end on February 6, 2015, rather than January 22, 2015. This extension will help ensure that the public has sufficient time to review the proposed rule and the supporting technical documents and data available in the docket.

After considering a request received to extend the public comment period, the EPA has decided to extend the public comment period for an additional 15 days. Therefore, the public comment period will end on February 6, 2015, rather than January 22, 2015. This extension will help ensure that the public has sufficient time to review the proposed rule, the supporting technical documents and data available in the docket.

You may be potentially affected by this action if you manufacture, process, or distribute in commerce chemical substances and mixtures. The following list of North American Industrial Classification System (NAICS) codes is not intended to be exhaustive, but rather provides a guide to help readers determine whether this document applies to them. Potentially affected entities may include:

• Chemical and Allied Products Manufacturers (NAICS code 32411).

• Petroleum Refining (NAICS code 325 and 32411).

• Paints, coatings and adhesives manufacturing (NAICS code 3255).

• Urethane and other foam product manufacturing (NAICS code 326150).

• Transportation polyurethane foam products (NAICS code 32615011).

• Building and construction polyurethane foam products (NAICS code 32615031).

• Products made of foam other than polystyrene or polyurethane (NAICS code 32615091).

• All other miscellaneous polyurethane foam products (NAICS code 32615061).

• Consumer and institutional polyurethane foam products (NAICS code 32615051).

• Packing polyurethane foam products (NAICS code 32615021).

• Elastomers (NAICS code 326199).

This action may also affect certain entities through pre-existing import certification and export notification rules under TSCA. Persons who import any chemical substance governed by a final SNUR are subject to the TSCA section 13 (15 U.S.C. 2612) import certification requirements and the corresponding regulations at 19 CFR 12.118 through 12.127; see also 19 CFR 127.28. Those persons must certify that the shipment of the chemical substance complies with all applicable rules and orders under TSCA, including any SNUR requirements. The EPA policy in support of import certification appears at 40 CFR part 707, subpart B. In addition, any persons who export or intend to export a chemical substance that is the subject of this proposed rule on or after February 17, 2015 are subject to the export notification provisions of TSCA section 12(b) (15 U.S.C. 2611(b)), (see 40 CFR 721.20), and must comply with the export notification requirements in 40 CFR part 707, subpart D.

If you have any questions regarding the applicability of this action to a particular entity, consult the technical information contact listed under FOR FURTHER INFORMATION CONTACT .

Section 5(a)(2) of TSCA (15 U.S.C. 2604(a)(2)) authorizes EPA to determine that a use of a chemical substance is a “significant new use.” EPA must make this determination by rule after considering all relevant factors, including those listed in TSCA section 5(a)(2). Once EPA determines that a use of a chemical substance is a significant new use, TSCA section 5(a)(1)(B) requires persons to submit a significant new use notice (SNUN) to EPA at least 90 days before they manufacture or process the chemical substance for that use (15 U.S.C. 2604(a)(1)(B)). As described in Unit V., the general SNUR provisions are found at 40 CFR part 721, subpart A.

EPA is proposing a SNUR for 2,4-toluene diisocyanate, 2,6-toluene diisocyanate, toluene diisocyanate unspecified isomers (these three chemical substances are hereafter referred to as toluene diisocyanates or TDI) and related compounds. The proposed significant new use is: Any use in a consumer product of any chemical substance listed in Table 1 of Unit II.A.; and any use in a consumer product of any chemical listed in Table 2 of Unit II.A. (except for use in coatings, elastomers, adhesives, binders, and sealants that results in less than or equal to 0.1 percent by weight of TDI in a consumer product).

This proposed significant new use rule would apply to the uses EPA has identified in this unit that EPA believes are not ongoing at the time of this proposed rule. EPA is requesting public comment on this proposal, and specifically on the Agency's understanding of ongoing uses for the chemicals identified in Table 1 of Unit II.A and Table 2 of Unit II.A. in consumer products. EPA is particularly interested in whether there are any ongoing uses of these chemicals in consumer products of which the Agency is currently unaware and would welcome specific documentation of any such ongoing uses. A consumer product is defined at 40 CFR 721.3 as: A chemical substance that is directly, or as part of a mixture, sold or made available to consumers for their use in or around a permanent or temporary household or residence, in or around a school, or in recreational settings.

This proposed SNUR would require persons that manufacture (including import) or process any of the chemicals for a significant new use, consistent with the requirements at 40 CFR 721.25, to notify EPA at least 90 days before commencing such manufacture or process of the chemical substance for a significant new use. For this proposed rule, EPA is proposing that the general SNUR article exemption at 40 CFR 721.45(f) for persons who import or process chemical substances as part of an article would not apply. The article exemption at 40 CFR 721.45(f) is based on an assumption that people and the environment will generally not be exposed to chemical substances in articles (see September 5, 1984; 49 FR 35014; FRL-2541-8) (Ref. 1). However, TDI and related compounds are volatile and as such could migrate out of articles that contain them. For instance, studies of TDI in polyurethane products reported that after the reaction between an isocyanate and an alcohol to form polyurethane products, residual levels of isocyanates were detected on the surface of the products, ( e.g. flexible foams), which if used could lead to exposure (Refs. 2 and 3). Because TDI and related compounds are known to be volatile chemical substances, have been reported to migrate from products, are sensitizers, and would be expected to present a higher potential for exposure if the TDI in the article were a consumer product, EPA would like the opportunity to evaluate such potential uses in consumer products for any associated risks or hazards that might exist before those uses would begin.

These SNURs are necessary to ensure that EPA receives timely advance notice of any future manufacturing and processing of TDI and related compounds for new uses that may produce changes in human and environmental exposures. The rationale and objectives for this SNUR are explained in Unit III.

EPA has evaluated the potential costs of establishing SNUR reporting requirements for potential manufacturers and processors of the chemical substances included in this proposed rule. This analysis, which is available in the docket, is discussed in Unit IX., and is briefly summarized here. In the event that a SNUN is submitted, costs are estimated to be less than $8,589 per SNUN submission for large business submitters and $6,189 for small business submitters. These estimates include the cost to prepare and submit the SNUN and the payment of a user fee. The proposed SNUR would require first-time submitters of any TSCA section 5 notice to register their company and key users with the CDX reporting tool, deliver a CDX electronic signature to EPA, and establish and use a Pay.gov E-payment account before they may submit a SNUN, for a cost of $200 per firm. However, these activities are only required of first-time submitters of section 5 notices. In addition, for persons exporting a substance that is the subject of a SNUR, a one-time notice must be provided for the first export or intended export to a particular country, which is estimated to be $84.22 per notification. The rule may also affect firms that plan to import or process articles that contain TDI and related compounds, because, while not required by the SNUR, these parties may take additional steps to determine whether TDI and related compounds are part of the articles that they are considering to import or process. Since EPA is unable to predict whether anyone might engage in future activities that would require reporting, potential total costs were not estimated.

This proposed SNUR would apply to TDI and its related compounds listed in Table 1 of this unit and Table 2 of this unit in consumer products. Diisocyanates contain free isocyanate functional groups (=N=C=O). Diisocyanates are combined with other compounds that contain free hydroxyl functional groups ( i.e., =OH), typically called “polyols.” These two-part components react and begin to form polyurethane polymers. This chemical reaction is completed when all of the isocyanate functional groups are bound within the polymer network. This process is commonly referred to as “curing.” Products that contain free isocyanate functional groups are intended to react further and undergo “curing” in the process of use. The chemical substances subject to this proposed SNUR contain free isocyanate functional groups and are by definition uncured. Prior to complete curing, consumers and bystanders can potentially be exposed to isocyanates through both dermal and respiratory routes. Exposures to uncured isocyanates could lead to sensitization.

To ascertain if TDI and related compounds are used in consumer products, EPA reviewed published literature, the most recent data from EPA's Chemical Data Reporting program (CDR), and communicated directly with manufacturers and processors. Reporting under the CDR indicated no consumer uses of TDI or related compounds. However, during conversations between EPA personnel and manufacturers and processors, it was revealed that in some cases consumer products may still contain residual TDI of no more than 0.1 percent by weight, as noted in Table 2 of this unit (Ref. 4). This was also confirmed by review of published literature and SDS for consumer adhesives and sealants available in retail outlets. It is EPA's understanding that any TDI present in a coating, adhesive, elastomer, binder or sealant consumer product is at levels of no more than 0.1 percent by weight and would typically be considered residual diisocyanate remaining from the manufacture of a polyurethane polymer, a concentration which is above the detection level (Ref. 5). EPA believes that other consumer products do not contain TDI or related compounds at any level.

TDI and the related compounds are generally high production volume chemicals, predominantly used in the production of polyurethanes. There are many types of polyurethane products in the marketplace, with foams representing the largest sector of the polyurethane industry. Flexible foam is primarily used for cushioning, while rigid foam is used mainly for insulation (Ref. 6). Approximately 90 percent of TDI, typically a mixture of toluene diisocyanate isomers, is used in the production of flexible foams, which are designed to be fully cured in a final product. Non-foam polyurethane use sectors of TDI include coatings, adhesives, elastomers, binders, and sealants. These products may be sold and used, most often in a mixture of formulated product, in an uncured form. Because of its hazards, some industry representatives assert that TDI is used in products intended for industrial use only (Ref. 7). In contrast, EPA believes coatings, adhesives, elastomers, binders, and sealants used by general consumers contain residual TDI of no more than 0.1 percent by weight. Due to the projected growth of the market for such use in consumer products as discussed further in Unit II.D., EPA is concerned that consumer products in the future might contain amounts of TDI above these levels. Therefore, EPA is proposing this action to provide the Agency with an opportunity to evaluate such potential uses in consumer products for any associated risks or hazards that might exist before those uses would begin.

In acute, subacute, and chronic animal exposure studies for TDI, the respiratory tract was the target organ, with nasal irritation evident at concentrations above 0.1 ppm and effects becoming more severe with increasing concentration (Ref. 8). TDI is uniformly distributed throughout the body, following inhalation exposure (Refs. 8 and 9). TDI causes skin, eye, and lung irritation, progressive impairment of lung function with long-term inhalation exposure and is a respiratory sensitizer via both the dermal and inhalation routes of exposure in animals (Ref. 8).

Most data on human health hazards resulting from diisocyanate exposures are from occupational populations rather than exposures to consumer products. As discussed in the Toluene Diisocyanate and Related Compounds Action Plan (Ref. 10), diisocyanates, including TDI and related compounds, are well-known dermal, eye, and inhalation irritants and sensitizers based on worker data. They have been documented in the workplace to cause asthma and respiratory problems, such as hypersensitivity pneumonitis, an inflammation of the lungs. In severe cases, there have been reported fatal reactions.

Isocyanate exposure has been identified as the leading attributable cause of work-related asthma, and prevalence in the exposed workforce has been estimated at 1-20 percent (Refs. 11 and 12). Once a worker is sensitized to diisocyanates, subsequent exposures can trigger severe asthma attacks. Spray application and heated processes are associated with higher incidences of asthma than other application methods because they can generate airborne isocyanate vapors and mists, which lead to worker exposure via the respiratory and dermal routes. Most workers who develop diisocyanate asthma have experienced long periods of exposure (months or longer); however, the minimum exposure to isocyanates that can elicit sensitization responses or asthma is unknown. In addition, immune response and subsequent disease in humans can vary significantly between individuals (Ref. 6). Fatalities linked to diisocyanate exposures in sensitized persons have been reported (Refs. 13 and 14).

The International Agency for Research on Cancer (IARC) classified toluene diisocyanates as “possibly carcinogenic to humans” (Carcinogenicity Group 2B), based on inadequate evidence for the carcinogenicity of TDI in humans and sufficient evidence for the carcinogenicity of TDI in experimental animals (Ref. 15). TDI has also been classified by the European Commission (EC) as Category 3 for carcinogenicity (“causes concerns for humans owing to possible carcinogenic effects”) (Ref. 16) and by the United States National Toxicology Program (NTP) as “reasonably anticipated to be a human carcinogen” (Ref. 17). National Institutes for Occupational Safety and Health (NIOSH) considers TDI to be an occupational carcinogen and recommends exposure reduction to the lowest feasible levels (Ref 18).

There are very few reports available regarding non-occupational health effects from exposures to TDI products. However, there are case reports suggesting that paraoccupational (brought outside of the workplace) asthma may have resulted from incidental exposure to TDI, one of which involved incidental exposure to varnishing products (Ref. 19). A specific, potential concern for consumer products is exposures to children. Children exposed to the same levels of TDI vapor as adults may receive a larger dose because they have greater lung surface area to body weight ratios and increased respiratory minute volumes to weight ratios. TDI vapor is heavier than air and may layer close to the floor; therefore, children who crawl, roll, or sit on surfaces treated with chemicals ( i.e. carpets and floors) and play with objects such as toys where residues may settle could potentially receive higher doses of inhaled toxicants than adults present in the same room (Ref. 20).

