We invite you to submit any written relevant data, views, or arguments regarding this proposal. Send your comments to an address listed under ADDRESSES. Include “AD Docket No. 2003-NE-46-AD” in the subject line of your comments. If you want us to acknowledge receipt of your mailed comments, send us a self-addressed, stamped postcard with the docket number written on it; we will date-stamp your postcard and mail it back to you. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of the proposed AD. If a person contacts us verbally, and that contact relates to a substantive part of this proposed AD, we will summarize the contact and place the summary in the docket. We will consider all comments received by the closing date and may amend the proposed AD in light of those comments.

We are reviewing the writing style we currently use in regulatory documents. We are interested in your comments on whether the style of this document is clear, and your suggestions to improve the clarity of our communications that affect you. You can get more information about plain language at http://www.faa.gov/language and http://www.plainlanguage.gov.

You may examine the AD Docket (including any comments and service information), by appointment, between 8 a.m. and 4:30 p.m., Monday through Friday, except Federal holidays. See ADDRESSES for the location.

GE has completed an updated LCF analysis for the CF6-80C2A5F, CF6-80C2B5F, CF6-80C2B7F, and CF6-80C2D1F HPT stage 1 disks, part numbers (P/Ns) 1531M84G10 and 1531M84G12, and has established a new reduced life cycle limit of 10,720 cycles-since-new (CSN) for these disks. In January 2003, the FAA became aware of GE's in-process analysis and material testing of HPT stage 1 disks, P/Ns 1531M84G10 and 1531M84G12. The FAA approved temporary revisions (TRs) to Chapter 5, Life Limits, of the engine manual (EM), to incorporate revised life limits for these disks based on initial analytical results. The original life limit of 13,200 CSN for these disks was last published in EM GEK 92451, Revision 57, dated March 1, 2003. TRs 05-0093 and 05-0094, dated May 15, 2003, revised this life limit from 13,200 CSN to 9,000 CSN. The FAA chose to wait for final analytical results before taking action to mandate a lower life limit. This wait was possible due to the young age of the affected disks. The high-cycle disk has accumulated fewer than 7,500 CSN at this time, which is well below the interim limit of 9,000 CSN and the final mandated limit. The FAA now approves GE's final analytical results and the reduced life limit of 10,720 CSN. GE issued TRs 05-0096 and 05-0097 on June 19, 2003 to revise the life limits section of the EM for CF6-80C2A5F, CF6-80C2B5F, CF6-80C2B7F, and CF6-80C2D1F HPT stage 1 disks, P/Ns 1531M84G10 and 1531M84G12, to 10,720 CSN. Although interim publications of the EM showed lower life limits for this part, those limits were not mandated by an AD. Therefore, an AD is now required to mandate the approved 10,720 CSN life limit.

We have evaluated all pertinent information and identified an unsafe condition that is likely to exist or develop on other products of this same type design. Therefore, we are proposing this AD, which would require replacing HPT stage 1 disks, P/Ns 1531M84G10 and 1531M84G12 at or before reaching a new reduced life cycle limit of 10,720 CSN.

On July 10, 2002, we issued a new version of 14 CFR part 39 (67 FR 47998, July 22, 2002), which governs the FAA's AD system. This regulation now includes material that relates to altered products, special flight permits, and alternative methods of compliance. This material previously was included in each individual AD. Since this material is included in 14 CFR part 39, we will not include it in future AD actions.

There are about 526 CF6-80C2A5F, CF6-80C2B5F, CF6-80C2B7F, and CF6-80C2D1F turbofan engines of the affected design in the worldwide fleet. We estimate that 208 engines installed on airplanes of U.S. registry would be affected by this proposed AD. The proposed action does not impose any additional labor costs. The prorated cost of a new HPT stage 1 disk would cost approximately $43,306 per engine. Based on these figures, and on the prorating for the usage of the HPT stage 1 disks, the cost of the proposed AD on U.S. operators is estimated to be $9,007,648.

We have determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government.

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

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

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

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

We prepared a summary of the costs to comply with this proposal and placed it in the AD Docket. You may get a copy of this summary by sending a request to us at the address listed under ADDRESSES. Include “AD Docket No. 2003-NE-46-AD” in your request.

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

Interested persons are invited to participate in the making of the proposed rule by submitting such written data, views, or arguments as they may desire. Communications shall identify the Rules Docket number and be submitted in triplicate to the address specified above. All communications received on or before the closing date for comments, specified above, will be considered before taking action on the proposed rule. The proposals contained in this action may be changed in light of the comments received.

Submit comments using the following format:

• Organize comments issue-by-issue. For example, discuss a request to change the compliance time and a request to change the service bulletin reference as two separate issues.

• For each issue, state what specific change to the proposed AD is being requested.

• Include justification ( e.g. , reasons or data) for each request.

Comments are specifically invited on the overall regulatory, economic, environmental, and energy aspects of the proposed rule. All comments submitted will be available, both before and after the closing date for comments, in the Rules Docket for examination by interested persons. A report summarizing each FAA-public contact concerned with the substance of this proposal will be filed in the Rules Docket.

Commenters wishing the FAA to acknowledge receipt of their comments submitted in response to this action must submit a self-addressed, stamped postcard on which the following statement is made: “Comments to Docket Number 2000-NM-65-AD.” The postcard will be date stamped and returned to the commenter.

Any person may obtain a copy of this NPRM by submitting a request to the FAA, Transport Airplane Directorate, ANM-114, Attention: Rules Docket No. 2000-NM-65-AD, 1601 Lind Avenue, SW., Renton, Washington 98055-4056.

A proposal to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) to add an airworthiness directive (AD); applicable to certain Cessna Model 500, 501, 550, and 551 airplanes; was published as a notice of proposed rulemaking (NPRM) in the Federal Register on September 7, 2000 (65 FR 54182). That NPRM would have required inspection of the piston housing for an “SB” impression stamp; a one-time inspection of the brake assembly to detect cracked or broken brake stator disks; and replacement of the brake assembly with a new or serviceable assembly, if necessary. That NPRM was prompted by several reports of wheel lockups that appear to be caused by cracked or broken brake stator disks becoming jammed in the brake assembly and preventing rotation. Such jamming of the brake assembly may result in reduced directional control or braking performance during landing.

Since the issuance of that NPRM, BFGoodrich has issued Goodrich Service Bulletins 2-1528-32-2 (for airplanes equipped with BFGoodrich brake assembly part number (P/N) 2-1528-6) and 2-1530-32-2 (for airplanes equipped with BFGoodrich brake assembly P/N 2-1530-4), both Revision 5, both dated February 19, 2003. (The original NPRM refers to BFGoodrich Service Bulletins 2-1528-32-2 and 2-1530-32-2, both Revision 1, both dated February 3, 2000, as the appropriate source of service information for the actions proposed by that NPRM.) Revision 5 of the service bulletins eliminates the inspection of the brake assembly to determine if the letters “SB” have been impression-stamped on the piston housing. That action was described in earlier revisions of the service bulletins, and in paragraph (a) of the original NPRM, as a method of determining whether it was necessary to inspect the brake stator disks for cracking. Since the issuance of the original NPRM, it has been determined that “SB” may be stamped on the piston housing of certain brake assemblies having stator disks that must be inspected for cracking. Thus, it is necessary to inspect all stator disks installed on BFGoodrich brake assemblies having P/N 2-1528-6 or 2-1530-4 to determine whether they are impression-stamped with “CHG AI” or with a change letter “B” or higher, and to inspect for cracking of subject stator disks and replace them if necessary.

Also since the issuance of the original NPRM, BFGoodrich has issued service bulletins 2-1528-32-3 (for BFGoodrich brake assembly P/N 2-1528-6) and 2-1530-32-3 (for BFGoodrich brake assembly P/N 2-1530-4), both dated March 23, 2000. Those service bulletins apply to BFGoodrich brake assemblies having P/N 2-1528-6 or 2-1530-4 that are used as spare parts. The service bulletins describe procedures for an inspection of the stator disks installed on those brake assemblies to determine whether they are impression-stamped with “CHG AI” or with a change letter “B” or higher, and replacement of subject stator disks with new disks.

Accomplishment of the actions specified in the applicable service bulletin is intended to adequately address the identified unsafe condition.

This supplemental NPRM differs from the service bulletins in that for any stator disk not stamped with “CHG AI” or “CHG B” or a higher change letter, if the piston housing is impression-stamped with the letters “SB,” this supplemental NPRM would require that the existing markings on the piston housing be removed by stamping “XX” over the letters “SB.” Though the service bulletin does not specify this action, we find that it is necessary to require this action to ensure that it is evident that the actions proposed by this supplemental NPRM have been accomplished on the affected parts.

This supplemental NPRM also differs from the service bulletins in that it would require accomplishing an initial inspection to determine the change letter of the brake stator disks within 50 landings or 90 days after the effective date of this AD, whichever occurs first. We find that this compliance time is consistent with that proposed in the original NPRM and is adequate to ensure the continued flight safety of the affected airplane fleet. For any stator disk not stamped with “CHG AI” or “CHG B” or a higher change letter, the compliance time for the detailed inspection for cracked or broken stator disks is consistent with the compliance time given in the service bulletin for those actions.

Due consideration has been given to the comments received from a single commenter in response to the original NPRM.

The commenter requests that the FAA revise paragraph (b) of the original NPRM to specify that the requirements of that paragraph need only be accomplished if “SB” is not impression-stamped on the piston housing. The commenter states that this would provide necessary clarification.

We do not concur. As explained previously, we have determined that even if “SB” is impression-stamped on the piston housing, all subject brake assemblies must be inspected to ensure that all stator disks are impression-stamped with “CHG AI” or with a change letter “B” or higher. We have made no change to the supplemental NPRM in this regard, other than the changes associated with the new service information described previously.

The commenter, the brake manufacturer, believes that the current inspection criteria and fleet compliance has reasonably addressed the issue of broken brake stator disks and that the proposed AD is not required. The commenter makes the following statements to justify its request:

• A reduction in the repetitive interval for replacing brakes on airplanes operated in the most severe conditions appears to have greatly reduced the occurrence of stator failures.

• Since the issuance of the BFGoodrich service bulletins referenced in the original NPRM, the commenter is not aware of any additional reports of locked wheels caused by broken brake stator disks.

• Brakes and brake stator disks in spares inventories have been addressed through the issuance of BFGoodrich Service Bulletins 2-1528-32-3 and 2-1530-32-3.

• Operators of subject airplanes have been briefed about the problem of cracked or broken brake stator disks.

• Cessna reports that 70 percent of the worldwide fleet of affected airplanes have already complied with the actions that would be required by the proposed AD.

We acknowledge the facts presented by the commenter. However, we do not agree that it is appropriate to withdraw the proposed AD. It is necessary to issue an AD to ensure that all affected airplanes are inspected and that the necessary corrective actions are accomplished to eliminate the unsafe condition. In addition, issuance of an AD also assists us in meeting our obligation to advise other civil airworthiness authorities of unsafe conditions identified in products manufactured in the United States, in accordance with various bilateral airworthiness agreements with countries around the world. Therefore, it is both warranted and necessary to issue this AD.

The commenter notes that it is aware of 3 reports of a locked wheel and 16 reports of broken stator disks. The commenter asks the FAA to provide it with information on additional reports of incidents of locked wheels resulting from broken brake stator disks.

We have not received any reports of locked wheels resulting from broken brake stator disks other than those noted by the commenter. We have made no change to the supplemental NPRM in this regard.

The commenter requests that the cost information in the original NPRM be revised to reflect exactly the cost information provided in the relevant BFGoodrich service bulletins. We do not concur. It is our practice to round up work hour figures to a whole number, which is how we arrived at the work hour estimates provided in the original NPRM. We have made no change to the supplemental NPRM in this regard.

For clarification and to reflect model designations in the most recent revision of the Type Certificate Data Sheet for the affected airplanes, we have revised all references to “Cessna Model 500 series airplanes” in the original NPRM to refer to “Cessna Model 500, 501, 550, and 551 airplanes” in this supplemental NPRM.

Since the changes related to the newly issued service information expand the scope of the originally proposed rule, we have determined that it is necessary to reopen the comment period to provide additional opportunity for public comment.

On July 10, 2002, we issued a new version of 14 CFR part 39 (67 FR 47997, July 22, 2002), which governs our AD system. This regulation now includes material that relates to altered products, special flight permits, and alternative methods of compliance (AMOCs). Because we have now included this material in part 39, only the office authorized to approve AMOCs is identified in each individual AD. Therefore, in this supplemental NPRM, we have removed Note 1 and paragraph (d) and revised paragraph (c) of the original NPRM.

Since the issuance of the original NPRM, we have reviewed the figures we have used over the past several years to calculate AD costs to operators. To account for various inflationary costs in the airline industry, we find it necessary to increase the labor rate used in these calculations from $60 per work hour to $65 per work hour. The cost impact information, below, reflects this increase in the specified hourly labor rate.

There are approximately 370 airplanes of the affected design in the worldwide fleet. We estimate that 259 airplanes of U.S. registry would be affected by this proposed AD. It would take up to 1 work hour per airplane to accomplish the proposed inspection if the inspection were done at the time of a tire change and up to 4 work hours per airplane if the inspection were done at a different time, at an average labor rate of $65 per work hour. Based on these figures, the cost impact of the proposed AD on U.S. operators is estimated to be $16,835, or $65 per airplane, for inspections of the brake assembly done at the time of a tire change; or up to $67,340, or $260 per airplane, for inspections done at a different time.

The cost impact figures discussed above are based on assumptions that no operator has yet accomplished any of the proposed requirements of this AD action, and that no operator would accomplish those actions in the future if this AD were not adopted. The cost impact figures discussed in AD rulemaking actions represent only the time necessary to perform the specific actions actually required by the AD. These figures typically do not include incidental costs, such as the time required to gain access and close up, planning time, or time necessitated by other administrative actions.

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

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

Accordingly, pursuant to the authority delegated to me by the Administrator, the Federal Aviation Administration proposes to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) as follows:

Interested persons are invited to participate in the making of the proposed rule by submitting such written data, views, or arguments as they may desire. Communications shall identify the Rules Docket number and be submitted in triplicate to the address specified above. All communications received on or before the closing date for comments, specified above, will be considered before taking action on the proposed rule. The proposals contained in this action may be changed in light of the comments received.

Submit comments using the following format:

• Organize comments issue-by-issue. For example, discuss a request to change the compliance time and a request to change the service bulletin reference as two separate issues.

• For each issue, state what specific change to the proposed AD is being requested.

• Include justification ( e.g. , reasons or data) for each request.

Comments are specifically invited on the overall regulatory, economic, environmental, and energy aspects of the proposed rule. All comments submitted will be available, both before and after the closing date for comments, in the Rules Docket for examination by interested persons. A report summarizing each FAA-public contact concerned with the substance of this proposal will be filed in the Rules Docket.

Commenters wishing the FAA to acknowledge receipt of their comments submitted in response to this action must submit a self-addressed, stamped postcard on which the following statement is made: “Comments to Docket Number 2001-NM-359-AD.” The postcard will be date stamped and returned to the commenter.

Any person may obtain a copy of this NPRM by submitting a request to the FAA, Transport Airplane Directorate, ANM-114, Attention: Rules Docket No. 2001-NM-359-AD, 1601 Lind Avenue, SW., Renton, Washington 98055-4056.

The FAA has received a report indicating that the exterior emergency function of one of the passenger doors was inoperative on a McDonnell Douglas Model MD-11 airplane. The exterior emergency door handle would not move and activate the emergency function of the forward passenger door. The cause was revealed to be six corroded bearings that seized in the exterior door handle mechanism. This condition, if not corrected, could result in the failure of the exterior emergency control handle mechanism of the forward passenger door, which could delay an emergency evacuation.

The subject area on certain McDonnell Douglas Model DC-10-10, DC-10-10F, DC-10-15, DC-10-30, DC-10-30F (KC-10A and KDC-10), DC-10-40, DC-10-40F, MD-10-10F, MD-10-30F, and MD-11F airplanes is almost identical to that on the affected Model MD-11 airplanes. Therefore, all of these models may be subject to the same unsafe condition.

The FAA is aware of a similar unsafe condition on the mid, overwing, and aft service doors on certain McDonnell Douglas Model DC-10-10, DC-10-10F, DC-10-15, DC-10-30, DC-10-30F (KC-10A and KDC-10), DC-10-40, DC-10-40F, MD-10-10F, MD-10-30F, MD-11 and MD-11F airplanes. We may consider future rulemaking actions to address the identified unsafe conditions.

The FAA has reviewed and approved McDonnell Douglas Service Bulletin MD11-52-046, Revision 02, dated October 8, 2002 (for Model MD-11 and MD-11F airplanes); and McDonnell Douglas Service Bulletin DC10-52-221, Revision 01, dated May 6, 2002 (for Model DC-10-10, DC-10-10F, DC-10-15, DC-10-30, DC-10-30F (KC-10A and KDC-10), DC-10-40, DC-10-40F, MD-10-10F, and MD-10-30F airplanes). Both service bulletins describe procedures for repetitive operation of the exterior emergency door handle of the forward passenger door to determine if binding exists in the exterior emergency control handle mechanism, and corrective action, if necessary. The corrective action is replacing the six bearings in the exterior emergency control handle mechanism of the forward passenger door with bearings made from corrosion resistant materials. Accomplishment of the actions specified in the service bulletins is intended to adequately address the identified unsafe condition.

Since an unsafe condition has been identified that is likely to exist or develop on other products of this same type design, the proposed AD would require accomplishment of the actions specified in the service bulletins described previously, except as discussed below.

Operators should note that, although the service bulletins include a procedure to replace the lower torque shaft bearings, this proposed AD does not mandate such replacement. Replacement of the lower torque shaft bearings does not address the identified unsafe condition of this AD.

Operators should also note that, although the service bulletins would require the replacement of seven bearings in the exterior emergency control handle mechanism, this proposed AD would require the replacement of only six bearings. The manufacturer has informed the FAA that a typographical error was made in the service bulletin, and that there are only six bearings that need to be replaced in the exterior emergency control handle mechanism. The manufacturer is planning to issue a new revision of the service bulletins to indicate this change.

There are approximately 604 airplanes of the affected design in the worldwide fleet. The FAA estimates that 396 airplanes of U.S. registry would be affected by this proposed AD, that it would take approximately 1 work hour per airplane to accomplish the proposed repetitive operation of the exterior emergency door handle of the forward passenger door, and that the average labor rate is $65 per work hour. Based on these figures, the cost impact of the proposed AD on U.S. operators is estimated to be $25,740, or $65 per airplane, per operation.

The cost impact figures discussed above are based on assumptions that no operator has yet accomplished any of the proposed requirements of this AD action, and that no operator would accomplish those actions in the future if this proposed AD were not adopted. The cost impact figures discussed in AD rulemaking actions represent only the time necessary to perform the specific actions actually required by the AD. These figures typically do not include incidental costs, such as the time required to gain access and close up, planning time, or time necessitated by other administrative actions.

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

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

Accordingly, pursuant to the authority delegated to me by the Administrator, the Federal Aviation Administration proposes to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) as follows:

Interested parties are invited to participate in this proposed rulemaking by submitting such written data, views, or arguments as they may desire. Comments that provide the factual basis supporting the views and suggestions presented are particularly helpful in developing reasoned regulatory decisions on the proposal. Comments are specifically invited on the overall regulatory, economic, environmental, and energy-related aspects of the proposal. Communications should identify both docket numbers and be submitted in triplicate to the address listed above. Commenters wishing the FAA to acknowledge receipt of their comments on this notice must submit with those comments a self-addressed, stamped postcard on which the following statement is made: “Comments to Docket No. FAA-2003-16120/Airspace Docket No. 03-AEA-12.” The postcard will be date/time stamped and returned to the customer.

An electronic copy of this document may be downloaded through the Internet at http://dms.dot.gov. Recently published rulemaking documents can also be accessed through the FAA's Web page at http://www.faa.gov or the Superintendent of Documents web page at http://www.access.gpo.gov/nara.

Additionally, any person may obtain a copy of this notice by submitting a request to the Federal Aviation Administration, Office of Air Traffic Airspace Management, ATA-400, 800 Independence Avenue, SW., Washington, DC 20591, or by calling (202) 267-8783. Communications must identify both docket numbers for this notice. Persons interested in being placed on a mailing list for future NPRMs should contact the FAA's Office of Rulemaking, (202) 267-9677, to request a copy of Advisory Circular No. 11-2A, Notice of Proposed Rulemaking Distribution System, which describes the application procedure.

The FAA is considering an amendment to Part 71 of the Federal Aviation Regulations (14 CFR Part 71) to amend the Class E airspace area at Jamestown, NY. The development of a SIAP to serve flights operating IFR into WCA Hospital Heliport make this action necessary. Controlled airspace extending upward from 700 feet AGL is needed to accommodate the SIAPs. Class E airspace designations for airspace areas extending upward from 700 feet or more above the surface are published in Paragraph 6005 of FAA Order 7400.9K, dated August 30, 2002, and effective September 16, 2002, which is incorporated by reference in 14 CFR 71.1. The Class E airspace designation listed in this document would be published subsequently in the Order.

The FAA has determined that this proposed regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. Therefore, this proposed regulation—(1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. Since this is a routine matter that would only affect air traffic procedures and air navigation, it is certified that this proposed rule would not have significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

In consideration of the foregoing, the Federal Aviation Administration proposes to amend 14 CFR part 71 as follows:

The Bureau of Industry and Security (BIS) administers export license, notification, and reporting requirements for a number of export and reexport transactions based on the nature of the item being exported or reexported, its intended destination, the end-user, and the end-use. In addition, BIS provides advice to persons concerning the classification of items that may be subject to the Export Administration Regulations and advisory opinions regarding the applicability of the Export Administration Regulations to particular transactions. The public obtains all of these services, except advisory opinions, by submitting a paper form or by submitting the information electronically, either through the SNAP system or through one of several systems maintained by private vendors. Recently, a majority of the submissions for which an electronic vehicle is available have been submitted electronically. Heretofore, the electronic submission vehicles have not provided for electronic submission of supporting documents or other documents that relate to an application, request, or report. SNAP+ would permit submissions via the World Wide Web using a Web browser and would have the capability to “attach” images (as PDF files) of related documents to applications or requests. It would also incorporate security features that were not available when electronic filing of export license applications began in the mid 1980s. Accordingly, BIS is proposing to amend the Export Administration Regulations to require that all export license applications (except Special Comprehensive Licenses), reexport license applications, Classification Requests, encryption review requests, and notifications prior to shipments of food and agricultural commodities to Cuba under License Exception AGR, along with any supporting or related documents be submitted via SNAP+. Any supporting or related documents attached to the submission would have to be in PDF format and, if they contain text, would have to be text searchable. BIS would consider requests for exceptions to the mandatory electronic filing rule and grant them in the following circumstances:

• A filer who has made no more than three submissions to BIS in the preceding twelve months;

• A filer who lacks access to the Internet;

• BIS has rejected the filer's request or revoked its eligibility to file electronically;

• BIS has requested that the filer submit a paper document for a particular transaction; or

• BIS determines that urgent circumstances or circumstances beyond the filer's control require allowing paper filing in a particular case.

BIS is aware of the possibility that some applicants might have to acquire certain hardware or software to be able to comply with this proposed rule. BIS also is aware that current electronic filers who use systems other than SNAP would have to begin using SNAP+ (or have an authorized agent acting on their behalf use SNAP+) in order to comply with this proposed rule unless one of the foregoing exceptions applies. BIS is interested in comments that address the benefits and burdens associated with these requirements.

SNAP+ would eliminate the registration of individual users by paper communication with BIS. Instead, a person may begin the registration process on behalf of himself or herself or may register an entity such as a corporation online. That person would be required to provide the following information concerning the SNAP+ applicant:

• Name of SNAP+ applicant;

• Address of SNAP+ applicant;

• “Organization Type,” whether the SNAP+ applicant is an individual or an entity other than an individual;

• Its “Employee Identification Number” if the SNAP+ applicant is not an individual and is located in the United States;

• The name, telephone number, and e-mail address of the SNAP+ applicant's “designated official;” and

• The name, telephone number, and e-mail address of the SNAP+ applicant's initial organization administrator.

The SNAP+ system would then generate a paper document called an electronic submission certification, which explains the major responsibilities of SNAP+ users, for the designated official to sign and submit to BIS. BIS would notify the designated official by e-mail of its approval or rejection of the application to use SNAP+.

BIS is also proposing to convert existing SNAP users to SNAP+ through the following process. BIS would send a letter to each existing SNAP user informing it of the date on which it will be converted to the new system. The letter will also inform the existing SNAP user that a person who knows the existing user's current SNAP company identification number must log onto the system to provide the name and contact information of the individuals who the existing user determines will be Organization Administrator and Designated Official in the SNAP+ system. Existing SNAP users will not be able to use SNAP on or after the conversion date until this step is taken. In addition, the letter will describe the roles of the Organization Administrator and Certifiers, as set forth below. BIS anticipates that it will not convert all of the existing SNAP users to SNAP+ at the same time and that the conversion process may take several months starting on the day that SNAP+ is implemented.

SNAP+ would also create some new roles with specific responsibilities in the SNAP+ system. Those roles, which apply to both new SNAP+ users and to existing SNAP users when they are converted to the SNAP+ system by BIS would be:

• SNAP+ Applicant. The entity or individual that applies to use SNAP+ to submit documents to BIS.

• SNAP+ User. The individual or entity that has been authorized to submit documents via SNAP+.

• Designated Official. The individual who executes, on behalf of the SNAP+ applicant, the application to use the SNAP+ system.

• Organization Administrator. An individual who can enable other people to use the SNAP+ system on a particular SNAP+ user's behalf and who can assign roles to, remove roles from, or eliminate all access to SNAP+ for those people. Those roles include additional organization administrators (who can do all of the tasks that the initial organization administrator can do), as well as certifiers, stagers and viewers.

• Certifier. An individual who can submit to BIS, on behalf of a SNAP+ user, any type of submission that is available via the SNAP+ system at the time of submission, even if that type of submission was not available at the time that he/she became a certifier, and who can make representations to BIS, on the SNAP+ user's behalf, as to the truth, accuracy and completeness of that submission. BIS will treat submissions made in the SNAP+ system by any of the SNAP+ user's certifiers as representations by the SNAP+ user to the United States Government until the certifier's role is terminated in the SNAP+ system by one of SNAP+ user's organization administrators or by BIS.

• Stager. An individual who can enter information and documents into the SNAP+ system on behalf of a SNAP+ User for submission to BIS by a certifier.

• Viewer. An individual who is able to view information and documents in the SNAP+ system, but is unable to enter, modify or certify any information or documents.

• Agents. An individual or entity who submits documents via SNAP+ for another party. An agent would be required to notify BIS immediately if his authority to do so is terminated. This provision is needed so that BIS can terminate any access that the agent would have in the SNAP+ system to information about a former client that is protected from disclosure by the confidentiality provisions of the Export Administration Act. Within the SNAP+ system, such agents are referred to as “third parties.”

BIS is also proposing to eliminate some obsolete, redundant or incorrect references in Part 748 of the Export Administration Regulations, eliminate an inconsistency, add information that had been omitted and replace some addresses listed in the regulations with references to BIS forms containing those addresses.

This proposed rule would make the following specific amendments to the Export Administration Regulations.

In part 740, § 740.17(d)(1) would be amended to make clear that review requests for License Exception ENC must be filed via SNAP+ unless BIS authorizes use of the paper form BIS-748P, that documents submitted in connection with SNAP+ submissions must be in “PDF” format and, if they contain text, must be text searchable. The reference to § 748.2(c) for the addresses for submitting license applications would be replaced with a reference to the addresses preprinted on the form. Section 740.18(c)(2) would be amended to replace language that makes use of electronic filing optional with language that makes use of SNAP+ mandatory unless BIS has approved the applicant for paper filing, that documents submitted in connection with SNAP+submissions must be in “PDF” format and, if they contain text, must be text searchable. Language referring to block numbers on the form would be replaced by names of blocks or fields because SNAP+ does not use block numbers.

In part 742, § 742.15(b)(2)(i) would be amended to make clear that SNAP+ must be used for requests to review encryption items exceeding 64 bit key length for mass market status and to replace the reference to § 748.2(c) for the addresses for submitting license applications with a reference to the addresses preprinted on the form. Supplement No. 6 to part 742 would be amended by having its introductory paragraph revised to replace language that makes use of electronic filing optional with language that makes use of SNAP+ mandatory unless BIS has approved the applicant for paper filing. Provisions regarding use of couriers or fax for paper documents related to electronic applications would also be removed because the new SNAP+ system will provide for “attachment” of electronic images of such documents to filings.

In part 748, §§ 748.1, 748.2, 748.3, 748.4, 748.5, 748.6, 748.7, 748.9, 748.10, 748.11, 748.12, 748.14, Supplement No. 1, and Supplement No. 2 would be amended as follows.