There is available information on worker exposures to industrial products containing TDI, such as coatings, adhesives, and sealants. Exposures resulting from the use of these industrial products may indicate potential but lower level exposures that may result for users conducting similar activities with consumer products containing residual TDI. There is a potential for worker exposure to TDI in all industrial and commercial settings where TDI is present (Ref. 7). Because of the high volatility of TDI, exposure can occur in all phases of its use, even in the final product (Ref.17), and it is unknown to what extent factors such as application techniques, product composition, and environmental conditions influence the availability of TDI in products. One activity where overexposures have been documented is floor finishing in both personal and area samples in one NIOSH evaluation (Ref. 21). Exposure data for professional workers may provide an indication of possible exposures if consumer products and articles were to contain residual TDI.

As previously discussed, TDI is used in coatings, adhesives, sealants, and other polyurethane products. TDI is used in the manufacturing process of the polymer and as a result, a small percentage of TDI may be present in consumer products, including articles. Further, researchers looking at workplace exposures to diisocyanates have noted an increase in the number of isocyanate-containing products used by consumers (Ref. 6). In addition, consumer use of adhesives and sealants is a potential growth sector as seen in the increasing numbers of “Do It Yourself” (DIY), energy-conscious homeowners doing more of their own home renovation and repair work, as well as from craftsmen and consumers generally continuing to use adhesives (Ref. 22). Most consumers would be unaware of the potential hazards of consumer products, including articles, containing TDI or other diisocyanates. Consequently, insufficient and inadequate hazard communication may lead to incorrect use and increased consumer and bystander exposures, particularly for sensitive groups, such as children. For example, exposures to bystanders and building occupants (including children) to TDI in industrial products have been reported in the literature, including emissions of TDI from concrete patio sealants (Refs. 23 and 24) and detection of TDI in building air samples following use of urethanes containing TDI to coat wood floors (Ref. 25). It is possible that lower level exposures could occur when conducting comparable activities using similar types of consumer products containing residual TDI. Even if consumers are aware of such potential hazards, they may not take appropriate precautions or research the appropriate resources in which these precautions are addressed. Of particular concern is the fact that children may have a greater potential for exposure if they use or are bystanders to the use of consumer products containing even residual amounts of TDI, because they may not have fully developed judgment for following labeling instructions and safety precautions and may not cease activity even when they are experiencing symptoms of exposure.

Diisocyanates are potent dermal and lung sensitizers and an attributable cause of work-related asthma worldwide (Ref. 26). In the past, consumer exposures have not been a focus of concern with respect to diisocyanates, because it had been assumed that consumers were generally exposed to products containing only completely cured polyurethanes, which have been generally considered to have low toxicity (Ref. 2). However, an increase in consumer use of polyurethane products that may further react and undergo “curing” could occur if consumer products, such as coatings, elastomers, adhesives, and sealants contained TDI in amounts greater than residual amounts. In such instances, TDI and related compounds that are not completely reacted upon their application can provide potential exposures both to the consumer as the direct user or to bystanders when products are used by others (Refs. 2 and 3). In sensitized individuals, exposure to even small amounts of diisocyanates may cause allergic respiratory reactions like asthma and severe breathing difficulties (Ref. 6). EPA believes that the use of any of these chemical substances in consumer products above current levels could significantly increase human exposure, and that such increase should not occur without an opportunity for EPA review and control as appropriate. As discussed in Unit II., regarding the chemicals listed in Table 2 of Unit II.A., based on Safety Data Sheets (SDS) information that coating-, adhesive-, elastomer-, binder-, or sealant-consumer products may contain residual TDI of no more than 0.1 percent by weight, EPA believes that these consumer products do not contain residual TDI of more than 0.1 percent by weight. EPA believes that other consumer products do not contain TDI or related compounds at any level.

Consistent with EPA's past practice for issuing SNURs under TSCA section 5(a)(2), EPA's decision to propose a SNUR for a particular chemical use need not be based on an extensive evaluation of the hazard, exposure, or potential risk associated with that use. Rather, the Agency action is based on EPA's determination that if the use begins or resumes, it may present a risk that EPA should evaluate under TSCA before the manufacturing or processing for that use begins. Since the new use does not currently exist, deferring a detailed consideration of potential risks or hazards related to that use is an effective use of resources. If a person decides to begin manufacturing or processing the chemical for the use, the notice to EPA allows EPA to evaluate the use according to the specific parameters and circumstances surrounding that intended use.

Based on the considerations in Unit III.A., EPA wants to achieve the following objectives with regard to the significant new use(s) that are designated in this proposed rule:

1. EPA would receive notice of any person's intent to manufacture or process TDI or its related compounds (see Table 1 of Unit II.A. and Table 2 of Unit II.A.) for the described significant new use before that activity begins.

2. EPA would have an opportunity to review and evaluate data submitted in a SNUN before the notice submitter begins manufacturing or processing TDI or its related compounds (see Table 1 of Unit II.A. and Table 2 of Unit II.A.) for the described significant new use.

3. EPA would be able to regulate prospective manufacturers or processors of TDI or its related compounds (see Table 1 of Unit II.A. and Table 2 of Unit II.A.) before the described significant new use of the chemical substance occurs, provided that regulation is warranted pursuant to TSCA sections 5(e), 5(f), 6 or 7.

Section 5(a)(2) of TSCA states that EPA's determination that a use of a chemical substance is a significant new use must be made after consideration of all relevant factors including:

1. The projected volume of manufacturing and processing of a chemical substance.

2. The extent to which a use changes the type or form of exposure of human beings or the environment to a chemical substance.

3. The extent to which a use increases the magnitude and duration of exposure of human beings or the environment to a chemical substance.

4. The reasonably anticipated manner and methods of manufacturing, processing, distribution in commerce, and disposal of a chemical substance.

In addition to these factors enumerated in TSCA section 5(a)(2), the statute authorizes EPA to consider any other relevant factors.

To determine what would constitute a significant new use of TDI or its related compounds subject to this proposed rule, as discussed in this unit, EPA considered relevant information about the toxicity of these substances, likely human exposures and environmental releases associated with possible uses, and the four factors listed in section 5(a)(2) of TSCA. EPA has preliminarily determined as the significant new uses: Any use in a consumer product for any chemical listed in Table 1 of Unit II.A.; and any use in a consumer product for any chemical listed in Table 2 of Unit II.A. (except for use in coatings, elastomers, adhesives, binders, and sealants that results in less than or equal to 0.1 percent by weight of TDI in a consumer product).

The article exemption at 40 CFR 721.45(f) is based on an assumption that people and the environment will generally not be exposed to chemical substances in articles (see September 5, 1984; 49 FR 35014,) (Ref. 1). However, TDI and related compounds are volatile and as such could migrate out of articles that contain them. For instance, studies of TDI in polyurethane products reported that after the reaction between an isocyanate and an alcohol to form polyurethane products, residual levels of isocyanates were detected on the surface of the products, which if used could lead to exposure (Refs. 2 and 3). Because TDI and related compounds are known to be volatile chemical substances, have been reported to migrate from products, are sensitizers, and would be expected to present a higher potential for exposure if the TDI in the article were a consumer product, EPA would like the opportunity to evaluate such potential uses in consumer products for any associated risks or hazards that might exist before those uses would begin.

EPA believes any new use of TDI and related compounds as part of articles would increase the duration and magnitude of human exposure to the substance. Based on these considerations, EPA has preliminarily determined that importing or processing substances in Table 1 of Unit II.A. and Table 2 of Unit II.A. as part of articles warrants making inapplicable the article exemption at 40 CFR 721.45(f) for the significant new uses identified in the tables in Unit II.A.

Once the determination of a significant new use under TSCA section 5(a)(2) has been made, EPA may separately determine whether it would be appropriate to make the regulatory exemption for some or all persons who import or process a chemical substance as part of an article (40 CFR 721.45(f)) inapplicable to a SNUR. In this case, EPA believes that the assumption underpinning this exemption, that people and the environment will generally not be exposed to chemical substances as part of articles, does not hold true. See Unit IV. for a discussion of why EPA believes this assumption is incorrect. Thus EPA is proposing to make this exemption inapplicable to importers or processors of the TDI and related compounds as part of an article for the identified significant new uses. EPA is requesting comment on the potential for exposure to these chemical substances via these articles and for comments on the ongoing uses of the TDI and related compounds as part of an article.

General provisions for SNURs appear under 40 CFR part 721, subpart A. These provisions describe persons subject to the rule, recordkeeping requirements, exemptions to reporting requirements, and applicability of the rule to uses occurring before the effective date of the final rule. However, for this action, EPA is proposing that 40 CFR 721.45(f) (which generally exempts persons importing or processing a substance as part of an article) will not apply and a person who imports or processes a chemical substance as part of an article would not be exempt from submitting a SNUN.

Provisions relating to user fees appear at 40 CFR part 700. According to 40 CFR 721.1(c), persons subject to SNURs must comply with the same notice requirements and EPA regulatory procedures as submitters of Premanufacture Notices (PMNs) under TSCA section 5(a)(1)(A). In particular, these requirements include the information submissions requirements of TSCA section 5(b) and 5(d)(1), the exemptions authorized by TSCA section 5(h)(1), (h)(2), (h)(3), and (h)(5), and the regulations at 40 CFR part 720. Once EPA receives a SNUN, EPA may take regulatory action under TSCA section 5(e), 5(f), 6 or 7 to control the activities on which it has received the SNUN. If EPA does not take action, EPA is required under TSCA section 5(g) to explain in the Federal Register its reasons for not taking action.

Persons who export or intend to export a chemical substance identified in a proposed or final SNUR are subject to the export notification provisions of TSCA section 12(b). The regulations that interpret TSCA section 12(b) appear at 40 CFR part 707, subpart D. In accordance with 40 CFR 707.60(b) this proposed SNUR does not trigger export notification for articles. Persons who import a chemical substance identified in a final SNUR are subject to the TSCA section 13 import certification requirements, codified at 19 CFR 12.118 through 12.127; see also 19 CFR 127.28. Those persons must certify that the shipment of the chemical substance complies with all applicable rules and orders under TSCA, including any SNUR requirements. The EPA policy in support of import certification appears at 40 CFR part 707, subpart B. The TSCA section 13 import certification requirement applies to articles containing a chemical substance or mixture if so required by the Administrator by a specific rule under TSCA. At this time EPA is not proposing to require import certification for these chemical substances as part of articles.

As discussed in the Federal Register of April 24, 1990 (55 FR 17376; FRL-3658-5) (Ref. 27), EPA has decided that the intent of section 5(a)(1)(B) of TSCA is best served by designating a use as a significant new use as of the date of publication of the proposed rule rather than as of the effective date of the final rule. If uses begun after publication of the proposed rule were considered ongoing rather than new, it would be difficult for EPA to establish SNUR notice requirements, because a person could defeat the SNUR by initiating the proposed significant new use before the rule became final, and then argue that the use was ongoing as of the effective date of the final rule. Thus, persons who begin commercial manufacture or processing of the chemical substance(s) that would be regulated through this proposed rule, if finalized, would have to cease any such activity before the effective date of the rule if and when finalized. To resume their activities, these persons would have to comply with all applicable SNUR notice requirements and wait until the notice review period, including all extensions, expires. Uses arising after the publication of the proposed rule are distinguished from uses that exist at publication of the proposed rule. The former would be new uses, the latter ongoing uses, except that uses that are ongoing as of the publication of the proposed rule would not be considered ongoing uses if they have ceased by the date of issuance of a final rule. To the extent that additional ongoing uses are found in the course of rulemaking, EPA would exclude those specific chemical substances for those specific uses from the final SNUR. EPA has promulgated provisions to allow persons to comply with the final SNUR before the effective date. If a person were to meet the conditions of advance compliance under 40 CFR 721.45(h), that person would be considered to have met the requirements of the final SNUR for those activities.

EPA recognizes that TSCA section 5 does not usually require developing any particular test data before submission of a SNUN. There are two exceptions:

1. Development of test data is required where the chemical substance subject to the SNUR is also subject to a test rule under TSCA section 4 (see TSCA section 5(b)(1)); and

2. Development of test data may be necessary where the chemical substance has been listed under TSCA section 5(b)(4) (see TSCA section 5(b)(2)).