Section 748.1, paragraph (a) would be amended to reverse the order in which paper and electronic submissions are mentioned to emphasize electronic submissions. It would also be amended to add encryption review requests and license exception notifications to the listing of submission to which part 748 applies. The last sentence of this paragraph would also be removed because it is superfluous. Two new paragraphs (d) and (e) would be added. Paragraph (d) would make use of SNAP+ mandatory for all license applications (except Special Comprehensive Licenses), Classification Requests, Encryption Review requests, and License Exception AGR notifications unless BIS authorizes paper filing. Paragraph (e) would establish the grounds under which BIS would grant authorization to use paper filing, the procedures for requesting authorization to use paper filing and the method by which BIS would notify a party of its decision. The proposed grounds justifying paper filing are: three or fewer filings in the preceding 12 months, lack of access to the Internet, rejection or revocation of electronic filing authorization by BIS, request by BIS that a filing for a particular transaction be submitted on paper, and when BIS determines that urgent circumstances or circumstances beyond the filer's control require paper filing in a particular instance.

Section 748.2 paragraph (c) would be amended by changing the first word from “All” to “Paper” because it provides the mailing address for paper applications and to replace the listing of the addresses to which paper applications may be submitted with a reference to the addresses listed on the paper forms.

Section 748.3 would be amended to revise paragraph (b) to make electronic filing via SNAP+ mandatory unless BIS grants an exception pursuant to § 748.1(e) and to replace references to block numbers on the paper application form with names or by describing the information that must be provided when seeking a Classification. This change is needed because SNAP+ will not contain block numbers. The proposal would require that documents submitted in connection with a Classification Request be submitted in “PDF” format and be text searchable, if they contain text. It would also amend paragraph (b) to replace the listing of addresses to which Classification Requests must be sent to a reference to the addresses on the application form. Paragraph (c)(2)(iii) would be amended to require the requestor to provide an Export Control Classification Number or a statement that the item is EAR99 for all Advisory Opinion requests. Classification Requests will be clearly designated as such and evaluated separately from Advisory Opinions. BIS will not provide both a Classification and an Advisory Opinion in a response to a single request. This change will allow BIS to ensure that all Classification Requests are properly recorded and will help promote consistent results when evaluating Classification Requests.

Section 748.4 would be amended by revising the third sentence in paragraph (b)(1) to replace the word “should” with the word “must” in describing the responsibility to disclose all parties to a transaction and the functions to be performed by each party. Block numbers throughout the paragraph would be replaced with names. Paragraph (b)(2)(ii) would be amended to implement the SNAP+ requirement that an agent who files on behalf of others and who is required to have a power of attorney or other written authorization to do so, register as a “Third Party” in SNAP+ and to replace block numbers with names. Paragraph (g) also would be amended to replace block numbers with names.

Section 748.5 would be amended by revising the introductory paragraph to replace separate references to paper and electronic applications with the single term “applications” and by revising paragraph (b) to replace a block number with a name.

Section 748.6 would be amended by revising paragraph (a) to make clear that license applications must be filed via SNAP+ unless BIS has authorized paper filing. Paragraph (e) would be amended to provide that references to the application control number must appear on documents submitted in connection with license applications submitted on paper; and that documents submitted in connection with applications filed via SNAP+ must be in “PDF” format and must be text searchable if they contain text.

Section 748.7 would be almost entirely rewritten. Provisions relating to applying by mail to use electronic filing, registration by BIS of each individual who is to use electronic filing, and assignment of company identification numbers and personal identification numbers would be removed. Requirements relating to use of company identification numbers and personal identification numbers would continue to apply to companies and individuals already authorized to file electronically until their accounts are converted to SNAP+. BIS anticipates that these requirements can be removed once all electronic filers are converted to SNAP+, a process that may take several months starting on the date that SNAP+ is implemented initially. The prohibitions against copying, stealing or using another person's personal identification number would remain in effect without limitation as would the requirement to keep a log of electronic filings made prior to conversion to SNAP+ (users of SNAP+ would not be required to keep such a log). New material would be added as follows. Paragraph (a) would reiterate that all electronic submissions must be made through SNAP+. Paragraph (b)(1) would establish the procedures for new applicants to use SNAP+. It would set forth the information that a SNAP+ applicant must provide and how to provide it, how BIS would communicate its response to the SNAP+ applicant and would establish some specific responsibilities for users of SNAP+. This section would require applicants to use SNAP+ to provide the name and address of the SNAP+ applicant, and whether the SNAP+ applicant is an individual or an entity other than an individual (referred to as “industry” in SNAP+). If the SNAP+ applicant is not an individual and is located in the United States, this section requires it to provide its Employer Identification Number. All SNAP+ applicants are also required to provide name, telephone number and e-mail address of the SNAP+ applicant's “Designated Official” and initial Organization Administrator. Paragraph (b)(2) establishes a procedure for notifying existing SNAP Users of the conversion to SNAP+ and of the information that the existing user must provide at the time of conversion. The SNAP User would have to provide that name and contact information of its initial Designated Official and Organization Administrator. Paragraph (c) would describe the roles and responsibilities of parties related to SNAP+. Paragraph (d) would describe requirements and prohibitions of SNAP that would continue in force after implementation of SNAP+. Paragraph (e) would describe responsibilities of parties who use current electronic submission systems that would continue until conversion to SNAP+.

Section 748.9 would be amended by revising paragraph (c) to make clear that license applicants using electronic submissions must designate on the appropriate data entry screen the type of supporting document they have obtained.

Sections 748.10(f), 748.11(a)(2), 748.12(d)(1), 748.14(b) would be amended to replace block numbers with names. In addition, § 748.10(g) would be amended to allow an electronic image of the PRC End User Certificate to be submitted in support of license applications filed via SNAP+ provided the applicant retains the original in its files. The original certificate would continue to be required for applications submitted on paper. Section 748.12(d) would be amended to make clear that requests for exceptions to a support document requirement may be submitted as electronic attachments to a license application filed via SNAP+. Section 748.14(b) would be amended to make clear that all of the recordkeeping requirements of part 762 and not just § 762.2 apply to firearms import certificates retained by a license applicant and § 748.14(e) would be amended to replace the term “BIS Form-748P” with “application” because it applies to both paper and electronic applications.

Supplement No. 1 to Part 748 would be amended to add references to SNAP+, Export License applications, Reexport Application requests, Classification Requests, Encryption Review requests, and License Exception AGR notifications and to state that its requirements apply to all of those types of submissions, unless specifically noted, regardless of whether submitted via SNAP+ or on paper. The descriptions of transactions that constitute reexports would be revised to make them more completely reflect the definition of that term in part 772. Clarifying language would be added to describe when information about ultimate consignees must be submitted. Language that makes submission of an item in SNAP+ the equivalent of a signature would be added. This supplement would also be amended to place in a single paragraph, the requirement to include the earlier application control number when reapplying for a transaction that has been previously denied or returned without action (RWA). The existing supplement lists this requirement separately for denials and RWA's.

Supplement No. 2 to Part 748 would be amended throughout to replace references to block numbers with block or field names because SNAP+ does not use block numbers. In addition, paragraph (c)(2) would be amended to delete references to Advisory Notes 3 and 4 in Category 4 of the Commerce Control List because those Advisory Notes no longer exist. Paragraph (c)(2)(i) would be amended to allow submission of facsimiles of required signed statements by the end-user or importing agency because electronic images of such documents will have to be submitted under SNAP+. A new paragraph (c)(3) would be created requiring that originals be retained in accordance with the recordkeeping requirements of the EAR. In paragraph (f), a reference to § 734.2(b)(8) would be corrected to read § 736.2(b)(8). In paragraph (g)(2)(v), the words “if possible” would be removed from the second sentence to more clearly reflect long-standing policy, which requires full disclosure of how the item proposed for export will be used in the sensitive nuclear end-uses to which this paragraph applies.

In part 754, §§ 754.2(g)(1), 754.4(d)(1) and (3), 754.5(b)(2) and supplement No. 2, footnote number 2 would all be revised to replace language requiring use of the paper form BXA-748P with a requirement to use SNAP+ unless BIS approves the use of the paper form and to replace other references to the BXA-748P with the term “application,” which could apply to both electronic and paper applications. § 754.4(d) also would be amended to allow applications for exports of unprocessed western red cedar filed through SNAP+ to include the exporter's statement in the additional information field of the SNAP+ application screen or as an electronic attachment to the application and to make the electronic certification of the application act as a signature on the statement rather than requiring a separate signed statement as is done with paper applications.

Section 772.1 would be amended by adding a sentence to the end to the definition of the term “Applicant” to make clear that the definition does not apply to the term “SNAP+ Applicant” in § 748.7. This change is needed to make sure that rules that apply uniquely to applications to use SNAP+ are clearly distinguished from the rules governing applications in general.

1. This proposed rule has been determined to be not significant for purposes of E.O. 12866.

2. This proposed rule contains revised collection-of-information requirements subject to review and approval by the Office of Management and Budget (OMB) under the Paperwork Reduction Act (PRA). The OMB control number for this collection is 0694-0088. The requirement for most exporters to register with and use Simplified Network Application Processing (SNAP+) will be submitted to OMB for approval. The public reporting burden for this collection of information is estimated to average 58 minutes per application, depending on the nature of the submission and any relevant supplemental information required to support the submission, as well as the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. Send comments regarding this collection of information to Ms. Marna Dove; Information Collection Budget Liaison, room H6622, Bureau of Industry and Security, U.S. Department of Commerce, Washington, DC 20230 and to OMB at the Office of Information and Regulatory Affairs, Washington, DC 20503 (Attention: BIS Desk Officer). Notwithstanding any other provision of the law, no person is required to respond to, nor shall any person be subject to a penalty for failure to comply with a collection of information, subject to the requirements of the PRA, unless that collection of information displays a currently valid OMB control number.

3. This rule does not contain policies with Federalism implications as this term is defined in Executive Order 13132.

4. The Chief Counsel for Regulation of the Department of Commerce has certified to the Counsel for Advocacy of the Small Business Administration that this proposed rule would not have a significant economic impact on a substantial number of small entities. An entity's potential burden under this rule would vary based on four factors; whether its submissions require additional documents; its pre-existing hardware and software; whether its documents are already in text searchable PDF format; and, if they are not, whether documents in such format can be created directly from other computer files or whether they must be scanned from paper documents.

Some entities might incur no additional burden because of this rule. These are the entities whose submissions require no accompanying documents, those who are already creating the documents in text searchable PDF format and those who are already creating the documents using software that is capable of producing the same documents in PDF text searchable format. BIS does not have accurate data on the number of entities that fall into this category, but based on a recent sample from its internal database, BIS projects that as many as half of the submissions that it receives do not require any accompanying documents.

Some entities might incur only a software acquisition burden because of this rule. These are the entities whose accompanying documents are already created using software that cannot produce PDF files directly, but that can produce such files with additional software that the entity can purchase. BIS estimates that such an entity with a small operation would incur an initial expense of approximately $325 to acquire that software necessary to comply with this rule. This estimate is based on the price of Adobe Acrobat® Standard Edition ($299) as posted on the Adobe Corporation Web site on August 13, 2003 plus any taxes or shipping charges.

Some entities might incur software and hardware acquisition costs and labor costs associated with a submission. These are the entities who will need to scan in paper documents and make them text searchable and who do not presently have either hardware or software capable of performing these functions. In some instances, the entity could utilize software that comes bundled with a scanner to comply with this requirement. In such instances, BIS estimates that the entity would incur an initial cost of approximately $300 (to purchase the scanner) to comply with this rule. In some cases, particularly if the entity has to scan numerous complex paper documents and make them text searchable, the costs could be higher. BIS estimates that the initial costs for an entity facing such a situation would be approximately $1,100. This estimate is based on a price of $300 for Adobe Acrobat® Standard Edition software, $400 for Adobe Capture® software, $300 for a scanner and $100 for taxes and shipping charges.

Entities who have to scan paper documents may also incur labor costs to proofread and correct mistakes that may occur when a computer converts images to text. BIS estimates that, depending on the complexity of the document, proofreading could take from 5 minutes to 20 minutes per page. In a recent random sampling of submissions recorded in BIS's databases, the number of supporting or explanatory pages associated with an individual submission varied from a low of zero to a high of 33 pages. A typical submission with attachments had about eight pages attached. However, BIS has no way of telling which attachments could be generated electronically and which would require scanning and proofreading. Assuming an average of 8 pages per document and labor costs for proofreading documents at $25 per hour, this cost would range from $16.67 to $100 per submission. BIS believes that this cost would not be incurred by entities that are able to produce the PDF documents from an electronic source because of the accuracy of the process for generating text in PDF files produced from such sources.

Electronic filing would yield some cost savings to offset part or all of these costs. If a submission relates to attachments from an earlier submission, the submitter could refer to the previous file instead of supplying new attached documents. Currently, in many instances, attachments are submitted to BIS by overnight courier. Electronic filing would eliminate these courier costs. In addition, BIS internally uses an electronic system to process all submissions that are subject to this proposed rule, whether it receives the submission on paper or electronically. However, the attachments are all on paper, creating delays as paper documents are moved to the technical personnel in BIS and in other government agencies. Electronic attachments are likely to reduce evaluation time, i.e. , the total time from submission to final decision, by several days.

BIS does not collect data on the size of entities that file these submissions. However, based on the information that it does possess, BIS believes that fewer than 400 small entities are likely to be affected by this rule. BIS arrived at this conclusion by identifying all of the entities that filed four or more submissions during the period from January 1, 2002 to May 13, 2003. A total of 591 entities were identified. BIS determined that 120 of these are not small businesses because they are corporations, or affiliates thereof, that were listed in the Fortune 500 listing of April 14, 2003, or the Fortune Global 500 listing of July 22, 2002, or because the entity's Web site indicated sales in the most recent year in excess of $100 million. The lowest reported sales figures for 2003 Fortune 500 and the 2002 Fortune Global 500 were $2.9 billion and $10 billion, respectively. Of the remaining 471 entities, 44 submitted export license applications totaling more than $10 million and an additional 21 submitted license applications between $5 million and $10 million during the period. Although BIS does not know their sales volumes or employment levels, companies anticipating such levels of export sales are unlikely to be small businesses.

Because many industries may be involved in exporting, BIS could not directly relate its data to the “Small Business Size Standards Matched to North American Industry Classification System” published by the Small Business Administration (SBA). However, BIS notes that the range of annual sales among industries in that publication that could be involved in exporting is from $0.75 to $6 million. 1 It is likely that many of the 406 remaining entities would not meet the small business standard established by the SBA. In addition, some of these entities may either file submissions that do not require attachments or already create text searchable PDF files of the documents that must be attached or already create the documents using software that can create PDF files directly. For these entities, the rule creates no new burden.

For two industries that are included in BIS's data, the SBA criteria is number of employees. These two industries are semiconductor manufacturing for which the level is 500 employees and small arms manufacturing, for which the level is 1,000 employees. BIS identified employee levels via the Web sites for several semiconductor manufacturers that appeared in its data. All of these had more than 500 employees. In addition, they all had more than $100 million in annual sales. BIS was unable to identify the employment level for the firearms manufacturers in its data.

However, most BIS firearms export applications are for shotguns that BIS can evaluate based on the applicant's furnishing of the manufacturer's name and the shotgun model number. Such applications typically require no attachments.

Overall the number of small entities affected by this proposed rule is likely to be small. For those that are affected, the savings from re-use of documents for multiple submissions, reduced courier fees and faster processing times are likely to fully or partially compensate for the cost of compliance with this rule.

BIS is seeking public comments on this proposed rule. The period for submission of comments will close January 12, 2004. BIS will consider all comments received on or before that date in developing a final rule. Comments received after that date will be considered if possible, but their consideration cannot be assured. BIS will not accept public comments accompanied by a request that a part or all of the material be treated confidentially because of its business proprietary nature or for any other reason. BIS will return such comments and materials to the persons submitting the comments and will not consider them in the development of the final rule. All public comments on this proposed rule must be in writing (including fax or e-mail) and will be a matter of public record, available for public inspection and copying. The Office of Administration, Bureau of Industry and Security, U.S. Department of Commerce, displays these public comments on BIS's Freedom of Information Act (FOIA) Web site at http://www.bis.doc.gov/foia. This office does not maintain a separate public inspection facility. If you have technical difficulties accessing this Web site, please call BIS's Office of Administration at (202) 482-0637 for assistance.

Accordingly, Parts 740, 742, 748, 754, and 772 of the Export Administration Regulations (15 CFR Parts 730-799) are proposed to be amended as follows:

As a result of the long-standing dispute between the Hopi Tribe and the Navajo Nation over beneficial ownership of the reservation created by the Executive Order of December 16, 1882, Congress passed the Act of July 22, 1958, 72 Stat. 403, which permitted the Navajo Nation and the Hopi Tribe to sue each other in federal court to resolve the issue. The Hopi Tribe initiated such a suit on August 1, 1958, in United States District Court for the District of Arizona in Healing v. Jones, 174 F. Supp. 211 (D. Ariz. 1959), ( Healing I ). The merits of the case were heard by a three judge panel of the United States District Court for the District of Arizona in Healing v. Jones, 210 F. Supp. 125 (D. Ariz. 1962) aff'd 373 U.S. 758 (1963), ( Healing II ) after the initial procedural challenges to the suit were dismissed in Healing I. The district court determined that while the Hopi Tribe had a right to the exclusive use and occupancy of a portion of the 1882 reservation know as District 6, it shared the remaining lands of the 1882 reservation in common with the Navajo Nation. Disputes between the two tribes continued over the right to use and occupy the 1882 reservation in spite of the district court's decision in Healing II. In an attempt to resolve these ongoing problems, Congress enacted the Navajo-Hopi Settlement Act, 25 U.S.C. 640d-640d-31, which provided for the partition of the Joint Use Area of the 1882 reservation, excluding District 6, between the two tribes. The Act was amended by the Navajo-Hopi Indian Relocation Amendments Acts of 1980, 94 Stat. 929, due to the dissatisfaction expressed by both tribes with the relocation process.

The Relocation Act Amendments added subsection (c) to 25 U.S.C. 640d-18. It required the Secretary of the Interior to complete the livestock reduction program contained in 25 U.S.C. 640d-18(a) within 18 months of its enactment. The new subsection also required that all grazing control and range restoration activities be coordinated and executed with the concurrence of the tribe to which the land had been partitioned. In 1982, the U.S. District Court for the District of Arizona determined in Hopi Tribe v. Watt, 530 F. Supp. 1217 (D. Ariz. 1982), that the grazing regulations contained in part 153 of 25 CFR were invalid with respect to the 1882 reservation partitioned to both the Navajo Nation and the Hopi Tribe. The court reached that conclusion because the regulations did not provide for the concurrence of the Navajo Nation or the Hopi Tribe as required by the Relocation Act Amendments. The district court's ruling was upheld by the Ninth Circuit Court of Appeals in Hopi Tribe v. Watt, 719 F. 2d 314 (9th Cir. 1983).

As a result of the decision in Hopi Tribe v. Watt, Id., the Bureau of Indian Affairs sought the concurrence of the Navajo Nation for the regulations, which are herein published. The concurrence of the Navajo Nation to these regulations was provided verbally by the Navajo-Hopi Land Commission and the Navajo Nation Natural Resource Committee which met jointly on June 26, 2003. Non-substantive, editorial changes have been made to the proposed regulations, which were approved by the Navajo Nation.

These regulations are issued to implement the Secretary of the Interior's responsibilities for the Navajo Partitioned Lands as mandated by the Navajo-Hopi Settlement Act, as amended by the Relocation Act Amendments, and the previously cited federal court decisions. In 1982, part 152 of 25 CFR was re-designated as part 167, Navajo Grazing Regulations, and part 153 of 25 CFR was re-designated as part 168, Hopi Partitioned Lands Grazing Regulations. All grazing permits issued for the joint Use Area under the old 25 CFR part 152, some of which dated from 1940, were canceled within one year pursuant to the Order of Compliance issued on October 14, 1972, by the U.S. District Court of the District of Arizona in Hamilton v. MacDonald, Civ. 579-PCT. From 1973 through 1978, the Bureau of Indian Affairs did not issue grazing permits for the Joint Use Area (JUA) during calculation of the range's carrying capacity and stocking rates. However, in late 1977 the Joint Use Area Administrative Office of the Bureau of Indian Affairs at Flagstaff, Arizona, completed its inventory and began issuing annual grazing permits to the residents of the JUA. These interim permits were limited to one year by order of the federal district court. Since the 1982 ruling in Hopi v. Watt, 530 F.2d 1217 (1983), declaring that the pre-1982 regulations were invalid, the Bureau of Indian Affairs has been subject to the provisions of the Navajo-Hopi Settlement Act, as amended, which require the development of new grazing regulations for the Navajo Partitioned Land with the concurrence of the Navajo Nation. These regulations are the product of that consultation.

Proposed rulemaking was published in the Federal Register on November 1, 1995 (60 FR 55506), and invited comments for 60 days ending January 2, 1996. To allow maximum input from the Navajo and Hopi Tribes and the public, an extension of the comment period to September 9, 1996 was published in the Federal Register on June 10, 1996 (61 FR 29327). A total of 74 written comments were received from individuals and attorneys representing the Navajo Nation, as well as individuals commenting on their own behalf. The comments were reviewed by the Navajo-Hopi Land Commission of the Navajo Nation Council NPL Subcommittee during the week of November 17, 1996. The suggested responses to the comments were sent to the Navajo Nation Resources Committee for further review and consideration on September 10, 1998. Comments and recommendations were adopted and incorporated into a proposed rule which was never finalized. We have reviewed the comments and recommendations, and incorporated them in the proposed rule where appropriate.

This rulemaking also incorporates the requirements of the American Indian Agricultural Resource Management Act (AIARMA)(107 Stat. 2011, 25 U.S.C. § 3703 et seq. ), as amended. The purposes of AIARMA include carrying out the trust responsibility of the United States and promoting self-determination of Indian tribes by providing for the management of Indian agricultural lands and related renewable resources in a manner consistent with identified tribal goals and priorities for conservation, multiple use, and sustained yield; by authorizing the Secretary to take part in the management of Indian agricultural lands with the participation of the beneficial owners of the land in a manner consistent with the trust responsibility of the Secretary and the objectives of the beneficial owners; and by providing for the development and management of Indian agricultural land. The AIARMA requires that the Secretary conduct all land management activities on Indian agricultural lands in accordance with agricultural resource management plans, integrated resources management plans, and all tribal laws and ordinances, except where such compliance would be contrary to the trust responsibility of the United States.

Final regulations governing grazing permits for all Indian lands were promulgated in 25 CFR part 166 on January 22, 2001, and are found at 25 CFR part 166. While part 166 applies to all Indian agricultural lands, part 161 applies only to the Navajo Partitioned Lands. Both regulations implement the requirements of AIARMA.

Subpart A, “Definitions, Authority, Purpose and Scope,” contains key terms used throughout the proposed regulation. These terms are consistent with those found in AIARMA. This subpart also describes the Secretary's authorities under this part.

Subpart B, “Tribal Policies and Laws Pertaining to Permits,” is consistent with AIARMA and makes clear that Navajo Nation laws generally apply to land under the jurisdiction of the Navajo Nation, except to the extent that those Navajo Nation laws are inconsistent with applicable federal law. Further, unless prohibited by federal law, BIA will recognize and comply with tribal laws regulating activities on the Navajo Partitioned Lands, including tribal laws relating to land use, environmental protection, and historic or cultural preservation.

Subpart C, “General Provisions,” lists the environmental compliance and management documents that are required by AIARMA. This subpart also discusses how carrying capacity and stocking rates are established.

Subpart D, “Grazing Permit Requirements,” describes the general requirements for obtaining a permit, the provisions contained in a grazing permit, the restrictions placed on permits, and other permit requirements.

Subpart E, “Reissuance of Grazing Permits,” sets forth eligibility and priority criteria for reissuance of cancelled grazing permits. This subpart makes clear that the Navajo Nation may prescribe eligibility requirement for grazing allocations within 180 days following the effective date of these regulations. BIA will prescribe the eligibility requirements after expiration of the 180-day period in the event that the Navajo Nation does not prescribe eligibility requirements, or in the event that satisfactory action is not taken by the Navajo Nation. This subpart also describes how new permits may be granted after the initial reissuance of permits, and sets forth the procedures for re-issuing permits and allocating permits within each range unit.

Subpart F, “Modifying A Permit,” describes how permits may be transferred, assigned or modified.

Subpart G, “Permit Violations,” sets forth the procedures for the investigation, notification and processing of permit violations. This section also describes the process by which mediation can be used in the event of a permit violation.

Subpart H, “Trespass,” describes the process for trespass notification, enforcement, actions and penalties, damages and costs. This subpart is substantially similar to the general grazing regulations, 25 CFR, part 166, subpart I, and is consistent with AIARMA.

Subpart I, “Concurrence/Appeals/Amendments,” sets forth the procedures for the Navajo Nation to provide concurrence to BIA under this part. This subpart also states that decisions made by BIA under this part may be appealed, and that decisions made by the Navajo Nation under this part may be appealed to the appropriate hearing body of the Navajo Nation.

Under Executive Order 12866 (58 FR 51735, October 4, 1993), the Office of Management and Budget (OMB) must determine whether the regulatory action is “significant” and therefore subject to OMB review and the requirements of the Executive Order. The Order defines “significant regulatory action” as one that is likely to result in a rule that may:

(1) Have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities;

(2) Create a serious inconsistency or otherwise interfere with an action taken or planned by another agency;

(3) Materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or

(4) Raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles in the Executive Order.

This proposed rule describes how BIA will administer grazing permits on trust land. Thus, the impact of the rule is confined to the Federal Government and individual Indian and the Navajo Nation, and does not impose a compliance burden on the economy generally. Accordingly, it has been determined that this rule is not a “significant regulatory action” under any of the preceding criteria.

Under the Regulatory Flexibility Act, 5 U.S.C. 601 et seq. , as amended, whenever an agency is required to publish a notice of rule making for any proposed or final rule, it must prepare and make available for public comment a regulatory flexibility analysis that describes the effects of the rule on small entities ( e.g. , small businesses, small organizations, and small government jurisdictions). Indian tribes are not considered to be small entities for purposes of the Act and, consequently, no regulatory flexibility analysis has been done.

This proposed implementation guidance does not have significant adverse effects on competition, employment, investment, productivity, innovation, or the ability of U.S. based enterprises to compete with foreign-based enterprises because it concerns only the Navajo Nation. Accordingly, this proposed regulation will not have an economic impact on a substantial number of small entities, and, therefore, no regulatory flexibility analysis has been prepared.

Under 5 U.S.C. 804(2), SBREFA, a rule is major if OMB finds that it results in (1) An annual effect on the economy of $100 million or more; (2) A major increase in costs or prices for consumers, individual industries, Federal, State, or local government agencies, or geographic regions; or (3) Significant adverse effects on competition, employment, investment, productivity, innovation, or the ability of U.S.-based enterprises to compete with foreign-based enterprises.

This proposed rule is not a major rule as defined by Section 804 of the SBREFA. This rule is uniquely confined to the Federal Government, individual Indians and the Navajo Nation, thus, it will not result in the expenditure by State, local and tribal governments, in the aggregate, or by the private sector, of $100 million or more in any one year. This proposed rule provides regulatory guidance for grazing permits on trust lands owned by individual Indians and the Navajo Nation.

The proposed implementation guidance would not impose unfunded mandates as defined by the Unfunded Mandates Reform Act of 1995 (Public Law 104-4, March 22, 1995, 109 Stat. 48). This proposed rule will not result in the expenditure by State, local and tribal governments, in the aggregate, or by the private sector, of $100 million or more in any one year (2 U.S.C. 1532). The impact of this proposed rule is confined to grazing permits on land held in trust for the Navajo Nation. Accordingly, this proposed rule will not result in the expenditure of $100 million or more in any one year.

This proposed implementation guidance does not have significant “takings” implications. Policies that have taking implications do not include actions affecting properties that are held in trust by the United States. The NPL grazing regulations provide specific regulatory guidance on trust lands.

On May 18, 2001, the President issued Executive Order 13211 which speaks to regulations that significantly affect energy supply, distribution, and use. The Executive Order requires agencies to prepare Statements of Energy Effects when undertaking certain actions. This proposed rule is restricted to 25 CFR 161, Navajo Partitioned Lands Grazing Permits on lands held in trust for individual Indians and tribes. Mineral development on lands held in trust for individual Indians and the Navajo Nation are regulated under the Indian Mineral Development Act. Regulations for mineral development are provided under a separate part in 25 CFR 211, 212 and 225. This proposed implementation guidance is not expected to significantly affect energy supplies, distribution, or use. Therefore, no Statement of Energy Effects has been prepared.

This proposed implementation guidance does not have significant Federalism effects because it pertains solely to Federal-tribal relations and will not interfere with the roles, rights, and responsibilities of States. While this proposed rule will impact tribal governments, there is no federalism impact on the trust relationship or balance of power between the United States government and the various tribal governments affected by this rulemaking. Therefore, in accordance with Executive Order 13132, it is determined that this rule will not have sufficient federalism implications to warrant the preparation of a federalism assessment.

With respect to the review of existing regulations and the promulgation of new regulations, section 3(a) of Executive Order 12988, Civil Justice Reform, 61 FR 4729, February 7, 1996, imposes on executive agencies the general duty to adhere to the following requirements:

(1) Eliminate drafting errors and ambiguity; (2) write regulations to minimize litigation; and (3) provide a clear legal standard for effective conduct rather than a general standard and promote simplification and burden reduction. With regard to the review required by section 3 (a), section (b) of Executive Order 12988 specifically requires that executives agencies make every reasonable effort to insure that the regulations: (1) Clearly specifies the preemptive effect, if any; (2) clearly specifies any effect on existing federal law or regulation; (3) provides a clear legal standard for affecting conduct while promoting simplification and burden reduction; (4) specifies the retroactive affect if any; (5) adequately defines key terms; and (6) addresses other important issues affecting clarity and general draftsmanship under any guidelines issued by the Attorney General. Section 3(c) of Executive Order 12988 requires executive agencies to review regulations in light of the applicable standards in section 3(a) and section 3(b) to determine whether they are met or it is unreasonable to meet on or more of them. This proposed implementation guidance does not unduly burden the judicial system and meets the applicable standards provided in sections 3(a) and 3(b)(2) of the Executive Order 12988.

This proposed rule is categorically excluded from the preparation of an environmental assessment or an environmental impact statement under the National Environmental Policy Act of 1969, 42 U.S.C. 4321, et seq., because its environmental effects are too broad, speculative, or conjectural to lend themselves to meaningful analysis and the Federal actions under the proposed rule ( i.e. , approval or disapproval of grazing permits on Indian lands) will be subject at the time of the action itself to the National Environmental Policy Act process, either collectively or case-by-case. Further, no extraordinary circumstances exist to require preparation of an environmental assessment or environmental impact statement.

Pursuant to Executive Order 13175 of November 6, 2000, Consultation and Coordination with Indian Tribal Governments, the Department has determined that because the proposed rule making will uniquely affect tribal governments it will follow Department and Administrative protocols in consulting with tribal governments on the rulemaking. Consequently, tribal governments will be notified through this Federal Register document and through BIA field offices, of the ramifications of this rulemaking. This will enable tribal officials and the affected tribal constituency throughout the Navajo Partitioned Lands to have meaningful and timely input in the development of the final rule. This will reinforce good intergovernmental relations with the Navajo Nation and better inform, educate and advise the Navajo Nation on compliance requirements of the rulemaking. We consulted with representatives of the Navajo Nation during the formulation of this proposed regulation. Representatives from the Navajo-Hopi Land Commission and Navajo Nation Natural Resource Committee met in consultation several times from November 2002 to June of 2003 to draft the proposed regulations. The comments received from these consultations were taken into consideration in the formulation of the following proposed NPL Grazing regulations. We have committed to consulting with the Navajo Nation in the formulation of a final rule for the Navajo Partitioned Lands Grazing regulations.

This regulation requires an information collection from 10 or more parties, and therefore is subject to review under the Paperwork Reduction Act of 1995 (Pub. L. 104-13).

The table showing the burden of the information collection is included below for your information.

DOI invites comments on the information collection requirements in the proposed regulation. You may submit comments by telefacsimile at (202) 395-6566 or by e-mail at OIRA_DOCKET@omb.eop.gov. Please also send a copy of your comments to BIA at the location specified under the heading ADDRESSES. Note that requests for comments on the rule and the information collection are separate.

You can receive a copy of BIA's submission to OMB by contacting the person listed in the FOR FURTHER INFORMATION CONTACT section, or by requesting the information from BIA Information Collection Clearance Officer, 1951 Constitution Avenue, NW., Mail Stop 52 SIB, Washington, DC 20240.

Comments should address: (1) Whether the proposed collection of information is necessary for the proper performance of the Program, including the practical utility of the information to BIA; (2) the accuracy of BIA's burden estimates; (3) ways to enhance the quality, utility, and clarity of the information collected; and (4) ways to minimize the burden of the collection of information on the respondents, including the use of automated collection techniques or other forms of information technology.

Please note that an agency may not sponsor or request, and an individual need not respond to, a collection of information unless it has a valid OMB Control Number. This is a new collection. OMB will assign an OMB Control Number when the collection is approved. OMB must make a decision concerning the collection of information requirements in this proposed rule no sooner than 30 days, and no later than 60 days, after it is published in the Federal Register . Therefore, a comment is best assured of having its maximum effect if OMB receives it within 30 days of publication. Comments on information collection requirements do not relate, however, to the deadline for general public comments on the proposed rule, indicated in the DATES section.

We are collecting this information in order to properly manage the grazing permits on the Navajo Partitioned Lands in keeping with good grazing practices. We estimate that the hourly public burden for providing the information ranges from 15 minutes to 1 hour. We estimate the cost to the public to be $6,132.00 based on an hourly cost of $5.00. The requested information is submitted in order to obtain or retain a benefit, i.e. , a grazing permit. We do not require the public to maintain records except temporarily for those needed to complete reports. There is no need for confidentiality protections other than those which would be covered by FOIA/Privacy Act.

Organizations and individuals who submit comments on the information collection requirements should be aware that BIA keeps such comments available for public inspection during regular business hours. If you wish to have your name and address withheld from public inspection, you must state this prominently at the beginning of any comments you make. BIA will honor your request to the extent allowable by law.

Executive Order 12866 requires each agency to write regulations that are easy to understand. We invite your comments on how to make this rule easier to understand, including answers to questions such as the following:

(1) Are the requirements in the rule clearly stated?

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

(3) Does the format of the rule (grouping and order of sections, use of headings, paragraphing, etc.) aid or reduce its clarity?

(4) Would the rule be easier to understand if it were divided into more (but shorter) sections? (A “section” appears in bold type and is preceded by the symbol “§ ” and a numbered heading; for example, § 161.1 What definitions do I need to know?)

(5) Is the description of the rule in the SUPPLEMENTARY INFORMATION section of the preamble helpful in understanding the proposed rule?

(6) What else could we do to make the rule easier to understand?

Send a copy of any comments that concern how we could make this rule easier to understand to: Office of Regulatory Affairs, Department of the Interior, Room 7229, 1849 C Street NW., Washington, DC 20240. You may also e-mail the comments to this address: Exsec@ios.doi.gov.

If you wish to comment on this proposed rule, you may mail or hand-deliver your written comments to the person listed in the ADDRESSES section of this document. Comments may also be telefaxed to the following number: (202) 219-0006. We cannot accept electronic submissions at this time. All written comments received by the date indicated in the DATES section of this document will be carefully assessed and fully considered before publication of a final rule.

Our practice is to make comments, including names and home addresses of respondents, available for public review during regular business hours. Individual respondents may request that we withhold their home address from the rulemaking record. We will honor the request to the extent allowable by law. There also may be circumstances in which we would withhold from the rulemaking record a respondent's identity, as allowable by law. If you wish us to withhold your name and/or address, you must state this prominently at the beginning of your comment. However, we will not consider anonymous comments. We will make all submissions from organizations or businesses, and from individuals identifying themselves as representatives or officials of organizations or businesses, available for public inspection in their entirety.

For the reasons stated in the preamble, the Bureau of Indian Affairs proposes to add part 161 to chapter I of title 25 of the Code of Federal Regulations as follows.

OSHA published the final, revised Respiratory Protection Standard, 29 CFR 1910.134, on January 8, 1998 (63 FR 1152). However, in the final standard, the Agency reserved the sections related to assigned protection factors (APFs) and maximum use concentrations (MUCs) pending further rulemaking (see 63 FR 1182 and 1203). On June 6, 2003, OSHA published an NPRM to revise its existing Respiratory Protection Standard to add definitions and specific requirements for APFs and MUCs (68 FR 34036). The proposed revisions also would supersede the respirator-selection provisions of existing substance-specific standards with the new APFs (except the APFs for the 1,3-Butadiene Standard).

During the comment period on the NPRM, which OSHA extended to October 2, 2003 (68 FR 53311), a number of commenters (Exs. 12-2, 12-4, 12-8, 12-10, 12-11, 12-12,13-1, 13-2, 13-3, 13-4, 13-5) requested an informal public hearing. OSHA is granting this request.

The Agency is placing the Notices of Intention to Appear, hearing testimony, and documentary evidence in the rulemaking docket, which will be available for inspection and copying at the OSHA Docket Office.

OSHA encourages members of the public to participate in this rulemaking by providing oral testimony and documentary evidence at the informal public hearing. Accordingly, the Agency invites interested parties having knowledge of, or experience with, the issues raised in the NPRM to participate in this process, and welcomes any pertinent data that will provide the Agency with the best available evidence to use in developing the final rule. This section describes the procedures the public must use to schedule an opportunity to deliver oral testimony and to provide documentary evidence at the informal public hearing.

Pursuant to section 6(b)(3) of the Occupational Safety and Health Act (“the Act”; 29 U.S.C. 655), members of the public must have an opportunity at the informal public hearing to provide oral testimony concerning the issues raised in the NPRM. An administrative law judge (ALJ) will preside over the hearing, and will resolve any procedural matters relating to the hearing on the first day.

The legislative history of Section 6 of the Act, as well as the Agency's regulation governing public hearings (29 CFR 1911.15), establish the purpose and procedures of informal public hearings. Although the presiding officer of the hearing is an ALJ, and questions by interested parties are allowed on pertinent issues, the hearing is informal and legislative in purpose. Therefore, the hearing provides interested parties with an opportunity to make effective and expeditious oral presentations in the absence of procedural restraints that could impede or protract the rulemaking process. The hearing is not an adjudicative proceeding subject to the technical rules of evidence; instead, it is an informal administrative proceeding convened for the purpose of gathering and clarifying information. The regulations that govern the hearing, and the pre-hearing guidelines issued for the hearing, will ensure that participants are treated fairly and have due process; this approach will facilitate the development of a clear, accurate, and complete record. Accordingly, application of these rules and guidelines will be such that questions of relevance, procedures, and participation will be decided in favor of developing a complete record.

Conduct of the hearing will conform to the provisions of 29 CFR part 1911 (“Rules of Procedure for Promulgating, Modifying, or Revoking Occupational Safety and Health Standards”). Although the ALJ who presides over the hearing makes no decision or recommendation on the merits of the NPRM or the final rule, the ALJ has the responsibility and authority to ensure that the hearing progresses at a reasonable pace and in an orderly manner. To ensure that interested parties receive a full and fair informal hearing, the ALJ has the authority and power to: Regulate the course of the proceedings; dispose of procedural requests, objections, and similar matters; confine the presentations to matters pertinent to the issues raised; use appropriate means to regulate the conduct of the parties who are present at the hearing; question witnesses, and permit others to question witnesses; and limit the time for such questions. At the close of the hearing, the ALJ will establish a post-hearing comment period for parties who participated in the hearing. During the first part of this period, the participants may submit additional data and information to OSHA, and during the second part of this period, they may submit briefs, arguments, and summations.

Hearing participants must file a Notice of Intention to Appear that provides the following information: The name, address, and telephone number of each individual who will provide testimony; the capacity ( e.g. , name of the establishment/organization the individual is representing; the individual's occupational title and position) in which the individual will testify; approximate amount of time requested for the individual's testimony; specific issues the individual will address, including a brief description of the position that the individual will take with respect to each of these issues; and any documentary evidence the individual will present, including a brief summary of the evidence.

OSHA emphasizes that, while the hearing is open to the public and interested parties are welcome to attend, only a party who files a proper Notice of Intention to Appear may ask questions and participate fully in the hearing. A party who did not file a Notice of Intention to Appear may be allowed to testify at the hearing if time permits, but this determination is at the discretion of the presiding ALJ.

The Agency will review each submission and determine if the information it contains warrants the amount of time requested. OSHA then will allocate an appropriate amount of time to each presentation, and will notify the participants of the time allotted to their presentations. Prior to the hearing, the Agency will notify the participant if the allotted time is less than the requested time, and will provide the reasons for this action. OSHA may limit to 10 minutes the presentation of any participant who fails to comply substantially with these procedural requirements. The Agency may also request a participant to return for questions at a later time.

Following the close of the hearing and post-hearing comment period, the ALJ will certify the record to the Assistant Secretary of Labor for Occupational Safety and Health. This record will consist of all of the written comments, oral testimony, documentary evidence, and other material received during the hearing. Following certification of the record, OSHA will review the proposed provisions in light of all the evidence received as part of the record, and then will issue the final determinations based on the entire record.

John L Henshaw, Assistant Secretary of Labor for Occupational Safety and Health, U.S. Department of Labor, 200 Constitution Avenue, NW., Washington, DC 20210, directed the preparation of this document. It is issued under Section 6(b) of the Occupational Safety and Health Act of 1970 (29 U.S.C. 655), Secretary of Labor's Order No. 5-2002 (67 FR 65008), and 29 CFR part 1911.

We encourage you to participate in this rulemaking by submitting comments and related material. If you do so, please include your name and address, identify the docket number for this rulemaking (COTP San Francisco Bay 03-002), indicate the specific section of this document to which each comment applies, and give the reason for each comment. Please submit all comments and related material in an unbound format, no larger than 8 1/2 by 11 inches, suitable for copying. If you would like to know that your submission reached us, please enclose a stamped, self-addressed postcard or envelope. We will consider all comments and material received during the comment period. We may change this proposed rule in view of them.

We do not now plan to hold a public meeting. But you may submit a request for a meeting by writing to the Waterways Management Branch at the address under ADDRESSES explaining why one would be beneficial. If we determine that one would aid this rulemaking, we will hold one at a time and place announced by a separate notice in the Federal Register .

Since the September 11, 2001 terrorist attacks on the World Trade Center in New York, the Pentagon in Arlington, Virginia and Flight 93, the Federal Bureau of Investigation (FBI) has issued several warnings concerning the potential for additional terrorist attacks within the United States. In addition, the ongoing hostilities in Afghanistan and Iraq have made it prudent to U.S. ports to be on a higher state of alert because Al-Qaeda and other organizations have declared an ongoing intention to conduct armed attacks on U.S. interests worldwide.

In its effort to thwart terrorist activity, the Coast Guard has increased safety and security measures on U.S. ports and waterways. As part of the Diplomatic Security and Antiterrorism Act of 1986 (Pub. L. 99-399), Congress amended section 7 of the Ports and Waterways Safety Act (PWSA), 33 U.S.C. 1226, to allow the Coast Guard to take actions, including the establishment of security and safety zones, to prevent or respond to acts of terrorism against individuals, vessels or public or commercial structures.

The Coast Guard also has authority to establish security zones pursuant to the Act of June 15, 1917, as amended by the Magnuson Act of August 9, 1950 (50 U.S.C. 191 et seq. ) and implementing regulations promulgated by the President in subparts 6.01 and 6.04 of part 6 of title 33 of the Code of Federal Regulations.

In this particular proposed rulemaking, to address the aforementioned security concerns and to take steps to prevent the catastrophic impact that a terrorist attack against a High Interest Vessel (HIV) would have on the public interest, the Coast Guard is proposing to establish permanent security zones around and under HIVs entering, departing, moored or anchored within the San Francisco Bay and Delta ports. These security zones would help the Coast Guard prevent vessels or persons from engaging in terrorist actions against HIVs. Due to these heightened security concerns and the catastrophic impact a terrorist attack on an HIV would have on the crew and passengers on board and surrounding communities, security zones are prudent for these types of vessels.

On February 10, 2003, we issued a rule under docket COTP San Francisco Bay 03-002 and published this rule in the Federal Register (68 FR 9003, February 27, 2003) creating temporary section 165.T11-077 of Title 33 of the Code of Federal Regulations (CFR). Under temporary section 165.T11-077, the Coast Guard established 100-yard moving and fixed security zones around all HIVs that are anchored, moored or underway within the San Francisco Bay and Delta ports.

Though temporary section 165.T11-077 expired at 11:59 p.m. P.s.t. on May 31, 2003, it was effectively and seamlessly extended by a change in effective period temporary rule that was issued on May 19, 2003. This change in the effective period of the temporary rule is found under docket COTP San Francisco Bay 03-002 and was published in the Federal Register (68 FR 32368, May 30, 2003), under the same previous temporary section 165.T11-077, and extended the rule to 11:59 p.m. P.d.t. on September 30, 2003. On September 11, 2003, a second change in effective period temporary rule was issued, under docket COTP San Francisco Bay 03-002 and was published (68 FR 55445, September 26, 2003), under the same previous temporary section 165.T11-077, further extending the rule to 11:59 p.m. P.s.t. on March 31, 2004. The Captain of the Port has determined there is a need for continued security regulations exists.

We propose to create permanent security zones in the same areas currently protected by temporary security zones under § 165.T11-077. Our proposed rule would amend § 165.1183, Security Zones; Cruise Ships and Tank Vessels, San Francisco Bay and Delta ports, California (see 67 FR 79856, December 31, 2002), which contains permanent security zones for cruise ships and tank vessels. In this NPRM, the Coast Guard is proposing to amend § 165.1183 to include HIVs as protected vessels along with cruise ships and tank vessels. The Coast Guard will utilize the extended effective period of the § 165.T11-077 to engage in notice and comment rulemaking to develop permanent regulations tailored to the present and foreseeable security environment with the Captain of the Port (COTP) San Francisco Bay.

The Coast Guard proposes to establish moving and fixed security zones around all HIVs that are anchored, moored or underway within the San Francisco Bay and Delta ports. These security zones are activated when any HIV passes shoreward of the line drawn between San Francisco Main Ship Channel buoys 7 and 8 (LLNR 4190 & 4195, positions 37°46.9′ N, 122°35.4′ W & 37°46.5′ N, 122°35.2′ W, respectively) and remains in effect while the vessel is underway, anchored or moored within in the San Francisco Bay and Delta ports. When activated, this security zone would encompass all waters, extending from the surface to the sea floor, within 100 yards ahead, astern and extending 100 yards along either side of any HIV in the San Francisco Bay and Delta ports.

This security zone is automatically deactivated when the HIV passes seaward of the line drawn between San Francisco Main Ship Channel buoys 7 and 8 (LLNR 4190 & 4195, positions 37°46.9′ N, 122°35.4′ W & 37°46.5′ N, 122°35.2′ W, respectively) on its departure from port. Vessels and people may be allowed to enter an established security zone on a case-by-case basis with authorization from the Captain of the Port.

These security zones are needed for national security reasons to protect HIVs, the public, transiting vessels, adjacent waterfront facilities and the ports from potential subversive acts, accidents or other events of a similar nature. Entry into these zones would be prohibited unless specifically authorized by the Captain of the Port or his designated representative.

Vessels or persons violating this section would be subject to the penalties set forth in 33 U.S.C. 1232 and 50 U.S.C. 192. Pursuant to 33 U.S.C. 1232, any violation of the security zone described herein, is punishable by civil penalties (not to exceed $27,500 per violation, where each day of a continuing violation is a separate violation), criminal penalties (imprisonment up to 6 years and a maximum fine of $250,000) and in rem liability against the offending vessel. Any person who violates this section using a dangerous weapon or who engages in conduct that causes bodily injury or fear of imminent bodily injury to any officer authorized to enforce this regulation, also faces imprisonment up to 12 years. Vessels or persons violating this section are also subject to the penalties set forth in 50 U.S.C. 192: seizure and forfeiture of the vessel to the United States, a maximum criminal fine of $10,000, and imprisonment up to 10 years.

The Captain of the Port would enforce these zones and may enlist the aid and cooperation of any Federal, State, county, municipal and private agency to assist in the enforcement of the regulation. This regulation is proposed under the authority of 33 U.S.C. 1226 in addition to the authority contained in 50 U.S.C. 191 and 33 U.S.C. 1231.

This proposed rule is not a “significant regulatory action” under section 3(f) of Executive Order 12866, Regulatory Planning and Review, and does not require an assessment of potential costs and benefits under section 6(a)(3) of that Order. The Office of Management and Budget has not reviewed it under that Order. It is not “significant” under the regulatory policies and procedures of the Department of Homeland Security (DHS).

We expect the economic impact of this proposed rule to be so minimal that a full Regulatory Evaluation under the regulatory policies and procedures of DHS is unnecessary. Although this proposed rule restricts access to the waters encompassed by the security zones, the effect of this proposed rule would not be significant because: (i) The zones would encompass only a small portion of the waterway; (ii) vessels would be able to pass safely around the zones; (iii) vessels may be allowed to enter these zones on a case-by-case basis with permission of the Captain of the Port, or his designated representative; and (iv) vessels are able to safely transit around the zones while a vessel is moored or at anchor in the San Francisco Bay and Delta ports.

The size of the proposed zones are the minimum necessary to provide adequate protection for HIVs, their crews and passengers, other vessels operating in the vicinity of HIVs, adjoining areas and the public. The entities most likely to be affected are commercial vessels transiting the main ship channel en route to the San Francisco Bay and Delta ports and pleasure craft engaged in recreational activities and sightseeing. The proposed security zones would prohibit any commercial vessels from meeting or overtaking an HIV in the main ship channels, effectively prohibiting use of the channels. However, the moving security zones would only be effective during HIV transits, which would last for approximately 30 minutes.

Under the Regulatory Flexibility Act (5 U.S.C. 601-612), we have considered whether this proposed rule would have a significant economic impact on a substantial number of small entities. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000.

The Coast Guard certifies under 5 U.S.C. 605(b) that this proposed rule would not have a significant economic impact on a substantial number of small entities. We expect this proposed rule may affect owners and operators of private and commercial vessels, some of which may be small entities, intending to transit or anchor in the small portions of the waterway that are affected by these security zones. The proposed security zones would not have a significant economic impact on a substantial number of small entities for several reasons: Vessel traffic can pass safely around the area and vessels engaged in recreational activities, sightseeing and commercial fishing have ample space outside of the security zones to engage in these activities. When a HIV is at anchor, vessel traffic would have ample room to maneuver around the security zones. Small entities and the maritime public would be advised of these security zones via public notice to mariners.

If you think that your business, organization, or governmental jurisdiction qualifies as a small entity and that this rule would have a significant economic impact on it, please submit a comment ( see ADDRESSES ) explaining why you think it qualifies and how and to what degree this rule would economically affect it.

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we want to assist small entities in understanding this proposed rule so that they can better evaluate its effects on them and participate in the rulemaking. If the proposed rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please contact Lieutenant Doug Ebbers, Waterways Management Branch, U.S. Coast Guard Marine Safety Office San Francisco Bay, (510) 437-3073.

This proposed rule would call for no new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520).

A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on State or local governments and would either preempt State law or impose a substantial direct cost of compliance on them. We have analyzed this proposed rule under that Order and have determined that it does not have implications for federalism.

The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 or more in any one year. Though this proposed rule would not result in such an expenditure, we do discuss the effects of this proposed rule elsewhere in this preamble.

This proposed rule would not effect a taking of private property or otherwise have taking implications under Executive Order 12630, Governmental Actions and Interference with Constitutionally Protected Property Rights.

This proposed rule meets applicable standards in sections 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden.

We have analyzed this proposed rule under Executive Order 13045, Protection of Children from Environmental Health Risks and Safety Risks. This rule is not an economically significant rule and would not create an environmental risk to health or risk to safety that might disproportionately affect children.

This proposed rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it would not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes.

We have analyzed this proposed rule under Executive Order 13211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use. We have determined that it is not a “significant energy action” under that order because it is not a “significant regulatory action” under Executive Order 12866 and is not likely to have a significant adverse effect on the supply, distribution, or use of energy. The Administrator of the Office of Information and Regulatory Affairs has not designated it as a significant energy action. Therefore, it does not require a Statement of Energy Effects under Executive Order 13211.

We have analyzed this proposed rule under Commandant Instruction M16475.lD, which guides the Coast Guard in complying with the National Environmental Policy Act of 1969 (NEPA)(42 U.S.C. 4321-4370f), and have concluded that there are no factors in this case that would limit the use of a categorical exclusion under section 2.B.2 of the Instruction. Therefore, this rule is categorically excluded, under figure 2-1, paragraph (34)(g), of the Instruction, from further environmental documentation because we are establishing a security zone.

A draft “Environmental Analysis Check List” and a draft “Categorical Exclusion Determination” (CED) are available in the docket where indicated under ADDRESSES. Comments on this section will be considered before we make the final decision on whether the rule should be categorically excluded from further environmental review.

For the reasons discussed in the preamble, the Coast Guard proposes to amend 33 CFR part 165 as follows:

A. Affected Entities: Entities that would be affected by this section are those organizations and facilities subject to 40 CFR part 355—Emergency Planning and Emergency Release Notification Requirements and 40 CFR part 370—Hazardous Chemical Reporting. To determine whether your facility is affected by this action, you should carefully examine the applicability provisions at 40 CFR part 355 and 40 CFR part 370. Entities potentially affected by this action are facilities that distribute phosmet as a pesticide for commercial use and farms that store, handle and apply phosmet to variety of fruit, nut, and field crops. If you have any questions regarding the applicability of this action to a particular entity, consult the person(s) listed in the FOR FURTHER INFORMATION CONTACT section.

Docket. EPA has established an official docket for this action under Docket ID No. SFUND-2003-0007. The official docket consists of the documents specifically referenced in this action, any public comments received, and other information related to this action. Although a part of the official docket, the public docket does not include Confidential Business Information (CBI) or other information whose disclosure is restricted by statute. The public docket is the collection of materials that is available for public viewing at SUPERFUND Docket in the EPA Docket Center, (EPA/DC) EPA West, Room B102, 1301 Constitution Avenue, NW., Washington, DC. This Docket Facility is open from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding legal holidays. The telephone number for the Public Reading Room is (202) 566-1744, and the telephone number for the SUPERFUND Docket is (202) 566-0270. You may copy up to 100 pages from any regulatory document at no cost. Additional copies are $0.15 per page.

Electronic Access. You may access this Federal Register document electronically through the EPA Internet under the “ Federal Register ” listings at http://www.epa.gov/fedrgstr .

An electronic version of the public docket is available through EPA's electronic public docket and comment system, EPA Dockets. You may use EPA Dockets at http://www.epa.gov/edocket/ to submit or view public comments, access the index listing of the contents of the public docket, and access those documents in the public docket that are available electronically. Once in the system, select “search,” then key in the appropriate docket identification number.

Certain types of information will not be placed in the EPA Dockets. Information claimed as CBI and other information whose disclosure is restricted by statute, which is not included in the official public docket, will not be available for public viewing in EPA's electronic public docket. EPA's policy is that copyrighted material will not be placed in EPA's electronic public docket but will be available only in printed, paper form in the official public docket. Although not all docket materials may be available electronically, you may still access any of the publicly available docket materials through the docket facility. EPA intends to work toward providing electronic access to all of the publicly available docket materials through EPA's electronic public docket.

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For additional information about EPA's electronic public docket visit EPA Dockets online or see 67 FR 38102, May 31, 2002.

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Your use of EPA's electronic public docket to submit comments to EPA electronically is EPA's preferred method for receiving comments. Go directly to EPA Dockets at http://www.epa.gov/edocket , and follow the online instructions for submitting comments. To access EPA's electronic public docket from the EPA Internet Home Page, select “Information Sources,” “Dockets,” and “EPA Dockets.” Once in the system, select “search,” and then key in Docket ID No. SFUND-2003-0007. The system is an “anonymous access” system, which means EPA will not know your identity, e-mail address, or other contact information unless you provide it in the body of your comment.

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By Mail. Send an original and two copies of your comments to: SUPERFUND Docket Information Center, U.S. Environmental Protection Agency, Mailcode: 5305T, 1200 Pennsylvania Ave., NW., Washington, DC, 20460, Attention Docket ID No. SFUND-2003-0007.

By Hand Delivery or Courier. Deliver your comments to: SUPERFUND Docket Information Center (EPA/DC) EPA West, Room B102, 1301 Constitution Avenue, NW., Washington, DC. Attention Docket ID No. SFUND-2003-0007. Such deliveries are only accepted during the Docket's normal hours of operation as identified in the “How Can I Get Copies of This Document and Other Related Information?” section.

Do not submit information that you consider to be confidential business information (CBI) electronically through EPA's electronic public docket or by e-mail. Send or deliver information identified as CBI only to the following address: SUPERFUND CBI Document Control Officer (5305T), U.S. EPA, 1200 Pennsylvania Avenue, NW., Washington, D.C. 20460, Attention Docket ID No. SFUND-2003-0007. You may claim information that you submit to EPA as CBI by marking any part or all of that information as CBI (if you submit CBI on disk or CD ROM, mark the outside of the disk or CD ROM as CBI and then identify electronically within the disk or CD ROM the specific information that is CBI). Information so marked will not be disclosed except in accordance with procedures set forth in 40 CFR, Part 2.

In addition to one complete version of the comment that includes any 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 and EPA's electronic public docket. If you submit the copy that does not contain CBI on disk or CD ROM, mark the outside of the disk or CD ROM clearly that it does not contain CBI. Information not marked as CBI will be included in the public docket and EPA's electronic public docket without prior notice. If you have any questions about CBI or the procedures for claiming CBI, please consult the person identified in the FOR FURTHER INFORMATION CONTACT section.