In the absence of a section 4 test rule or a section 5(b)(4) listing covering the chemical substance, persons are required to submit only test data in their possession or control and to describe any other data known to or reasonably ascertainable by them (15 U.S.C. 2604(d); 40 CFR 721.25, and 40 CFR 720.50). However, as a general matter, EPA recommends that SNUN submitters include data that would permit a reasoned evaluation of risks posed by the chemical substance during its manufacture, processing, use, distribution in commerce, or disposal. EPA encourages persons to consult with the agency before submitting a SNUN. As part of this optional pre-notice consultation, EPA would discuss specific data it believes may be useful in evaluating a significant new use. SNUNs submitted for significant new uses without any test data may increase the likelihood that EPA will take action under TSCA section 5(e) to prohibit or limit activities associated with this chemical.

SNUN submitters should be aware that EPA will be better able to evaluate SNUNs that provide detailed information on:

• Human exposure and environmental releases that may result from the significant new uses of the chemical substance,

• Potential benefits of the chemical substance, and

• Information on risks posed by the chemical substances compared to risks posed by potential substitutes.

EPA recommends that submitters consult with the Agency prior to submitting a SNUN to discuss what data may be useful in evaluating a significant new use. Discussions with the Agency prior to submission can afford ample time to conduct any tests that might be helpful in evaluating risks posed by the substance. According to 40 CFR 721.1(c), persons submitting a SNUN must comply with the same notice requirements and EPA regulatory procedures as persons submitting a PMN, including submission of test data on health and environmental effects as described in 40 CFR 720.50. SNUNs must be submitted on EPA Form No. 7710-25, generated using e-PMN software, and submitted to the Agency in accordance with the procedures set forth in 40 CFR 721.25 and 40 CFR 720.40. E-PMN software is available electronically at http://www.epa.gov/opptintr/newchems.

EPA has evaluated the potential costs of establishing SNUR reporting requirements for potential manufacturers and processors of the chemical substances included in this proposed rule, including as part of articles (Ref. 28). In the event that a SNUN is submitted, costs are estimated at approximately $8,589 per SNUN submission for large business submitters and $6,189 for small business submitters. These estimates include the cost to prepare and submit the SNUN, and the payment of a user fee. Businesses that submit a SNUN would be subject to either a $2,500 user fee required by 40 CFR 700.45(b)(2)(iii), or, if they are a small business with annual sales of less than $40 million when combined with those of the parent company (if any), a reduced user fee of $100 (40 CFR 700.45(b)(1)). EPA's complete economic analysis is available in the public docket for this proposed rule (Ref. 28).

Under section 12(b) of TSCA and the implementing regulations at 40 CFR part 707, subpart D, exporters must notify EPA if they export or intend to export a chemical substance or mixture for which, among other things, a rule has been proposed or promulgated under TSCA section 5. For persons exporting a substance that is the subject of a SNUR, a one-time notice must be provided for the first export or intended export to a particular country. The total costs of export notification will vary by chemical, depending on the number of required notifications ( i.e., the number of countries to which the chemical is exported). While EPA is unable to make any estimate of the likely number of export notifications for the chemical covered in this proposed SNUR, as stated in the accompanying EA of this proposed SNUR, the estimated cost of the export notification requirement on a per unit basis is $84.22.

In proposing to make inapplicable the exemption relating to persons that import or process certain chemical substances as part of an article, this action may affect firms that plan to import or process types of articles that may contain the subject chemical substance. Some firms have an understanding of the contents of the articles they import or process. However, EPA acknowledges that importers and processors of articles may have varying levels of knowledge about the chemical content of the articles that they import or process. These parties may need to become familiar with the requirements of the rule. And, while not required by the SNUR, these parties may take additional steps to determine whether the subject chemical substances are part of the articles that they are considering to import or process. This determination may involve activities such as gathering information from suppliers along the supply chain, and/or testing samples of the article itself. Costs vary across the activities chosen and the extent of familiarity a firm has regarding the articles it imports or processes. Cost ranges are presented in the “Understanding the Costs Associated with Eliminating Exemptions for Articles in SNURs” (Ref. 29). Based on available information, EPA believes that article importers that choose to investigate their products would incur costs at the lower end of the ranges presented in the Economic Analysis. For those companies choosing to undertake actions to assess the composition of the articles they import or process, EPA expects that importers would take actions that are commensurate with the company's perceived likelihood that a chemical substance might be a part of an article, and the resources it has available. Example activities and their costs are provided in the accompanying Economic Analysis of this rule (Ref. 28).

Before proposing this SNUR, EPA considered the following alternative regulatory action:

Under a TSCA section 8(a) rule, EPA could, among other things, generally require persons to report information to the agency when they intend to manufacture or process a listed chemical for a specific use or any use. However, for TDI, the use of TSCA section 8(a) rather than SNUR authority would have several limitations. First, if EPA were to require reporting under TSCA section 8(a) instead of TSCA section 5(a), EPA would not have the opportunity to review human and environmental hazards and exposures associated with the proposed significant new use and, if necessary, take immediate follow-up regulatory action under TSCA sections 5(e) or 5(f) to prohibit or limit the activity before it begins. In addition, EPA may not receive important information from small businesses, because such firms generally are exempt from TSCA section 8(a) reporting requirements (see TSCA sections 8(a)(1)(A) and 8(a)(1)(B)). In view of the level of health concerns about TDI if used for the proposed significant new use, EPA believes that a TSCA section 8(a) rule for this substance would not meet EPA's regulatory objectives.

Under the SNUR exemption provision at 40 CFR 721.45(f), a person who imports or processes a chemical substance covered by a SNUR identified in 40 CFR part 721, subpart E, as part of an article is not generally subject to the notification requirements of 40 CFR 721.25 for that chemical substance. However, EPA is concerned that exempting TDI and related compounds as part of articles would render the SNUR less effective because of the possibility that articles could be imported or processed for uses subject to this proposed SNUR without the submission of a SNUN. This proposed rule would not include the exemption at 40 CFR 721.45(f).

EPA welcomes comment on all aspects of this proposed rule. EPA based its understanding of the use profile of these chemicals on the published literature, the 2012 CDR submissions, market research, discussions with manufacturers, and product SDSs. To confirm EPA's understanding, the Agency is requesting public comment on the EPA's understanding that coating, adhesive, elastomer, binder, or sealant consumer products do not contain residual TDI of more than 0.1 percent by weight, as noted in Table 2 of Unit II.A. EPA believes that other consumer products do not contain TDI or related compounds at any level. In providing comments on the concentration of TDI and related compounds in the consumer product, it would be helpful if you provide sufficient information for EPA to substantiate any assertions of use and concentrations.

1. Submitting CBI. It is EPA's policy to include all comments received in the public docket without change or further notice to the commenter and to make the comments available on-line at www.regulations.gov, including any personal information provided, unless a comment includes information claimed to be CBI or other information whose disclosure is restricted by statute. Do not submit this information to EPA through regulations.gov or email. 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 that you mail to EPA 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, subpart B.

2. Tips for preparing your comments. When submitting comments, remember to:

i. Identify the document by docket ID number and other identifying information (subject heading, Federal Register date, and page number).

ii. Follow directions. The agency may ask you to respond to specific questions or organize comments by referencing a CFR part or section number.

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

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

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

vi. Provide specific examples to illustrate your concerns and suggest alternatives.

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

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

The following is a listing of the documents that are specifically referenced in this document. The docket includes these documents and other information considered by EPA, including documents that are referenced within the documents that are in the docket, even if the referenced document is not physically located in the docket. For assistance in locating these other documents, please consult technical person listed under FOR FURTHER INFORMATION CONTACT .

This proposed SNUR has been designated by the Office of Management and Budget (OMB) as a “significant regulatory action” under section 3(f) of Executive Order (58 FR 51735, October 4, 1993). Accordingly, EPA submitted this action to OMB for review under Executive Orders 12866 and 13563 (76 FR 3821, January 21, 2011), and any changes made in response to OMB recommendations are documented in the docket.

This action does not impose any new information collection burden under the PRA, 44 U.S.C. 3501 et seq. Burden is defined in 5 CFR 1320.3(b). The information collection activities associated with existing chemical SNURs are already approved by OMB under OMB control number 2070-0038 (EPA ICR No. 1188); and the information collection activities associated with export notifications are already approved by OMB under OMB control number 2070-0030 (EPA ICR No. 0795). If an entity were to submit a SNUN to the Agency, the annual burden is estimated to be less than 100 hours per response, and the estimated burden for an export notifications is less than 1.5 hours per notification. In both cases, burden is estimated to be reduced for submitters who have already registered to use the electronic submission system. Additional burden, estimated to be less than 10 hours, could be incurred where additional record keeping requirements are specified under 40 CFR 721.125(a), (b), and (c).

An agency may not conduct or sponsor, and a person is not required to respond to a collection of information that requires OMB approval under the PRA, unless it has been approved by OMB and displays a currently valid OMB control number. The OMB control numbers for EPA's regulations in Title 40 of the CFR, after appearing in the Federal Register , are listed in 40 CFR, part 9, and included on the related collection instrument, or form, if applicable. EPA is amending the table in 40 CFR part 9 to list this SNUR. This listing of the OMB control numbers and their subsequent codification in the CFR satisfies the display requirements of the PRA and OMB's implementing regulations at 5 CFR part 1320. Since the existing OMB approval was previously subject to public notice and comment before OMB approval, and given the technical nature of the table, EPA finds that further notice and comment to amend the table is unnecessary. As a result, EPA finds that there is “good cause” under section 553(b)(3)(B) of the Administrative Procedure Act (5 U.S.C. 553(b)(3)(B)) to amend this table without further notice and comment.

Pursuant to section 605(b) of the RFA, 5 U.S.C. 601 et seq., I hereby certify that promulgation of this proposed SNUR would not have a significant economic impact on a substantial number of small entities. The rationale supporting this conclusion is as follows.

EPA generally finds that proposed and final SNURs are not expected to have a significant economic impact on a substantial number of small entities (See, e.g., Ref. 30). Since these proposed SNURs would require a person who intends to engage in such activity in the future to first notify EPA by submitting a SNUN, no economic impact would occur unless someone files a SNUN to pursue a significant new use in the future or forgoes profits by avoiding or delaying the significant new use. Although some small entities may decide to engage in such activities in the future, EPA cannot presently determine how many, if any, there may be. However, EPA's experience to date is that, in response to the promulgation of SNURs covering over 1,000 chemical substances, the Agency receives only a handful of notices per year. During the six year period from 2005-2011, only three submitters self-identified as small in their SNUN submission (Ref. 28). EPA believes the cost of submitting a SNUN is relatively small compared to the cost of developing and marketing a chemical new to a firm and that the requirement to submit a SNUN generally does not have a significant economic impact.

A SNUR applies to any person (including small or large entities) who intends to engage in any activity described in the rule as a “significant new use.” EPA has preliminarily determined, based in part, on the Agency's market research, that these chemical substances are not being manufactured (including imported) or processed for a significant new use. This preliminary determination also includes importation and processing of these chemical substances as part of articles for the significant new use (Unit IV.). Therefore, based on current knowledge, EPA has preliminarily determined that these uses, including the importation of these chemical substances as part of articles, are not ongoing, and that no small entities presently manufacture for the significant new uses addressed in this proposed rule. EPA will consider information received during the comment period that might indicate that this preliminary determination is incorrect.

EPA believes that there will be minimal impact to processors and importers of these chemical substances as part of articles from this proposed SNUR. The SNUR does not require processors and importers of articles to conduct specific activities to ascertain if they are importing or processing an article that uses a chemical subject to the proposed rule. EPA expects importers would take actions that are commensurate with their perceived likelihood of a chemical substance subject to the SNUR being part of an article, and the resources it has available. EPA has no reason to believe that a firm would voluntarily incur substantial costs to comply with the SNUR, but rather EPA believes each firm will choose the most efficient route to identify whether it is importing the subject chemical substances in articles.

Therefore, EPA believes that the potential economic impact of complying with this proposed SNUR is not expected to be significant or adversely impact a substantial number of small entities.

Based on EPA's experience with proposing and finalizing SNURs, State, local, and Tribal governments have not been impacted by these rulemakings, and EPA does not have any reason to believe that any State, local, or Tribal government would be impacted by this rulemaking. As such, the requirements of sections 202, 203, 204, or 205 of UMRA, 2 U.S.C. 1531-1538, do not apply to this action.

This action will not have a substantial direct effect on 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 (64 FR 43255, August 10, 1999).