You may find the following suggestions helpful for preparing your comments:

1. Explain your views as clearly as possible.

2. Describe any assumptions that you used.

3. Provide any technical information and/or data you used that support your views.

4. If you estimate potential burden or costs, explain how you arrived at your estimate.

5. Provide specific examples to illustrate your concerns.

6. Offer alternatives.

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

8. To ensure proper receipt by EPA, identify the appropriate docket identification number in the subject line on the first page of your response. It would also be helpful if you provided the name, date, and Federal Register citation related to your comments.

This proposed rule is issued under sections 302 and 328 of the Emergency Planning and Community Right-to-Know Act of 1986 (EPCRA).

On October 17, 1986, the President signed into law the Superfund Amendments and Reauthorization Act of 1986 (SARA), Pub. L. 99-499 (1986). Title III of SARA established a program designed to require state and local planning and preparedness for spills or releases of hazardous substances and to provide the public and local governments with information concerning potential chemical hazards in their communities. This program is codified as the Emergency Planning and Community Right-to-Know Act of 1986 (EPCRA), 42 U.S.C. 11001-11050.

Subtitle A of EPCRA establishes the framework for local emergency planning. The statute requires that EPA publish a list of “extremely hazardous substances” (EHSs). The EHS list was established by EPA to identify chemical substances which could cause serious irreversible health effects from accidental releases (51 FR 13378). EPA had previously published this list as the list of acutely toxic chemicals in November 1985, in Appendix A of the Chemical Emergency Preparedness Program Interim Guidance (CEPP Guidance). The Agency was also directed to establish “threshold planning quantities” (TPQs) for each extremely hazardous substance.

Under EPCRA section 302, a facility which has on-site an EHS in excess of its TPQ must notify the State Emergency Response Commission (SERC) and Local Emergency Planning Committee (LEPC) as well as participate in local emergency planning activities. The facility must also report accidental releases in excess of the Reportable Quantity (RQ) to the LEPC and SERC. Under EPCRA section 311 and 312, some facilities with phosmet on-site in excess of its TPQ are required to submit an emergency and hazardous chemical inventory form and Material Safety Data Sheet (MSDS) required for phosmet with their SERC, LEPC and local fire department. However, facilities that apply phosmet to crops as a pesticide, do not have to file the inventory form or MSDS because chemicals that are used at facilities in routine agricultural operations are not included as hazardous chemicals subject to the reporting requirements.

The purpose of the extremely hazardous substance list is to focus initial efforts in the development of State and local contingency plans. Inclusion of a chemical on the EHS list does not mean state or local communities should ban or otherwise restrict use of a listed chemical. Rather, such identification indicates a need for the community to undertake a program to investigate and evaluate the potential for accidental exposure associated with the production, storage or handling of the chemical at a particular site.

The list of extremely hazardous substances and their threshold planning quantities are codified in 40 CFR part 355, Appendices A & B. EPA first published the EHS list and TPQs along with the methodology for determining threshold planning quantities as an interim final rule on November 17, 1986 (51 FR 41573-41579 and 41580 ). In the final rule, EPA made a number of revisions to the interim final rule (52 FR 13387, April 22, 1987). Among other things, the final rule republished the EHS list, with the addition of four new chemicals and revised the methodology for determining some TPQs. Details of the methodology used to determine whether to list a substance as an extremely hazardous substance and for deriving the threshold planning quantities are found in the November 1986 and April 1987 Federal Register notices and in technical support documents in the rulemaking records. These records are found in Superfund Docket No. 300PQ.

EPA has since received a number of petitions to amend the EHS list. To date, 46 chemicals have been delisted from the EHS list in previous rulemakings because they did not meet the toxicity criteria for the list and were originally listed under section 302 in error.

EPA received a petition dated August 8, 1996 from Gowan Company to delete the chemical phosmet from the EHS list under Section 302 of EPCRA. Gowan believes that listing of phosmet was based on an inappropriate toxicity study and argues that phosmet should be removed from the EHS list because there are no valid data that indicate the chemical meets the listing criteria.

Phosmet (O,O-dimethyl-S-phthalimidomethylphosphorodithioate, CAS No. 732-11-6) is a pink to white crystalline solid with chemical formula C 11 H 12 NO 4 PS 2 . It is slightly soluble in water and has a relatively low vapor pressure. It is a non-systemic organophosphate insecticide used for agricultural crop protection in fruit, nut and certain field crops. It is also used on trees and ornamental plants. According to EPA's Office of Pesticide Programs (OPP), approximately 1,250,000 pounds active ingredient (a.i.) of phosmet are used annually. Technical grade phosmet contains approximately 94% phosmet. Products containing phosmet can be in the form of dusts, emulsifiable concentrates, soluble concentrates, and wettable powders and can contain varying amounts of the active ingredient phosmet. More information on phosmet can be found in the February 2003 Technical Background Document: Proposed Rule to Delist Phosmet from the EHS List, available in the docket.

As previously described, in November 1985, EPA published a list of substances in Appendix A of the “Chemical Emergency Preparedness Program Interim Guidance.” Under section 302(a) of EPCRA, Congress required EPA to adopt that same list as the EHS list. Appendix A defines the list of chemicals as those “for which an acute toxicity measure has a value meeting the criteria stated in Chapter 6” of the November 1985 Interim Guidance. The listing criteria discussed in Chapter 6 are the same criteria referenced and discussed in EPA's interim final and final rules establishing the EHS list. Those criteria contain two sets of numerical acute toxicity measures. For purposes of clarification in today's rulemaking, EPA will refer to the two sets of numerical acute toxicity criteria as the primary listing criteria and the secondary listing criteria. In developing these criteria, the Agency presumed that humans may be as sensitive as the most sensitive mammalian species tested.

The primary acute toxicity criteria are, based on data from mammalian testing:

LC 50 is the median lethal concentration, defined as the concentration level at which 50 percent of the test animals died when exposed by inhalation for a specified time period.

LD 50 is the median lethal dose, defined as the dose at which 50 percent of the test animals died during exposure.

EPA included on the EHS list other chemicals that did not meet the primary acute toxicity criteria. These were added based on the secondary acute toxicity criteria below as well as the following factors: Large volume production and known risk, as indicated by the fact that some of the chemicals have caused death and injury in accidents.

The secondary acute toxicity criteria are, based on data from mammalian testing:

The chemical with the lowest production volume that was included as an EHS based on the secondary criteria and high production volume, had an annual production volume of 30 million pounds. In addition to high production chemicals meeting these criteria, several other chemicals slightly less toxic than the secondary criteria, were listed because of their recognized toxicity as a chemical of concern or known hazard; for example several of them have caused death or injury in accidents.

The selection criteria were designed as screening tools to identify highly acute toxic chemicals. The specific values chosen are recognized by the scientific community as indicating a high potential for acute toxicity, and chemicals meeting the toxicity criteria are considered potentially hazardous. Even with the amount of animal data that are available, some chemicals have no standard acute toxicity test data.

In choosing chemicals for the EHS list, EPA matched the criteria against all mammalian test data for all chemicals. A chemical was identified as acutely toxic according to these criteria if mammalian acute toxicity data for any one of the three routes of administration was equal to or less than the numerical criteria specified for that route. The Agency used LC LO or LD LO data for a chemical in cases where median lethal concentration or dose (LC 50 or LD 50 ) were not available. The lethal concentration low (LC LO ) and the lethal dose low (LD LO ) are the lowest concentration in air or the lowest dose in milligrams of chemical per kilogram of body weight, respectively, at which any test animals died. These values may be more variable than those provided from median lethality tests, but for the purposes of screening large numbers of chemicals, it was deemed necessary to provide a second level screening tool in preference to missing potentially toxic chemicals because they were not adequately tested. For inhalation data, the Agency chose to use LC 50 and LC LO values with exposure periods up to eight hours or even with no reported exposure period. EPA recognized that this was a conservative approach, but did not want to miss any acutely toxic chemical of concern.

The Agency also used lethality data from the most sensitive mammalian species and not only those from rats because it was not possible to predict which species is the appropriate surrogate for humans for a given chemical. In addition, because populations are heterogeneous and individuals are expected to vary considerably in their sensitivity to chemical substances, the Agency assumed that humans may be as sensitive as the most sensitive mammalian species tested.

When the initial list was developed, the Agency used acute toxicity data from the Registry of Toxic Effects of Chemical Substances (RTECS), maintained by the National Institute of Occupational Safety and Health (NIOSH). The RTECS data was compared with the EHS listing toxicity criteria (both primary and secondary). The RTECS data base was used as the principal source of toxicity data for identifying acutely toxic chemicals because it represents the most comprehensive repository of acute toxicity information available with basic toxicity information and other data on more than 79,000 chemicals. Although RTECS is not formally peer-reviewed, data from RTECS is widely accepted and used as a toxicity data source by industry and regulatory agencies alike. The data presented are from scientific literature which has been edited by the scientific community before publication.

Phosmet was originally listed on the EHS list because a four-hour rat inhalation LC 50 of 0.054 mg/L, reported in the 1985 RTECS database, met the EHS primary toxicity inhalation criteria of LC 50 ≤ 0.5 mg/L. The value in RTECS was cited from a 1982 Russian publication, which was a compilation of toxicity data for many chemicals.

The TPQ for phosmet depends on its physical state. As a solid, phosmet has a TPQ of 10 pounds if it: (1) Is a powder with particle size less than 100 microns, (2) is in molten form, (3) is in solution, or (4) has a National Fire Protection Association (NFPA) reactivity rating of 2, 3, or 4. Otherwise, the TPQ for phosmet is 10,000 pounds.

Gowan Company of Yuma, Arizona submitted to EPA a petition dated August 8, 1996 requesting that EPA remove phosmet from the EHS list because it does not meet the toxicity criteria. During EPA's review of the petition, Gowan submitted additional toxicity data and other information. EPA also reviewed acute toxicity data for phosmet previously submitted to EPA's Office of Pesticide Programs (OPP) for the registration of phosmet as a pesticide. Gowan argued that the inhalation LC 50 (rat) value of 0.054 mg/liter/4 hours, as cited in RTECS, is unverifiable because the experimental details, study protocol, and quality control procedures are unavailable. Without these experimental details, Gowan maintained that it is impossible to reconstruct and validate the original experiment. In addition, Gowan asserted that this LC 50 value is inconsistent with all other available inhalation toxicity data for technical grade (95% purity or higher) phosmet. Gowan also asserted that the phosmet technical grade does not meet the toxicity criteria for listing as an EHS following exposure by the oral or dermal routes, as indicated by a number of experimental studies. Gowan submitted with their petition data from a number of acute inhalation toxicity tests which they believe show that phosmet technical poses a low risk of acute toxicity by inhalation, as indicated by the absence of mortality when test animals were exposed to phosmet vapor or dust. Gowan also claimed that the toxicity studies on phosmet formulations, including wettable powders and liquid formulations, indicate that these phosmet products do not meet the criteria for the EHS list.

Because phosmet is not a high production chemical (less than 2 million pounds annually), EPA focused its efforts on evaluating whether the existing toxicity data meets the primary listing criteria. In addition to the phosmet toxicity data submitted by Gowan and available data from OPP, EPA found data from acute mouse oral toxicity studies identified from a search of toxicity databases and literature. In July 2001, Gowan supplied EPA with data from five acute oral mouse studies and EPA obtained a journal article on an acute mouse oral toxicity study conducted by the National Center for Toxicological Research (NCTR) of the Food and Drug Administration (FDA). More details of the phosmet toxicity studies and their evaluation can be found in the February 2003 Technical Background Document: Proposed Rule to Delist Phosmet from the EHS List available in the public docket.

The four-hour rat inhalation LC 50 of 0.054 mg/L, reported in 1985 RTECS was cited from a Russian publication (Izmerov et al. 1982. Toxicometric Parameters of Industrial Toxic Chemical Under Single Exposure) which contained compiled toxicity values for many chemicals, but no study details. In both the Russian and English translation version of this document, the chemical structure given for phosmet is incorrect, which led Gowan to assert that there was some uncertainty as to whether the chemical being tested was indeed phosmet. EPA was not able to obtain the actual phosmet toxicity study conducted by a Russian researcher L.P. Danilenko, but was able to obtain a translation of a Russian 1969 journal article by Danilenko that discussed the rat inhalation study and the results. Based on the chemical name and chemical synonyms (O,O-dimethyl-phthalimidio-methyl-dithiophosphate or phthalophos) used in (Danilenko 1969), EPA believes the chemical being tested was indeed phosmet. No chemical structure was given in the article.

In Danilenko (1969), the following acute toxicity results were reported for phthalophos, also known as Imidan or phosmet: a four-hour rat inhalation LC 50 of 54 mg/m 3 (0.054 mg/L); a four-hour rat inhalation LC LO of 31 mg/m 3 (0.031 mg/L); and a four-hour cat inhalation LC LO of 65 mg/m 3 (0.065 mg/L). The tests were performed using an aqueous emulsion of phthalophos (phosmet) on albino rats and cats. The animals were exposed to a liquid aerosol produced by atomization of the preparation with a special sprayer (Boitenko). The concentration of phthalophos (phosmet) in the chamber air was determined by a thin-layer chromatographic method.

However, the Danilenko (1969) article severely lacks key details of the experimental methods, such as the purity of phosmet, extent of animal body exposure, possibility of other routes of exposure, specific emulsion components and their toxicity. The phosmet used in the experiment was manufactured in the Union of Soviet Socialist Republics (USSR) by a research institute using an unknown method. With the number of unanswered key questions regarding the experimental protocol, EPA has determined that the results in this paper are insufficient to provide the basis for the continued listing of phosmet on the EHS list.

EPA evaluated more than 20 other inhalation studies of technical grade phosmet (≥94% phosmet) and other phosmet formulations, such as wettable powders and emulsions. The testing exposure routes included vapor, particulates and aerosols. Only three of these inhalation studies produced any mortality. The LC 50 data from these three studies were not in the range of the LC 50 value in the Russian study and did not meet the primary toxicity listing criteria of ≤0.5 mg/L. Of these three studies, results of one study with mortality were not considered appropriate to use because the phosmet formulation contained methylene chloride, a toxic component. Another study conducted in 1994, exposed rats to aerosols from an emulsion containing 27.5% phosmet and 8.4% naphthalenes. The aerosols were respirable-sized having a mass median aerodynamic diameter (MMAD) of 1.5-2.2 microns (μm). This study resulted in a LC 50 of 1.19 mg/L for male rats and 0.845 mg/L for females. A third study conducted in 1995 reported a LC 50 of 1.6 mg/L for rats and exposed the animals to a 70% phosmet particulates having a MMAD of 1.61 to 2.38 microns (μm).

Given the uncertainties with the inhalation toxicity data from (Danilenko, 1969) and based on the Agency's review of all the acute inhalation toxicity data for phosmet, EPA believes that there are no inhalation data meeting the primary listing criteria for phosmet of sufficient reliability or quality to support the listing of phosmet as an EHS chemical. As a result, EPA has decided to remove this inhalation value from consideration for the purpose of listing phosmet as an EHS. EPA solicits comments on the validity of the available inhalation toxicity studies to support listing of phosmet as an EHS based on the listing criteria for inhalation toxicity. EPA invites submission of any valid acute inhalation toxicity studies not already made available to EPA. EPA's review of all currently available acute inhalation toxicity studies can be found in the February 2003 Technical Background Document: Proposed Rule to Delist Phosmet from the EHS List available in the public docket.

EPA undertook review of existing acute dermal toxicity data for phosmet. EPA could find no dermal toxicity data that met the primary dermal listing criteria of LD 50 ≤ 50 mg/kg. The lowest test results for technical phosmet indicated that the dermal LD 50 is greater than 3160 mg/kg.

Gowan submitted several acute rat oral studies in 1996, for technical grade phosmet and phosmet powder and emulsion formulations. None of the rat LD 50 values from these studies met the EHS listing criteria, even when the percentage of inert ingredients in the formulation was taken into account. The lowest reported rat oral LD 50 for technical grade phosmet (96.1%) is 113 mg/kg, which does not exceed the primary oral listing criteria of 25 mg/kg. The lowest reported rat oral LD 50 for a phosmet formulation of 70% dust is 147 mg/kg (73.5 mg/kg based on active ingredient). Even when adjusted for the percentage active ingredient, this dose still does not exceed the criteria of 25 mg/kg.

Subsequently, EPA retrieved LD 50 values from six mouse oral studies on technical grade phosmet from toxicity databases and the literature. Gowan was able to supply five of the mouse studies, which had been conducted by Stauffer Chemical Company. EPA also reviewed oral acute toxicity data available from OPP. Review of the six acute mouse oral studies indicates that mice are more sensitive than rats to phosmet. One mouse study conducted by Stauffer Chemical Company in 1971 reported a phosmet technical LD 50 of 23.3 mg/kg for mice for technical grade phosmet, percentage unspecified . Another study conducted by researchers at NCTR (Haley et al. , 1975) reported LD 50 results of 23.1 and 24.9 mg/kg for males and female mice, respectively for 99.5% phosmet. Other acute oral studies of technical grade phosmet with mice had LD 50 results varying from 36.9 to 51 mg/kg. For a phosmet powder formulation, the lowest reported oral LD 50 was 79.4 mg/kg in mice for 50% phosmet wettable powder. These studies are discussed in more detail in the February 2003 Technical Background Document: Proposed Rule to Delist Phosmet from the EHS List, available in the public docket.

The oral mouse LD 50 of 23.3 mg/kg for phosmet technical resulted from testing a material called Imidan-EDC. Phosmet is also known by the name “Imidan.” Gowan stated that EDC (ethylene dichloride or dichloroethane), was a solvent used in the initial synthesis step of a discontinued process and that the impurity profile is not known. Gowan was not sure whether this product was ever registered for commercial use by Stauffer, who was the previous pesticide registrant with EPA. Gowan never utilized the EDC process and currently uses a benzene process to manufacture technical phosmet, the product currently registered with EPA. According to Gowan, Stauffer also licensed the phosmet-benzene process as a registrant with EPA. The Stauffer researchers determined the mouse oral LD 50 for Imidan-Benzene to be 43 mg/kg. The greater toxicity observed for technical phosmet synthesized via the EDC route presumably may have been due to impurities resulting from the starting material, incomplete synthesis, degradation or other syntheses method-specific factors. Gowan believes that the “Imidan-EDC” phosmet is an inappropriate test substance. Because of these uncertainties, EPA does not believe the Imidan-EDC results are representative for the phosmet manufactured and registered with EPA by either Stauffer Chemical (former pesticide registrant) or Gowan Company (current pesticide registrant). Therefore, EPA removed these values from consideration for EHS listing purposes.

Only one other study (Haley et al., 1975) reported results with an LD 50 ≤ 25 mg/kg. This study examined the acute oral toxicity of five organophosphate pesticides (including Imidan or phosmet) in a total of three experiments: a range finding experiment, a pilot experiment, and a main experiment designed to estimate an LD 1 value and extrapolate an LD 0.1 value. LD 50 values for phosmet were reported from the pilot study as 25.2 and 23.1 mg/kg for males and females, respectively and from the main study as 23.1 and 24.9 mg/kg for males and females, respectively. The study was conducted by the National Center for Toxicological Research (FDA), Arkansas. After reviewing this information, Gowan made several arguments why the information in the Haley study was insufficient to support the listing of phosmet as an EHS.

Haley et al. (1975) conducted two dose response experiments, a pilot study (100 mice) and a main study (660 mice). A linear regression was developed from the pilot results. The LD 50 and its confidence intervals, and the slope of the regression and its confidence intervals are provided in the journal article. Using this regression, doses for LD 1 , LD 2 , LD 4 , LD 8 , LD 16 , LD 32 , and LD 64 were taken from the regression and used in the main study. The goal of the study was to estimate the LD 1 and extrapolate the LD 0.1 . For the pilot study the actual doses and number of animals killed are not presented. The LD 1 , LD 16 , and LD 50 results only, by sex, were presented in a table in Haley et al. (1975) as predicted doses from the pilot study and calculated doses from the main study. The actual doses in the main study were chosen based on the results from the pilot study. The log of actual doses and percentage of animals killed are presented in a graph for each sex, except the value of the LD 2 for males which gave an aberrant response.

One of Gowan's key criticisms of Haley et al. (1975) was that no mortality data was presented from the pilot experiment and complete data from the main experiment is presented only in graphical form. Because the actual doses and animals killed at each dose are not cited, Gowan stated that the LD 50 results cannot be replicated or confirmed. EPA agrees with Gowan that the lack of tabulated mortality data is a serious flaw in this experiment. EPA attempted to recover the actual mortality data from the National Center for Toxicological Research, but the NCTR was not able to recover it. Gowan also raised other issues regarding Haley et al. (1975) which included the variations in main study mortality response, lack of information on the use of control data, and other questions or potential problems with the study methodology or design. The Agency addresses these issues in detail in the technical background document supporting this rulemaking.

Because of the uncertainties surrounding verification of results of the Haley study, EPA proposed conducting a new acute oral mouse LD 50 study using the Up-And-Down Method, as described in the Office of Prevention, Pesticides and Toxic Substances (OPPTS) new Harmonized Test Guideline 870.1100 for Acute Oral Toxicity. This guideline has been adopted by the Federal Interagency Coordinating Committee on the Validation of Alternative Methods (ICCVAM), the Organization for Economic Coordination and Development (OECD) and EPA's Science Advisory Panel (SAP). EPA's participation in ICCVAM is part of the Agency's commitment to support testing that reduces the use of animals.

Before EPA initiated the new test, Gowan decided to conduct its own acute toxicity study in mice. Based on its review of the existing toxicity data and the recommended test method, EPA provided Gowan with the recommended test method and comments on Gowan's draft test protocol. EPA recommended that Gowan test at multiple dose levels using the Up and Down Procedure (UDP) for acute oral toxicity. (See Docket for test method and comments provided to Gowan.)

Gowan completed its study of mouse responses to acute oral exposure to phosmet in December 2002. Their study planned to dose 20 female mice at 40 mg/kg, initially, with subsequent doses tested, if warranted. Twenty female mice were administered 40 mg/kg by oral gavage. After 14 days observation, there were no mortalities. Because no mortality occurred at 40 mg/kg, Gowan saw no need to conduct further tests. Thus, Gowan conducted a single dose study rather than an LD 50 test. Gowan believes the test results confirm that the oral LD 50 of phosmet exceeds 25 mg/kg listing criterion and that there is no basis for continuing to list phosmet as an Extremely Hazardous Substance.

The study results have been carefully reviewed by a cross-agency ad hoc committee whose consensus was that the Gowan study seemed to confirm the oral mouse LD 50 results from most of the previous literature studies, which showed LD 50 s greater than EHS listing criterion of 25 mg/kg. EPA believes that the new test results support the conclusion that the acute oral LD 50 of phosmet exceeds 25 mg/kg and that phosmet should be removed from the EHS list. The Gowan study appears to be sound and conducted properly according to Good Laboratory Practices, although it is only for a single dose. The large number of mice (20) tested at a much higher concentration than the EHS List criterion supports the probability that the acute oral mouse LD 50 is greater than 25 mg/kg . In addition, Gowan had done a thorough chemical analysis of the phosmet material that was administered to the animals.

Normally EPA would not accept a single dose study for drawing conclusions about the LD 50 for a chemical. However, the Agency believes this study can be used in its analysis because of existing data indicating the approximate range of probable LD 50 values and data showing that phosmet has a steep dose-response curve. Although the new test did not follow new acute oral toxicity testing guidelines, the test results are consistent with the variability of individual animal dose response seen in existing oral mouse LD 50 studies.

Phosmet is an organophosphate pesticide, with known lethal and toxic human health effects. However, after careful consideration of all of the toxicity data, EPA proposes that phosmet should be delisted from the EHS list for the following reasons: (1) The mouse oral LD 50 data that meet the criteria from the Haley et al. (1975) study have a number of deficiencies that increase the uncertainty around the results, such as lack of tabulated mortality data for either the pilot or the main study, lack of information on treatment of the control data, and considerable variability in the results at the LD 01 -LD 08 doses, (2) the Haley LD 50 results are right at the limit of the oral toxicity listing criteria of 25 mg/kg, and (3) other acute mouse oral studies (including Gowan's December 2002 study conducted using Good Laboratory Practices) indicate the mouse oral LD 50 exceeds the 25 mg/kg listing criteria. EPA solicits comment on the proposed delisting decision and its rationale, and invites the public to submit or identify relevant peer-reviewed studies or data, of which the Agency may not be aware. EPA invites submission of any valid oral toxicity studies for phosmet that meet the listing criteria which are not already been reviewed by EPA. EPA's review of all currently available acute oral toxicity studies can be found in the February 2003 Technical Background Document: Proposed Rule to Delist Phosmet from the EHS List available in the public docket.

Under Executive Order 12866 (58 FR 51735), the Agency must determine whether this regulatory action is “significant” and therefore subject to formal review by the Office of Management and Budget (OMB) and to the requirements of the Executive Order, which include assessing the costs and benefits anticipated as a result of the proposed regulatory action. The Order defines “significant regulatory action” as one that is likely to result in a rule that may: (1) Have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or state, local, or tribal governments or communities; (2) create a serious inconsistency or otherwise interfere with an action taken or planned by another agency; (3) materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or (4) raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in the Executive Order.

It has been determined that this rule is not a “significant regulatory action” under the terms of Executive Order 12866 and is therefore not subject to OMB review.

The Office of Management and Budget (OMB) has previously approved the information collection requirements contained in the existing regulations 40 CFR Part 355 under the provisions of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. and has assigned OMB control number 2050-0092, (EPA ICR No. 1395.04). Copies of the ICR document(s) may be obtained from Susan Auby, by mail at U.S. Environmental Protection Agency, Collection Strategies Division (Mail Code 2822), 1200 Pennsylvania Ave., NW., Washington, DC 20460-0001, by email at auby.susan@epa.gov, or by calling 202-566-1672. A copy may also be downloaded off the internet at http://www.epa.gov/icr Include the ICR and / or OMB number in any correspondence.

This action does not impose any new information collection burden. This proposed rule will relieve burden for facilities that have phosmet on-site. Therefore, we conclude that this proposed action does not impose any new information collection burden, rather, it would relieve the regulatory burden for those facilities that handled phosmet. Burden means the total time, effort, or financial resources expended by persons to generate, maintain, retain, or disclose or provide information to or for a Federal agency. This includes the time needed to review instructions; develop, acquire, install, and utilize technology and systems for the purposes of collecting, validating, and verifying information, processing and maintaining information, and disclosing and providing information; adjust the existing ways to comply with any previously applicable instructions and requirements; train personnel to be able to respond to a collection of information; search data sources; complete and review the collection of information; and transmit or otherwise disclose the information.

An Agency may not conduct or sponsor, and a person is not required to respond to a collection of information unless it displays a currently valid OMB control number. The OMB control numbers for EPA's regulations are listed in 40 CFR Part 9 and 48 CFR Chapter 15.

Comments are requested on the changes included in this proposal. Send comments on the ICR to the Director, Collection Strategies Division; U.S. Environmental Protection Agency (2823); 1200 Pennsylvania Avenue, NW., Washington, DC 20460-0001; and to the Office of Information and Regulatory Affairs, Office of Management and Budget, 725 17th St., NW., Washington, DC 20503, marked “Attention: Desk Officer for EPA.” Include the ICR number in any correspondence. Since OMB is required to make a decision concerning the ICR between 30 and 60 days after November 12, 2003, a comment to OMB is best assured of having its full effect if OMB receives it by December 12, 2003. The final rule will respond to any OMB or public comments on the information collection requirements contained in this proposal.

The Regulatory Flexibility Act (RFA), as amended by the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA), 5 U.S.C. 601 et. seq., generally requires an agency to prepare a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements under the Administrative Procedure Act or any other statute, unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. Small entities include small businesses, small organizations, and small governmental jurisdictions.

For purposes of assessing the impacts of today's rule on small entities, small entity is defined as: (1) A small business that has fewer than 1000 or 100 employees per firm depending upon the SIC code the firm primarily is classified; (2) a small governmental jurisdiction that is a government of a city, county, town, school district or special district with a population of less than 50,000; and (3) a small organization that is any not-for-profit enterprise which is independently owned and operated and is not dominant in its field.

After considering the economic impacts of today's proposed rule on small entities, I hereby certify that this proposal will not have a significant economic impact on a substantial number of small entities. In determining whether a rule has a significant economic impact on a substantial number of small entities, the impact of concern is any significant adverse economic impact on small entities, since the primary purpose of the regulatory flexibility analyses is to identify and address regulatory alternatives “which minimize any significant economic impact of the proposed rule on small entities” (5 U.S.C. 603 and 604). Thus, an agency may certify that a rule will not have a significant economic impact on a substantial number of small entities if the rule relieves regulatory burden, or otherwise has a positive economic effect on small entities subject to the rule. This proposed rule would remove requirements for reporting and emergency planning for small entities with phosmet on site. We have therefore concluded that today's proposed rule would relieve regulatory burden for small entities.

We continue to be interested in the potential impacts of the proposed rule on small entities and welcome comments on issues related to such impacts.