This proposed rule does not have Tribal implications because it is not expected to have any effect ( i.e., there will be no increase or decrease in authority or jurisdiction) on Tribal governments, on the relationship between the Federal government and the Indian tribes, or on the distribution of power and responsibilities between the Federal government and Indian tribes. Thus, Executive Order 13175 (65 FR 67249, November 9, 2000), does not apply to this action.

This action is not subject to Executive Order 13045 (62 FR 19885, April 23, 1997), because this action is not intended to address environmental health or safety risks for children.

This proposed rule is not subject to Executive Order 13211 (66 FR 28355, May 22, 2001), because this action is not expected to affect energy supply, distribution, or use.

Since this action does not involve any technical standards, section 12(d) of NTTAA, 15 U.S.C. 272 note, does not apply to this section.

This proposed rule does not invoke special consideration of environmental justice related issues as delineated by Executive Order 12898 (59 FR 7629, February 16, 1994), because EPA has determined that this action will not have disproportionately high and adverse human health or environmental effects on minority or low-income populations. This action does not affect the level of protection provided to human health or the environment.

Therefore, it is proposed that 40 CFR chapter I be amended as follows:

This is a summary of the Commission's Notice of Proposed Rulemaking, FCC 14-210, adopted on December 17, 2014 and released on December 19, 2014. 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. This document 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 these documents in accessible formats (computer diskettes, large print, audio recording, and Braille), send an email to fcc504@fcc.gov or call the Commission's Consumer and Governmental Affairs Bureau at (202) 418-0530 (voice), (202) 418-0432 (TTY).

In the Notice of Proposed Rulemaking (“ NPRM” ), we propose to update our rules to better reflect the fact that video services are being provided increasingly over the Internet. Specifically, we propose to modernize our interpretation of the term MVPD by including within its scope services that make available for purchase, by subscribers or customers, multiple linear streams of video programming, regardless of the technology used to distribute the programming. Such an approach will ensure both that incumbent providers will continue to be subject to the pro-competitive, consumer-focused regulations that apply to MVPDs as they transition their services to the Internet and that nascent, Internet-based video programming services will have access to the tools they need to compete with established providers. For readability throughout the NPRM, we use the term “Internet-delivered” to refer to any service delivered using IP whether or not it uses the public Internet, except for cable service.

Here the Commission faces, as it has before, the impact of technology transition. Incumbent cable systems have made plain their intent to use a new transmission standard that will permit cable systems to deliver video via IP, and other innovative companies are also experimenting with new business models based on Internet distribution. That is not surprising: Over-the-air television has moved from analog transmission to digital. The telephone networks of the 20th Century have become broadband networks, providing a critical pathway to the Internet. And, in our January Technology Transitions Order, the Commission encouraged experiments that assess the impact on consumers of the coming transition from traditional copper facilities to new telecommunications networks composed of fiber, copper, coaxial cable, and/or wireless connections.

The Commission has recognized that innovation must be encouraged, but not at the expense of technology-neutral public policies. That is why the January Technology Transitions Order emphasized the importance of preserving competition, consumer protection, and public safety. And that is why the NPRM proposes to ensure that the rights and responsibilities of an MVPD are not jeopardized by changes in technology. This IP transition will enable cable operators to untether their video offerings from their current infrastructure, and could encourage them to migrate their traditional services to Internet delivery. With these changes on the horizon, it becomes important to interpret the statutory definition of MVPD to ensure that our rules apply sensibly and in a way that encourages innovation regardless of how service is delivered and that the pro-consumer values embodied in MVPD regulation will continue to be served. In so doing, we take note of the regulatory requirements that cable operators must adhere to as they use new technology to offer services, and we invite comment on the regulatory treatment of additional services that cable operators may offer.

Adoption of a technology-neutral MVPD definition will not only preserve current responsibilities, it may create new competitive opportunities that will benefit consumers. Increasingly, companies—incumbents and new entrants alike—are interested in using the Internet as the transmission path for packages of video channels. In initiating this proceeding, our goal is to bring our rules into synch with the realities of the current marketplace and consumer preference where video is no longer tied to a certain transmission technology.

Specifying the circumstances under which an Internet-based provider may qualify as an MVPD, possessing the rights as well as responsibilities that attend that status, may incent new entry that will increase competition in video markets. In particular, extending program access protections to Internet-based providers would allow them to “access[] critical programming needed to attract and retain subscribers.” And extending retransmission consent protections and obligations to those providers would allow them to enter the market “for the disposition of the rights to retransmit broadcast signals.” Broadcast and cable-affiliated programming could make Internet-based services attractive to customers, who would access the services via broadband. The resulting increased demand for broadband may in turn provide a boost to the deployment of high-speed broadband networks.

In the NPRM, we seek comment on possible interpretations of the term MVPD as used in the Communications Act of 1934, as amended (the “Act”) and seek comment on how each of those interpretations would affect the industry and consumers. Below, we seek comment on two possible interpretations: We propose to interpret the term MVPD to mean distributors of multiple linear video programming streams, including Internet-based services and tentatively conclude that this interpretation is a reasonable interpretation of the Act, and is most consistent with consumer expectations and conditions in the industry. We also seek comment on an alternative interpretation that would require a programming distributor to have control over a transmission path to qualify as an MVPD and invite comment on whether this interpretation is consistent with the Act and Congressional intent. We also invite comment on how this interpretation would apply as companies begin to offer subscription linear video services over the Internet.

We then seek comment on the effects that either interpretation would have on entities that are classified as MVPDs, consumers, and content owners. We seek comment on how each interpretation would benefit and burden entities that would be subject to our rules. We also ask whether we should consider exemption or waiver of certain regulations, if allowed under the statute. We seek comment on whether to modify our retransmission consent “good faith” negotiation rules with respect to Internet-based MVPDs to protect local broadcasters. We seek comment on what impact these interpretations would have on content owners, including broadcasters and cable-affiliated programmers. Finally, we seek comment on how to ensure that our interpretation will promote competition and broadband adoption, consistent with the Act and Commission policy.

We also note that the fact that an entity uses IP to deliver cable service does not alter the classification of its facility as a cable system and does not alter the classification of the entity as a cable operator. In other words, those video programming services provided over the operator's facilities remain subject to regulation as cable services. We seek comment on the regulatory status of purely Internet-based linear video programming services that cable operators and direct broadcast satellite (“DBS”) providers may choose to offer in addition to their traditional services.

Section 602(13) of the Act defines an MVPD as “[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.” The Act also defines the terms “channel” and “video programming,” which are used in the MVPD definition. Section 602(4) defines “channel” as “a portion of the electromagnetic frequency spectrum which is used in a cable system and which is capable of delivering a television channel (as television channel is defined by the Commission by regulation).” And Section 602(2) of the Act defines “video programming” as “programming provided by, or generally considered comparable to programming provided by, a television broadcast station.”

On March 24, 2010, Sky Angel U.S., LLC (“Sky Angel”), a provider of multiple streams of prescheduled programming over the Internet, filed a complaint and petition for temporary standstill for program access relief, which is available only to MVPDs. On April 21, 2010, the Commission's Media Bureau denied the petition for standstill, holding that Sky Angel failed to carry its burden of demonstrating that it is likely to succeed in showing on the merits that it is an MVPD entitled to seek relief under the program access rules. The Media Bureau determined that the term “channel” as used in the definition of MVPD appears to include a transmission path as a necessary element. Based on the limited record at the time, the Bureau was unable to find that Sky Angel provides its subscribers with a transmission path. Sky Angel's complaint, a second petition for injunctive relief, a motion for sanctions, and discovery requests are pending. In 2012, Sky Angel filed a Petition for Writ of Mandamus with the United States Court of Appeals for the D.C. Circuit, asking the court to require the Commission to adopt and release a final order on the merits of its complaint, and the court denied the Petition “without prejudice to renewal in the event of significant delay.” In March 2012, the Media Bureau issued a Public Notice in connection with the Sky Angel complaint, seeking comment on the most appropriate interpretation of the definition of an MVPD (the “March 2012 Public Notice”) to ensure that the Commission has the benefit of broad public input. In June 2014, Sky Angel notified the Commission that it had “suspended its video and audio distribution services” in January 2014 because it is unable “to acquire programming in a fair and nondiscriminatory way.”

More recently, issues have arisen regarding the status of Aereo, Inc., a former provider of online linear video programming, under the Copyright Act and Communications Act. On June 25, 2014, the Supreme Court found that Aereo violated certain copyright holders' exclusive right to perform their works publicly as provided under the Copyright Act. Aereo then filed with the Copyright Office to pay statutory royalties to retransmit broadcast signals as a cable system. The Copyright Office accepted the filing “on a provisional basis,” pending “further regulatory or judicial developments,” including this Commission's interpretation of the term MVPD and the outcome of the case that was pending before the U.S. District Court for the Southern District of New York. On November 21, 2014, Aereo filed to reorganize under Chapter 11 of the U.S. Bankruptcy Code.

Comments filed in response to the March 2012 Public Notice reveal a wide range of views. By initiating this rulemaking proceeding, we propose an interpretation that we based on many comments in the record of that proceeding. But we continue to seek broad public input, including discussions with stakeholders, which will fully inform us as we seek to clarify the scope of the definition of MVPD. We note that the Media Bureau recently changed the ex parte status of the March 2012 Public Notice. And today, the Bureau issued a decision holding the Sky Angel proceeding in abeyance pending the outcome of this proceeding and terminating the March 2012 Public Notice docket. These actions will allow parties to discuss with the Commission the definitional and policy issues raised herein without running afoul of the ex parte rules.

As discussed below, we tentatively conclude that the statutory definition of MVPD includes certain Internet-based distributors of video programming. Specifically, we propose to interpret the term MVPD to mean all entities that make available for purchase, by subscribers or customers, multiple streams of video programming distributed at a prescheduled time. In reaching this conclusion, we understand that the market for Internet-based distribution of video programming is nascent and that companies continue to experiment with business models. The current business models include, but are not limited to, the following types of Internet-based video service offerings, including combinations of these offerings: Subscription Linear. We use this term to refer to Internet-based distributors that make available continuous, linear streams of video programming on a subscription basis. This category includes Sky Angel's service as it existed before 2014 and Aereo's service as it existed before the Supreme Court decision. Subscription On-Demand. We use this term to refer to Internet-based distributors that make video programming available to view on-demand on a subscription basis, allowing subscribers to select and watch television programs, movies, and/or other video content whenever they request to view the content without having to pay an additional fee beyond their recurring subscription fee. This category includes Amazon Prime Instant Video, Hulu Plus, and Netflix. Transactional On-Demand. We use this term to refer to Internet-based distributors that make video programming available to view on-demand, with consumers charged on a per-episode, per-season, or per-movie basis to rent the content for a specific period of time or to download the content for storage on a hard drive for viewing at any time. This category includes Amazon Instant Video, CinemaNow (Best Buy), Google Play, iTunes Store (Apple), Sony Entertainment Network, Vudu (Walmart), and Xbox Video (Microsoft). Ad-based Linear and On-Demand. We use this term to refer to Internet-based distributors that make video programming available to view linearly or on demand, with consumers able to select and watch television programs, movies, and/or other video content whenever they request on a free, ad-supported basis. This category includes Crackle, FilmOn, Hulu, Yahoo! Screen, and YouTube as they exist today. Transactional Linear. We use this term to refer to non-continuous linear programming that is offered on a transactional basis. This category includes Ultimate Fighting Championship's UFC.TV pay-per-view service. We invite commenters to identify other categories and examples of Internet-based distributors of video programming not mentioned here.

As explained below, we seek comment on our tentative conclusion that entities that provide Subscription Linear video services are MVPDs as that term is defined in the Act because they make multiple channels of video programming available for purchase. We seek comment also on whether any of the other categories of Internet-based distributors of video programming identified above fall within the statutory definition of an MVPD. Because these other Internet-based distributors of video programming either (1) make programming available for free, and not “for purchase” as required by the definition of an MVPD, or (2) do not provide prescheduled programming that is comparable to programming provided by a television broadcast channel, we believe they fall outside the statutory definition. We seek comment on this view.

Below, we begin by seeking comment on our proposed interpretation of the definition of the term MVPD and on alternative interpretations. We then seek comment on the public policy ramifications of these alternatives and any other alternatives commenters may suggest. We note that an entity that uses IP to deliver cable service does not alter the classification of its facility as a cable system and does not alter the classification of the entity as a cable operator. Finally, we seek comment on how to treat Internet-based linear video programming services that cable operators and DBS providers may choose to offer in addition to their traditional services.

Defining MVPD. To qualify as an MVPD under the Communications Act, an entity must “make[] available for purchase, by subscribers or customers, multiple channels of video programming.” The Commission has previously held that video distributed over the Internet qualifies as “video programming.” Thus, the key remaining definitional issue is how to interpret the phrase “multiple channels of video programming.” We seek comment on this issue as set forth below.

The Act defines a “channel” as “a portion of the electromagnetic frequency spectrum which is used in a cable system and which is capable of delivering a television channel (as television channel is defined by the Commission by regulation).” As discussed in the Media Bureau's March 2012 Public Notice and in further detail below, there are at least two possible interpretations of the term “channel” within the definition of MVPD. We tentatively conclude that the best reading is that “channels of video programming” means streams of linear video programming (the “Linear Programming Interpretation”). Under this interpretation, linear video programming networks, such as ESPN, The Weather Channel, and other sources of video programming that are commonly referred to as television or cable “channels,” would be considered “channels” for purposes of the MVPD definition, regardless of whether the provider also makes available physical transmission paths. We also seek comment on an alternative interpretation under which the definition of MVPD would include only entities that make available transmission paths in addition to content, and thus exclude those Internet-based distributors of video programming that do not own or operate facilities for delivering content to consumers (the “Transmission Path Interpretation”). We seek comment on which interpretation is most consistent with the text, purpose, legislative history, and structure of the Act and which interpretation best serves Congressional intent. We also invite commenters to identify any other interpretation of MVPD that is consistent with the statute and would better serve Congressional intent. For example, some commenters call for a “functional equivalency” standard, whereby an entity would qualify as an MVPD if it looks and functions like a traditional MVPD from the perspective of consumers; others suggest that Internet-based distributors should be allowed to elect whether or not to avail themselves of MVPD status, taking on both the benefits of such status (such as program access) as well as the regulatory obligations. To the extent that any commenters favor these or other interpretations, they should explain how their proposed interpretation comports with the statute, how it would be administered or adjudicated in particular cases, and describe the policy ramifications.

Proposed “Linear Programming Interpretation”. Under our proposed rule, we would interpret the term “channels of video programming” to mean prescheduled streams of video programming (which we refer to in this NPRM as “linear” programming), without regard to whether the same entity is also providing the transmission path. We believe that this is the better interpretation for three reasons: (i) It is a reasonable interpretation of the Act and most consistent with Congressional intent, (ii) it best aligns with consumer expectations and industry developments, and (iii) it is consistent with the common meaning of the word channel. We seek comment on the interpretation as set forth below. We seek comment also on our proposal to define “linear video” as a “stream of video programing that is prescheduled by the programmer.”

We tentatively conclude that our proposed Linear Programming Interpretation is consistent with the language of the statute. The statutory definition of MVPD begins by stating that an MVPD is 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 . . . .” In the Sky Angel Standstill Denial, the Media Bureau stated that, although the list is preceded by the phrase “not limited to,” making it clear that the list is illustrative rather than exclusive, it is also preceded by the phrase “such as,” which suggests that other covered entities should be “similar” to those listed. We tentatively conclude that the essential element that binds the illustrative entities listed in the provision is that each makes multiple streams of prescheduled video programming available for purchase, rather than that the entity controls the physical distribution network. Therefore, we believe that our interpretation is consistent with the illustrative list of MVPDs that the statutory definition provides.

In addition, the Commission has previously held that an entity need not own or operate the facilities that it uses to distribute video programming to subscribers in order to qualify as an MVPD. Rather, an MVPD may use a third party's distribution facilities in order to make video programming available to subscribers. We find, therefore, that our proposed interpretation is consistent with Commission precedent. We seek comment on this finding.

We also find the term “channel” used in the context of the MVPD definition ( i.e., “multiple channels of video programming”) to be ambiguous. Further, we tentatively conclude that Congress did not intend the term “channel” in this context to be interpreted in accordance with the definition in Section 602(4) of the Act, but rather intended the term to be given its ordinary and common meaning. The Act states that “the term ‘cable channel’ or ‘channel’ means a portion of the electromagnetic frequency spectrum which is used in a cable system and which is capable of delivering a television channel (as television channel is defined by the Commission by regulation). This definition was adopted in the 1984 Cable Act, which focused primarily on the regulation of cable television. In contrast, the term “MVPD” was adopted by Congress eight years later in 1992, when new competitors to cable were emerging, and is specifically “not limited” solely to cable operators. Therefore, we tentatively conclude that we should not rely on the cable-specific definition of the term “channel” to interpret the definition of “MVPD,” which is explicitly defined to encompass video programming distributors that include, but are not limited to, cable operators.

Moreover, using the cable-specific definition of “channel” to interpret the definition of “MVPD” does not seem consistent with the illustrative list of MVPDs that is included in the definition. For example, DBS providers are specifically included in the definition as MVPDs, but the linear streams of video programming that they provide to subscribers do not align with the definition of “channel” in Section 602(4) of the Act, because that definition specifically refers to the electromagnetic spectrum “used in a cable system.” If Congress intended an entity to have control over the transmission path in order to be deemed an MVPD, presumably it would have explicitly specified that in the definition of MVPD, as it did with the definition of cable system. Therefore, we tentatively conclude that, when Congress defined an MVPD as an entity that “makes available . . . channels of video programming,” it did not intend to limit the types of entities that meet the definition to only those that control the physical method of delivery ( i.e., a transmission path). As a consequence, we believe that this is a reasonable interpretation of the Act. We seek comment on this position.

We believe that our proposed interpretation is consistent with Congress's intent to define “MVPD” in a broad and technology-neutral way to ensure that it would not only cover video providers using technologies that existed in 1992, but rather be sufficiently flexible to cover providers using new technologies such as Internet delivery. The Act imposes important pro-consumer responsibilities on MVPDs. As incumbent MVPDs transition to IP delivery, we must ensure that the definition of MVPD is read broadly enough to ensure that consumers do not lose the benefits those provisions are intended to confer. For example, we note that the goals of the program access provision of the Cable Television Consumer Protection and Competition Act of 1992 (“1992 Cable Act”) are to increase competition and diversity in the video programming market, to increase the availability of programming to persons in rural areas, and to spur the development of communications technologies. It would frustrate those goals to exclude from coverage new technologies and services that develop. Consumers are watching more online subscription video, and incumbent operators and new entrants alike are experimenting with or planning to launch linear video services over the Internet. Therefore, we tentatively conclude that the Linear Programming Interpretation is most consistent with consumer expectations and industry trends, and we believe that Congress's goals are best served by an interpretation of MVPD that accommodates changing technology. We seek comment on our tentative conclusion that our proposed interpretation is most consistent with consumer expectations and industry trends. To the extent that commenters disagree with our interpretation, they should address why an interpretation of MVPD that focuses on the physical delivery method an entity uses to provide video programming (i) would serve Congress's goals, (ii) would promote innovation, and (iii) is consistent with the statute.

Finally, certain commenters suggest that the term “channel” can be interpreted both in the “content” sense and in the “container” sense: “In a video context, the Act uses the term both in a `container' sense, to refer to a range of frequencies used to transmit programming, and in a `content' sense to refer to the programming itself, or the programmer.” Those commenters argue that, based on the context, the content sense applies when interpreting the definition of MVPD, “since only that reading is consistent with the Act's pro-competitive purposes.” We note that the legislative history of the 1992 Cable Act refers to ESPN as a “sports channel” and CNN as a “news channel”; given that both of these are linear programming networks, this suggests that Congress used the term channel, at least in this instance, to refer to such programming networks and not to portions of the electromagnetic frequency spectrum. Commenters provide numerous examples of the use of the term “channel” in both the content sense ( i.e., a linear video programming network) and the container sense ( i.e., a range of frequencies used to transmit programming) in everyday usage and in dictionaries, as well as by Congress and the Commission. Because the term “channel” as used in the definition of MVPD is ambiguous, we tentatively conclude that it is reasonable to read the term to have its common, everyday meaning of a stream of prescheduled video programming when we interpret the definition of MVPD. As discussed above, we believe our proposed interpretation is most consistent with the Act's goals of increased video competition and broadband deployment. In addition, we believe that it is most consistent with consumer expectations because consumers are focused on the content they receive, rather than the specific method used to deliver it to them. We seek comment on this tentative conclusion.

Scope of the Linear Programming Interpretation. We also seek comment on whether, under the Linear Programming Interpretation, we can and should carve out certain types of entities that make available multiple linear streams of video programming from the MVPD definition. If we interpret “multiple channels of video programming” to mean multiple linear streams of video programming, could we, consistent with the statute, narrow the category of entities that would qualify as MVPDs? For example, are there niche online subscription programming providers or other small entities that would not be able to remain in business if they qualify as MVPDs? A “multichannel” video programming distributor is required by definition to make multiple channels of video programming available. We seek comment on how to interpret the term “multiple” in the definition of MVPD. Although we believe it is important to modernize our interpretation of MVPD to capture entities that provide service similar to or competitive with more traditional MVPD service but through new distribution methods, we also wish to ensure that our rules do not impede innovation by imposing regulations on business models that may be better left to develop unfettered by the rules applicable to MVPDs. Should we interpret the term MVPD to require that a certain number of channels of video programming, such as twenty, be made available? Would twenty channels be too low or too high? Is there justification for a different number? What if an entity makes multiple channels available nationwide, but makes only one channel available for purchase to each subscriber? Should we interpret the term “channels of video programming” to require a certain number of programming hours per day or per week or to exempt certain niche programmers? Is there justification to require eighteen hours of programming per day, seven days per week, or some other number? We tentatively conclude that an entity that makes linear services available via the Internet is an MVPD, and our regulations apply to all of the MVPD's video services. Are there other factors that we should consider? For example, should we exempt from the interpretation of linear programming discrete, intermittent events that occur at prescheduled times, such as live individual sporting events? While these events are prescheduled by the programming provider, they are presented sporadically, in contrast to most television channels that broadcast continuously throughout the day. If such events are considered linear programming, our proposed Linear Programming Interpretation would appear to apply to online subscription video packages that stream multiple sporting events, such as those offered by Major League Baseball, Major League Soccer, the National Basketball Association, and the National Hockey League. We seek comment on whether distributors of these types of services should be included within our interpretation of MVPD and, if not, on the statutory basis for excluding them and bright-line tests that we could use to evaluate whether such an exclusion would apply.

We tentatively conclude that we should interpret MVPD so that the definition would not apply to a distributor that makes available only programming that it owns—for example, sports leagues or stand-alone program services like CBS's new streaming service. A potential consequence of the Linear Programming Interpretation would be that a programmer that decides to sell two or more of its own programming networks directly to consumers online, either instead of or in addition to selling them through cable or DBS operators' programming packages, might subject itself to the benefits and burdens of MVPD status. For example, if Disney were to offer, for purchase by subscribers, a package of linear feeds of the Disney Channel, Disney XD, and Disney Junior for online streaming to customers, would that make Disney an MVPD? Would this unduly limit consumer options? Would bringing such an offering into our MVPD regulations discourage innovation? We seek comment on our statutory authority to adopt our tentative conclusion.

Under the Act, an entity is an MVPD only if it makes multiple channels of video programming “available for purchase.” We seek comment on what it means to make video programming available for purchase, particularly as that term would apply if we were to adopt our proposed Linear Programming Interpretation. We tentatively conclude that the term means making an offer to consumers to exchange video service for money. We seek comment on this tentative conclusion. Are there other forms of consideration that a consumer could use to purchase services? If a cable or satellite company offers its subscribers access to supplemental online linear video services without a separate charge, but as part of their paid television packages, does this offering constitute making the online services “available for purchase”? Do any cable or satellite companies charge subscribers for those services indirectly? Is there any way to trace general subscription fees specifically to supplemental online linear video services? We seek comment on how our proposed interpretation could affect new business models that do not conform with the traditional monthly subscription model, and whether we should treat those business models on a case-by-case basis.

We also seek comment on how our proposed interpretation would apply to entities that are located overseas but make linear video programming networks available for purchase in the United States over the Internet. An entity could meet the definition of MVPD under our proposed definition even if it has no physical presence in the United States. We tentatively conclude that the Commission should not assert jurisdiction over these entities. If commenters disagree, they should provide the authority under which the Commission could assert jurisdiction. If we assert jurisdiction solely over entities with a physical presence in the United States, will some Internet-based distributors of video programming locate their operations overseas to avoid Commission regulation? Would the alternative interpretation discussed below, which would consider an entity to be an MVPD only if it maintains control over a transmission path, avoid this result by requiring an MVPD to have a jurisdictional presence in the United States?