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public Law 104-4, establishes requirements for Federal Agencies to assess the effects of their regulatory actions on State, local, and tribal governments and the private sector. Under section 202 of the UMRA, EPA must prepare a written analysis, including a cost-benefit analysis, for proposed and final rules with “Federal mandates” that may result in expenditures to State, local, and tribal governments, in the aggregate, or to the private sector, of $100 million or more in any one year. Before promulgating an EPA rule for which a written statement is needed, section 205 of the UMRA requires EPA to identify and consider a reasonable number of regulatory alternatives and adopt the least costly, most cost-effective, or least burdensome alternative that achieves the objectives of the rule. The provisions of section 205 do not apply when they are inconsistent with applicable law. Moreover, section 205 allows EPA to adopt an alternative other than the least costly, most cost-effective or least burdensome alternative if the Administrator publishes with the final rule an explanation why that alternative was not adopted.

Before EPA establishes any regulatory requirements that may significantly or uniquely affect small governments, including tribal governments, it must have developed under section 203 of the UMRA a small government agency plan. The plan must provide for notifying potentially affected small governments, enabling officials to have meaningful and timely input in the development of regulatory proposals, and informing, educating, and advising small governments on compliance with the regulatory requirements.

EPA has determined that this rule does not include a Federal mandate that may result in expenditures of $100 million or more for State, local, or tribal governments, in the aggregate, or the private sector in any one year. This is because this proposed rule would provide regulatory burden relief and does not impose any additional costs to any State, local, or tribal governments. EPA also has determined that this rule contains no regulatory requirements that might significantly or uniquely affect small governments. In addition, as discussed above, the private sector is not expected to incur costs exceeding $100 million. Therefore, today's proposed rule is not subject to the requirements of Sections 202 and 205 of UMRA.

Executive Order 13132, entitled “Federalism” (64 FR 43255, August 10, 1999), requires EPA to develop an accountable process to ensure “meaningful and timely input by State and local officials in the development of regulatory policies that have federalism implications.” “Policies that have federalism implications” is defined in the Executive Order to include regulations that have “substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.”

This proposal does not have federalism implications. It will not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132. This proposed rule does not impose any new requirements on states or other levels of government. Instead it relieves LEPCs of the responsibility of developing and maintaining emergency plans for facilities that handle and store phosmet. SERCs and LEPCs will no longer be notified of releases of phosmet under the requirements of EPCRA Section 304. Thus, the requirements of section 6 of the Executive Order do not apply to this proposal.

In the spirit of Executive Order 13132, and consistent with EPA policy to promote communications between EPA and State and local governments, EPA specifically solicits comment on this proposed rule from State and local officials.

Executive Order 13175, entitled “Consultation and Coordination with Indian Tribal Governments” (65 FR 67249, November 9, 2000), requires EPA to develop an accountable process to ensure “meaningful and timely input by tribal officials in the development of regulatory policies that have tribal implications.”

This proposed rule does not have tribal implications, as specified in Executive Order 13175. This proposed rule does not impose any new requirements on tribal officials. Instead it relieves them of the responsibility of developing emergency plans for facilities that handle and store phosmet. EPA does not believe that tribes have any significant number of facilities that handle, store or use phosmet. Phosmet formulations are handled and stored by farm chemical distributors and used mostly on fruit and nut crops. Today's rule does not significantly or uniquely affect the communities of Indian tribal governments, nor would it impose substantial direct compliance costs on them. Thus, Executive Order 13175 does not apply to this rule.

EPA specifically solicits additional comment on this proposed rule from tribal officials.

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

This proposal is not subject to the Executive Order because it is not economically significant as defined in Executive Order 12866, and because the Agency does not have reason to believe the environmental health or safety risks addressed by this proposed rule present a disproportionate risk to children.

This proposed rule is not a “significant energy action” as defined in Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355 (May 22, 2001)) because it is not likely to have a significant adverse effect on the supply, distribution, or use of energy. This proposed rule reduces regulatory burden. It thus should not adversely affect energy supply, distribution or use.

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

For the reasons set out in the preamble, part 355 of title 40 of the Code of Federal Regulations is proposed to be amended as follows:

This is a summary of the Federal Communications Commission's Notice of Proposed Rulemaking ( NPRM ), FCC 03-222, adopted September 10, 2003, and released October 6, 2003. The full text of this document is available for inspection and copying during normal business hours in the FCC Reference Information Center, 445 12th Street, SW., Washington, DC 20554. The complete text may be purchased from the FCC's copy contractor, Qualex International, 445 12th Street, SW., Room CY-B402, Washington, DC 20554. The full text may also be downloaded at: www.fcc.gov. Alternative formats are available to persons with disabilities by contacting Brian Millin at (202) 418-7426 or TTY (202) 418-7365 or at Brian.Millin@fcc.gov.

1. In this Notice of Proposed Rulemaking ( NPRM ), we continue to examine ways to promote the rapid and efficient deployment of quality spectrum-based services in rural areas. We build upon the record developed in response to our Notice of Inquiry , in which we sought comment on how we could modify our policies to further encourage the provision of wireless services in rural areas. See Facilitating the Provision of Spectrum-Based Service to Rural Areas and Promoting Opportunities for Rural Telephone Companies to Provide Spectrum-Based Services, WT Docket No. 02-381, Notice of Inquiry, 68 FR 723 (January 7, 2003) ( Rural NOI ). We also draw upon the findings and recommendations of the Spectrum Policy Task Force.

2. The Commission's primary mission is the promotion of “communication by wire and radio so as to make available, so far as possible, to all the people of the United States, without discrimination on the basis of race, color, religion, national origin, or sex, a rapid, efficient, Nation-wide, and world-wide wire and radio communication service.” Furthermore, for auctionable services, the Commission is required to promote various objectives in designing a system of competitive bidding, including the development and rapid deployment of new technologies, products, and services for the benefit of the public, “including those residing in rural areas,” and “the efficient and intensive use of spectrum.” Under section 706 of the Communications Act, the Commission is also directed to “encourage the provision of new technologies and services to the public.” Consistent with these statutory mandates, the Commission's spectrum policy goals generally have been to facilitate efficient use, competition, and rapid, widespread service consistent with the goals of the Communications Act.

3. On a national scale, the deployment of wireless mobile services has been a huge success, resulting in increased competition and services overall. We believe that a number of measures that the Commission has already adopted have contributed to this successful deployment of wireless service. Recently, the Commission took steps to facilitate spectrum leasing in secondary markets, building upon existing, flexible, market-based policy efforts to encourage more efficient use of spectrum. The Commission did so with the belief that secondary markets would also facilitate investment in rural areas.

4. We recognize the inherent economic challenges of providing telecommunications services in sparsely populated, expansive rural areas. We note that the Federal-State Joint Board has solicited comment on issues relating to the eligibility of wireless carriers to receive universal service support. Further, the Wireless Telecommunications Bureau and the U.S. Department of Agriculture's Rural Utilities Service (RUS) have recently initiated a “Federal Rural Wireless Outreach Initiative” that seeks to harmonize the agencies' policies regarding rural wireless deployment and highlight the RUS loan programs available to wireless companies that serve rural communities. At present, programs are available to support the provision of spectrum-based services in rural areas.

5. We believe that rural as well as urban consumers and businesses have benefited from our market-oriented policies that promote facilities-based competition for telecommunications services. The Commission recently found that there is effective competition in the CMRS marketplace as a whole, including in rural areas. The Commission's policy to let market forces determine the number of firms operating in a given geographic area, subject to limits on spectrum availability and aggregation, recognizes this fact, and allows firms to operate at a competitive and efficient scale of operation. The Commission recognizes that, as a result of varying technical and demographic characteristics, the economics of providing service can be significantly different in rural areas as compared to urban areas. Our proposals attempt to acknowledge that market characteristics, especially demographics, will affect the optimal market structure.

6. Furthermore, there may well be a public interest in policies that encourage potential users to become mobile subscribers due to the network externalities that would result. In short, network externalities occur when adding a user to a communications network increases the value of the network for existing users who wish to communicate with that new user. For this reason, it is an especially important Commission goal to facilitate access to service broadly, not just in urban markets but also in rural areas, to enable Americans who travel, reside or conduct business throughout the country to communicate effectively for the benefit of the general public interest.

7. The NPRM focuses upon the following issues: (1) Determining an appropriate definition of what constitutes a “rural” area for purposes of our policies and requirements; (2) creating mechanisms for access to “unused” spectrum; (3) relaxing performance requirements to remove disincentives to serve rural areas and to allow all geographic area licensees to satisfy construction requirements by providing “substantial service” in their initial license term; (4) determining whether geographic area licensees should be required to provide coverage to increased portions of their licensed areas after their initial license term; (5) amending our regulations to permit increased power limits in rural areas for both licensed services and unlicensed services; (6) evaluating the appropriate size of licensing areas for geographic area licenses; (7) determining what, if any, regulatory or policy changes should be made to complement the RUS program for low interest loans for deployment of broadband services; (8) considering whether we could enhance access to capital by permitting the grant of conditional security interests in spectrum licenses to RUS; (9) considering whether we should modify application of the cellular cross-interest rule in Rural Service Areas (RSAs) with greater than three competitors; (10) establishing a clear, predictable policy on infrastructure sharing; and (11) updating and refining our rules governing the Rural Radiotelephone Service (RRS) and Basic Exchange Telephone Radio Systems (BETRS).

8. As an initial matter, we seek comment on an appropriate definition of a “rural area” for use in conjunction with each of the policies addressed in this proceeding. Furthermore, given the various definitions of “rural” that already have been utilized, we believe that some clarification of the term is necessary. Although sections 309(j)(3) and 309(j)(4) of the Communications Act direct the Commission to promote the development and deployment of spectrum-based services to “rural areas,” the Communications Act does not define “rural areas,” nor has the Commission adopted a specific definition of “rural areas” for purposes of implementing section 309(j). In the Seventh and Eighth Competition Reports, 17 FCC Rcd 12985 (2002) and 18 FCC Rcd 14783 (2003), the Commission used three different proxy definitions of “rural” for purposes of analyzing the average number of mobile telephony competitors in rural versus non-rural counties. The Commission compared the number of competitors in: (1) RSA counties versus MSA counties; (2) non-nodal Economic Area (EA) counties versus nodal EA counties; and (3) counties with population densities below 100 persons per square mile versus those with population densities above 100 persons per square mile. In connection with administering universal service support programs for schools, libraries, and rural health care providers, the Commission defines “rural area” as any county outside of an MSA (with some exceptions). Moreover, the federal government has multiple ways of defining “rural,” reflecting the multiple purposes for which the definitions are used. The Commission has used RSAs as a proxy for “rural” in certain instances. In administering its financial assistance program for broadband access to rural areas, RUS defines “rural” as any place that is not located within an MSA and that has no more than 20,000 inhabitants (based upon the most recently available Census data). The Economic Research Service of the USDA, in conjunction with others, developed a definition of “rural” based on a set of metrics that delineates each census tract as being either rural or urban. By contrast, the Census Bureau established a different metric for defining “rural” areas during its 2000 census. Although there are many definitions of “rural” used by the federal government, we have developed a record in response to our Rural NOI proceeding that provides some guidance with respect to an appropriate definition of “rural area.”

9. Based upon the record developed in the Rural NOI proceeding, as well as certain definitions used by the Commission and by other federal agencies as proxies for “rural,” we have identified and seek comment on the following potential definitions of “rural area,” or some combination of elements combined in these potential definitions: (1) Counties with a population density of 100 persons or fewer per square mile; (2) RSAs; (3) non-nodal counties within an EA; (4) the definition for “rural” used by the RUS for its broadband program; (5) the definition for “rural area” used by the Commission in connection with universal service support for schools, libraries, and rural health care providers; (6) the definition of “rural” based on census tracts as outlined by the Economic Research Service of the USDA; (7) the Census Bureau definition of “rural” counties; and (8) any census tract that is not within ten miles of any incorporated or census-designated place containing more than 2,500 people, and is not within a county or county equivalent which has an overall population density of more than 500 persons per square mile of land. In the event that commenters disagree with these potential definitions, we ask commenters to provide alternative definitions of “rural.” Commenters that believe that none of these potential definitions are workable or feasible should identify specific factors that the Commission should consider when determining whether an area is a “rural area,” such as population density, Census rankings, or other criteria. Finally, we seek comment on whether we should adopt different definitions of what constitutes a “rural area” depending upon the policy initiative for which the definition is used, as set out in this proceeding.

10. The Commission has promoted access to and efficient use of spectrum through a variety of means that may foster the rapid and efficient deployment of wireless services in rural areas. Applied to licensed spectrum, these approaches may be viewed as existing along a continuum, with voluntary, market-based mechanisms at one end, regulatory incentives and other approaches in the middle, and regulatory mandates and enforcement mechanisms at the other end. More specifically, the means by which the Commission may promote access to and use of spectrum range from allowing voluntary arrangements that move spectrum and licenses between users to establishing regulatory mechanisms by which the Commission reclaims and re-licenses unused spectrum.

11. In many spectrum-based services, the Commission has established rules by which it reclaims unused spectrum and makes it available to other parties. This process for reclaiming unused licensed spectrum differs across services. For example, with site-based private land mobile radio services, licensees generally are given one year to construct particular sites. A licensee with an unconstructed site after one year loses its authorization to operate at that site, and other parties subsequently may request a license to operate in that unused spectrum. In the geographically-based cellular service, initial licensees are given five years to construct facilities and begin providing service within a geographic service area. At the end of the initial five-year period, the licensee is allowed to keep those portions of its licensed area in which it has constructed, while the unconstructed portions of the market become available for licensing to other parties via the cellular “unserved area” licensing process. We refer to this standard as a “keep what you use” approach.

12. Other geographically licensed services, in contrast, face notably different construction benchmarks and means by which unused spectrum may be reclaimed and re-licensed by the Commission. For example, PCS licensees must meet five- and ten-year benchmarks that mandate coverage of a certain percentage of the population of their licensed areas, or where applicable, make a showing of substantial service. Failure to meet these benchmarks results in automatic cancellation or non-renewal of the entire license, including the rights to operate from any facilities already constructed under the authorization. Moreover, for many services, if the licensee loses its authorization for failing to meet the coverage requirements, it is often ineligible to reapply for that authorization. However, once these benchmarks are achieved, licensees are generally afforded exclusive rights and a renewal expectancy for the entire area and band under the license regardless of whether service is being provided in all parts of the area or over all of the spectrum. Because licensees that fail to comply with this coverage requirement lose their entire license, we refer to this standard of termination or forfeiture as the “complete forfeiture” approach. Among the advantages of this model, since licensees do not have to cover their entire geographic license areas or use all of their licensed spectrum capacity, there is a greater incentive for licensees to build out those areas that will ensure their economic viability as providers. Among the disadvantages is the potentially lower likelihood that rural and less-populous areas will be served by the licensee, because there may be an incentive for construction to focus first on populous areas and little corresponding incentive for licensees to construct in rural areas.

13. In addition, there are other approaches the Commission may use to transition spectrum to higher-valued uses. For example, as the Spectrum Policy Task Force observed, the Commission could create expanded “overlay” rights to licensed spectrum, whereby usage rights are given to new licensees. To address issues related to the incumbent licensees in these bands, the Commission could adopt various policies, including mandatory relocation of incumbents to other bands, grandfathering incumbents in the existing band, or providing incentives for band-clearing. Overlays with relocation of incumbents were used in broadband PCS, while grandfathering of incumbents was used in services such as paging and SMR. Among the advantages of this approach, overlays may be more flexible and, in some cases, less burdensome on incumbents. Among the disadvantages of this approach are potential incumbent hold-out problems, lengthy periods for incumbent relocation, and the expense of additional auctions. Because the “keep what you use,” “complete forfeiture,” and other approaches such as overlays may not be effective tools to ensure prompt delivery of service to rural and underserved areas, we explore below alternative methods to facilitate access to and use of spectrum in these markets.

14. As the Commission attempts to increase efficient access to and use of spectrum, and as it subsequently establishes policies for access to unused spectrum, we must provide a clear definition of “use” for all parties affected by these rules. That is, licensees that construct or lease their spectrum must understand how this use is construed in terms of construction requirements, re-licensing, and other policies that may affect them so that they will know what rights licensees will retain in the event they do not “use” their spectrum, however we define it. We seek comment on how to define “use” in order to effectively promote access to and use of spectrum in rural areas. We also inquire how to define this term in a flexible manner so as to recognize the many ways in which licensees provide service, or allow other parties to provide service, with their licensed spectrum. Under our current rules for many service bands, “use” is defined to reflect construction and operation of specified facilities by the licensee. We seek comment on whether this is the appropriate baseline standard for determining use and, if not, what this standard or other “performance” criteria should be.

15. We recognize that leasing via secondary markets may require viewing the concept of use from a different perspective. That is, under a negotiated spectrum leasing arrangement, a licensee assigns a usage right to a third party. We propose that spectrum in rural areas that is leased by a licensee, and for which the lessee meets the performance requirements that are applicable to the licensee, should be construed as “used” for the purposes of this proceeding and any other performance criteria we adopt. We note that merely leasing spectrum, where the lessee does not fully meet the lessors' performance requirements, would not be considered “use” under this proposal. We seek comment on this approach and other ways we could better tailor or expand the concept of “use” to encourage service by licensees or lessees in rural and underserved areas. Finally, should our definition of “use” be in any way limited as it applies to leasing?

16. Under one approach to defining construction, the Commission would rely on the filings of wireless providers, perhaps with certain reporting criteria. This approach is based on the presumption that wireless providers are in the best position to determine the meaning of “built” for their particular technology and application. Moreover, such an approach is consistent with recent Commission precedent and trends. With broadband PCS licensees, for example, the Commission did not attempt to specify a particular signal level, but instead required licensees to provide a signal level “sufficient to provide adequate service” to one-third of the population in the market within five years, and to two-thirds within ten years. In applying this approach to measuring construction, the Commission could provide guidance regarding what type of range would be acceptable and how this might vary from service to service. Alternatively, we could decline to provide direction and simply monitor the various means by which licensees report their construction.

17. We recognize that the approach described above, however, may present certain risks, particularly in the event that a licensee claims that it is satisfying the more flexible “substantial service” standard, instead of satisfying a concrete coverage benchmark. The Commission may not have sufficient resources to verify that the many different uses of rural spectrum likely to emerge will actually serve the goals of our build out requirements. Additionally, we note that this approach might present some risk for the licensee. For example, were it able to do so, the Commission could determine, upon receiving an assertion of compliance by a licensee, that the indicated build out is insufficient and that the licensee must do more in order to satisfy its construction requirements. This would require additional construction and investments not planned for by the licensee, which ultimately could prove more expensive to comply with than if they had been planned for and completed with the original build out. We therefore seek comment regarding whether the Commission should establish a baseline above which a licensee must reach in order to minimally comply with our substantial service requirements. We seek comment on whether this baseline should be determined in terms of signal strength or using some other metric.

18. We also seek comment on two other approaches for determining whether spectrum is being used in accordance with construction requirements or for purposes of finding available spectrum in rural areas. First, the Commission has developed rules defining protected service areas for site-based incumbents, such as 220 MHz, 800 MHz SMR, and paging licensees. We seek comment on how we should address these and other differences in estimating coverage in rural areas. In light of the fact that our rules defining protected service areas vary by service, we ask commenters whether we should harmonize these regulations across services and establish a data base of available “white space” in rural areas. Second, we seek comment on expanding the use of spectrum “audits” and on exploring the means and methodologies for making in situ measurements of signal strength in selected rural areas to maintain an “inventory” of available spectrum resources. We inquire as to whether expanded use of such audits would help identify unused spectrum in rural areas so as to ultimately make more spectrum, and thus more service, available in these markets. We also inquire as to what may be an appropriate way to test whether a spectrum inventory is feasible. Should we limit such an inventory to the most rural or underserved areas? We believe markets in Alaska, Appalachia, and the Mississippi Delta may be particularly appropriate, and we inquire as to whether commenters recommend these or other areas.

19. As described above, the Commission practices re-licensing in several different forms, both in terms of the conditions under which licensed spectrum is returned to the Commission, and in terms of how that spectrum subsequently is made available to other users. Generally, licensed spectrum may return to the Commission due to non-use under a “complete forfeiture” standard, as applied to PCS licensees, or under a “keep what you use” standard, as applied to cellular licensees. Once this spectrum is reclaimed, the Commission may then re-license via competitive bidding, as with PCS licenses, or it may use a non-auction mechanism such as the cellular unserved area re-licensing rule.

20. We seek comment on when, and under what circumstances, the Commission should use re-licensing as a means to increase access to spectrum, and thus service, especially in rural areas. We do not propose to change the current re-licensing rules for any current wireless service. Rather, we inquire as to whether we should apply one of the current rules, or some other rule, to future spectrum allocations. We also inquire as to whether we should apply a new standard to spectrum that has been returned, under the current rules, to the Commission for re-licensing at the end of a licensee's second term.

21. In the event of spectrum re-licensing, we seek comment on whether there are particular construction standards, such as “complete forfeiture” or “keep what you use,” that are most effective in promoting access and service, especially in rural areas. In particular, we seek comment on whether a “keep what you use” standard based on the cellular unserved area model is most appropriate to advance our goal of promoting rural service, should we decide to extend this approach to additional services. Further, how might the “keep what you use” approach work in tandem with the substantial service safe harbor that we propose below?

22. As described above, in the cellular service, after the initial five-year period, there is an unserved area licensing process whereby unconstructed portions of a market become available to other parties. In a Petition for Reconsideration filed in WT Docket 01-108, Dobson proposed that licensees should be permitted to extend into unserved areas of less than 50 square miles operating on a secondary non-interference basis to any licensee that might be authorized to cover the area in the future. While we intend to address Dobson's petition in the context of that proceeding, we seek comment on whether there are other changes to the cellular unserved area rules that could promote service in rural areas. We also seek comment on whether, for purposes of defining use, the most appropriate approach would be based on the PCS model ( i.e. , allowing providers to define construction based on their particular technology and application). We note that the approach with the PCS model is technology neutral, yet it requires a sufficiently strong signal to produce a reasonable level of service.

23. In addition, we seek comment on the relative merits of re-licensing as compared to secondary markets. Are there particular circumstances or factors that we should consider in deciding to use one approach or the other? We recognize that re-licensing is a more regulatory approach, and we therefore inquire as to whether we should limit its application. What market conditions or other measures should we consider in determining whether to apply re-licensing to a particular service or in a particular market? Is this approach more appropriate for rural markets, and if so, why?

24. Finally, we note that while the Spectrum Policy Task Force recommended that the Commission focus on secondary markets as the primary means to increase access to spectrum, it also recommended that, after there has been sufficient time to consider the effectiveness of this approach, the Commission also consider alternative mechanisms such as government-defined easements. We seek comment on whether now is an appropriate time to consider the use of spectrum easements for new licenses.

25. Subsequent to the enactment of section 309(j), the Commission initiated the Competitive Bidding proceeding, which, among other things, addressed how the Commission intended to implement the statutory mandate for “performance requirements” for licenses awarded through competitive bidding. See Implementation of Section 309(j) of the Communications Act—Competitive Bidding, PP Docket No. 93-253, Notice of Proposed Rulemaking, 58 FR 53489 (October 15, 1993). Depending upon the service, the Commission's construction benchmarks may require coverage of a certain percentage of the licensed area's population or coverage of a certain percentage of the licensed area's geographic area. For many services, the Commission has adopted a flexible “substantial service” construction standard that allows licensees that are providing a beneficial use of the spectrum to retain their authorizations. While the definition of “substantial service” is generally consistent among wireless services, the factors that the Commission will consider when determining if a licensee has met the standard vary among services. Substantial service generally means service that is sound, favorable, and substantially above a level of mediocre service that would barely warrant renewal.

26. As we have explained, the Commission has taken a market-oriented approach to spectrum policy that, where possible, has allowed economic forces to determine build-out of wireless facilities and the provision of wireless services. The Commission has shifted towards providing licensees increased flexibility to tailor use of their spectrum to unique business plans and needs. This increased flexibility is evident in our adoption of the “substantial service” benchmark for many of our services. In more recently adopted rules for wireless services, the Commission established the substantial service standard as the only construction requirement. In addition, for licensees subject only to the substantial service requirement, the Commission often has included “safe harbors,” i.e. , examples of how a licensee would meet the substantial service standard.

27. As a general matter, we believe that our current performance requirements, in combination with economic incentives and the licensing of multiple competitors, have served to promote significant build out. Nevertheless, we believe that current geographic area licensees without a “substantial service” option or a rural-specific construction requirement may be unduly constrained and may lack sufficiently flexibility to provide service to rural areas or to offer niche services. Moreover, given the unique characteristics and considerations inherent in constructing within rural areas, we believe that a construction standard that is based upon coverage of a requisite percentage of an area's population may be an inappropriate measure of levels of rural construction. Accordingly, while we intend to keep our current construction requirements, as they are set forth in our service-specific rule sections, we propose to adopt a “substantial service” alternative for all wireless services that are licensed on a geographic area basis and that are subject to construction requirements. This proposal therefore would affect the following licensees: 30 MHz broadband PCS licensees; 800 MHz SMR licensees (blocks A, B, and C only); certain 220 MHz licensees; LMS licensees; MDS/ITFS licensees; and 700 MHz public safety licensees. If we adopt our proposed modification of our build-out rules, these licensees would have the flexibility to comply with existing service-specific benchmarks or to satisfy the substantial service benchmark, at their option.

28. We are concerned that current population-or geographic area-specific benchmarks may impinge upon licensees' abilities to serve niche or less populated areas, and may unintentionally discourage construction in rural areas. Particularly in the case of a population-based construction requirement, a licensee has both an economic and practical incentive to achieve compliance with the requirement by providing service only to the urban areas of its licensed area. In addition, because each licensee must satisfy the same population-based benchmark, we are concerned that, as multiple licensees enter a market, they likely will construct systems in the same populous areas, thereby duplicating coverage. Consequently, within any given market, urban areas are likely to have multiple wireless competitors providing service, whereas rural areas may have fewer options.

29. We believe that providing all geographic area wireless licensees with a substantial service option will address concerns that construction requirements based on population or geographic coverage may discourage the build-out of rural areas. As we have explained in past proceedings, the substantial service option provides licensees with greater flexibility and therefore may result in the more efficient use of spectrum and the provision of service to rural, remote, and insular areas. Furthermore, in light of the fact that we have been moving towards a more flexible approach to coverage requirements, offering all geographic area wireless licensees a substantial service option will increase regulatory parity. We also note that, by providing terrestrial wireless licensees with greater flexibility in satisfying their construction requirements and by alleviating the pressure of satisfying minimum population-based benchmarks, licenses that are comprised largely of rural areas might be more likely to appeal to a wider range of potential bidders at auction.

30. We intend to retain our current construction benchmarks and propose adopting the substantial service benchmark as an additional means of satisfying our construction requirements. Our proposal effectively would harmonize construction benchmarks across all wireless services licensed on a geographic-basis (and that are subject to construction requirements) so that all geographic area licensees have the increased flexibility of a substantial service option. Licensees may elect to satisfy either the construction benchmark options already available to them today or the substantial service benchmark, according to their preference. In the past, in evaluating substantial service showings, we have considered factors such as whether the licensee is offering a specialized or technologically sophisticated service that does not require a high level of coverage to be of benefit to customers, and whether the licensee's operations serve niche markets. In the context of providing substantial service to rural areas, we are particularly interested in the following factors: (1) Coverage of counties or geographic areas where population density is less than or equal to 100 persons per square mile; (2) significant geographic coverage; (3) coverage of unique or isolated communities or business parks; and (4) expanding the provision of E911 services into areas that have limited or no access to such services. We intend to limit this proposal to wireless services that are currently licensed on a geographic area basis. In the event we adopt geographic areas for new wireless services at a future date, we will examine the appropriateness of adopting a substantial service or alternative construction requirement for the new service at that time.

31. We seek comment on our proposal to adopt a “substantial service” benchmark for all wireless services that are licensed by geographic area and are subject to build-out requirements, but currently do not have a substantial service option. We also seek comment on whether any services should be excluded from our proposal. In the event that commenters believe that a substantial service standard is inappropriate for certain services, we ask commenters to suggest alternative benchmarks that might promote the deployment of service within rural areas. We ask commenters whether the adoption of a substantial service requirement is likely to increase deployment of wireless services in rural areas. Finally, because this proposed modification of our rules will apply generally to all geographic area licensees, and not just those licensees serving rural areas, we ask how the adoption of a substantial service requirement might affect the deployment of wireless services in non-rural areas.

32. We also seek comment on whether we should adopt geographic-based construction requirements for those private and commercial terrestrial wireless services that are licensed on a geographic area basis and that currently do not have a geographic area coverage option. A geographic benchmark would provide an alternative for licensees who do not intend to focus construction efforts on population centers. Further, like population-based benchmarks, geographic benchmarks would provide increased certainty for licensees, in comparison to the more flexible substantial service standard. Commenters supporting geographic-based construction requirements should identify the applicable radio service(s) and recommend benchmark levels, or percentages, for the relevant market sizes. We seek comment on whether the benchmark levels may be reduced where the geographic areas in question are rural areas.

33. In addition to proposing the adoption of a substantial service benchmark for all wireless services that are licensed by geographic area, we propose the adoption of a substantial service “safe harbor” based on provision of rural service. We propose two different rural safe harbors, depending on whether a licensee is providing mobile or fixed wireless service. With respect to mobile wireless services, we propose that a licensee will be deemed to have met the substantial service requirement if it provides coverage, through construction or lease, to at least 75 percent of the geographic area of at least 20 percent of the “rural” counties within its licensed area. We propose that “rural” counties be defined as those counties with a population density less than or equal to 100 persons per square mile. For example, if a licensee's market contains five counties (all having a population density of 100 persons per square mile or fewer), the licensee could meet the safe harbor by providing coverage to 75 percent of the geography in one of those five counties. With respect to fixed wireless services, we propose to define the substantial service requirement as met if a licensee, through construction or lease, constructs at least one end of a permanent link in at least 20 percent of the “rural” counties within its licensed area (using the same “rural” county definition). For example, if a licensee's market contains five counties (all having a population density of 100 persons per square mile or fewer), the licensee could meet the safe harbor by constructing one end of a permanent link in one of those five counties. Our proposal to base the safe harbor on a population density of 100 persons per square mile or fewer is derived from our finding in the Eighth Competition Report, which indicates that counties with population densities of 100 persons per square mile or less “have an average of 3.3 mobile competitors, while the more densely populated counties have an average of 5.6 competitors.” We note that these proposed “safe harbors” are intended to provide licensees with a measure of certainty in determining whether they are providing substantial service, but are not intended to be the only means of demonstrating substantial service.

34. We seek comment on whether we should adopt rural safe harbors and, if so, whether it is advisable to adopt the specific safe harbors described above. We note that although the analyses of competition in counties with population densities of 100 persons per square mile or fewer were based upon data pertaining to the mobile telephony industry (dominated by cellular, broadband PCS, and digital SMR providers), we believe that 100 persons per square mile nevertheless provides a usable and reasonable proxy for “rural” for the purpose of establishing a rural substantial service safe harbor. We seek comment on this proposed population-density based standard. In particular, we seek comment on whether this safe harbor is suitably flexible to accommodate variances in service areas and how we might modify our safe harbors to accommodate various geographic service areas and uneven population distributions. In the event commenters disagree with our proposed safe harbors, we ask that commenters suggest examples of alternative rural safe harbors, in light of their practical experience and based upon their own service-specific demands and requirements. Should we adopt a rural safe harbor that applies to all services, or are services sufficiently specialized that we should adopt service-specific safe harbors?

35. At present, we require compliance with our construction requirements during the initial license term. Depending upon the particular service, we require licensees to satisfy minimum coverage benchmarks at an interim period prior to the end of the initial license term, and/or at the conclusion of the initial license term. Licensees obtain authorizations to use designated spectrum for a specific period of time (typically a term of ten years), and may request renewal of their authorizations prior to the expiration of their license terms. Once a licensee renews its license, however, no additional performance requirements are imposed in subsequent license terms.

36. We seek comment on whether we should require geographic area licensees to satisfy performance requirements during their renewal license terms (we refer to license terms subsequent to the initial license term as “renewal terms”). This question of whether licensees should satisfy additional performance requirements during renewal terms is particularly relevant as licensees approach the end of their initial license terms or enter into their renewal terms. We ask whether additional performance requirements are likely to increase the provision of wireless services to rural areas.

37. With respect to commercial mobile wireless services, we have seen the prompt use of at least a portion of the spectrum and provision of at least a minimum level of service. While this data appears to suggest that our construction requirements have facilitated competition and have promoted the deployment of wireless services, it is nevertheless difficult to identify whether wireless deployment is the result of our minimum coverage requirements or the operation of market forces. We ask commenters whether market forces, and not build out requirements, should govern any additional construction during renewal terms. Will the imposition of additional performance requirements during renewal terms likely result in uneconomic construction?

38. In the event that commenters believe additional construction requirements are appropriate and necessary to promote the continued deployment of wireless services to consumers in rural areas, we ask what form these construction requirements should take. For example, should we adopt a population- or geography-based benchmark? Should we adopt a modified version of substantial service and require the provision of additional coverage beyond what is sufficient to satisfy “substantial service” during the initial license term (in effect, a “substantial service plus” requirement)? Should we require compliance with these benchmarks at the expiration of the renewal term, or at some interim period prior to the end of the renewal term? Furthermore, given our objective of promoting service to rural consumers, we ask whether renewal term construction requirements should be specifically targeted towards construction in rural areas or otherwise include a rural component.

39. In the following sections, we propose modifications to our regulations governing power limits and technical specifications for operations in rural areas. In its report, the Spectrum Policy Task Force recommended that in less congested areas ( i.e., rural areas) spectrum users should be permitted to operate at higher power levels so long as they do not cause interference and do not receive additional interference protection. Similarly, in the Rural NOI we observed that technical and operational rules throughout the spectrum-based services are necessary to facilitate efficient use of the radio spectrum while minimizing the potential for interference among licensees. We sought comment on the degree of flexibility that these regulations afford to providers of spectrum-based services in rural areas.

40. Unlicensed devices are permitted to operate under Part 15 of our rules at very low power levels. One of the more significant developments in the use of unlicensed devices is the emergence of wireless Internet service providers or “WISPs.” Using unlicensed devices, WISPs around the country are beginning to provide an alternative high-speed connection to cable or DSL services. In addition to providing competition to cable and DSL, the record reflects that WISPs have taken root in many rural areas where these services have been slow to arrive.

41. We remain committed to exploring more flexible spectrum policies for rural areas to help foster, where possible, a viable last mile solution for delivering Internet services, other data applications, or even video and voice services to underserved or isolated communities. The record in the Rural NOI identifies legitimate issues under our Part 15 policies, such as interference with other Part 15 devices and how to design a framework that reasonably ensures that Part 15 devices operate using different parameters in different locations or under differing RF conditions. Cognitive radio technologies, which permit radio systems to modify their performance in response to such external information, would appear to hold great promise in resolving such issues. In this connection, we plan to initiate a proceeding shortly to consider how to leverage these technologies to permit more intensive use of spectrum in a number of situations, including possible rule changes that would permit greater use of spectrum in rural areas. In this proceeding, we plan to invite comment on any specific factors that may need to be considered to allow cognitive radios to operate with higher power in rural America. This impending proceeding also will address power limits for the operation of “dumb” or “non-cognitive radio” unlicensed devices in rural areas.

42. Two commenters responding to the Rural NOI address the issue of whether we should modify our regulations to permit increased power levels in the context of mobile voice systems. South Dakota Telecommunications Association (SDTA) points out that higher power levels could reduce the number of transmitters required to connect stretches of roadways between small rural towns and to serve ranches and farms beyond the highways, but cautions that while it may be feasible to increase power and still safeguard urban and suburban operations, such safeguards must include “clear-cut interference definitions and protections.” CTIA, however, argues that an increase in base station power levels would not improve matters unless mobile station ( i.e., handset) power levels are increased as well. CTIA contends that it is unlikely that handset manufacturers would make special “high power” handsets for rural areas.

43. Increasing the range of radio systems is one means of making it more economical to provide spectrum-based radio services in rural areas by potentially lowering infrastructure costs. One way to increase the range of radio systems is by increasing power levels. While there may be challenges in implementing increased power levels for cellular-like mobile systems, we would like to further investigate whether power increases may be beneficial for other mobile or fixed services. In doing so, we must consider increasing power levels in rural areas in the context of base/mobile systems, point-to-point systems, and point-to-multipoint systems. Base/mobile systems ( e.g., cellular, PCS, SMR, private land mobile) consist of a base station antenna intended to provide coverage over a specific area, and the mobile units that communicate with the base station. The base station operates at a sufficient power level to cover the desired area, while the battery-powered mobile units operate at relatively low power. The ability of the base station to reach a mobile unit is limited by, among other things, transmitter power, the propagation characteristics of the frequency band, antenna directionality (gain), antenna height, terrain, clutter, man-made obstructions, and the sensitivity of the mobile unit receiver. As stated above, there are challenges related to increasing power levels. First, increasing the base station power may cause unacceptable levels of interference to nearby systems. Second, simply guaranteeing that a mobile unit can “hear” the base station, however, is not sufficient for two-way communications. The low power mobile unit, which is likely located close to ground level, must also be able to return a signal to the base station antenna, i.e., the base station must be able to “hear” the mobile unit. One can observe that, at the fringe of the base station coverage area, the most significant limiting factors to two-way transmissions are the power level and the location of the mobile unit. Thus, merely increasing the base station power level may not improve the communications range unless the mobile unit is capable of returning a signal to the base station antenna.

44. It is instructive to provide examples of the likely results of increasing base station power for specific types of base/mobile systems. Because received signal levels decrease exponentially as the receiver moves farther from the transmitter, we would expect that relatively large increases in power would yield only small increases in communications range. In the case of a rural 800 MHz cellular system, we found that increasing the base station power by 10 percent (500 W ERP to 550 W ERP) and 20 percent (500 W ERP to 600 W ERP) increased the base station range by 1.5 km (0.93 mi) and 3 km (1.86 mi) respectively. We note, however, that our calculations show that a typical 0.5 W ERP mobile unit would not have sufficient range to reach the base station from the edge of the base station coverage area regardless of whether the base station power is 500 (maximum under the rules today), 550, or 600 W ERP. Similarly, in the case of a rural 1,900 MHz PCS system, we found that increasing the base station power by 10 percent (1,640 W EIRP to 1,804 W EIRP) and 20 percent (1,640 W EIRP to 1,968 W EIRP) increased the base station range by 1 km (0.62 mi) and 2 km (1.24 mi) respectively. We note, however, that our calculations show that a typical 0.8 W EIRP mobile unit would not have sufficient range to reach the base station from the edge of the base station coverage area regardless of whether the base station power is 1,640 (maximum under the rules today), 1,806, or 1,968 W EIRP.

45. Microwave point-to-point systems generally consist of a highly directional, high gain transmitting antenna and a highly directional, high gain receive antenna separated by some distance along a path. System performance is impacted by, among other things, transmitter power, propagation characteristics of the frequency band, antenna directionality (gain), height of transmit and receive antennas, terrain between the antennas, interference, clutter, man-made obstructions, weather, type of modulation, and sensitivity of the receiver. Unlike a base/mobile system, however, the system designer can increase the distance of the path by increasing transmitter power or using a higher gain antenna as well as elevating the receive antenna. Point-to-multipoint microwave systems share many of the characteristics of point-to-point microwave systems, except that there are multiple receive antennas situated in an area of desired service and the transmitting antenna may not be as highly directional. In either case, as with base/mobile systems, increasing the transmitter power may cause unacceptable levels of interference to neighboring paths, or limit the number of paths in a particular area.

46. For example, in the theoretical case of a typical rural microwave path in the 6.8 GHz band, a 45 percent increase in transmitter output power yields only a one km (0.62 mi) increase in path length. We seek comment on whether the benefits of such a modest increase in path length outweigh the potential for unacceptable levels of interference to neighboring paths, or siting limitations on new paths in the same area.

47. We seek comment on whether it is beneficial, feasible, and advisable to increase the current power limits for stations located in rural areas licensed under parts 22, 24, 27, 80, 87, 90, and 101. A licensee can increase power by increasing transmitter output power and/or by using a directional antenna that focuses energy on the specific area to be covered and reduces energy in other directions, serving to limit interference potential, and potentially improving reception of signals from mobile units. Commenters should indicate which radio service(s) and power level(s) should be increased, specify a particular amount of additional power (either transmitter output power, EIRP, or both), specify directional antenna parameters if applicable ( e.g., front to back ratio or beamwidth), and quantify the benefits that one could expect from the power increase. In particular, we are interested in how such increases may increase the potential for unacceptable levels of interference to other stations, increase exposure to electromagnetic radiation for workers and consumers, or limit future use of the spectrum in such areas.

48. We also seek comment on how best to define the term “rural” for purposes of permitting increased power levels. In the case of base/mobile systems, would both the base stations and mobile stations need to be located in a rural area? For point-to-point and point-to-multipoint systems, would both ends of the transmission path need to be in a rural area? Rather than defining certain geographic areas as rural for these purposes, would some other measure ( e.g., taking into account a combination of terrain and nearby spectrum usage) be more appropriate?

49. We also seek comment on other measures that licensees may be using to minimize the costs associated with serving rural areas, and whether our rules and policies are sufficiently flexible to facilitate and encourage such innovations. For example, cellular and PCS licensees in rural areas may be using tower top amplifiers to boost incoming mobile signals. Similarly, licensees may deploy “smart antenna” systems capable of increasing base station range and suppressing interference from unwanted sources.

50. Over the past decade, the Commission has moved from the use of site-based licenses to the use of geographic areas for licensing commercial wireless services. In selecting the initial size of geographic service areas for licenses with mutually exclusive applications (and thus competitive bidding), section 309(j)(4)(C) directs the Commission to promote certain goals. Specifically, section 309(j)(4)(C) requires the Commission to, consistent with other objectives, prescribe service areas “that promote (i) an equitable distribution of licenses and services among geographic areas, (ii) economic opportunity for a wide variety of applications, including small businesses, rural telephone companies, and businesses owned by members of minority groups and women, and (iii) investment in and rapid deployment of new technologies and services.”

51. We believe that the Commission's choice for the initial size of geographic service areas plays an important role in promoting a number of policy goals, including efficiency of spectrum use, competition among providers, and advancing service to rural areas. If geographic service area licenses are assigned with an initial size that does not represent the needs of service providers, then transaction costs are incurred, as carriers seek to acquire rights to spectrum in areas they wish to serve and divest their interest in areas they do not wish to serve. While we hope that the Commission's recent efforts to facilitate the development of secondary markets will make these transaction costs less burdensome, we recognize that some costs to moving spectrum to its highest valued use will remain.

52. Since it is costly to aggregate or disaggregate spectrum, it is important that the Commission select initial license sizes and boundaries that are appropriate for the likely users and services to be provided. We recognize that there are tradeoffs between the use of large service areas and small service areas. Large service areas provide economies of scale and reduce coordination costs. On the other hand, smaller service areas allow local, independent operators to better tailor their services to local conditions and provide greater financial incentives to local licensees than if they were managers in very large enterprises. Adopting small license areas also may allow smaller enterprises with limited financing to acquire spectrum licenses. In addition, license boundaries are also a concern of the Commission, which has attempted to choose boundaries that combine people and firms who are part of the same community and who are likely to communicate with each other. The Commission also has attempted to avoid setting boundaries that would preclude incumbents from bidding on licenses because of cross-ownership rules.

53. We recognize that carriers are divided on the issue of the appropriate size of geographic service areas. In various Commission proceedings, representatives of small, regional, and rural providers have argued that CMAs are the most appropriate size. In contrast, representatives of large regional and nationwide CMRS providers and other parties have argued that service areas that are too small may be inefficient. Still other parties have argued that the size of service areas should be tailored to the wireless service in question.

54. We seek comment on the costs of partitioning post-auction as compared to the costs of aggregating spectrum during or after the auction process. We observe that spectrum aggregation within auctions is fairly common. While we recognize the concerns of small carriers regarding their access to spectrum in rural markets, especially when large geographic areas are used, we note that partitioning also is relatively common. Partitioning appears to be occurring across all regions of the country and includes many counties that fall within the various definitions of “rural” that are proposed above.

55. We seek comment on the lessons we should draw from the Commission's experience in choosing initial service area sizes. Is there evidence of net aggregation towards nationwide service areas for certain services such as cellular and PCS? Is there evidence of net partitioning for other services? To the extent partitioning is more common in some services and less so in others, is this trend indicative of some miscalculation by the Commission in choosing the initial size of service areas? Alternatively, could this activity reflect changes in the demand for services that could be provided in this band, or changes in technologies or other factors that affect what services could be supplied in this band? We also seek comment as to whether the difference in the level of partitioning across services could reflect the application of different Commission rules, such as build-out requirements. Finally, we note that there are certain transaction costs associated with any partitioning. Should we expect that licenses for highly valued spectrum, in highly valued services, will be more likely to be partitioned, given the greater likelihood that the value created by this trade will exceed the transaction costs? Similarly, as secondary markets develop and transaction costs decline, should we expect that partitioning through leasing arrangements will become more feasible in more services? To what extent might such partitioning be limited by a hold-out problem? That is, might licensees with large geographic areas refuse to make spectrum available to small providers that want to serve small or niche markets, which tend to be in rural areas?

56. We tentatively conclude that it is in the public interest for the Commission to balance the needs of different providers, including the larger carriers' need for economies of scale and the smaller carriers' need for license areas that more closely resemble their service areas. We recognize that, since users of spectrum have a variety of needs, one size of service area does not fit all. We intend to continue establishing geographic areas on a service-by-service basis, and we seek comment on steps we can take to effectively balance the competing needs of different users as we make these service area decisions. Would such an approach produce economically efficient results? Is such an approach necessary, given our expectation that secondary markets will become more prevalent in the future? We especially encourage commenters to use empirical evidence to support their assessment of partitioning costs, aggregation costs, and the efficiency of any approach they recommend.

57. In addition, while the largest geographic service area the Commission may adopt would be a nationwide area, there is some question as to what would be the smallest size that would still be functional. That is, at what point is it more appropriate for the Commission to use site-based licenses instead of very small geographic area licenses? Also, to the extent we believe small license areas are appropriate for specific bands, what size is most appropriate? Are there particular frequencies that are better suited for allocations to small license areas? We also inquire as to whether it is possible that use of relatively small geographic areas would introduce an unreasonable risk of another type of hold-out problem. In particular, might such an approach result in many small incumbent licensees who could then frustrate post-auction attempts to aggregate licenses efficiently by refusing to sell except at excessive prices?

58. We also seek ways to make it easier for providers in need of larger areas to acquire them with minimal transaction costs. One way to achieve this objective may be to adopt bidding design mechanisms that permit the aggregation of geographic areas or spectrum blocks during an auction. Typically, the Bureau uses a simultaneous multiple-round auction design, which facilitates aggregation by making all licenses in the auction available at the same time. Recently, the Bureau selected a package bidding design for two auctions. This relatively new approach to auctions allows bidders to submit all-or-nothing bids on combinations of geographic areas or spectrum blocks in addition to bids on individual licenses or authorizations. We believe that, in instances in which the Commission has determined that smaller size license areas are appropriate, a package bidding format may be helpful to bidders seeking to acquire larger geographic areas or spectrum blocks. We recognize, however, that in such circumstances, the use of package bidding may introduce significant computational complexities.

59. We also observe that choosing a geographic service area that represents a “middle solution” may be an inefficient approach. We note that, as an alternative to such a “middle solution” in which service area size represents a compromise that may not be ideal for either small or large service providers, there may be situations in which it is possible to create geographic service areas of mixed sizes. In particular, if there is sufficient bandwidth available, both large regional (or even national) and small local license areas can be created. We inquire as to whether such a mixed plan may reduce the aggregation/disaggregation transaction costs inherent in a single size geographic licensing scheme, and we seek comment on what other costs, as well as benefits, may be associated with such an approach. We recognize that, while a mixed approach may be useful in some bands with spectrum users that have very different needs, it may not be appropriate in other bands, and we conclude that our approach must be tailored to the needs of each band or service in question.

60. The U.S. Department of Agriculture's RUS Telecommunications Program assists the private sector in developing, planning, and financing the construction of telecommunications infrastructure in rural America. Programs administered by RUS include: (1) Infrastructure loans; (2) broadband loans and grants; (3) distance learning and telemedicine loans and grants; (4) weather radio grants; (5) local TV loan guarantees; and (6) digital translator grants. The largest of these programs are the infrastructure loan program and the broadband loan program.

61. The infrastructure loan program is technology neutral, requires broadband-capable facilities, and provides financing for infrastructure ( e.g. , building and equipment), but not financing for the costs of operating the business. Within the infrastructure loan program, there are four types of financing: (1) Hardship loans; (2) cost-of-money loans; (3) rural telephone bank loans; and (4) federal financing bank loans. For fiscal year 2003, the total authorized loan level for these four programs is $670 million.

62. The broadband loan program is technology neutral; requires provision of high-quality data transmission service and may provide voice, graphics, and video; and must enable a subscriber to transmit and receive at a rate of no less than 200 kilobits per second. Similar to the infrastructure loan program, the broadband loan program finances the construction or acquisition of new facilities and facility improvements. RUS makes broadband loans available to any legally organized entity that has sufficient authority to enter into a contract with RUS and carry out the purposes of the loan, so long as the entity is providing or proposes to provide service to an area that meets the following criteria: (1) There are no more than 20,000 inhabitants, and (2) the service area does not fall within a standard metropolitan statistical area. For fiscal year 2003, RUS has $80 million for 4 Percent loans, $80 million for Guaranteed loans, and $1.3 billion for Treasury Rate loans. In fiscal year 2004, the total loan level is anticipated to be $418 million.

63. The Commission's Wireless Telecommunications Bureau (WTB) has partnered with RUS to sponsor the “Federal Rural Wireless Outreach Initiative” (FCC/RUS Outreach Partnership). The FCC/RUS Outreach Partnership is designed to exchange program and regulatory information about rural development and wireless telecommunications access in rural areas. The four key goals of the FCC/RUS Outreach Partnership are to: (1) Exchange information about products and services each agency offers to promote the expansion of wireless telecommunications services in rural America; (2) harmonize rules, regulations and processes whenever possible to maximize the benefits for rural America; (3) educate partners and other agencies about Commission, WTB and USDA/RUS offerings; and (4) expand the FCC/WTB and USDA/RUS partnership, to the extent that it is mutually beneficial, to other agencies and partners.

64. We seek methods to help facilitate access to capital in rural areas in order to increase the ability of wireless telecommunications providers to offer service in rural areas. An important part of accomplishing this goal is through the promotion of federal government financing programs. We seek comment on how the Commission can assist in making the RUS loan programs more effective. We seek comment on whether there are any Commission regulations or policies that should be reexamined or modified to facilitate participation in the RUS programs by wireless licensees and service providers. In addition, we ask for comment on whether the FCC/RUS Outreach Partnership could be expanded to include other federal, state, or local government programs and, if so, which programs. We further seek comment on whether there is a role for non-governmental entities in the FCC/RUS Outreach Partnership and how such entities might be able to participate. We also ask for suggestions regarding effective outreach programs and the groups that should be targeted. In addition, we ask for submission of lists of associations, government agencies, or other interested parties that would want to join in this FCC/RUS Outreach Partnership or receive future information regarding this program.

65. As a historical matter, the Commission has not permitted third parties to take a security interest in spectrum licenses. At the same time, the Commission's legal and policy bases for various restrictions on transactions involving licenses have evolved over the years. For instance, at one time, the policy of prohibiting the sale of bare licenses, as well as the policies against security and reversionary interests in licenses, were based on the Commission's interpretation of the Communications Act. In various decisions, the Commission modified its views on the statutory basis for these policies in the context of cellular and other wireless licenses. For all spectrum-based services, the Commission has expressly permitted licensees to grant security interests in the stock of the licensee, in the physical assets used in connection with its licensed spectrum, and in the proceeds from operations associated with the licensed spectrum. The Commission and the courts have likewise determined that security interests in the proceeds of the sale of a license do not violate Commission policy. In connection with the auction installment payment program, the Commission itself has taken an exclusive security interest in licenses subject to installment payments and a senior security interest in the proceeds of a sale of an auctioned license. In its Secondary Markets Policy Statement, the Commission considered ways in which licensees may be able to maximize their efficient use of spectrum by leveraging “the value of their retained spectrum usage rights to increase access to capital.” See Principles for Promoting the Efficient Use of Spectrum by Encouraging the Development of Secondary Markets, WT Docket No. 00-230, Policy Statement, 65 FR 81475 (December 26, 2000) ( Secondary Markets Policy Statement ). Specifically, the Commission said “we plan to evaluate our policies prohibiting security and reversionary interests in licenses.”

66. Pursuant to our stated intent in the Secondary Markets Policy Statement , we initiate a discussion regarding whether we should permit RUS to obtain security interests in the spectrum licenses of their borrowers. We seek comment on whether, and to what extent, licensees in rural areas would benefit from the opportunity to pledge their licenses to RUS as collateral as a means of overcoming their difficulties in raising capital.

67. As an initial matter, we limit the scope of our inquiry to commercial and private terrestrial wireless services. We further limit our inquiry concerning security interests to licenses and licensees in rural and underserved areas that are seeking federal financial assistance through RUS loan programs. We believe that such licensees will benefit most in light of their apparently greater need for lower-cost capital and the new opportunities presented by RUS loans discussed below. Also with regard to the scope of our inquiry, we note that we do not intend to implement any policy change that would, in the case of a licensee operating under the installment payment program, compromise the Commission's exclusive or senior secured position with respect to the license and the proceeds of the sale of such license. Nevertheless, we seek comment on whether permitting RUS to obtain security interests in the spectrum licenses of their borrowers, as described below, could have unintended effects on installment licensees and the Commission's rights under these arrangements.

68. Our primary goal is to determine whether further relaxation of the security interest restrictions—by allowing at least a modified form of collateralization of FCC licenses by licensees obtaining RUS funds—could increase opportunities to raise capital or avoid financial collapse. We therefore seek comment on the extent to which a licensee's ability to grant RUS a security interest directly in an FCC license would, in fact, create new financing opportunities and facilitate the construction, deployment and continuity of new and existing wireless services in rural and underserved areas. We also ask how this change in our policy would affect the ability of small businesses to obtain much needed startup capital.

69. On the other hand, despite these potential benefits, we recognize that a licensee's current ability to grant security interests in its stock and in the proceeds of a license sale may already provide it with financing opportunities that are similar to those we seek to foster by our proposal below. If so, it would appear that we may not significantly enhance financing opportunities. We ask all interested parties, including licensees, vendors, RUS, lenders and others to comment on these potential benefits and to identify any other specific benefits that could accrue from such a policy change.

70. We further note that any security interest granted to RUS would be expressly conditioned, in writing as part of all applicable financing documents, on the Commission's prior approval of any assignment of the license or any transfer of de jure or de facto control of the licensee to RUS. We discuss below the reasons for this limitation and seek comment on some specific concerns.

71. First, in addition to the benefits from lower costs of and greater access to capital, we seek comment on whether modifying our policy to permit RUS to take a security interest in FCC licenses is a natural outgrowth of the Commission and judicial developments discussed above, which recognize the value and ability of a lender obtaining a security interest in the licensee's stock, proceeds and other assets without infringing upon the Commission's statutory obligations. For instance, in MLQ Investors , L.P. v. Pacific Quadracasting, Inc., 146 F.3d 746 (9th Cir. 1998), the U.S. Court of Appeals for the Ninth Circuit determined that a security interest in the proceeds of the sale of a broadcast license can be perfected prior to the sale of the license, and that “[g]overnment licenses, as a general rule, are considered to be 'general intangibles' under the Uniform Commercial Code, “ i.e. , personal property interests in which security interests may be perfected.”' The Ninth Circuit identified the Commission's primary policy concern by stating that “[t]he FCC may prohibit security interests in licenses themselves because the creation of such an interest could result in foreclosure and transfer of the license without FCC approval.” The Ninth Circuit went on to explain that the Commission's interest in regulating spectrum to promote the public interest is not implicated “by a security interest in the proceeds of licenses, which does not grant the creditor any power or control over the license.” We also note that application of state laws under Article 9 of the Uniform Commercial Code is generally limited in connection with the treatment of security interests of non-assignable “personal property” governed by federal law. We seek comment on how cases like MLQ Investors and the application of the UCC provisions have affected lending practices for FCC licensees and what, if any, impact the grant of security interests in spectrum licenses to RUS might have on established law in this area, including the appropriate method of how RUS would perfect a security interest in FCC licenses.

72. Next, we address the concerns that have led us to propose that any security interest granted to RUS be expressly conditioned on the Commission's prior approval of any assignment of the license or any transfer of de jure or de facto control. We ask whether it may be feasible for a licensee to grant RUS a security interest in an FCC license without compromising our obligation to maintain control of spectrum in the public interest, so long as we are completely able to fulfill our applicable mandates under the Communications Act of 1934, as amended. For example, we must and will preserve our authority under section 310(d) to review and approve license assignments and transfers of control, to assess and confirm the basic qualifications of assignees and transferees, and, more generally, to exercise our statutory responsibility to determine whether the section 310(d) transaction in question will serve the public interest, convenience and necessity. The Commission has historically disallowed granting security interests in FCC licenses, based upon its concern that such financing arrangements may interfere with its ability to regulate the assignment of licenses, the transfer of control over licenses, and, more generally, the use of spectrum. If, however, we can ensure that appropriate prior approval of assignments and transfers is obtained, and if we further limit any grant of a security interest to RUS, a federal loan agency, do commenters believe that our policy and statutory concerns would be satisfactorily addressed, thus enabling us to promote flexibility and financing opportunities for licensees serving rural and underserved areas? In this regard, we note that we have seen no detectable erosion of our regulatory authority from our current policy of permitting licensees to engage in a very similar type of financing arrangement—that is, a licensee grant of a third party security interest in its stock and the proceeds of the sale of the license, along with third party perfection of that interest, prior to the sale of the subject license. We seek comment on the relative impact that such developments may have on our ability to implement and enforce our statutory obligations.

73. We recognize that permitting RUS to obtain security interests in FCC licenses would provide RUS with greater rights vis-à-vis the license and licensee than it currently can obtain. We therefore ask whether our proposed condition requiring prior FCC approval before RUS can foreclose on the license would satisfactorily and adequately preserve existing regulatory relationships. The type of security interest that we are seeking comment on would be a right between the licensee and RUS, exercisable only upon Commission approval. Would such a right be fully consistent with our responsibilities under the Communications Act? We ask whether it would not be different than granting RUS an option to purchase a license, for example. We note that we would review and require our approval of an assignment to RUS in accordance with our transfer and assignment policies before RUS could assume control of a license. Such a process is designed to ensure that the federal government retains appropriate control over use of the spectrum consistent with sections 301 and 304 of the Act, and that the perfection of a security interest in a license does not interfere with these or other statutory obligations and policy prerogatives. For example, would a security interest in a license give RUS any rights that might conflict with the Commission's regulatory oversight (other than an unapproved foreclosure or assertion of control) that it could exercise against the licensee? Furthermore, in light of the fact that RUS is a federal government agency, we ask whether we may have greater statutory latitude to grant it a security interest while still ensuring that the federal government retains control over spectrum.

74. Our next concern relates to any unintended consequences that may result from this potential policy change, especially as it relates to existing and future financial and regulatory relationships and any new claims or conflicts that may arise. It appears that one of the main conceptual differences between the current limits on the scope of permissible security interests and our proposal is that a security interest in a license itself would link the secured party more directly to the Commission. It is our understanding that under current financing practices involving FCC licensees, the secured party's rights stem from its relationship as a lender (and possibly an equipment vendor, bondholder or stockholder) to the licensee, not directly to the Commission, even after default and foreclosure on the secured assets. We seek comment on whether the grant by a licensee of a contingent interest in a Commission authorization to RUS—without the Commission's permission or review—would undermine our regulatory authority embodied in sections 301 and 304. We also ask how the existence of RUS, as a secured creditor, may affect the ability of the licensee to seek financing from other sources in this situation? In sum, we seek comment on what, if any, difference from the perspective of RUS, a third-party lender, or the licensee, would there be on a relaxation of the current security interest policies in the circumstances described above.

75. Finally, we seek comment on one other concern that had been raised in the past by the Commission in connection with prior similar proposals. In particular, in the context of broadcast licenses, the Commission expressed concern about the independence of broadcast stations and about the ability of creditors to have substantial influence over a borrower station. We seek comment on whether such dangers exist in the connection with RUS's attainment of security interests in non-broadcasting wireless licenses, especially as it relates to preserving and protecting facilities-based competition and innovation by and among wireless service providers.

76. Section 22.942 of the Commission's rules substantially limits the ability of parties to have interests in cellular carriers on different channel blocks in the same rural geographic area. To the extent licensees on different channel blocks have any degree of overlap between their respective cellular geographic service areas (CGSAs) in an RSA, section 22.942 prohibits any entity from having a direct or indirect ownership interest of more than 5 percent in one such licensee when it has an attributable interest in the other licensee. An attributable interest is defined generally to include an ownership interest of 20 percent or more or any controlling interest. An entity may have a non-controlling and otherwise non-attributable direct or indirect ownership interest of less than 20 percent in licensees for different channel blocks in overlapping CGSAs within an RSA.

77. The Commission initiated a comprehensive review of the cellular cross-interest rule in January 2001 as part of its 2000 biennial regulatory review of spectrum aggregation limits. In December 2001, pursuant to section 11 of the Communications Act, the Commission released its Spectrum Cap Sunset Order and, on the basis of the state of competition in CMRS markets, sunset the CMRS spectrum cap rule in all markets effective January 1, 2003. See 2000 Biennial Regulatory Review Spectrum Aggregation Limits for Commercial Mobile Radio Services, WT Docket No. 01-14, Report and Order, 67 FR 1626 (Jan. 14, 2002) ( Spectrum Cap Sunset Order ). In that order, the Commission also determined that cellular carriers in urban areas no longer enjoyed first-mover, competitive advantages, and it therefore eliminated the cellular cross-interest rule in MSAs on that basis, also pursuant to section 11 of the Act. While the Commission left the cross-interest rule in place in RSAs, it indicated that it would consider waiver requests and reassess the need for the rule at a future date.

78. In March 2002, the Commission sought comment on petitions filed by Dobson Communications Corporation, Western Wireless Corporation, and Rural Cellular Corporation (Dobson/Western/RCC) and Cingular Wireless LLC (Cingular) seeking reconsideration of the decision in the Spectrum Cap Sunset Order to retain the cellular cross-interest rule in RSAs. Petitioners and commenting parties focused on the sufficiency of the competitive market analysis underlying the decision to retain the cellular cross-interest rule in RSAs, as well as the consequences of relying on case-by-case review to examine cellular competition in rural areas. Parties also asserted that the waiver process established in the Spectrum Cap Sunset Order creates regulatory uncertainty and discourages potential transactions and financing that could benefit rural consumers. These petitions remain pending and are being consolidated into the instant rulemaking.

79. In its December 2002 Rural NOI, the Commission sought comment on the cellular cross-interest rule as it reviewed its policies to encourage the provision of wireless services in rural areas. The Commission received comments supporting either modification or elimination of the rule so as to facilitate investment and financing arrangements for rural cellular providers.

80. We seek comment on whether the continued application of the cellular cross-interest rule in all RSAs may impede market forces that drive investment and economic development in rural areas. The recent downturn in telecommunications markets, worsening financial condition of many carriers, and the ongoing need for capital investment to keep up with technological and regulatory changes, has made it more difficult for wireless carriers, especially those serving rural areas, to obtain financing. In light of the foregoing, we seek comment regarding whether we should modify the cellular cross-interest rule to promote investment while protecting against potential competitive harms. Specifically, we tentatively conclude to retain the cellular cross-interest rule as it applies only in RSAs with three or fewer CMRS competitors and we seek comment on removing the rule as it applies to other RSAs and to non-controlling investments in all RSA licensees.

81. In the Spectrum Cap Sunset Order, the Commission concluded that it would be more efficient and less costly to the Commission to maintain a prophylactic cross-interest rule applicable to all RSAs and to entertain waiver requests for the small subset of transactions in RSAs where competition was more robust. As a consequence of that decision, cellular licensees in MSAs are free to procure financing that involves ownership interests that fall below the threshold that triggers the cross-interest rule, while cellular licensees in all RSAs are not. While the Commission attempted to address this barrier to investment in rural areas by providing a specific waiver process, the transactions costs and regulatory uncertainty surrounding any waiver procedure may deter some beneficial investment in these areas.

82. We seek comment on whether changing the cellular cross-interest rule for RSAs that enjoy a greater degree of competition will spur needed investment in these rural areas and foster even more competition in others. As an initial matter, we seek comment regarding what constitutes a “competitor” for purposes of this rule. We also seek comment regarding whether, in the event we do eliminate the cellular cross-interest rule for RSAs with greater than three competitors, we should adopt a transition period after which time the rule would sunset for these RSAs. In the event that commenters support such a sunset period, we seek comment regarding the appropriate length of the sunset period.

83. We also ask commenters for additional suggestions regarding how we may modify our cellular cross-interest rule to promote investment in rural areas while retaining adequate competitive safeguards. For example, should we eliminate the cellular cross-interest restriction for all RSAs where the ownership interest being transferred, assigned or acquired is not a controlling interest ( i.e. , where the interest is a non-controlling interest and where the transaction otherwise would not require prior FCC approval)? We ask parties to focus their comments on the effect of the cross-interest rule on licensees' acquisition of adequate capital in these areas. Commenters supporting our proposal should identify and discuss specific past instances in which they have had difficulty obtaining financing in rural areas due to the cellular cross-interest rule. We also request parties to provide examples of the extent to which the waiver process has deterred or prevented acquisition of capital in a rural market(s). We seek specific market data and historical examples to assist our public interest determination of the extent to which application of the cellular cross-interest rule in RSAs impedes market forces that drive development in these rural and underserved areas.

84. We also seek comment on whether extension of the case-by-case review, as established in the Spectrum Cap Sunset Order, will promote investment and is sufficient to safeguard competition in RSAs with more than three competitors. Although we recognize the role that the cellular cross-interest rule has provided in the past against the possibility of significant additional consolidation of cellular providers in rural areas, we ask whether the public interest may be better served by the benefits of pure case-by-case review. In the Spectrum Cap Sunset Order, the Commission concluded that case-by-case review under section 310(d) of the Act, properly performed and with appropriate enforcement mechanisms, allows greater regulatory flexibility and greater attention to the actual circumstances of a particular transaction, thus promoting economic efficiency by reducing the possibility both of approving secondary market transactions that are not in the public interest and of impeding transactions that are actually in the public interest. In the markets still covered by the cellular cross-interest rule, for example, the rule prevents the two cellular licensees from merging regardless of the competitive circumstances in a given market, but does not prevent one cellular licensee from merging with a PCS licensee, even though the competitive effect of both transactions might be very similar. We seek comment on whether this inequity may distort the market in any area in which more than just the two cellular licensees are operating and whether the better approach to safeguarding competition is to take account of the particular circumstances of each market through case-by-case competitive review.

85. Both in the United States (U.S.) and the European Union (EU), commercial wireless providers have sought to minimize their capital expenditures and maximize their coverage by engaging in joint ventures with other providers to share infrastructure costs. Such arrangements are generally known as “infrastructure sharing,” and they can take place at various levels. At the most basic level is sharing of passive elements such as antennas and towers, followed by sharing of active or “intelligent” elements of the networks such as switches and nodes, followed by sharing of spectrum.

86. In the United States, several infrastructure sharing arrangements have been announced in the past two years. The providers claim that such infrastructure sharing will allow them to cover a larger geographic area at lower cost. In addition, because two or more providers share the infrastructure, these arrangements may allow for more providers to serve a market than otherwise would be possible. Finally, to the extent that these arrangements make it possible for providers to cover a larger geographic area, and thus serve a greater number of consumers, they may provide an important public interest benefit.

87. Infrastructure sharing arrangements that do not involve a transfer of control, as defined under section 310(d), do not require Commission review. Infrastructure sharing arrangements that do involve a transfer of control, like other arrangements, require Commission review. Also, while previous infrastructure sharing arrangements have not required Commission review, the Commission has taken no regulatory action to either promote or create incentives for parties to enter into such arrangements.

88. As compared to the U.S. market, infrastructure sharing has received more attention from regulators in the EU and its Member States. Within the past year, the European Commission announced a preliminary conclusion to favorably view two agreements for the provision of 3G services, one in the United Kingdom and one in Germany. The European Commission noted that these arrangements should allow for faster rollout of service and greater coverage, especially in remote and rural areas.

89. As noted earlier, because of the lower population density and smaller customer base found in rural areas, the economically efficient number of providers for these markets will be fewer than that for urban markets. Because infrastructure sharing helps lower capital costs and thus extend the coverage of providers, this practice may be particularly important in rural areas, for which geographic coverage is especially important. In addition, because infrastructure sharing may make it possible for more providers to operate in a given area, this practice again is important for rural markets that tend to have fewer competitors.

90. We continue to believe that, under certain circumstances, licensees should be able to engage in infrastructure sharing in order to further promote service in these markets. Thus, for infrastructure sharing in rural areas that involve no transfer of control, as defined by section 310(d), there are no requirements for Commission pre-clearance. For infrastructure sharing arrangements in rural areas that involve a transfer of control, we will maintain section 310(d) review. We note that in the Secondary Markets proceeding we have significantly streamlined the transfer of control and assignment process, and we inquire as to whether there are other steps we should consider to further streamline this process.

91. We seek comment on the extent to which infrastructure sharing may promote service in rural markets. Are there particular types of infrastructure sharing arrangements that may be most effective in promoting this goal? Are there specific policy steps we should take as a regulatory matter to promote infrastructure sharing arrangements that, in turn, promote service in rural areas? We encourage comments from providers involved in infrastructure sharing in the U.S. and EU as well as those familiar with such arrangements.

92. We also seek comment on the potential costs and benefits of this proposed policy. With regard to the potential benefits, we note that comments by European Commission regulators in support of such arrangements in the E.U. generally focus on the ability of carriers to lower costs and increase their coverage area, especially to rural markets. Can we assume similar benefits for rural areas in the U.S.? We recognize that the Commission has stressed the value of facilities-based competition, and that infrastructure sharing by definition limits competition between two potential competitors. We seek comment on the factors we should consider in evaluating infrastructure sharing arrangements that require section 310 approval so as to effectively balance promoting competition among providers and promoting expanded coverage in rural areas.

93. In addition, we recognize that, as in the case of secondary market spectrum leasing, infrastructure sharing may require reconsideration of our regulatory definitions of spectrum use. As described above, we propose that licensees that make their spectrum in rural areas available to other parties via secondary markets are, in a sense, using that spectrum. Should we similarly consider spectrum involved in infrastructure sharing arrangements to be “used” and thus not subject to re-licensing or any other mechanism to make the spectrum available to third parties?

94. The Rural Radiotelephone Service (RRS) was established to permit the use of certain VHF and UHF spectrum to provide radio telecommunications services, in particular, basic telephone service, to subscribers in locations generally deemed so remote that traditional wireline service or service by other means is not feasible. The RRS operates in the paired 152/158 MHz and 454/459 MHz bands, which are also used by paging services. In 1987, the Commission adopted rules that authorized the establishment of the Basic Exchange Telecommunications Radio Service (BETRS) within the RRS. BETRS is authorized in the same paired spectrum bands as RRS and in addition, on fifty channel pairs in the 816-820/861-865 MHz band. BETRS, which is essentially a type of technology used to provide RRS, utilizes a digital system that is more spectrally efficient than traditional analog RRS, provides private calling, and has a much lower call blocking rate than RRS. Only local exchange carriers that have been state certified to provide basic exchange telephone service (or others having state approval to provide such service) in the pertinent area are eligible to hold authorizations for BETRS.

95. The BETRS R&O provided that traditional RRS and BETRS would be co-primary with other services that were authorized to use the same spectrum. See Basic Exchange Telecommunications Radio Service, CC Docket No. 86-495, Report and Order , 53 FR 3210 (February 4, 1988) ( BETRS R&O ). Prior to the establishment of BETRS, RRS was licensed on a secondary, non-interfering basis. In 1997, the Commission established rules to auction the 152/158 MHz and 454/459 MHz bands and issue paging licenses on a geographic basis. As a result, existing RRS and BETRS licensees authorized for these spectrum bands were afforded protection as incumbent licensees and could continue operating on a primary basis. However, we indicated that subsequent RRS and BETRS licenses in these bands would be issued on a secondary basis to the geographic area licensee. Similarly, in 1997, the Commission established rules to auction the 816-820/861-865 MHz bands and issue SMR licenses on a geographic basis. As a result, existing BETRS licensees authorized in the 800 MHz band were afforded protection as incumbent licensees and could continue operating on a primary basis. Again, we indicated subsequent BETRS licenses in these bands would be issued on a secondary basis to the geographic area licensee. Today new RRS and BETRS licenses are issued on a secondary, non-interfering basis.

96. We seek to establish a more complete record regarding these services in order to allow us to determine if certain rules and policy changes are needed to facilitate the use of RRS and BETRS. As discussed below, we seek comment on whether: (1) There is a current demand for RRS and BETRS; (2) other wireless services have supplanted RRS and BETRS as alternatives to wireline service; (3) access to spectrum is a limiting factor for RRS and BETRS and (4) current Commission rules and polices are prohibiting/limiting the effectiveness of RRS and BETRS to provide service in rural areas.

97. As an initial matter, we would like to determine the level of demand for RRS and BETRS. We reviewed licensing data, locations where basic exchange service does not appear to be available, and the availability of equipment for RRS and BETRS. It appears, on the surface, certain areas that do not have basic telephone service might benefit from RRS or BETRS. For example, we note that no RUS or BETRS facilities are licensed in Mississippi, which according to 2000 Census data, has the lowest household telephone penetration rate in the U.S. In addition, we cannot find evidence that 800 MHz BETRS equipment has ever been manufactured and made available in the U.S. Furthermore, we only found one company that claimed it provided new RRS and BETRS equipment. We seek comment on whether there is still a demand for RRS and BETRS, beyond what is currently offered, and whether RRS and BETRS are viable options in the provision of basic telecommunications services. If there is a demand for these services, are there ways that RRS and BETRS could be used more efficiently and/or effectively?

98. If there is a demand for basic communications services, other than wireline, and it is not being met using traditional RRS and BETRS spectrum, we are interested in exploring how the demand is being met. The Commission has embraced policies that provide many wireless licensees with added flexibility in providing various types of services ( i.e. , fixed or mobile/voice or data). It is now possible that services ( i.e. , basic exchange service) previously offered only by RRS and BETRS licensees could be offered by licensees in other wireless services, using other spectrum bands. Furthermore, it is possible with the proliferation of mobile telephony throughout the country, individuals that in the past would have been a prime candidate to receive RRS or BETRS may now have access to a mobile telephone that is the sole telephone used within a household. We are not able to determine how many licensees are providing basic exchange service to rural areas using alternative spectrum or how many licensees are providing services ( i.e. , mobile telephony) and therefore could negate the need for RRS or BETRS in particular areas. We therefore seek comment on the effectiveness of non-RRS and BETRS licensees in providing the same services or alternative services in lieu of RRS and BETRS. Furthermore, we seek comment on whether additional flexibility is necessary in order to fully exploit capabilities of licensees in this context? In addition, we seek comment regarding to what, if any, extent unlicensed spectrum is being used to provide services that have traditionally been provided by RRS and BETRS licensees.

99. In some instances, there may be a demand for a service; however, access to the spectrum needed to provide such services may not be readily available. We noted in the Secondary Markets proceeding that facilitating spectrum leasing arrangements permits additional spectrum users to gain access to spectrum. Furthermore, several commenters in the Secondary Markets proceeding specifically indicated that facilitating leasing arrangements would increase service offerings to rural customers by enabling rural telephone companies and others to access underutilized spectrum. We seek comment on whether there is a problem for potential providers of RRS or BETRS in accessing spectrum and if so, whether parties feel secondary markets will provide the appropriate means for access to the desired spectrum.

100. We are also interested in determining if the Commission's current rules and policies for RRS and BETRS are limiting factors towards a more expansive use of these services. We note that currently there is an eligibility restriction for BETRS that restricts the issuance of a license to only those entities that receive state approval to provide basic exchange telephone service. We believe that this rule may be unnecessary and may serve as a potential regulatory hurdle towards a more rapid and efficient use of the BETRS spectrum. We therefore propose to remove the eligibility restrictions contained within section 22.702 of our rules regarding state approval prior to the issuance of a BETRS license. Furthermore, the current service rules for RRS and BETRS provides that new licenses are issued on a secondary, non-interfering basis. In a Petition for Rulemaking filed by several parties, which eventually lead to the establishment of BETRS, a request was made to provide 2 MHz of dedicated spectrum for the use of BETRS. At the time, we determined that the demand for BETRS was not clear and therefore made the decision not to provide discrete spectrum for the use of BETRS. However, we indicated that if the spectrum that was made available for BETRS proved to be insufficient at a future date, we would revisit the problem at that time. We note that in the Rural NOI we sought comment on how we might revise existing RRS and BETRS rules to further facilitate the provision of wireless services to rural areas. We did not receive any comments that specifically addressed the need to revise RRS or BETRS rules. We seek comment on our proposal to remove the eligibility restrictions in section 22.702 of the Commission's rules for BETRS licensees. Based on the current RRS and BETRS licensing scheme, we seek comment on whether there is a need for us to expand the secondary status for RRS and BETRS to other spectrum bands in order to facilitate and encourage construction in rural areas. If so, what spectrum bands could RRS and BETRS be expanded to include? If additional spectrum should be designated on a primary basis for BETRS, what band(s) would be viable? How much spectrum would be needed? Is there existing equipment or equipment that can be manufactured and made readily available for use in the band(s)?

101. As a final matter, and in light of the Commission's policies towards a more flexible-use, market-based approach to spectrum management, we believe it is appropriate at this time to determine if the current designation of RRS and BETRS as fixed services creates disincentives towards a more expansive use of the spectrum. We seek comment on whether providing additional flexibility to allow other types of service offerings using RRS and BETRS spectrum on a secondary basis would provide the proper incentives for these spectrum bands to be more fully utilized in providing telecommunications services to rural areas. If a more flexible use policy were created for RRS and BETRS, what considerations must the Commission consider in adopting rules and policies to facilitate such flexible use?

102. This is a permit-but-disclose notice and comment rulemaking proceeding. Ex parte presentations are permitted, except during the Sunshine Agenda period, provided they are disclosed as provided in Commission rules. See generally 47 CFR 1.1202, 1.1203, and 1.1206.

103. As required by the Regulatory Flexibility Act, the Commission has prepared an Initial Regulatory Flexibility Analysis (IRFA) of the possible impact on small entities of the proposals in the NPRM. The IRFA is set forth below. Written public comments are requested on the IRFA. These comments must be filed in accordance with the same filing deadlines for comments on the NPRM , and they must have a separate and distinct heading designating them as responses to the Initial Regulatory Flexibility Analysis. The Commission's Consumer Information Bureau, Reference Information Center, will send a copy of this Notice of Proposed Rulemaking, including the Initial Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of the Small Business Administration, in accordance with the Regulatory Flexibility Act. See 5 U.S.C. 603(a).

104. In this NPRM , we continue to examine ways of amending our regulations and policies governing the electromagnetic spectrum and the facilities-based commercial and private wireless services that rely on spectrum, in order to promote the rapid and efficient deployment of these services in rural areas. This NPRM builds upon the work of our Notice of Inquiry, in which we sought comment on how we could modify our policies to encourage the provision of wireless services in rural areas. This NPRM also draws upon the efforts and recommendations of the Spectrum Policy Task Force, which identified and evaluated potential changes in our spectrum policy that would increase public benefits from spectrum-based services. This NPRM proposes several ways in which the Commission can modify and improve its regulations and policies in order to promote such wireless service within rural areas while simultaneously removing any disincentives or other barriers to construction and operation in rural areas.

105. As a complement to the measures the Commission has already taken, we seek to minimize regulatory costs and eliminate unnecessary regulatory barriers to the deployment of spectrum-based services in rural areas. As reflected in the proposals set forth in this NPRM , we believe there are additional spectrum policy initiatives the Commission can adopt to reduce the overall cost of regulation and increase flexibility in a manner that will facilitate access, capital formation, build-out and coverage in rural areas. Specifically, in this NPRM , we seek comment on the appropriate definition of what constitutes a “rural area” for the purposes of this proceeding. We also seek comment on how to define “built” spectrum and we inquire as to whether the most efficient approach may be to rely on providers' filings of their construction notifications, an approach used with broadband PCS. Notably, we propose that spectrum in rural areas that is leased by a licensee, and for which the lessee meets the performance requirements that are applicable to the licensee, should be construed as “used” for the purposes of this proceeding and any performance requirements we adopt. Furthermore, we seek comment on ways the Commission could modify its regulations pertaining to unused spectrum.

106. In this NPRM , we propose the adoption of a “substantial service” construction benchmark during the initial license term for all wireless services that are licensed on a geographic area basis and that are subject to performance requirements. We also propose a substantial service safe harbor for rural areas. We also seek comment on whether we should adopt a geography-based benchmark for wireless services that are licensed on a geographic area basis and that currently do not have a geographic area coverage option. In addition, we seek comment on whether we should impose performance requirements in subsequent license terms after initial renewal. We also seek comment on measures that may be taken to increase power flexibility for licensed services. We also seek comment as to the relative effect on service in rural areas of the Commission's use of small versus large geographic service areas.

107. In this NPRM , we seek comment on what, if any, regulatory or policy changes should be made to complement the Rural Utilities Service's (RUS) financing programs. We also ask whether we should allow RUS to take security interests in spectrum licenses, provided that any security interest is expressly conditioned on the Commission's prior approval of any assignment of the license from the licensee to the secured party. We also seek comment on whether we should eliminate the cellular cross-interest rule in Rural Service Areas with greater than three competitors, and we seek comment on what should constitute a “competitor.” In addition, we seek comment on whether clarifying the Commission's policy on infrastructure sharing may promote service in rural areas. Finally, we propose ways of modifying our rules governing Rural Radiotelephone Service (RRS) and Basic Exchange Telephone Radio Systems (BETRS) to expand the use of these services, including removing eligibility restrictions on the use of BETRS spectrum.

108. We tentatively conclude that we have authority under sections 4(i), 11, 303(r), 309(j) and 706 of the Communications Act of 1934, as amended, 47 U.S.C. 154(i), 157, 161, 303(r), and 309(j), to adopt the proposals set forth in the NPRM .

109. The RFA directs agencies to provide a description of, and where feasible, an estimate of the number of small entities that may be affected by the rules adopted herein. The RFA generally defines the term “small entity” as having the same meaning as the terms “small business,” “small organization,” and “small governmental jurisdiction.” In addition, the term “small business” has the same meaning as the term “small business concern” under the Small Business Act. A “small business concern” is one which: (1) Is independently owned and operated; (2) is not dominant in its field of operation; and (3) satisfies any additional criteria established by the Small Business Administration (SBA).

110. Cellular Licensees. The SBA has developed a small business size standard for small businesses in the category “Cellular and Other Wireless Telecommunications.” Under that SBA category, a business is small if it has 1,500 or fewer employees. According to the Bureau of the Census, only twelve firms out of a total of 1,238 cellular and other wireless telecommunications firms operating during 1997 had 1,000 or more employees. Therefore, even if all twelve of these firms were cellular telephone companies, nearly all cellular carriers are small businesses under the SBA's definition.

111. 220 MHz Radio Service—Phase I Licensees. The 220 MHz service has both Phase I and Phase II licenses. Phase I licensing was conducted by lotteries in 1992 and 1993. There are approximately 1,515 such non-nationwide licensees and four nationwide licensees currently authorized to operate in the 220 MHz band. The Commission has not developed a definition of small entities specifically applicable to such incumbent 220 MHz Phase I licensees. To estimate the number of such licensees that are small businesses, we apply the small business size standard under the SBA rules applicable to “Cellular and Other Wireless Telecommunications” companies. This category provides that a small business is a wireless company employing no more than 1,500 persons. According to the Census Bureau data for 1997, only twelve firms out of a total of 1,238 such firms that operated for the entire year, had 1,000 or more employees. If this general ratio continues in the context of Phase I 220 MHz licensees, the Commission estimates that nearly all such licensees are small businesses under the SBA's small business standard.

112. 220 MHz Radio Service—Phase II Licensees. The 220 MHz service has both Phase I and Phase II licenses. The Phase II 220 MHz service is subject to spectrum auctions. In an order relating to this service, we adopted a small business size standard for defining “small” and “very small” businesses for purposes of determining their eligibility for special provisions such as bidding credits and installment payments. This small business standard indicates that a “small business” is an entity that, together with its affiliates and controlling principals, has average gross revenues not exceeding $15 million for the preceding three years. A “very small business” is defined as an entity that, together with its affiliates and controlling principals, has average gross revenues that do not exceed $3 million for the preceding three years. The SBA has approved these small size standards. Auctions of Phase II licenses commenced on September 15, 1998, and closed on October 22, 1998. In the first auction, 908 licenses were auctioned in three different-sized geographic areas: Three nationwide licenses, 30 Regional Economic Area Group (EAG) Licenses, and 875 Economic Area (EA) Licenses. Of the 908 licenses auctioned, 693 were sold. Thirty-nine small businesses won 373 licenses in the first 220 MHz auction. A second auction included 225 licenses: 216 EA licenses and 9 EAG licenses. Fourteen companies claiming small business status won 158 licenses. A third auction included four licenses: 2 BEA licenses and 2 EAG licenses in the 220 MHz Service. No small or very small business won any of these licenses.

113. Lower 700 MHz Band Licenses. We adopted criteria for defining three groups of small businesses for purposes of determining their eligibility for special provisions such as bidding credits. We have defined a small business as an entity that, together with its affiliates and controlling principals, has average gross revenues not exceeding $40 million for the preceding three years. A very small business is defined as an entity that, together with its affiliates and controlling principals, has average gross revenues that are not more than $15 million for the preceding three years. Additionally, the lower 700 MHz Service has a third category of small business status that may be claimed for Metropolitan/Rural Service Area (MSA/RSA) licenses. The third category is entrepreneur, which is defined as an entity that, together with its affiliates and controlling principals, has average gross revenues that are not more than $3 million for the preceding three years. The SBA has approved these small size standards. An auction of 740 licenses (one license in each of the 734 MSAs/RSAs and one license in each of the six Economic Area Groupings (EAGs)) commenced on August 27, 2002, and closed on September 18, 2002. Of the 740 licenses available for auction, 484 licenses were sold to 102 winning bidders. Seventy-two of the winning bidders claimed small business, very small business or entrepreneur status and won a total of 329 licenses. A second auction commenced on May 28, 2003, and closed on June 13, 2003, and included 256 licenses: 5 EAG licenses and 476 CMA licenses. Seventeen winning bidders claimed small or very small business status and won sixty licenses, and nine winning bidders claimed entrepreneur status and won 154 licenses.

114. Upper 700 MHz Band Licenses. The Commission released an order authorizing service in the upper 700 MHz band. This auction, previously scheduled for January 13, 2003, has been postponed.

115. Paging. In a recent order relating to paging, we adopted a size standard for “small businesses” for purposes of determining their eligibility for special provisions such as bidding credits and installment payments. A small business is an entity that, together with its affiliates and controlling principals, has average gross revenues not exceeding $15 million for the preceding three years. The SBA has approved this definition. An auction of Metropolitan Economic Area (MEA) licenses commenced on February 24, 2000, and closed on March 2, 2000. Of the 2,499 licenses auctioned, 985 were sold. Fifty-seven companies claiming small business status won 440 licenses. An auction of Metropolitan Economic Area (MEA) and Economic Area (EA) licenses commenced on October 30, 2001, and closed on December 5, 2001. Of the 15,514 licenses auctioned, 5,323 were sold. 132 companies claiming small business status purchased 3,724 licenses. A third auction, consisting of 8,874 licenses in each of 175 EAs and 1,328 licenses in all but three of the 51 MEAs commenced on May 13, 2003, and closed on May 28, 2003. Seventy-seven bidders claiming small or very small business status won 2,093 licenses. Currently, there are approximately 24,000 Private Paging site-specific licenses and 74,000 Common Carrier Paging licenses. According to the most recent Trends in Telephone Service, 608 private and common carriers reported that they were engaged in the provision of either paging or “other mobile” services. Of these, we estimate that 589 are small, under the SBA-approved small business size standard. We estimate that the majority of private and common carrier paging providers would qualify as small entities under the SBA definition.

116. Broadband Personal Communications Service (PCS). The broadband PCS spectrum is divided into six frequency blocks designated A through F, and the Commission has held auctions for each block. The Commission has created a small business size standard for Blocks C and F as an entity that has average gross revenues of less than $40 million in the three previous calendar years. For Block F, an additional small business size standard for “very small business” was added and is defined as an entity that, together with its affiliates, has average gross revenues of not more than $15 million for the preceding three calendar years. These small business size standards, in the context of broadband PCS auctions, have been approved by the SBA. No small businesses within the SBA-approved small business size standards bid successfully for licenses in Blocks A and B. There were 90 winning bidders that qualified as small entities in the Block C auctions. A total of 93 “small” and “very small” business bidders won approximately 40 percent of the 1,479 licenses for Blocks D, E, and F. On March 23, 1999, the Commission reauctioned 155 C, D, E, and F Block licenses; there were 113 small business winning bidders.

117. Narrowband PCS. The Commission held an auction for Narrowband PCS licenses that commenced on July 25, 1994, and closed on July 29, 1994. A second commenced on October 26, 1994 and closed on November 8, 1994. For purposes of the first two Narrowband PCS auctions, “small businesses” were entities with average gross revenues for the prior three calendar years of $40 million or less. Through these auctions, the Commission awarded a total of forty-one licenses, 11 of which were obtained by four small businesses. To ensure meaningful participation by small business entities in future auctions, the Commission adopted a two-tiered small business size standard in an order relating to narrowband PCS. A “small business” is an entity that, together with affiliates and controlling interests, has average gross revenues for the three preceding years of not more than $40 million. A “very small business” is an entity that, together with affiliates and controlling interests, has average gross revenues for the three preceding years of not more than $15 million. The SBA has approved these small business size standards. A third auction commenced on October 3, 2001 and closed on October 16, 2001. Here, five bidders won 317 (MTA and nationwide) licenses. Three of these claimed status as a small or very small entity and won 311 licenses.

118. Specialized Mobile Radio (SMR). The Commission awards “small entity” bidding credits in auctions for Specialized Mobile Radio (SMR) geographic area licenses in the 800 MHz and 900 MHz bands to firms that had revenues of no more than $15 million in each of the three previous calendar years. The Commission awards “very small entity” bidding credits to firms that had revenues of no more than $3 million in each of the three previous calendar years. The SBA has approved these small business size standards for the 900 MHz Service. The Commission has held auctions for geographic area licenses in the 800 MHz and 900 MHz bands. The 900 MHz SMR auction began on December 5, 1995, and closed on April 15, 1996. Sixty bidders claiming that they qualified as small businesses under the $15 million size standard won 263 geographic area licenses in the 900 MHz SMR band. The 800 MHz SMR auction for the upper 200 channels began on October 28, 1997, and was completed on December 8, 1997. Ten bidders claiming that they qualified as small businesses under the $15 million size standard won 38 geographic area licenses for the upper 200 channels in the 800 MHz SMR band. A second auction for the 800 MHz band was held on January 10, 2002 and closed on January 17, 2002 and included 23 BEA licenses. One bidder claiming small business status won five licenses.

119. The auction of the 1,050 800 MHz SMR geographic area licenses for the General Category channels began on August 16, 2000, and was completed on September 1, 2000. Eleven bidders won 108 geographic area licenses for the General Category channels in the 800 MHz SMR band qualified as small businesses under the $15 million size standard. In an auction completed on December 5, 2000, a total of 2,800 Economic Area licenses in the lower 80 channels of the 800 MHz SMR service were sold. Of the 22 winning bidders, 19 claimed “small business” status and won 129 licenses. Thus, combining all three auctions, 40 winning bidders for geographic licenses in the 800 MHz SMR band claimed status as small business.

120. In addition, there are numerous incumbent site-by-site SMR licensees and licensees with extended implementation authorizations in the 800 and 900 MHz bands. We do not know how many firms provide 800 MHz or 900 MHz geographic area SMR pursuant to extended implementation authorizations, nor how many of these providers have annual revenues of no more than $15 million. One firm has over $15 million in revenues. We assume, for purposes of this analysis, that all of the remaining existing extended implementation authorizations are held by small entities, as that small business size standard is established by the SBA.

121. Private Land Mobile Radio (PLMR). PLMR systems serve an essential role in a range of industrial, business, land transportation, and public safety activities. These radios are used by companies of all sizes operating in all U.S. business categories, and are often used in support of the licensee's primary (non-telecommunications) business operations. For the purpose of determining whether a licensee of a PLMR system is a small business as defined by the SBA, we could use the definition for “Cellular and Other Wireless Telecommunications.” This definition provides that a small entity is any such entity employing no more than 1,500 persons. The Commission does not require PLMR licensees to disclose information about number of employees, so the Commission does not have information that could be used to determine how many PLMR licensees constitute small entities under this definition. Moreover, because PMLR licensees generally are not in the business of providing cellular or other wireless telecommunications services but instead use the licensed facilities in support of other business activities, we are not certain that the Cellular and Other Wireless Telecommunications category is appropriate for determining how many PLMR licensees are small entities for this analysis. Rather, it may be more appropriate to assess PLMR licensees under the standards applied to the particular industry subsector to which the licensee belongs.

122. The Commission's 1994 Annual Report on PLMRs indicates that at the end of fiscal year 1994, there were 1,087,267 licensees operating 12,481,989 transmitters in the PLMR bands below 512 MHz. Because any entity engaged in a commercial activity is eligible to hold a PLMR license, the revised rules in this context could potentially impact every small business in the United States.

123. Fixed Microwave Services. Fixed microwave services include common carrier, private-operational fixed, and broadcast auxiliary radio services. Currently, there are approximately 22,015 common carrier fixed licensees and 61,670 private operational-fixed licensees and broadcast auxiliary radio licensees in the microwave services. The Commission has not yet defined a small business with respect to microwave services. For purposes of this IRFA, we will use the SBA's definition applicable to “Cellular and Other Wireless Telecommunications” companies—that is, an entity with no more than 1,500 persons. The Commission does not have data specifying the number of these licensees that have more than 1,500 employees, and thus is unable at this time to estimate with greater precision the number of fixed microwave service licensees that would qualify as small business concerns under the SBA's small business size standard. Consequently, the Commission estimates that there are 22,015 or fewer small common carrier fixed licensees and 61,670 or fewer small private operational-fixed licensees and small broadcast auxiliary radio licensees in the microwave services that may be affected by the rules and policies adopted herein. The Commission notes, however, that the common carrier microwave fixed licensee category includes some large entities.

124. Wireless Communications Services. This service can be used for fixed, mobile, radiolocation, and digital audio broadcasting satellite uses. The Commission defined “small business” for the wireless communications services (WCS) auction as an entity with average gross revenues of $40 million for each of the three preceding years, and a “very small business” as an entity with average gross revenues of $15 million for each of the three preceding years. The SBA has approved these definitions. The FCC auctioned geographic area licenses in the WCS service. In the auction, which commenced on April 15, 1997 and closed on April 25, 1997, there were seven bidders that won 31 licenses that qualified as very small business entities, and one bidder that won one license that qualified as a small business entity. An auction for one license in the 1670-1674 MHz band commenced on April 30, 2003 and closed the same day. One license was awarded. The winning bidder was not a small entity.

125. 39 GHz Service. The Commission defines “small entity” for 39 GHz licenses as an entity that has average gross revenues of less than $40 million in the three previous calendar years. “Very small business” is defined as an entity that, together with its affiliates, has average gross revenues of not more than $15 million for the preceding three calendar years. The SBA has approved these definitions. The auction of the 2,173 39 GHz licenses began on April 12, 2000, and closed on May 8, 2000. The 18 bidders who claimed small business status won 849 licenses.

126. Local Multipoint Distribution Service. An auction of the 986 Local Multipoint Distribution Service (LMDS) licenses began on February 18, 1998, and closed on March 25, 1998. The Commission defined “small entity” for LMDS licenses as an entity that has average gross revenues of less than $40 million in the three previous calendar years. An additional classification for “very small business” was added and is defined as an entity that, together with its affiliates, has average gross revenues of not more than $15 million for the preceding three calendar years. These regulations defining “small entity” in the context of LMDS auctions have been approved by the SBA. There were 93 winning bidders that qualified as small entities in the LMDS auctions. A total of 93 small and very small business bidders won approximately 277 A Block licenses and 387 B Block licenses. On March 27, 1999, the Commission re-auctioned 161 licenses; there were 32 small and very small business winning bidders that won 119 licenses.

127. 218-219 MHz Service. The first auction of 218-219 MHz (previously referred to as the Interactive and Video Data Service or IVDS) spectrum resulted in 178 entities winning licenses for 594 Metropolitan Statistical Areas (MSAs). Of the 594 licenses, 567 were won by 167 entities qualifying as a small business. For that auction, we defined a small business as an entity that, together with its affiliates, has no more than a $6 million net worth and, after federal income taxes (excluding any carry over losses), has no more than $2 million in annual profits each year for the previous two years. In an order relating to the 218-219 MHz service, we defined a small business as an entity that, together with its affiliates and persons or entities that hold interests in such an entity and their affiliates, has average annual gross revenues not exceeding $15 million for the preceding three years. A very small business is defined as an entity that, together with its affiliates and persons or entities that hold interests in such an entity and its affiliates, has average annual gross revenues not exceeding $3 million for the preceding three years. The SBA has approved of these definitions. At this time, we cannot estimate the number of licenses that will be won by entities qualifying as small or very small businesses under our rules in future auctions of 218-219 MHz spectrum. Given the success of small businesses in the previous auction, and the prevalence of small businesses in the subscription television services and message communications industries, we assume for purposes of this IRFA that in future auctions, many, and perhaps all, of the licenses may be awarded to small businesses.

128. Location and Monitoring Service (LMS). Multilateration LMS systems use non-voice radio techniques to determine the location and status of mobile radio units. For purposes of auctioning LMS licenses, the Commission has defined “small business” as an entity that, together with controlling interests and affiliates, has average annual gross revenues for the preceding three years not exceeding $15 million. A “very small business” is defined as an entity that, together with controlling interests and affiliates, has average annual gross revenues for the preceding three years not exceeding $3 million. These definitions have been approved by the SBA. An auction for LMS licenses commenced on February 23, 1999, and closed on March 5, 1999. Of the 528 licenses auctioned, 289 licenses were sold to four small businesses. We cannot accurately predict the number of remaining licenses that could be awarded to small entities in future LMS auctions.

129. Rural Radiotelephone Service. We use the SBA definition applicable to cellular and other wireless telecommunication companies, i.e., an entity employing no more than 1,500 persons. There are approximately 1,000 licensees in the Rural Radiotelephone Service, and the Commission estimates that there are 1,000 or fewer small entity licensees in the Rural Radiotelephone Service that may be affected by the rules and policies adopted herein.

130. Air-Ground Radiotelephone Service. We use the SBA definition applicable to cellular and other wireless telecommunication companies, i.e. , an entity employing no more than 1,500 persons. There are approximately 100 licensees in the Air-Ground Radiotelephone Service, and the Commission estimates that almost all of them qualify as small entities under the SBA definition.

131. Offshore Radiotelephone Service. This service operates on several ultra high frequency (UHF) TV broadcast channels that are not used for TV broadcasting in the coastal area of the states bordering the Gulf of Mexico. At present, there are approximately 55 licensees in this service. We use the SBA definition applicable to cellular and other wireless telecommunication companies, i.e., an entity employing no more than 1,500 persons. The Commission is unable at this time to estimate the number of licensees that would qualify as small entities under the SBA definition. The Commission assumes, for purposes of this IRFA, that all of the 55 licensees are small entities, as that term is defined by the SBA.

132. Multiple Address Systems (MAS). Entities using MAS spectrum, in general, fall into two categories: (1) Those using the spectrum for profit-based uses, and (2) those using the spectrum for private internal uses. With respect to the first category, the Commission defines “small entity” for MAS licenses as an entity that has average gross revenues of less than $15 million in the three previous calendar years. “Very small business” is defined as an entity that, together with its affiliates, has average gross revenues of not more than $3 million for the preceding three calendar years. The SBA has approved of these definitions. The majority of these entities will most likely be licensed in bands where the Commission has implemented a geographic area licensing approach that would require the use of competitive bidding procedures to resolve mutually exclusive applications. The Commission's licensing database indicates that, as of January 20, 1999, there were a total of 8,670 MAS station authorizations. Of these, 260 authorizations were associated with common carrier service. In addition, an auction for 5,104 MAS licenses in 176 EAs began November 14, 2001, and closed on November 27, 2001. Seven winning bidders claimed status as small or very small businesses and won 611 licenses.

133. With respect to the second category, which consists of entities that use, or seek to use, MAS spectrum to accommodate their own internal communications needs, we note that MAS serves an essential role in a range of industrial, safety, business, and land transportation activities. MAS radios are used by companies of all sizes, operating in virtually all U.S. business categories, and by all types of public safety entities. For the majority of private internal users, the definitions developed by the SBA would be more appropriate. The applicable definition of small entity in this instance appears to be the “Cellular and Other Wireless Telecommunications” definition under the SBA rules. This definition provides that a small entity is any entity employing no more than 1,500 persons. The Commission's licensing database indicates that, as of January 20, 1999, of the 8,670 total MAS station authorizations, 8,410 authorizations were for private radio service, and of these, 1,433 were for private land mobile radio service.

134. Incumbent 24 GHz Licensees. The rules that we adopt could affect incumbent licensees who were relocated to the 24 GHz band from the 18 GHz band, and applicants who wish to provide services in the 24 GHz band. The Commission did not develop a definition of small entities applicable to existing licensees in the 24 GHz band. Therefore, the applicable definition of small entity is the definition under the SBA rules for “Cellular and Other Wireless Telecommunications.” This definition provides that a small entity is any entity employing no more than 1,500 persons. The 1992 Census of Transportation, Communications and Utilities, conducted by the Bureau of the Census, which is the most recent information available, shows that only 12 radiotelephone (now Wireless) firms out of a total of 1,178 such firms that operated during 1992 had 1,000 or more employees. This information notwithstanding, we believe that there are only two licensees in the 24 GHz band that were relocated from the 18 GHz band, Teligent and TRW, Inc. It is our understanding that Teligent and its related companies have less than 1,500 employees, though this may change in the future. TRW is not a small entity. Thus, only one incumbent licensee in the 24 GHz band is a small business entity.

135. Future 24 GHz Licensees. With respect to new applicants in the 24 GHz band, we have defined “small business” as an entity that, together with controlling interests and affiliates, has average annual gross revenues for the three preceding years not exceeding $15 million. “Very small business” in the 24 GHz band is defined as an entity that, together with controlling interests and affiliates, has average gross revenues not exceeding $3 million for the preceding three years. The SBA has approved these definitions. The Commission will not know how many licensees will be small or very small businesses until the auction, if required, is held.

136. 700 MHz Guard Band Licenses. In an order relating to the 700 MHz Guard Band, we adopted a small business size standard for “small businesses” and “very small businesses” for purposes of determining their eligibility for special provisions such as bidding credits and installment payments. A “small business” is an entity that, together with its affiliates and controlling principals, has average gross revenues not exceeding $15 million for the preceding three years. Additionally, a “very small business” is an entity that, together with its affiliates and controlling principals, has average gross revenues that are not more than $3 million for the preceding three years. An auction of 52 Major Economic Area (MEA) licenses commenced on September 6, 2000, and closed on September 21, 2000. Of the 104 licenses auctioned, 96 licenses were sold to nine bidders. Five of these bidders were small businesses that won a total of 26 licenses. A second auction of 700 MHz Guard Band licenses commenced on February 13, 2001 and closed on February 21, 2001. All eight of the licenses auctioned were sold to three bidders. One of these bidders was a small business that won a total of two licenses.

137. Multipoint Distribution Service, Multichannel Multipoint Distribution Service, and Instructional Television Fixed Service. Multichannel Multipoint Distribution Service (MMDS) systems, often referred to as “wireless cable,” transmit video programming to subscribers using the microwave frequencies of the Multipoint Distribution Service (MDS) and Instructional Television Fixed Service (ITFS). In connection with the 1996 MDS auction, the Commission defined “small business” as an entity that, together with its affiliates, has average gross annual revenues that are not more than $40 million for the preceding three calendar years. The SBA has approved of this standard. The MDS auction resulted in 67 successful bidders obtaining licensing opportunities for 493 Basic Trading Areas (BTAs). Of the 67 auction winners, 61 claimed status as a small business. At this time, we estimate that of the 61 small business MDS auction winners, 48 remain small business licensees. In addition to the 48 small businesses that hold BTA authorizations, there are approximately 392 incumbent MDS licensees that have gross revenues that are not more than $40 million and are thus considered small entities. After adding the number of small business auction licensees to the number of incumbent licensees not already counted, we find that there are currently approximately 440 MDS licensees that are defined as small businesses under either the SBA's or the Commission's rules. Some of those 440 small business licensees may be affected by the proposals in the Further Notice.

138. In addition, the SBA has developed a small business size standard for Cable and Other Program Distribution, which includes all such companies generating $12.5 million or less in annual receipts. According to Census Bureau data for 1997, there were a total of 1,311 firms in this category, total, that had operated for the entire year. Of this total, 1,180 firms had annual receipts of under $10 million, and an additional 52 firms had receipts of $10 million or more but less than $25 million. Consequently, we estimate that the majority of providers in this service category are small businesses that may be affected by the rules and policies proposed in the Further Notice.

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

140. The NPRM does not propose any specific reporting, recordkeeping or compliance requirements. However, we seek comment on what, if any, requirements we should impose if we adopt the proposals set forth in the NPRM.

141. The RFA requires an agency to describe any significant, specifically small business, alternatives that it has considered in developing its approach, which may include the following four alternatives (among others): (1) The establishment of differing compliance or reporting requirements or timetables that take into account the resources available to small entities; (2) the clarification, consolidation, or simplification of compliance or reporting requirements under the rule for small entities; (3) the use of performance, rather than design, standards; and (4) an exemption from coverage of the rule, or any part thereof, for small Entities.

142. As stated earlier, we seek to minimize regulatory costs and eliminate unnecessary regulatory burdens to the deployment of spectrum-based services in rural areas. Therefore, we believe that modifying or eliminating certain rules should decrease the costs associated with regulatory compliance for licensees and increase flexibility in a manner that will facilitate access, capital formation, build-out and coverage in rural areas. We therefore anticipate that, although it seems likely that there will be a significant economic impact on a substantial number of small entities, there will be no adverse economic impact on small entities. In fact, certain of the proposed rules may particularly benefit small entities.

143. For example, the NPRM proposes that spectrum in rural areas that is leased by a licensee, and for which the lessee meets the performance requirements that are applicable to the licensee, should be construed as “used” for the purposes of this proceeding and any performance requirements we adopt. Although adoption of this proposal would benefit both small and large entities in the radio services where leasing is allowed, the majority of businesses in these radio services are small entities.

144. The NPRM further proposes a “substantial service” construction benchmark for all wireless services licensed on a geographic basis. We believe this proposal, if adopted, will affect small and large entities alike by providing increased flexibility, particularly in rural areas, for licensees to meet their performance requirements.

145. In addition, the NPRM proposes to modify the eligibility restrictions on the use of spectrum within the Basic Exchange Telephone Radio Systems (BETRS) to allow more flexible use of the spectrum. We believe this proposal, if adopted, will provide a particular benefit to small entities by providing current BETRS licensees, of which a majority are small entities, with increased flexibility to use BETRS spectrum.

146. In the NPRM, then, the Commission has set forth various options it is considering for each rule, from modifying them to eliminating them all together. We seek comment on any additional appropriate alternatives and especially alternatives that may further reduce economic impacts on small entities.

147. None.

148. This NPRM seeks comment on a proposed information collection. As part of the Commission's continuing effort to reduce paperwork burdens, we invite the general public and the Office of Management and Budget (OMB) to take this opportunity to comment on the information collections contained in this NPRM, as required by the Paperwork Reduction Act of 1995, Public Law 104-13. Public and agency comments are due at the same time as other comments on this NPRM and must have a separate heading designating them as responses to the Initial Paperwork Reduction Analysis (IPRA). OMB comments are due 60 days from date of publication of this NPRM in the Federal Register. Comments should address: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information shall have practical utility; (b) the accuracy of the Commission's burden estimates; (c) ways to enhance the quality, utility, and clarity of the information collected; and (d) ways to minimize the burden of the collection of information on the respondents, including the use of automated collection techniques or other forms of information technology. In addition to filing comments with the Secretary, a copy of any comments on the information collection(s) contained herein should be submitted to Judith B. Herman, Federal Communications Commission, room 1-C804, 445 12th Street, SW., Washington, DC 20554, or via the Internet to < Judith.B-Herman@fcc.gov > and to Kim A. Johnson, OMB Desk Officer, room 10236 NEOB, 725 17th Street, NW., Washington, DC 20503 via the Internet to Kim_A._Johnson@omb.eop.gov or by fax to 202-395-5167.

149. Pursuant to applicable procedures set forth in sections 1.415 and 1.419 of the Commission's Rules, interested parties may file comments on or before December 29, 2003 and reply comments on or before January 26, 2004. Comments and reply comments should be filed in WT Docket No. 03-202. All relevant and timely comments will be considered by the Commission before final action is taken in this proceeding. To file formally in this proceeding, interested parties must file an original and four copies of all comments, reply comments, and supporting comments. If interested parties want each Commissioner to receive a personal copy of their comments, they must file an original plus nine copies.

150. Comments also may be filed using the Commission's Electronic Comment Filing System (ECFS). Comments filed through the ECFS can be sent as an electronic file via the Internet to < http://www.fcc.gov/cgb/ecfs >. Generally, only one copy of an electronic submission must be filed. Commenters should transmit one electronic copy of the comments to WT Docket No. 03-202. In completing the transmittal screen, commenters should include their full name, Postal Service mailing address, and the applicable docket or rulemaking number. Parties may also submit electronic comments by Internet e-mail. To receive filing instructions for e-mail comments, commenters should send an e-mail to ecfs@fcc.gov, and should include the following words in the body of the message, “get form <your e-mail address>.” A sample form and directions will be sent in reply.

151. Parties who choose to file by paper must file an original and four copies of each filing. Filings can be sent by hand or messenger delivery, by commercial overnight courier, or by first-class or overnight U.S. Postal Service mail (although we continue to experience delays in receiving U.S. Postal Service mail). The Commission's contractor, Natek, Inc., will receive hand-delivered or messenger-delivered paper filings for the Commission's Secretary at 236 Massachusetts Avenue, NE., Suite 110, Washington, DC 20002. The filing hours at this location will be 8 a.m. to 7 p.m. All hand deliveries must be held together with rubber bands or fasteners. Any envelopes must be disposed of before entering the building. In addition, parties who choose to file by paper should provide a courtesy copy of each filing to Nicole McGinnis, Attorney Advisor, Commercial Wireless Division, Wireless Telecommunications Bureau, 445 12th Street, SW., Room 6223, Washington, DC 20554 or by e-mail to Nicole McGinnis at Nicole.McGinnis@fcc.gov.

152. 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 mail, Express Mail, and Priority Mail should be addressed to 445 12th Street, SW., Washington, DC 20554. All filings must be addressed to the Commission's Secretary, Office of the Secretary, Federal Communications Commission.

153. Regardless of whether parties choose to file electronically or by paper, parties should also file one copy of any documents filed in this docket with the Commission's copy contractor, Qualex International, Portals II, 445 12th Street, SW., CY-B402, Washington, DC 20554 (see alternative addresses above for delivery by hand or messenger) (telephone 202-863-2893; facsimile 202-863-2898) or via e-mail at qualexint@aol.com.

154. The full text of this document is available for public inspection and copying during regular business hours at the FCC Reference Information Center, Portals II, 445 12th Street, SW., Room CY-A257, Washington, DC, 20554. This document may also be purchased from the Commission's duplicating contractor, Qualex International, Portals II, 445 12th Street, SW., Room CY-B402, Washington, DC, 20554, telephone 202-863-2893, facsimile 202-863-2898, or via e-mail qualexint@aol.com. Alternative formats (computer diskette, large print, audio cassette and Braille) are available to persons with disabilities by contacting Brian Millin at (202) 418-7426, TTY (202) 418-7365, or at brian.millin@fcc.gov.

155. Pursuant to the authority contained in sections 4(i), 11, 303(r), 309(j) and 706 of the Communications Act of 1934, as amended, 47 U.S.C. 154(i), 157, 161, 303(r), and 309(j), the NPRM is adopted.

156. The Commission's Consumer and Governmental Affairs Bureau, Reference Information Center, shall send a copy of the NPRM, including the Initial 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 Parts 22, 24, and 90 as follows:

Public Participation

The DMS is available 24 hours each day, 365 days each year. You can get electronic submission and retrieval help guidelines under the “help” section of the DMS web site. If you want us to notify you that we received your comments, please include a self-addressed, stamped envelope or postcard or print the acknowledgement page that appears after submitting comments on-line.

Section 393.67(c)(7)(ii) of Title 49, Code of Federal Regulations (CFR), requires the fill pipe and vents of a CMV with a fuel tank of more than 25 gallons capacity to permit the tank to be filled at a rate of at least 20 gallons per minute (gpm) without fuel spillage.

In 1999, Ford and GM filed applications for limited exemptions from this fuel system requirement.

Ford manufactures a line of vehicles under the “Econoline” brand for additional work and sale by second-stage manufacturers, including use as CMVs as defined in 49 CFR 390.5. Specifically, finished vehicles are based on a “light-truck” platform with load-or passenger-carrying capabilities that place them within the weight-or passenger-carrying thresholds of the FMCSRs.

The fill pipe of the fuel system of these light-duty vehicles is routed to minimize its exposure in the event of a crash. Because of the design characteristics of the fuel fill-pipe and system and the vapor generated when filling such tanks with gasoline, Ford found that the fuel systems in the gasoline versions of these light-duty vehicles could not meet the FMCSA requirement of § 393.67(c)(7)(ii). However, Ford noted that the diesel versions complied with the 20 gallon per minute minimum filling rate. Ford applied for exemptions for the gasoline fueled light-duty vehicles from § 393.67(c)(7)(ii), and also 49 CFR 393.67(f)(2) and (f)(3), which require that liquid fuel tanks be marked with the manufacturer's name and display a certification label that the tank conforms to all applicable rules in § 393.67.

On August 10, 1999, the Federal Highway Administration (FHWA), now the FMCSA, published a Notice of Intent to grant Ford's application for exemption (64 FR 43417). The FHWA requested public comment on Ford's application and the agency's safety analysis and presented other relevant information. After considering all the comments received, the agency granted an exemption to Ford on December 20, 1999 (64 FR 71184). In that notice (at 71185), the agency noted that the 20 gallon per minute rate, while appropriate for diesel fuel-powered vehicles, mandates that fill pipes on gasoline-powered vehicles be capable of receiving fuel at twice the maximum rate gasoline pumps are allowed to dispense fuel. 1 The vehicles in question are gasoline-fueled and are capable of receiving fuel at a rate of 17 gallons per minute.