Alternative “Transmission Path Interpretation”. We seek comment also on an alternative approach that would interpret the term channel in this context as requiring a transmission path. This is the approach for which the Media Bureau expressed tentative support in denying Sky Angel's standstill request. Citing the statutory definition of “channel” as “a portion of the electromagnetic frequency spectrum which is used in a cable system and which is capable of delivering a television channel,” the Media Bureau expressed the tentative view that the term “channel” as used in the definition of MVPD “appear[s] to include a transmission path as a necessary element.” Under this interpretation, we would not consider Internet-based linear video providers to be MVPDs unless they control at least some portion of the physical means by which the programming is delivered—for example, via a physical cable that the provider owns or via spectrum that the provider is licensed to use. We seek comment on the Transmission Path Interpretation. How would we reconcile the Transmission Path Interpretation with previous Commission decisions that held that an entity need not own or operate the facilities that it uses to distribute video programming to qualify as an MVPD? Would an entity have to make available multiple transmission paths (or, using the language in the definition of “channel,” multiple “portions of the electromagnetic frequency spectrum”) to each subscriber or customer to qualify as an MVPD? Do all traditional MVPDs make available multiple “portions of the electromagnetic frequency spectrum” to each subscriber or customer, including cable operators using switched digital video technology or an IP-based system in which no unique transmission path is associated with any video programming stream? Is there a reasonable basis to believe that Congress intended to regulate as MVPDs only those entities that make available two or more transmission paths to each subscriber or customer, but not those that make available only one transmission path? If we adopt the Transmission Path Interpretation, how can we ensure that our regulations keep up with technology, particularly as incumbent MVPDs transition their services to Internet delivery?

We also seek comment on whether Congress intended to promote only facilities-based competition in the video distribution market, which might support the Transmission Path Interpretation. The Conference Report accompanying the 1992 Cable Act includes a statement that Congress intended to promote “facilities-based” competition. Moreover, the Commission has previously stated that “ `[f]acilities-based competition' is a term used in the legislative history of the Act to emphasize that program competition can only become possible if alternative facilities to deliver programming to subscribers are first created. The focus in the 1992 Cable Act is on assuring that facilities-based competition develops.” On the other hand, the ABC/CBS/NBC Affiliates note that “there is but one reference to `facilities-based competition' in the lengthy House Report. . . . Certainly, that single reference cannot support the incorporation of a `transmission path' requirement into a statutory definition that does not, on its face, contain any such restriction.” Accordingly, we seek comment on whether Congress sought to increase facilities-based competition exclusively, or sought to encourage competition to incumbent cable operators more generally, regardless of how the competitive service is delivered.

Scope of the Transmission Path Interpretation. As we note above, incumbent MVPDs are obtaining rights to distribute content online at a rapid pace and appear prepared to launch online linear video services that are not tied to their facilities. We seek comment on our regulatory authority under the Transmission Path Interpretation in these cases. The Transmission Path Interpretation seems difficult to apply in certain cases because an entity's status would change depending on how and where the subscriber receives the content. For example, consider a subscriber who views video at her home on a tablet over broadband infrastructure that the video distributor owns, and then visits a local coffee shop and views video on that same tablet via the Internet using broadband infrastructure that the video distributor does not own. In that case, the video provider would be an MVPD at the subscriber's home, but not at the coffee shop. We believe that this would lead to regulatory uncertainty, thus providing more support for the Linear Programming Interpretation. We seek comment on this analysis.

We invite comment on any other interpretation the Commission should consider in addition to the Linear Programming Interpretation and the Transmission Path Interpretation.

Regulatory Implications of Alternative Interpretations. Below, we seek comment on the policy ramifications of the various interpretations set forth above. To the extent possible, we encourage commenters to quantify any costs and benefits and submit supporting data. In addition to the specific effects that we ask about below, we invite commenters to identify other possible effects of the Linear Programming Interpretation and the Transmission Path Interpretation and how those effects should influence our interpretation.

We realize that under our proposed Linear Programming Interpretation, several new and planned services may be considered MVPD services. On the one hand, DISH, Sony, and Verizon have each announced linear Internet-based subscription video services whose launch is imminent. These services reportedly will carry programming from some of the largest content companies in the world. On the other hand, Aereo, FilmOn, and Sky Angel launched or planned to launch Internet-based subscription video services, but they claim that regulatory uncertainty has limited their ability to develop a subscriber base, limited investment in their services, and hindered their ability to compete. In light of these contrasting examples, we seek comment on whether the privileges and obligations set forth in this section tilt in favor of or against our proposed Linear Programming Interpretation. Would the proposal (i) give innovative companies access to programming that consumers want, or (ii) unduly and unnecessarily burden companies seeking to offer innovative new services?

Application of MVPD-Specific Regulatory Privileges and Obligations to Internet-Based Distributors of Video Programming. As discussed in further detail below, our proposed interpretation would ensure that incumbent MVPDs do not evade our regulations by migrating their services to the Internet. It would also allow Internet-based distributors of video programming, including those that do not control any facilities, to take advantage of the privileges of MVPD status but would also require them to comply with the legal obligations applicable to MVPDs. Conversely, the Transmission Path Interpretation could allow many if not most Internet-based distributors of video programming to avoid regulation, including obligations that promote important public interest benefits, and would also deprive them of certain regulatory privileges. We seek comment on these policy ramifications below.

General Privileges and Obligations. An entity that meets the definition of an MVPD is subject to both privileges and legal obligations under the Communications Act and the Commission's rules. The regulatory privileges of MVPD status include the right to seek relief under the program access rules and the retransmission consent rules. Among the regulatory obligations of MVPDs are statutory and regulatory requirements relating to (i) program carriage; (ii) the competitive availability of navigation devices (including the integration ban); (iii) good faith negotiation with broadcasters for retransmission consent; (iv) Equal Employment Opportunity (“EEO”); (v) closed captioning; (vi) video description; (vii) access to emergency information; (vi) signal leakage; (vii) inside wiring; and (viii) the loudness of commercials.

To the extent that an Internet-based distributor of video programming falls within the definition of an MVPD, it will be able to take advantage of the privileges of MVPD status but will also be subject to MVPD obligations, unless the Commission waives some or all of them if authorized to do so. We seek comment on the overall costs and benefits of applying these regulatory privileges and obligations to Internet-based distributors of video programming, including incumbent operators who migrate to Internet delivery. We also seek comment on specific privileges and obligations below. Would waiver or exemption from certain regulations be an appropriate approach for regulating Internet-based distributors? If so, what regulations should be waived or modified to exempt Internet-based distributors, and do we have authority to do so under the Act? Alternatively, does the statute permit us to allow these entities to choose whether they wish to be classified as MVPDs?

Would subjecting Internet-based distributors to MVPD regulations deter investment in new technologies and drive some current or prospective Internet-based distributors from the market? On the other hand, would subjecting Internet-based distributors to MVPD regulations provide regulatory certainty that could reassure consumers and spur investment by service providers? To what extent should we consider increasing consumer adoption of non-traditional MVPDs as a factor in regulatory treatment of entities that provide similar services but use different delivery mechanisms? If Internet-based distributors compete with traditional MVPDs, should they be subject to the same regulatory obligations as traditional MVPDs?

Specific Privileges. Below, we seek comment on the specific privileges of MVPD status and how they would apply to Internet-based distributors of video programming. Would applying the privileges of MVPD status to Internet-based distributors of video programming impose costs on third parties, such as cable-affiliated programmers and broadcasters? To what extent would the public be harmed if these privileges did not extend to Internet-based distributors of video programming?

Program Access. As required by Section 628 of the Act, the Commission's program access rules provide certain protections to MVPDs in their efforts to license cable-affiliated programming. These rules: (i) Prohibit a cable operator or its affiliated, satellite-delivered programmer from engaging in “unfair methods of competition or unfair or deceptive acts or practices” that have the “purpose or effect” of “hinder[ing] significantly or prevent[ing]” an MVPD from providing programming to subscribers or consumers (the “unfair act” prohibition); (ii) prohibit a cable operator from unduly or improperly influencing the decision of its affiliated, satellite-delivered programmer to sell, or unduly or improperly influencing the programmer's prices, terms, and conditions for the sale of, satellite-delivered programming to any unaffiliated MVPD (the “undue or improper influence” rule); and (iii) prohibit a cable-affiliated, satellite-delivered programmer from discriminating in the prices, terms, and conditions of sale or delivery of satellite-delivered programming among or between competing MVPDs (the “non-discrimination” rule). To the extent that an MVPD believes that a cable-affiliated programmer has violated these rules, it may file a complaint with the Commission.

If the program access rules were to apply, would cable-affiliated programmers be required to negotiate with and license programming to potentially large numbers of Internet-based distributors? How will this impact the value of cable-affiliated programming to traditional MVPDs, especially as compared to non-cable-affiliated programming? To the extent that licensing programming to a particular Internet-based distributor presents reasonable concerns about signal security and piracy, do the program access rules adequately address this issue by recognizing these concerns as a legitimate reason for a cable-affiliated programmer to withhold programming from an MVPD? Would extending the reach of the program access rules have a positive effect for consumers?

We also seek comment on whether and how our proposed rule and alternative interpretations would impact competition in the video distribution market (both at present and in the future), specifically with respect to the program access rules. Among other things, the program access rules are intended to prevent cable-affiliated programmers from discriminating among similarly situated MVPDs. If Internet-based distributors of video programming are deemed not to be MVPDs because they do not make available transmission paths (and therefore are ineligible for the benefits of the program access rules), would there be any regulatory or other constraint that would prevent a cable-affiliated programmer from making its affiliated programming available for online distribution to only certain Internet-based distributors of video programming, such as those owned by its affiliated cable operator, but not to those owned by other MVPDs? In such a scenario, because the cable-affiliated programmer would not be differentiating among “MVPDs,” would different treatment be permissible under the program access rules? How would this impact competition in the video distribution market? Cablevision contends that extending the program access rules to Internet-based distributors would give them too much flexibility compared to existing MVPD competitors. Is this a concern that we should consider, and if so, why? We note that the Commission receives few program access complaints; should this affect our analysis? Or does it reflect that programmers are following our program access rules and they are working?

Retransmission Consent. Section 325(b) of the Act benefits MVPDs by requiring broadcasters to negotiate in good faith with MVPDs for retransmission consent and prohibiting broadcasters from negotiating exclusive retransmission consent agreements with any MVPD. Absent these provisions, broadcasters could potentially refuse to negotiate with and thereby withhold their signals from MVPDs that wish to carry these signals. To the extent that an MVPD believes that a broadcaster has violated these provisions, it may file a complaint with the Commission.

We seek comment on the impact that our proposed interpretation of the definition of MVPD and alternative interpretations would have on the retransmission consent process. Under our proposal, would the retransmission consent rules force broadcasters to negotiate with and license their signals to potentially large numbers of Internet-based distributors? We seek comment also on whether and how competition in the video distribution market (both at present and in the future) would be impacted if Internet-based distributors of video programming are not considered MVPDs and therefore are not able to benefit from the retransmission consent rules.

Section 325(b)(1)(A) of the Act provides that “no cable system or other multichannel video programming distributor” shall retransmit a broadcast signal without the broadcaster's consent. But an entity wishing to retransmit a broadcast signal also must obtain authorization to publicly perform the copyrighted works within the broadcast signal. If we adopt the Linear Programming Interpretation and the Copyright Office does not afford statutory licenses to Internet-based video providers, how would we construe a broadcaster's obligation to negotiate in good faith? What effect should the answer to that question have on our policy analysis?

Specific Obligations. Below, we seek comment on specific obligations imposed on MVPDs and how those obligations would apply to Internet-based distributors of video programming. How costly would it be for Internet-based distributors of video programming to comply with these regulations? Would the public be harmed if these obligations did not extend to Internet-based distributors of video programming and such distribution became prevalent?

The interpretation of MVPD that we ultimately adopt in this proceeding may subject certain Internet-based distributors of video programming to Commission regulation that are not currently subject to such regulation. What transition period should we allow these entities to come into compliance with each of the relevant rules?

Program Carriage. The program carriage rules prohibit MVPDs from (i) requiring a financial interest in a video programming vendor's program service as a condition for carriage; (ii) coercing a video programming vendor to provide, or retaliating against a vendor for failing to provide, exclusive rights as a condition of carriage; or (iii) unreasonably restraining the ability of an unaffiliated video programming vendor to compete fairly by discriminating in video programming distribution on the basis of affiliation or nonaffiliation of vendors in the selection, terms, or conditions for carriage. To the extent that a programming vendor believes that an MVPD is not in compliance with these rules, it may file a complaint with the Commission.

What practical impact, if any, would these rules have on Internet-based distributors of video programming? As we note above, large, established cable operators, DBS providers, and technology companies have announced plans to launch Internet-based video programming services that would be MVPD services under the Linear Programming Interpretation. If these companies follow through with these plans, absent application of the program carriage rules there may be no regulatory constraint preventing them from demanding a financial interest or exclusive rights from programmers as a condition for carriage. Does this argue in favor of adopting an interpretation of MVPD that would cover providers of these services under the program carriage rules? Moreover, as more Internet-based distributors invest in their own programming, they may have an incentive to favor their affiliated programming over unaffiliated programming on the basis of affiliation. We seek comment on the effect that the alternative interpretations will have on negotiations with programmers and Internet-based video programming services. What are the costs and benefits of applying the program carriage obligations to Internet-based video programming services?

Retransmission Consent. As discussed above, Section 325(b)(1)(A) of the Act provides that “No cable system or other multichannel video programming distributor shall retransmit the signal of a broadcasting station, or any part thereof, except—(A) with the express authority of the originating station. . . .” Thus, to the extent that an Internet-based distributor of video programming qualifies as an MVPD, it must receive the consent of the broadcaster before retransmitting the broadcaster's signal. Moreover, Section 325(b) of the Act imposes an obligation on MVPDs to negotiate in good faith with broadcasters in obtaining retransmission consent. If a broadcaster believes that an MVPD has violated these provisions, it may file a complaint with the Commission.

We seek comment above on how the retransmission consent rules can benefit MVPDs, as we propose to interpret that term. We now seek comment on the practical impact the obligations of MVPDs under the retransmission consent rules would have on Internet-based distributors of video programming that qualify as MVPDs. What impact will the obligation to negotiate in good faith with broadcasters have on the resources of Internet-based distributors of video programming that qualify as MVPDs? In particular, will Internet-based distributors of video programming that operate on a nationwide basis have to engage in negotiations with thousands of broadcasters throughout the nation?

Are some Internet-based distributors of video programming likely to prefer not to carry broadcast signals? For example, to the extent that an Internet-based provider provides service nationwide it may prefer not to offer local content. In that case, would the good faith negotiation requirements allow these distributors to simply reject all carriage terms offered by a broadcaster and to refrain from making any carriage offers of their own? Or, would this conduct amount to a violation of the duty to negotiate in good faith? Would it matter whether the distributor declined to negotiate with any broadcast stations? How will the answers to these questions impact the business models of Internet-based distributors of video programming that qualify as MVPDs but would prefer not to carry broadcast signals? Is it likely or possible that Internet-based distributors will want to carry broadcast network programming, or to carry broadcast stations nationwide?

How do network affiliation agreements impact the carriage of broadcast stations on Internet-based MVPDs? Specifically, to what extent do existing network affiliation agreements limit or prohibit local network stations' ability to grant retransmission consent rights to Internet-based MVPDs? For example, do any network affiliation agreements prohibit a local network-affiliated station from permitting the retransmission of the entirety of its signal over the Internet? Do they limit the retransmission of network programming over the Internet? Would limiting or prohibiting these provisions harm localism?

Other MVPD Obligations. Closed Captioning. Section 79.1 of the Commission's rules (the “television closed captioning rules”) requires MVPDs to provide closed captioning, defined as the “visual display of the audio portion of video programming pursuant to the technical specifications set forth in this part.” Internet video services are not subject to these requirements. Internet-based distributors of video programming, however, are subject to the Commission's Internet protocol (“IP”) closed captioning requirements set forth in § 79.4 of the Commission's rules (the “IP closed captioning rules”) to the extent that they make video programming available directly to end users through a distribution method that uses IP. The IP closed captioning rules are narrower than the television closed captioning rules, insofar as the IP closed-captioning rules require closed captioning of IP-delivered video programming only if the programming is published or exhibited on television with captions, whereas the television closed captioning rules require closed captioning for all new nonexempt English- and Spanish-language video programming. The Commission has explained that the “IP closed captioning rules do not apply to traditional managed video services that MVPDs provide to their MVPD customers within their service footprint, regardless of the transmission protocol used; rather, such services are already subject to § 79.1 of the Commission's rules.” To the extent that some Internet-based distributors of video programming qualify as MVPDs, how will this impact their obligations with respect to closed captioning? Will they be subject to § 79.1 or § 79.4 of the Commission's rules, or will the Commission need to develop another set of requirements tailored to these services? Will we need to amend our closed captioning rules if we adopt the Linear Programming Interpretation, and if so, how?

Video Description. As required by the Twenty-First Century Communications and Video Accessibility Act of 2010, the Commission's rules require MVPD systems that serve 50,000 or more subscribers to provide 50 hours per quarter of video description, which makes video programming accessible to people who are blind or visually impaired, on each of the five most popular nonbroadcast networks. In general, MVPDs of any size must pass through any video description provided with programming they carry, including broadcast channels, as long as they have the technical capability to do so. Section 79.105 of the Commission's rules requires apparatus designed to receive or play back video programming to decode and make available the secondary audio stream, if technically feasible, to facilitate the transmission and delivery of video description. We seek comment on the costs as well as the practical impact these obligations will have on an Internet-based distributor of video programming that qualifies as an MVPD. Are there attributes of Internet-based distributors of video programming that make compliance with these requirements more burdensome than for traditional MVPDs? We also seek comment on our authority to extend our video description regulations to Internet-delivered MVPDs under the Linear Programming Interpretation. Will we need to amend our video description rules if we adopt the Linear Programming Interpretation, and if so, how?

Accessibility of Emergency Information. Section 79.2 of the Commission's rules requires MVPDs to comply with certain requirements pertaining to the accessibility of emergency information by persons with disabilities. And to make emergency information accessible to individuals who are blind or visually impaired, § 79.105 of the Commission's rules requires apparatus designed to receive or play back video programming to decode and make available the secondary audio stream, if technically feasible. We seek comment on the costs as well as the practical impact these obligations will have on Internet-based distributors of video programming that qualify as MVPDs. Will we need to amend our emergency information accessibility rules if we adopt the Linear Programming Interpretation, and if so, how?

Accessible User Interfaces, Guides, and Menus. Section 79.108 of the Commission's rules requires MVPDs to “ensure that the on-screen text menus and guides provided by navigation devices for the display or selection of multichannel video programming are audibly accessible in real time upon request by individuals who are blind or visually impaired.” We seek comment on the costs and the practical impact these obligations will have on Internet-based distributors of video programming that qualify as MVPDs, particularly in light of the fact that digital apparatus (aside from navigation devices) that are designed to receive digital video (including IP video) must be accessible to and useable by individuals who are blind or visually impaired. Will we need to amend our user interface accessibility rules if we adopt the Linear Programming Interpretation, and if so, how?

Equal Employment Opportunities (“EEO”). The Commission's EEO rules apply to MVPDs. In general terms, these rules (i) require MVPDs to provide equal opportunity in employment to all qualified persons and prohibit MVPDs from discriminating in employment based on race, color, religion, national origin, age, or sex; (ii) require MVPDs to engage in certain outreach and recruitment activities; and (iii) require MVPDs to comply with certain reporting and recordkeeping requirements. We seek comment on the practical impact these obligations will have on Internet-based distributors of video programming that qualify as MVPDs. Do Internet-based distributors of video programming currently meet some or all of these requirements? Will we need to amend our EEO rules if we adopt the Linear Programming Interpretation, and if so, how?

Navigation Devices. Section 629 of the Act directs the Commission to adopt regulations to assure the commercial availability of navigation devices used by consumers to access services from MVPDs. The Commission has adopted several regulations that allow consumers to attach non-harmful devices to MVPD networks, require MVPDs to offer separate conditional access elements if they use navigation devices to perform conditional access functions, and prohibit MVPDs from using integrated conditional access in the devices that they lease or sell to their consumers. We seek comment on the practical impact as well as the costs these obligations will have on Internet-based distributors of video programming that qualify as MVPDs. To what extent do Internet-based distributors of video programming use navigation devices in the provision of their video programming service? If they do use such devices, do they currently meet these requirements? What devices do they use to provide programming to subscribers? Sky Angel, for example, states that its service cannot be viewed without its “proprietary set-top box, which Sky Angel directly and remotely controls at all times for purposes ranging from periodic service and software updates to service activation or termination.” Do Internet-based distributors meet the requirements for an exemption from the integration ban? Are there aspects of Internet-based video services that make compliance with these requirements more burdensome than for traditional MVPDs? Will we need to amend our navigation device rules if we adopt the Linear Programming Interpretation, and if so, how?

Signal Leakage. The Commission's rules require specified MVPDs to comply with certain technical rules pertaining to signal leakage, as well as reporting and notification requirements related thereto. We expect that in general MVPDs that use Internet protocol to deliver video will not use aeronautical frequencies and thus will not be subject to these requirements. We seek comment on this expectation, and any practical impact these obligations will have on Internet-based distributors of video programming that qualify as MVPDs. Will we need to amend our signal leakage rules if we adopt the Linear Programming Interpretation, and if so, how?

Inside Wiring. The Commission's cable inside wiring rules apply to all MVPDs. In general terms, these rules govern the disposition of home wiring and home run wiring after a subscriber terminates service. To what extent, if any, would these obligations affect Internet-based distributors of video programming that qualify as MVPDs, especially if they do not control the “last mile” of the transmission path used to deliver video programming to consumers but are affiliated with an entity that controls the transmission path? We expect that if we adopt the Linear Programming Interpretation that these inside wiring rules would not apply to Internet-based distributors of video programming.

Commercial Loudness. As required by the CALM Act, the Commission's rules require MVPDs to ensure that commercials are transmitted to consumers at an appropriate loudness level in accordance with a specified industry standard. Depending on the size of the MVPD and the type of the commercial at issue ( i.e. , inserted by the MVPD or embedded in the programing by a third-party), the Commission's rules may require an MVPD to install equipment and associated software or perform spot checks or both. Do these requirements need to be modified to apply to Internet-based distributors of video programming that qualify as MVPDs, and if so, how? If the requirements do need to be modified, are there ways to make the rules less burdensome for Internet-based distributors of video programming while meeting our statutory mandates?

MDU Access. The Commission's rules prohibit cable operators, common carriers (or their affiliates) that provide video programming, and OVS operators from enforcing or executing any provision in a contract that grants to it the exclusive right to provide any video programming service to a Multiple Dwelling Unit. The Commission has sought comment on whether to extend this prohibition to other MVPDs. To the extent the Commission were to do so, what impact, if any, would this prohibition have on Internet-based distributors of video programming that qualify as MVPDs? Is there any way a landlord could restrict a tenant's ability to access certain content over the Internet to prevent a tenant from accessing an Internet-based linear video service? Will we need to amend our MDU access rules if we adopt the Linear Programming Interpretation, and if so, how?

Other Regulatory Issues. We also seek comment on how other regulations should account for Internet-based distributors of video programming that qualify as MVPDs. For example, should we extend any cable or satellite-specific regulations to MVPDs more generally? If so, what would be our statutory basis for doing so?

Impact on Content Owners. As discussed in this section, our interpretation of the definition of an MVPD may impact content owners in their negotiations with broadcasters, cable networks, and MVPDs. We seek comment on these issues below.

Broadcast Content. Section 111 of the Copyright Act provides “cable systems” (as defined by the Copyright Act) a statutory license to retransmit copyrighted broadcast performances if the “cable system” pays a statutory fee for those performances. Some content creators and owners contend that the Commission, in interpreting the definition of MVPD in the Communications Act, should be cognizant of the interplay between Section 111 of the Copyright Act and the Communications Act and even suggest that a Commission decision interpreting the definition of MVPD to include Internet-based distributors would conflict with copyright law. But the market and legal landscape has changed significantly since content creators and owners made those claims. Therefore, we ask commenters to update the record with respect to how expanding the definition of MVPD in the Communications Act to include some Internet-based distributors interrelates with copyright law.

Cable-Affiliated Content. Through application of the program access rules, Internet-based distributors that qualify as MVPDs will be entitled to non-discriminatory access to cable-affiliated networks. Generally speaking, a programmer licenses content from various content creators, aggregates the content into a network, and then licenses the network to MVPDs for distribution. Discovery claims, however, that cable-affiliated networks cannot license all of the content displayed on their networks for distribution on the Internet because they frequently do not possess the right to authorize Internet distribution of that content. Rather, Discovery argues that (i) content creators frequently retain for themselves the rights to Internet distribution in order to generate a separate revenue stream by displaying the content on their own Web sites or by selling the content to other video providers; and (ii) obtaining Internet distribution rights is simply too expensive for some networks. What effect should the Copyright Office's decisions have on our statutory and policy analysis?

To what extent do cable-affiliated networks possess—or have the ability to negotiate for—the right to authorize distribution of content displayed on their network over the Internet? If we adopt the Linear Video Interpretation, what impact does that have on existing rights for content distribution? We note that some cable-affiliated networks are made available over the Internet to authenticated MVPD subscribers. Does this reflect that cable-affiliated programmers possess the right to authorize distribution of content displayed on their network over the Internet? Does the concern about lack of rights to authorize Internet distribution of content apply only with respect to content not owned by the network? To what extent do cable-affiliated networks own the content displayed on their networks (or are affiliated with the content creators or otherwise possesses all of the rights with respect to distribution of that content)? To what extent is the content displayed on cable-affiliated networks owned by entities unaffiliated with the network?

Would or should the adoption of the proposed definition of an MVPD have any effect on a cable-affiliated network that does not possess the right to authorize Internet distribution of content displayed on its network? In other words, would or should the network be required to obtain such rights to comply with the program access rules if certain Internet-based distributors qualify as MVPDs? We seek comment on how the resolution of this question would impact content creators, cable-affiliated programmers, and MVPDs, either traditional or Internet-based. We also seek comment on our authority to require entities to enter into contracts for these distribution rights.

Non-Broadcast, Non-Cable-Affiliated Content. If we were to require cable-affiliated networks to obtain Internet distribution rights from content creators to comply with the program access rules, what impact, if any, would or should this have on non-cable-affiliated networks? For example, Ovation claims that, if cable-affiliated networks are required to obtain Internet distribution rights, “marketplace pressures would foreseeably require other networks to do the same.” We seek comment on this concern.

Regulatory Treatment of Cable Operators and DBS Providers that Provide Linear Video Services via IP. It seems evident that merely using IP to deliver cable service does not alter the classification of a facility as a cable system or of an entity as a cable operator. That is, to the extent an operator may provide video programming services over its own facilities using IP delivery within its footprint it remains subject to regulation as a cable operator. At the same time, we understand that some cable operators and DBS providers are exploring new business models that might be indistinguishable from other over-the-top (“OTT”) services—that is, linear video services that travel over the public Internet and that cable operators do not treat as managed video services on any cable system. As mentioned above, cable operators and DBS providers are obtaining rights for online distribution of content, and some have launched or may soon launch Internet-based video programming services. Below, we seek comment on the regulatory treatment of national OTT video services that a cable operator or DBS provider may provide nationally-as contrasted to the traditional services it offers.

Cable Service Provided via IP Over the Operator's Facilities. The Act defines a cable operator as, essentially, an entity that provides cable service over a cable system. Thus, we must interpret the three terms—cable service, cable system, and cable operator—together to determine the proper regulatory treatment of IP-based services provided by cable operators. The Act defines cable service as “(A) the one-way transmission to subscribers of (i) video programming, or (ii) other programming service, and (B) subscriber interaction, if any, which is required for the selection or use of such video programming or other programming service.” The Commission and other authorities have previously concluded that the statute's definition of “cable service” includes linear IP video service.

Second, to the extent a cable operator uses “a set of closed transmission paths” to provide cable service, as one providing IP video programming over its copper wire (including coaxial cable) or fiber optic cable does, its facility meets Section 602(7) of the Act's definition of cable system: “a facility, consisting of a set of closed transmission paths and associated signal generation, reception, and control equipment that is designed to provide cable service which includes video programming and which is provided to multiple subscribers within a community, but such term does not include (A) a facility that serves only to retransmit the television signals of 1 or more television broadcast stations; (B) a facility that serves subscribers without using any public right-of-way; (C) a facility of a common carrier which is subject, in whole or in part, to the provisions of subchapter II of this chapter, except that such facility shall be considered a cable system (other than for purposes of section 541(c) of this title) to the extent such facility is used in the transmission of video programming directly to subscribers, unless the extent of such use is solely to provide interactive on-demand services; (D) an open video system that complies with section 573 of this title; or (E) any facilities of any electric utility used solely for operating its electric utility system.”

Finally, an entity that delivers cable services via IP is a cable operator to the extent it delivers those services as managed video services over its own facilities and within its footprint. This is compelled by the Act's definition of a cable operator as a “person or group of persons (A) who provides cable service over a cable system and directly or through one or more affiliates owns a significant interest in such cable system, or (B) who otherwise controls or is responsible for, through any arrangement, the management and operation of such a cable system.”

IP-based service provided by a cable operator over its facilities and within its footprint must be regulated as a cable service not only because it is compelled by the statutory definitions; it is also good policy, as it ensures that cable operators will continue to be subject to the pro-competitive, consumer-focused regulations that apply to cable even if they provide their services via IP.

Congress and the Commission advanced several pro-competitive, consumer-focused values when they adopted the cable-specific provisions of the Act and the rules implementing these important provisions. The Act and our rules include many cable-specific requirements, including the following: Annual regulatory fees; Emergency Alert System (“EAS”) requirements; the V-Chip; commercial limits in children's programs; network non-duplication; syndicated program exclusivity; notice to broadcasters regarding: (i) Deletion or repositioning of a broadcast signal, (ii) a change in designation of principal headend, (iii) change in technical configuration, (iv) the provision of service to 1,000 subscribers, thereby entitling broadcast stations to exercise non-duplication protection or syndicated exclusivity protection; political programming and candidate access rules; sponsorship identification; lotteries; public inspection file; public, educational, or governmental channels (“PEG”); program access; leased access; various reporting requirements; cross-ownership restrictions; prohibition on buy outs; national subscriber limits (horizontal ownership restriction); limits on carriage of vertically integrated programming; various franchising requirements; rate regulation, including a requirement to offer a basic service tier, a prohibition on negative option billing, an obligation to offer a tier buy-through option, and requirements pertaining to information on subscriber bills; regulation of services, facilities, and equipment, including minimum technical standards and notification to customers of changes in rates, programming services, or channel positions; consumer protection and customer service; consumer electronics equipment compatibility, including prohibition on scrambling or encrypting the basic service tier; support for unidirectional digital cable products (Plug and Play); protection of subscriber privacy; transmission of obscene programming; and scrambling of cable channels for non-subscribers.

In particular, these obligations on cable operators are critical for noncommercial, local, and independent broadcasters. Sections 614 and 615 of the Communications Act and implementing rules adopted by the Commission entitle commercial and noncommercial television broadcasters to carriage on local cable television systems. When the Commission proposed implementing regulations, it noted that Congress emphasized strongly that the public interest demands that cable subscribers be able to access their local commercial and noncommercial broadcast stations. That congressional policy directive persists today; and the continued application of these requirements to cable operators that provide video programming over IP will ensure that local broadcasters will be carried, and that other cable-centric regulations will apply, regardless of the method that the cable operator uses to deliver the cable service.

Cable Operators Offering OTT Services. We tentatively conclude that video programming services that a cable operator may offer over the Internet should not be regulated as cable services. Some cable operators have announced plans to offer video programming services via the Internet. If a cable operator delivers video programming service over the Internet, rather than as a managed video service over its own facilities, we tentatively conclude that this entity would be (i) a cable operator with respect to its managed video service, and (ii) a non-cable MVPD under our proposed Linear Programming Interpretation with respect to its OTT service. To the extent a consumer located within a cable operator's footprint may access the cable operator's OTT service using that cable operator's broadband facilities for Internet access, how should this arrangement be classified? We tentatively conclude that such an OTT service, if provided to consumers without regard to whether they subscribe to the cable operator's managed video service, would be a non-cable MVPD service inside and outside of the operator's footprint, even if it is accessible over that cable operator's broadband facilities. We seek comment on whether there is any reason that our tentative conclusion should change if a cable operator provides an OTT service within its footprint only, rather than nationally. Would our analysis change if the OTT service were bundled with the cable service? Finally, we seek comment on the likely forms that new OTT services will take, and on both the application of the statutory definitions discussed above to such services and the policy implications of classifying these services.

DBS Providers Offering OTT Services. Some DBS providers offer linear OTT services (and have announced plans to expand those services) via the Internet. To the extent that DBS providers offer video programming services over the Internet, we tentatively conclude that those services should not be regulated as DBS service, and therefore should not be subject to the regulatory and statutory obligations and privileges of such services. If we adopt our proposed Linear Programming Interpretation, those services would be MVPD services subject to the regulatory and statutory obligations and privileges of such services. We reach this tentative conclusion because that service does not use the providers' satellite facilities, but rather relies on the Internet for delivery. We believe that this tentative conclusion is consistent with the Act and our rules. We seek comment on this tentative conclusion.

Ex Parte Rules. The proceeding initiated by the Notice of Proposed Rulemaking shall be treated as “permit-but-disclose” proceedings in accordance with the Commission's ex parte rules. 1 Persons making ex parte presentations must file a copy of any written presentation or a memorandum summarizing any oral presentation within two business days after the presentation (unless a different deadline applicable to the Sunshine period applies). Persons making oral ex parte presentations are reminded that memoranda summarizing the presentation must: (1) List all persons attending or otherwise participating in the meeting at which the ex parte presentation was made; and (2) summarize all data presented and arguments made during the presentation. If the presentation consisted in whole or in part of the presentation of data or arguments already reflected in the presenter's written comments, memoranda, or other filings in the proceeding, the presenter may provide citations to such data or arguments in his or her prior comments, memoranda, or other filings (specifying the relevant page and/or paragraph numbers where such data or arguments can be found) in lieu of summarizing them in the memorandum. Documents shown or given to Commission staff during ex parte meetings are deemed to be written ex parte presentations and must be filed consistent with rule 1.1206(b). In proceedings governed by rule 1.49(f) or for which the Commission has made available a method of electronic filing, written ex parte presentations and memoranda summarizing oral ex parte presentations, and all attachments thereto, must be filed through the electronic comment filing system available for that proceeding, and must be filed in their native format ( e.g. , .doc, .xml, .ppt, searchable .pdf). Participants in this proceeding should familiarize themselves with the Commission's ex parte rules.

Filing Requirements. Pursuant to §§ 1.415 and 1.419 of the Commission's rules, 2 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 the Commission's Electronic Comment Filing System (“ECFS”). Electronic Filers: Comments may be filed electronically using the Internet by accessing the ECFS: http://fjallfoss.fcc.gov/ecfs2/. Paper Filers: Parties who choose to file by paper must file an original and one copy 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. All filings must be addressed to the Commission's Secretary, Office of the Secretary, Federal Communications Commission. All hand-delivered or messenger-delivered paper filings for the Commission's Secretary must be delivered to FCC Headquarters at 445 12th St. SW., Room TW-A325, Washington, DC 20554. The filing hours are 8:00 a.m. to 7:00 p.m. All hand deliveries must be held together with rubber bands or fasteners. Any envelopes and boxes 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 must be addressed to 445 12th Street SW., Washington, DC 20554.

Availability of Documents. Comments and reply comments will be available for public inspection 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. Documents will be available electronically in ASCII, Microsoft Word, and/or Adobe Acrobat.

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

Regulatory Flexibility Analysis. As required by the Regulatory Flexibility Act of 1980, see 5 U.S.C. 604, the Commission has prepared an Initial Regulatory Flexibility Analysis (IRFA) of the possible significant economic impact on small entities of the policies and rules addressed in this document. The IRFA is set forth in Appendix B. Written public comments are requested in the IRFA. These comments must be filed in accordance with the same filing deadlines as comments filed in response to this Notice of Proposed Rulemaking as set forth on the first page of this document, and have a separate and distinct heading designating them as responses to the IRFA.

Initial Paperwork Reduction Act Analysis. This Notice of Proposed Rulemaking seeks comment on a potential new or revised information collection requirement. If the Commission adopts any new or revised information collection requirement, the Commission will publish a separate notice in the Federal Register inviting the public to comment on the requirement, as required by the Paperwork Reduction Act of 1995, Public Law 104-13 (44 U.S.C. 3501-3520). In addition, pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 107-198, 44 U.S.C. 3506(c)(4), the Commission seeks specific comment on how it might “further reduce the information collection burden for small business concerns with fewer than 25 employees.”

Accordingly, it is ordered , pursuant to the authority contained in sections 4(i), 4(j), 303(r), 325, 403, 616, 628, 629, 634 and 713 of the Communications Act of 1934, as amended, 47 U.S.C. 154(i), 154(j), 303(r), 325, 403, 536, 548, 549, 554, and 613, that the Notice of Proposed Rulemaking is adopted.

It is further ordered that the Commission's Consumer and Governmental Affairs Bureau, Reference Information Center, SHALL SEND a copy of the Notice of Proposed Rulemaking including the Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of the Small Business Administration.

For the reasons discussed in the preamble, the Federal Communications Commission proposes to amend 47 CFR part 76 as follows: