In December 2004, the Board initiated a comprehensive review of the open-end credit rules in Regulation Z by issuing an advance notice of proposed rulemaking (ANPR) that contained 58 specific questions. This document supplements that ANPR by requesting data or comment on specific issues relating to the Truth in Lending Act provisions in the new Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. Consequently, the requests in this document are numbered consecutively, starting at number 59. Commenters are requested to refer to these numbers in their submitted comments, which will assist the Board and members of the public that review comments online. Questions are presented by subject matter, reflecting the TILA provisions in the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 as follows:

Should certain types of accounts and transactions be exempt from the disclosures? Q59-61

Hypothetical examples for periodic statements. Q62-64

What assumptions should be used in calculating the estimated repayment period? Q65

How should the minimum payment requirement and APR information be used in estimating the repayment period? Q66-75

What disclosures do consumers need about the assumptions made in estimating their repayment period? Q76

Option to provide the actual number of months to repay the outstanding balance. Q77-79

Are there alternative approaches the Board should consider? Q80-82

What guidance should the Board provide on making the minimum payment disclosures “clear and conspicuous?” Q83-84

Introductory Rate Disclosures. Q85-92

Internet Based Credit Card Solicitations. Q93-96

Disclosures Related to Payment Deadlines and Late Payment Penalties. Q97-101

Disclosures for Home-Secured Loans that May Exceed the Dwelling's Fair-Market Value. Q102-105

Prohibition on Terminating Accounts for Failure to Incur Finance Charges. Q106-108

The Congress based the Truth in Lending Act (TILA) on findings that economic stability would be enhanced and competition among consumer credit providers would be strengthened by the informed use of credit, which results from consumers' awareness of the credit's cost. Accordingly, the stated purposes of the TILA are: (1) To provide a meaningful disclosure of credit terms to enable consumers to compare the various credit terms available in the marketplace more readily and avoid the uninformed use of credit; and (2) to protect consumers against inaccurate and unfair credit billing and credit card practices. 15 U.S.C. 1601(a). TILA is implemented by the Board's Regulation Z. 12 CFR part 226. An Official Staff Commentary interprets the requirements of Regulation Z. 12 CFR part 226 (Supp. I).

TILA mandates that the Board prescribe regulations to carry out the purposes of the act. 15 U.S.C. 1604(a). In promulgating rules to implement TILA, the Board is also authorized, among other things, to do the following:

• Issue regulations that contain such classifications, differentiations, or other provisions, or provide for such adjustments and exceptions for any class of transactions, that in the Board's judgment are necessary or proper to effectuate the purposes of TILA, facilitate compliance with the act, or prevent circumvention or evasion. 15 U.S.C. 1604(a), and;

• Exempt from all or part of TILA any class of transactions if the Board determines that TILA coverage does not provide a meaningful benefit to consumers in the form of useful information or protection. The Board must consider factors identified in the act and publish its rationale at the time a proposed exemption is published for comment. 15 U.S.C. 1604(f).

The Board periodically reviews its regulations to update them, if necessary. In December 2004, the Board initiated a review of Regulation Z by issuing an advanced notice of proposed rulemaking (ANPR). 69 FR 70925, Dec. 8, 2004. The ANPR sought public comment on a variety of specific issues relating to three broad categories: the format of open-end credit disclosures, the content of disclosures, and the substantive protections provided under the regulation. The ANPR solicited comment on the scope of the Board's review, and also requested commenters to identify other issues that the Board should address in the review. The ANPR contained a series of questions designed to elicit commenters' views on the types of changes the Board should consider. The comment period closed on March 28, 2005.

The Board received over 200 comment letters in response to the December 2004 ANPR. More than half of the comments were from individual consumers. About 60 comments were received from the industry or industry representatives, and about 20 comments were received from consumer advocates and community development groups. The Office of the Comptroller of the Currency, one state agency, and one member of Congress also submitted comments. Staff is continuing to analyze the comment letters.

On April 20, 2005, President Bush signed into law S. 256, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (the “Bankruptcy Act”). Public Law 109-8, 119 Stat. 23. Although the new law primarily amends the bankruptcy code, it also contains several provisions amending TILA. The TILA amendments principally deal with open-end (revolving) credit accounts and require new disclosures on periodic statements and on credit card applications and solicitations. The new TILA provisions are as follows:

Minimum payment warnings. For open-end accounts, creditors must provide on each periodic statement a standardized warning about the effect of making only minimum payments, including:

• An example of how long it would take to pay off a specified balance, and

• A toll-free telephone number that consumers can use to obtain an estimate of how long it will take to pay off their own balance if only minimum payments are made.

The Board must develop a table that creditors can use in responding to consumers requesting such estimates. The Board and the Federal Trade Commission (FTC) must also establish their own toll-free telephone numbers for use by customers of small banks and non-depository institution creditors, respectively.

Introductory rate offers. A card issuer offering discounted introductory rates must disclose clearly and conspicuously on the application or solicitation the expiration date of the offer, the rate that will apply after that date, and an explanation of how the introductory rate could be lost ( e.g. , by making a late payment).

Internet solicitations. Credit card offers on the Internet must include the same disclosure table (commonly known as the “Schumer box”) that is currently required for applications or solicitations sent by direct mail.

Late fees. For open-end accounts, creditors must disclose on each periodic statement the earliest date on which a late payment fee may be charged, as well as the amount of the fee.

High loan-to-value mortgage credit. For home-secured credit that may exceed the dwelling's fair-market value, creditors must provide additional disclosures at the time of application and in advertisements (for both open-end and closed-end credit). The disclosures would warn consumers that interest on the portion of the loan that exceeds the home's fair-market value is not tax deductible.

Account termination. Creditors are prohibited from terminating an open-end account before its expiration date solely because the consumer has not incurred finance charges on the account.

The Bankruptcy Act requires the Board to issue regulations implementing the amendments to TILA. The Board plans to implement these provisions as part of the Board's ongoing review of Regulation Z's open-end credit rules. Accordingly, the Board is publishing this second ANPR to reopen and extend the public comment period to obtain comments on implementing the Bankruptcy Act's amendments to TILA.

The Bankruptcy Act does not mandate when the new disclosures (including the Board's minimum payment table and toll-free number) must be implemented. The new TILA disclosure requirements will not take effect until at least 12 months after the Board issues final regulations adopting the changes. Even though there is no statutory deadline for issuing final rules to implement the new open-end disclosures, for disclosures concerning minimum payments and introductory rates, a separate provision of the Bankruptcy Act states that the Board should issue model forms and providing guidance on the “clear and conspicuous” standard within six months of the enactment of the Act (October 20, 2005). The issuance of model forms and clear and conspicuous standards within six months would have no effect, however, until final rules implementing the minimum payment and introductory rate disclosures are issued and become effective.

As a practical matter, issuing model forms and clear and conspicuous guidance for disclosures concerning minimum payments and introductory rates would require development of the substantive rules for the underlying disclosures at the same time. But the six-month period provides little time to develop and seek public comment on the underlying substantive disclosures that are subject to the guidance, and precludes effective consumer testing of the proposed new disclosures.

Implementing the Bankruptcy Act amendments as part of the broader Regulation Z review permits the new disclosures for minimum payments and introductory rates to be developed in the context of other changes that might be made both to the content and the format of the current open-end disclosures. A primary goal of the Regulation Z review is to improve the effectiveness and usefulness of TILA's open-end credit disclosures. One factor to be considered in the review is how the content of disclosures might be simplified to address concerns about so-called “information overload.” The review also will study alternatives for improving the format of disclosures, including revising the model forms and clauses published by the Board. The Board has stated its intention to use consumer testing and focus groups to test the effectiveness of any proposed revisions.

By incorporating the Bankruptcy Act amendments into the Regulation Z review, the Board can coordinate the changes and make all changes to the periodic statement disclosures at one time. The same would be true for the credit card solicitation disclosures. If the Board separately implemented the Bankruptcy Act amendments before completing the Regulation Z review, subsequent changes to the TILA disclosures made during the broader review might necessitate reexamination of the rules implementing the Bankruptcy Act. Combining the two rulemakings mitigates that risk.

Moreover, a substantial burden would be imposed on creditors if they were required to implement changes twice—once to implement the Bankruptcy Act amendments for minimum payments and introductory rates, and a second time to implement changes made as part of Regulation Z review. Implementing the Bankruptcy Act amendments as part of the overall review of Regulation Z should involve less regulatory burden by allowing creditors to adopt all the necessary changes to their systems at one time. The views of members of the Board's Consumer Advisory Council were solicited at their June 2005 meeting, and there was general consensus among the Council members supporting this approach.

Accordingly, the Board has decided to use an integrated approach that will develop both the underlying disclosures and the clear and conspicuous guidance at the same time, with the assistance of consumer testing, as part of the ongoing Regulation Z review. A clear and conspicuous standard currently exists in Regulation Z, and this is the standard that will apply to all TILA disclosures, including the Bankruptcy Act amendments, until a new standard is adopted after notice and comment is sought in connection with the Regulation Z review. See 12 CFR 226.5(a)(1); comment 5(a)(1)-1.

The Board is requesting public comment on implementation of the Bankruptcy Act's amendments to TILA, as discussed below.

The Bankruptcy Act amends Section 127(b) of TILA to require creditors that extend open-end credit to provide a disclosure on the front of each periodic statement in a prominent location about the effects of making only minimum payments. This disclosure includes: (1) A “warning” statement indicating that making only the minimum payment will increase the interest the consumer pays and the time it takes to repay the consumer's balance; (2) a hypothetical example of how long it would take to pay off a specified balance if only minimum payments are made; and (3) a toll-free telephone number that the consumer may call to obtain an estimate of the time it would take to repay their actual account balance.

Under the Bankruptcy Act, depository institutions may establish and maintain their own toll-free telephone numbers or use a third party. In order to standardize the information provided to consumers through the toll-free telephone numbers, the Bankruptcy Act directs the Board to prepare a “table” illustrating the approximate number of months it would take to repay an outstanding balance if the consumer pays only the required minimum monthly payments and if no other advances are made. The Board is directed to create the table by assuming a significant number of different annual percentage rates, account balances, and minimum payment amounts; instructional guidance must be provided on how the information contained in the table should be used to respond to consumers' requests. The Board is also required to establish and maintain, for two years, a toll-free number for use by customers of depository institutions having assets of $250 million or less. The FTC must maintain a toll-free telephone number for creditors other than depository institutions.

The Bankruptcy Act provides that consumers who call the toll-free telephone number may be connected to an automated device through which they can obtain repayment information by providing information using a touch-tone telephone or similar device, but consumers who are unable to use the automated device must have the opportunity to be connected to an individual from whom the repayment information may be obtained. Creditors may not use the toll-free telephone number to provide consumers with information other than the repayment information set forth in the “table” issued by the Board.

Alternatively, a creditor may use a toll-free telephone number to provide the actual number of months that it will take consumers to repay their outstanding balance instead of providing an estimate based on the Board-created table. A creditor that does so, need not include a hypothetical example on their periodic statements; their toll-free number must be disclosed on the periodic statement but it need not be located on the front.

Under the Bankruptcy Act, minimum payment disclosures are required for all open-end accounts (such as credit card accounts, home-equity lines of credit, and general-purpose credit lines). The Act expressly states that these disclosure requirements do not apply, however, to any “charge card” account, the primary purpose of which is to require payment of charges in full each month. As discussed above, the Board has broad authority to provide exceptions from TILA's requirements. See 15 U.S.C. 1604(a), (f). Accordingly, the Board requests comment on whether certain open-end accounts should be exempt from some or all of the minimum payment disclosure requirements, as discussed below.

Much of the debate in Congress about the minimum payment disclosures focused on credit card accounts. For example, Senator Grassley, a primary sponsor of the Bankruptcy Act, in discussing the minimum payment disclosures, stated:

Thus, it appears the principal concern was that consumers may not be fully aware of how long it takes to pay off their credit card accounts if only minimum monthly payments are made. This differs from an installment loan where borrowers are required by the contract to repay the entire outstanding balance in a specified period. This concern may not exist for certain types of open-end credit accounts. For some open-end accounts, the length of time to repay the outstanding balance is fixed and expressed in the credit agreement. For example, some home-equity lines of credit (HELOCs) have a defined draw period and defined repayment period for amortizing the outstanding balance; the date of the final payment would be disclosed at account opening.

Reverse mortgages are another form of open-end credit where minimum payment disclosures may not be appropriate. Reverse mortgages are designed to allow consumers to convert the equity in their homes into cash; during an extended “draw” period consumers continue living in their homes, sometimes for an indefinite period, without making payments. The principal and interest become due upon certain events, such as when the homeowner moves, sells the home, or dies, or at the end of a selected loan term. Where payment dates are unknown, it does not appear that an estimate of the time to pay off the account could be provided.

Q59: Are there certain types of transactions or accounts for which the minimum payment disclosures are not appropriate? For example, should the Board consider a complete exemption from the minimum payment disclosures for open-end accounts or extensions of credit under an open-end plan if there is a fixed repayment period, such as with certain types of HELOCs? Alternatively, for these products, should the Board provide an exemption from disclosing the hypothetical example and the toll-free telephone number on periodic statements, but still require a standardized warning indicating that making only the minimum payment will increase the interest the consumer pays?

Q60: Should the Board consider an exemption that would permit creditors to omit the minimum payment disclosures from periodic statements for certain accountholders, regardless of the type of account; for example, an exemption for consumers who typically (1) do not revolve balances; or (2) make monthly payments that regularly exceed the minimum?

Q61: Some credit unions and retailers offer open-end credit plans that also allow extensions of credit that are structured like closed-end loans with fixed repayment periods and payments amounts, such as loans to finance the purchase of motor vehicles or other “big-ticket items.” How should the minimum payment disclosures be implemented for such credit plans?

Under the Bankruptcy Act, the hypothetical example that creditors must disclose on periodic statements varies depending on the creditor's minimum payment requirement. Generally, creditors that require minimum payments equal to 4 percent or less of the account balance must disclose on each statement that it takes 88 months to pay off a $1000 balance at an interest rate of 17 percent if the consumer makes a “typical” 2 percent minimum monthly payment. Creditors that require minimum payments exceeding 4 percent of the account balance must disclose that it takes 24 months to pay off a balance of $300 at an interest rate of 17 percent if the consumer makes a “typical” 5 percent minimum monthly payment (but the creditor may opt instead to disclose the statutory example for making 2 percent minimum payments). The example of a 5 percent minimum payment must be disclosed by creditors that are subject to FTC enforcement with respect to TILA, regardless of the creditor's actual minimum payment requirement. Creditors also have the option to substitute an example based on an APR that is greater than 17 percent.

Q62: The Bankruptcy Act authorizes the Board to periodically adjust the APR used in the hypothetical example and to recalculate the repayment period accordingly. Currently, the repayment periods for the statutory examples are based on a 17 percent APR. Nonetheless, according to data collected by the Board, the average APR charged by commercial banks on credit card plans in May 2005 was 12.76 percent. If only accounts that were assessed interest are considered, the average APR rises to 14.81 percent. See Board of Governors of the Federal Reserve Board, Statistical Release G. 19 , (July 2005). Should the Board adjust the 17 percent APR used in the statutory example? If so, what criteria should the Board use in making the adjustment?

Q63: The hypothetical examples in the Bankruptcy Act may be more appropriate for credit card accounts than other types of open-end credit accounts. Should the Board consider revising the account balance, APR, or “typical” minimum payment percentage used in examples for open-end accounts other than credit cards accounts, such as HELOCs and other types of credit lines? If revisions were made, what account balance, APR, and “typical” minimum payment percentage should be used?

Q64: The statutory examples refer to the stated minimum payment percentages of 2 percent or 5 percent, as being “typical.” The term “typical” could convey to some consumers that the percentage used is merely an example, and is not based on the consumer's actual account terms. But the term “typical” might be perceived by other consumers as indicting that the stated percentage is an industry norm that they should use to compare the terms of their account to other accounts. Should the hypothetical example refer to the minimum payment percentage as “typical,” and if not, how should the disclosure convey to consumers that the example does not represent their actual account terms?

The Bankruptcy Act requires open-end creditors to provide a toll-free telephone number on periodic statements that consumers can use to obtain an estimate of the time it will take to repay the consumer's outstanding balance, assuming the consumer makes only minimum payments on the account and the consumer does not make any more draws on the line. The Act requires creditors to provide estimates that are based on tables created by the Board that estimate repayment periods for different outstanding balances, payment amounts, and interest rates. The Board plans to develop formulas that can be used to generate the required tables. The formulas also can be used by creditors, the FTC, and the Board to calculate the repayment period for a particular account; the use of a formula instead of a table facilitates the use of automated systems to provide the required disclosures. Copies of the tables that can be generated using the repayment calculation formulas would also be made available by the Board upon request.

In establishing formulas and tables that estimate repayment periods, the Act directs the Board to assume a significant number of different APRs, account balances, and minimum payment amounts. A number of other assumptions can also affect the calculation of a repayment period. For example, the hypothetical examples that must be disclosed on periodic statements incorporate the following assumptions, in addition to the statutory assumptions listed above:

1. Balance Calculation Method. The previous-balance method is used; finance charges are based on the beginning balance for the cycle.

2. Grace Period. No grace period applies to any portion of the balance.

3. Residual Finance Charge. When the account balance becomes less than the required minimum payment, the receipt of the final amount in full completely pays off the account. In other words, there is no residual finance charge that accrues in the month when the final bill is paid in full.

4. Interest Rate and Outstanding Balance. There is a single periodic rate (17%) applied to a single balance.

5. Minimum Payment Amount. The minimum payment requirement in the $1,000 balance example is assumed to be 2 percent of the outstanding balance or $20, whichever is greater. For the $300 balance example, the minimum payment requirement is assumed to be 5 percent of the outstanding balance or $15, whichever is greater.

In developing a formula for calculating a consumer's estimated repayment period, the Board could use some of the same assumptions that were used in creating the statute's hypothetical examples.

Balance Calculation Method. The statutory examples use a previous-balance method which calculates the finance charge based on the entire account balance as of the first day in the billing cycle. The average daily balance method is more commonly used by creditors; however, that method requires additional assumptions. For example, an assumption would need to be made about the length of each billing cycle, and the date during each cycle that a consumer's payment is made. The Board does not have data on when consumers typically make their payments each month. In using the previous-balance method, the estimated repayment periods are similar to those that would result from using the average daily balance method, assuming that all months are of equal length and that payments are credited on the last day of the billing cycle.

Grace Period. The required disclosures about the effect of making minimum payments are based on the assumption that the consumer will be “revolving” or carrying a balance. Thus, it seems reasonable to assume that the account is already in a revolving condition at the time the consumer calls to obtain the estimate, and that no grace period applies.

Residual Interest. When the consumer's account balance at the end of a billing cycle is less than the required minimum payment, the statutory examples assume that no additional transactions occurred after the end of the billing cycle, that the account balance will be paid in full, and that no additional finance charges will be applied to the account between the date the statement was issued and the date of the final payment. This assumption is necessary to have a finite solution to the repayment period calculation. Without this assumption, the repayment period could be infinite.

Q65. In developing the formulas used to estimate repayment periods, should the Board use the three assumptions stated above concerning the balance calculation method, grace period, and residual interest? If not, what assumptions should be used, and why?

The Bankruptcy Act directs the Board in estimating repayment periods to allow for a significant number of different outstanding balances, minimum payment amounts, and interest rates. These variables could have a significant impact on the repayment period. With respect to the toll-free numbers set up by the Board and the FTC, information about the consumers' account terms must come from consumers because the information is not available to the Board or the FTC. Consumers would need easy access to this information to request an estimated repayment period. Because consumers' outstanding account balances appear on their monthly statements, consumers can provide that amount when requesting an estimate of the repayment period. Issues arise, however, with respect to the minimum payment requirement and interest rate information.

Periodic statements do not disclose the fixed percentage or formula used to determine the minimum dollar amount that must be paid each month. The statements only disclose the minimum dollar amount that must be paid for the current statement period, which would vary each month as the account balance declines. Furthermore, while periodic statements must disclose all APRs applicable to the account, the statements may, but do not necessarily, indicate the portion of the account balance subject to each APR. This information is also needed to estimate the repayment period.

Below, the Board seeks commenters' views regarding three basic approaches for developing a system to calculate estimated repayment periods for consumers who call the toll-free telephone number. The three approaches discussed are:

(1) Prompting consumers to provide an account balance, a minimum payment amount, and APRs in order to obtain an estimated repayment period. For information about minimum payments and APRs that is not currently disclosed on periodic statements, the Board could require additional disclosures on those statements. But the Board also could develop a formula that makes assumptions about these variables for a “typical” account.

(2) Prompting consumers to input information, or using assumptions based on a “typical” account to calculate an estimated repayment period—but also giving creditors the option to input information from their own systems regarding consumers' account terms, to provide more accurate estimates. Estimates provided by creditors that elect this option would differ somewhat from the estimates provided by other creditors, the Board, and the FTC.

(3) Prompting consumers to provide their account balance, but requiring creditors to input information from their own systems regarding the account's minimum payment requirement and the portion of the balance subject to each APR. These estimates would be more accurate, but would impose additional compliance burdens, and would not necessarily reflect consumers' actual repayment periods because of the use of several other assumptions.

Minimum Payment Amount. The Board solicits comment on how the creditor's minimum payment requirement should be factored into the formula used to calculate repayment periods. Most creditors calculate the minimum payment each month based on a formula. Although minimum payment formulas typically calculate the payment as a percentage of the outstanding balance, the exact formulas that creditors use can vary among creditors and accounts. Some credit card issuers may calculate the minimum payment amount as a percentage of the outstanding balance; others may calculate the minimum payment as a percentage of the outstanding balance plus any finance charges, late fees, or other fees. Some creditors may use minimum payment formulas that vary based on the APR; for example, higher minimum payment percentages might apply to accounts with higher APRs. Open-end credit plans with multiple credit features may apply different minimum payment formulas to different account features. For HELOCs, the minimum payment formula used during the draw period may differ from the formula used during the repayment period.

Although the dollar amount of the minimum payment due for the month is disclosed on periodic statements, the formula used by the creditor to calculate this amount currently is not included on the periodic statement. Even if the creditor's minimum payment formula were disclosed on periodic statements, the formula might be sufficiently complex that it would not be reasonable to expect this information to be used by consumers in using the toll-free telephone system.

The Board seeks comment on alternative approaches to address how minimum payment requirements should be factored into the formula used to estimate repayment periods. As discussed above, most minimum payment formulas, at least in part, calculate the minimum payment as a percentage of the outstanding balance. As the outstanding balance declines each month, the minimum payment amount declines until it reaches a certain floor amount (such as $20). Using the dollar amount of the minimum payment for a particular billing cycle would overstate the minimum payment amount in the succeeding months when the account balance declines and, therefore, would underestimate the consumer's repayment period. The potential error produced by using the current month's minimum payment amount would be compounded if that amount also includes fees assessed in the current cycle, such as late payment fees or over-the-credit-limit fees which, according to the statutory assumptions, will not be recurring each month.

One alternative is for the Board to select a “typical” minimum payment formula for particular types of open-end accounts ( e.g. , general-purpose credit cards, retail credit cards, HELOCs, and other lines of credit), and use “typical” formulas for calculating the repayment estimates. For example, although there is no absolute industry standard for minimum payments for general-purpose credit cards, in recent months several major credit card issuers have moved toward using similar minimum payment formulas. These minimum payment formulas generally prevent prolonged negative amortization for customers who keep their payments current and are under the credit limit by requiring minimum payments never be less than all finance charges plus one percent of the outstanding balance. These creditors have different ways of treating late fees and over-the-credit limit fees, but generally the formulas are designed to prevent prolonged negative amortization either by including the fees in the minimum payment or capping the fees. The Board could use some variation of these minimum payment formulas, as an approximation of the minimum payment formulas that apply to general-purpose credit cards.

Unlike the Board and the FTC which must use consumer-input systems, a creditor that establishes its own toll-free telephone number could estimate repayment periods based on information in the creditor's database, including the creditor's minimum payment formula. A system based on the creditor's information might be easier for consumers to use and give them more accurate estimates. Accordingly, the Board could grant creditors the flexibility to either (1) use the same assumptions about minimum payment formulas and interest rates as the Board and FTC, or (2) use the creditor's actual minimum payment formula and interest rates to calculate the repayment estimate. One consequence of giving the creditor an option in this regard would be that consumers with identical account terms and balances could obtain different repayment estimates depending on whether the estimate was prepared using the Board's assumptions or the actual account terms. Alternatively, the Board could require all creditors to use their actual minimum payment formulas and interest rates to calculate the repayment estimate. But the Board and FTC would still be providing estimates using the Board's assumptions.

Q66: Comment is specifically solicited on whether the Board should select “typical” minimum payment formulas for various types of accounts. If so, how should the Board determine the formula for each type of account? Are there other approaches the Board should consider?

Q67: If the Board selects a “typical” minimum payment formula for general-purpose credit cards, would it be appropriate to assume the minimum payment is based on one percent of the outstanding balance plus finance charges? What are typical minimum payment formulas for open-end products other than general-purpose credit cards (such as retail credit cards, HELOCs, and other lines of credit)?

Q68: Should creditors have the option of programming their systems to calculate the estimated repayment period using the creditor's actual payment formula in lieu of a “typical” minimum payment formula assumed by the Board? Should creditors be required to do so? What would be the additional cost of compliance for creditors if they must use their actual minimum payment formula? Would the cost be outweighed by the benefit in improving the accuracy of the repayment estimates?

Q69: Negative amortization can occur if the required minimum payment is less than the total finance charges and other fees imposed during the billing cycle. As discussed above, several major credit card issuers have moved toward minimum payment requirements that prevent prolonged negative amortization. But some creditors may use a minimum payment formula that allows negative amortization (such as by requiring a payment of 2% of the outstanding balance, regardless of the finance charges or fees incurred). Should the Board use a formula for calculating repayment periods that assumes a “typical” minimum payment that does not result in negative amortization? If so, should the Board permit or require creditors to use a different formula to estimate the repayment period if the creditor's actual minimum payment requirement allows negative amortization? What guidance should the Board provide on how creditors disclose the repayment period in instances where negative amortization occurs?

APR information. The statute's hypothetical repayment examples assume that a single APR applies to a single account balance. But open-end credit accounts, particularly credit card accounts, can have multiple APRs. The APR may differ for purchases, cash advances, and balance transfers. A card issuer may have a promotional APR that applies to the initial balance transfer and a separate APR for other balance transfers. Although all the APRs for accounts are disclosed on periodic statements, calculating the repayment period requires information about what percentage or amount of the total ending balance is subject to each APR. 15 U.S.C. 1637(b)(5); 12 CFR 226.7(d). Currently, the total ending balance is required to be disclosed, but not the portion of the cycle's ending balance that is subject to each APR. 15 U.S.C. 1637(b)(8); 12 CFR 226.7(i). (Some creditors may voluntarily disclose such information on periodic statements.) For example, assuming a $1,000 outstanding balance on an account with a 12 percent APR for purchases and a 19.5 percent APR on cash advances, the consumer will know from his or her periodic statement the amount of the total outstanding balance ($1,000), but may not know the percentage or amount of the ending balance subject to the 12 percent rate and the ending balance subject to the 19.5 percent rate. Creditors know the portion of the cycle's ending balance that is subject to each APR, and could develop automated systems that incorporate this information as part of their calculation. But again, the toll-free telephone systems developed by the Board and FTC would have to depend solely on data provided by the consumer.

If multiple APRs apply to the outstanding balance, using the lowest APR to calculate the repayment period would estimate repayment periods that are consistently too short; using the highest APR would estimate repayment periods that are consistently too long. How much the repayment periods are underestimated or overestimated in each of these cases would depend on how the outstanding balance is distributed among the multiple rates. Using an average of the multiple rates may either overestimate or underestimate the repayment period depending on how the outstanding balance is distributed among the rates. It is unclear whether detailed transaction data about how consumers use their credit card accounts would support a finding that there is a “typical” approach that would provide the best estimate of the repayment periods in most cases.

Q70: What proportion of credit card accounts accrue finance charges at more than one periodic rate? Are account balances typically distributed in a particular manner, for example, with the greater proportion of the balance accruing finance charges at the higher rate or the lower rate?

More precise repayment periods could be calculated if balances subject to different rates are treated separately. This raises practical issues if consumers must provide information about the multiple rates and the balances subject to each rate. Periodic statements would need to disclose the portion of the outstanding balance to which each APR applies. Although creditors commonly disclose an average daily balance for each periodic rate applied in a billing cycle, in many cases, the average daily balances applicable to the rates may not be good approximations of the portion of the ending balances applicable to the rates. The Board solicits comments on the best approach for applying APR information to estimate the repayment period.

Q71: The statute's hypothetical examples assume that a single APR applies to a single balance. For accounts that have multiple APRs, would it be appropriate to calculate an estimated repayment period using a single APR? If so, which APR for the account should be used in calculating the estimate?

Q72. Instead of using a single APR, should the Board adopt a formula that uses multiple APRs but incorporates assumptions about how those APRs should be weighted? Should consumers receive an estimated repayment period using the assumption that the lowest APR applies to the entire balance and a second estimate based on application of the highest APR; this would provide consumers with a range for the estimated repayment period instead of a single answer. Are there other ways to account for multiple APRs in estimating the repayment period?

Q73: One approach to considering multiple APRs could be to require creditors to disclose on periodic statements the portion of the ending balance that is subject to each APR for the account. Consumers could provide this information when using the toll-free telephone number to request an estimated repayment period that incorporates all the APRs that apply. What would be the additional compliance cost for creditors if, in connection with implementing the minimum payment disclosures, creditors were required to disclose on periodic statements the portion of the ending balance subject to each APR for the account?

Q74: As an alternative to disclosing more complete APR information on periodic statements, creditors could program their systems to calculate a consumer's repayment period based on the APRs applicable to the consumer's account balance. Should this be an option or should creditors be required to do so? What would be the additional cost of compliance for creditors if this was required? Would the cost be outweighed by the benefit in improving the accuracy of the repayment estimates?

Q75: If multiple APRs are used, assumptions must be made about how consumers' payments are allocated to different balances. Should it be assumed for purposes of the toll-free telephone number that payments always are allocated first to the balance carrying the lowest APR?

Consumers may need to be aware of some of the assumptions underlying the estimate of their repayment period to properly comprehend the significance of the estimate. Accordingly, certain assumptions may need to be disclosed. For example, consumers might be informed that the estimated repayment period is based on the assumption that there will be no new transactions, no late payments, no changes in the APRs, and that only minimum payments are made. Consumers might also need to be aware of any assumptions about the creditor's minimum payment requirement.

Q76: What key assumptions, if any, should be disclosed to consumers in connection with the estimated repayment period? When and how should these key assumptions be disclosed? Should some or all of these assumptions be disclosed on the periodic statement or should they be provided orally when the consumer uses the toll-free telephone number? Should the Board issue model clauses for these disclosures?

The Bankruptcy Act allows creditors to forego using the toll-free number to provide an estimated repayment period if the creditor instead provides through the toll-free number the “actual number of months” to repay the consumer's account.

Q77: What standards should be used in determining whether a creditor has accurately provided the “actual number of months” to repay the outstanding balance? Should the Board consider any safe harbors? For example, should the Board deem that a creditor has provided an “actual” repayment period if the creditor's calculation is based on certain account terms identified by the Board (such as the actual balance calculation method, payment allocation method, all applicable APRs, and the creditor's actual minimum payment formula)? With respect to other terms that affect the repayment calculation, should creditors be permitted to use the assumptions specified by the Board, even if those assumptions do not match the terms on the consumer's account?

Q78: Should the Board adopt a tolerance for error in disclosing the actual repayment periods? If so, what should the tolerance be?

Q79: Is information about the “actual number of months” to repay readily available to creditors based on current accounting systems, or would new systems need to be developed? What would be the costs of developing new systems to provide the “actual number of months” to repay?

Above, the Board solicits comments on three approaches for disclosing estimated repayment periods if only minimum payments are made. In developing a system, the Board will consider the complexity of each approach and the resulting compliance burden, as well as the accuracy and usefulness of the estimates that would be produced.

Q80: Are there alternative frameworks to the three approaches discussed above that the Board should consider in developing the repayment calculation formula? If suggesting alternative frameworks, please be specific. Given the variety of account structures, what calculation formula should the Board use in implementing the toll-free telephone system?

Q81: Are any creditors currently offering Web-based calculation tools that permit consumers to obtain estimates of repayment periods? If so, how are these calculation tools typically structured; what information is typically requested from consumers, and what assumptions are made in estimating the repayment period?

Q82: Are there alternative ways the Board should consider for creditors to provide repayment periods other than through toll-free telephone numbers? For example, the Board could encourage creditors to disclose the repayment estimate or actual number of months to repay on the periodic statement; these creditors could be exempted from the requirement to maintain a toll-free telephone number. This would simplify the process for consumers and possibly for creditors as well. What difficulties would creditors have in disclosing the repayment estimate or actual repayment period on the periodic statement?

The Bankruptcy Act provides that the minimum payment disclosures must be on the front of the periodic statement in a prominent location, and must be clear and conspicuous. The Board is directed to issue model disclosures and to promulgate rules to provide guidance on the clear and conspicuous requirement. The Act requires the Board to consult with the other Federal banking agencies, the National Credit Union Administration, and the FTC. In promulgating clear and conspicuous regulations, the Board is directed to ensure that the required standard “can be implemented in a manner that results in disclosures which are reasonably understandable and designed to call attention to the nature and significance of the information in the notice.”

Q83: What guidance should the Board provide on the location or format of the minimum payment disclosures? Is a minimum type size requirement appropriate?

Q84: What model forms or clauses should the Board consider?

The Bankruptcy Act amends section 127(c) of TILA to require additional disclosures for credit card applications and solicitations sent by direct mail or provided over the Internet that offer a “temporary” APR. The Act defines a “temporary” APR as any credit card interest rate that applies “for an introductory period of less than 1 year, if that rate is less than an APR that was in effect within 60 days before the date of mailing the application or solicitation.”

Currently, creditors offering a temporary APR may promote the introductory rate in their marketing materials, as long as the permanent rate is provided in the required disclosure table (commonly known as the “Schumer box”) that is included on or with the solicitation. The Schumer box must contain any APR that may be applied to an outstanding balance. Although creditors are not required to include temporary introductory rates in the Schumer box, when a temporary rate is included, the expiration date must also appear in the box. If the initial APR may increase upon the occurrence of one or more specific events, such as a late payment, the issuer must disclose in the Schumer box both the initial rate and the increased penalty rate. The specific event or events that may trigger the penalty rate must be disclosed outside of the Schumer box, with an asterisk or other means to direct the consumer to this additional information. 15 U.S.C. 1637(c)(1)(A)(i); 12 CFR 226.5a(b)(1); comments 5a(b)(1)-5, -7.

The Bankruptcy Act requires credit card issuers to use the term “introductory” clearly and conspicuously in immediate proximity to each mention of the temporary APR in applications, solicitations, and all accompanying promotional materials. Credit card issuers also must disclose, in a prominent location closely proximate to the first mention of the introductory APR, the time period when the introductory APR expires and the APR that will apply after the introductory rate expires (popularly known as the “go-to” APR). If the go-to APR is a variable rate, then the disclosure must be based on an APR that was in effect within 60 days before the application or solicitation was mailed.

The Bankruptcy Act also requires credit card issuers to disclose clearly and conspicuously in offers with temporary APRs, a general description of the circumstances that may result in revocation of the introductory rate (other than expiration of the introductory period), and the APR that will apply if the introductory APR is revoked. For variable-rate programs, the disclosed APR must be one that was in effect within 60 days before the date of mailing the application or solicitation. These disclosures also must be located prominently on or with the application or solicitation.

Q85: The Bankruptcy Act requires the Board to issue model disclosures and rules that provide guidance on satisfying the clear and conspicuous requirement for introductory rate disclosures. The Board is directed to adopt standards that can be implemented in a manner that results in disclosures that are “reasonably understandable and designed to call attention to the nature and significance of the information.” What guidance should the Board provide on satisfying the clear and conspicuous requirement? Should the Board impose format requirements, such as a minimum font size? Are there other requirements the Board should consider? What model disclosures should the Board issue?

Q86: Credit card issuers must use the term “introductory” in immediate proximity to each mention of the introductory APR. What guidance, if any, should the Board provide in interpreting the “immediate proximity” requirement? Is it sufficient for the term “introductory” to immediately precede or follow the APR (such as “Introductory APR 3.9%” or “3.9% APR introductory rate”)?

Q87: The expiration date and go-to APR must be closely proximate to the “first mention” of the temporary introductory APR. The introductory APR might, however, appear several times on the first page of a solicitation letter. What standards should the Board use to identify one APR in particular as the “first mention” (such as the APR using the largest font size, or the one located highest on the page)?

Q88: Direct-mail offers often include several documents sent in a single envelope. Should the Board seek to identify one document as the “first mention” of the temporary APR? Or should each document be considered a separate solicitation, so that all documents mentioning the introductory APR contain the required disclosures?

Q89: The expiration date for the temporary APR and the go-to APR also must be in a “prominent location” that is “closely proximate” to the temporary APR. What guidance, if any, should the Board provide on this requirement?

Q90: Some credit card issuers' offers list several possible permanent APRs, and consumer qualifications for any particular rate is subsequently determined by information gathered as part of the application process. What guidance should the Board provide on how to disclose the “go-to” APR in the solicitation when the permanent APR is set using risk-based pricing? Should all the possible rates be listed, or should a range of rates be permissible, indicating the rate will be determined based on creditworthiness?

Q91: Regulation Z currently provides that if the initial APR may increase upon the occurrence of one or more specific events, such as a late payment, the issuer must disclose in the Schumer box both the initial rate and the increased penalty rate. The specific event or events that may trigger the penalty rate must be disclosed outside of the Schumer box, with an asterisk or other means used to direct the consumer to this additional information. The Bankruptcy Act requires that a general description of the circumstances that may result in revocation of the temporary rate must be disclosed “in a prominent manner” on the application or solicitation. What additional rules should be considered by the Board to ensure that creditors' disclosures comply with the Bankruptcy Act amendments? Is additional guidance needed on what constitutes a “general description” of the circumstances that may result in revocation of the temporary APR? If so, what should that guidance say?

Q92: The introductory rate disclosures required by the Bankruptcy Act apply to applications and solicitations whether sent by direct mail or provided electronically. To what extent should the guidance for applications and solicitations provided by direct mail differ from the guidance for those provided electronically?

The Bankruptcy Act further amends Section 127(c) of TILA to require that the same disclosures made for applications or solicitations sent by direct mail also be made for solicitations to open a credit card account using the Internet or other interactive computer service. A “solicitation” is an offer to open an account without requiring an application. 15 U.S.C. 1637(c); 12 CFR 226.5a(a)(1). The Act specifies that disclosures provided using the Internet must be “readily accessible to consumers in close proximity to the solicitation,” and also must be “updated regularly to reflect the current policies, terms, and fee amounts.”

In June 2000, the Electronic Signatures in Global and National Commerce Act (E-Sign Act) became law. The E-Sign Act seeks to encourage the continued expansion of electronic commerce, and establishes the legal validity and enforceability of electronic signatures, contracts, and other records (including disclosures) in interstate and foreign commerce transactions. The E-Sign Act does not affect any requirement imposed by law or regulation, other than a requirement that documents or signatures be “non-electronic” or in paper form. The E-Sign Act also does not affect the content or timing of any consumer disclosure. The E-Sign Act became effective on October 1, 2000.

In March 2001, the Board issued interim final rules authorizing the use of electronic disclosures under Regulation Z, consistent with the requirements of the E-Sign Act. 66 FR 17329 (Mar. 30, 2001). The interim rules, which are not mandatory, also contained standards for the electronic delivery of disclosures, including the need to update periodically the disclosures made available on a creditor's Internet web site. For example, the interim rules stated that variable-rate disclosures made available at a credit card issuer's Internet web site should be based on an APR that was in effect within the last 30 days.

Q93: Although the Bankruptcy Act provisions concerning Internet offers refer to credit card solicitations (where no application is required), this may be interpreted to also include applications. Is there any reason for treating Internet applications differently than Internet solicitations?

Q94: What guidance should the Board provide on how solicitation (and application) disclosures may be made clearly and conspicuously using the Internet? What model disclosures, if any, should the Board provide?

Q95: What guidance should the Board provide regarding when disclosures are “readily accessible to consumers in close proximity” to a solicitation that is made on the Internet? The 2001 interim final rules stated that a consumer must be able to access the disclosures at the time the application or solicitation reply form is made available electronically. The interim rules provided flexibility in satisfying this requirement. For example, a card issuer could provide on the application (or reply form) a link to disclosures provided elsewhere, as long as consumers cannot bypass the disclosures before submitting the application or reply form. Alternatively, if a link to the disclosures was not used, the electronic application or reply form could clearly and conspicuously refer to the fact that rate, fee, and other cost information either precedes or follows the electronic application or reply form. Or the disclosures could automatically appear on the screen when the application or reply form appears. Is additional or different guidance needed from the guidance in the 2001 interim final rules?

Q96: What guidance should the Board provide regarding what it means for the disclosures to be “updated regularly to reflect the current policies, terms, and fee amounts?” Is the guidance in the 2001 interim rules, suggesting a 30-day standard, appropriate?

Under the Bankruptcy Act, Section 127(b) of TILA is amended to require creditors offering open-end plans to provide additional disclosures on periodic statements if a late payment fee will be imposed for failure to make a payment on or before the required due date. The periodic statement must disclose clearly and conspicuously, the date on which the payment is due or, if different, the earliest date on which a late payment fee may be charged, as well as the amount of the late payment fee that may be imposed if payment is made after that date.

Q97: Under what circumstances, if any, would the “date on which the payment is due” be different from the “earliest date on which a late payment fee may be charged?”

Q98: Is additional guidance needed on how these disclosures may be made in a clear and conspicuous manner on periodic statements? Should the Board consider particular format requirements, such as requiring the late payment fee to be disclosed in close proximity to the payment due date (or the earliest date on which a late payment fee may be charged, if different)? What model disclosures, if any, should the Board provide with respect to these disclosures?

Q99: The December 2004 ANPR requested comment on whether the Board should issue a rule requiring creditors to credit payments as of the date they are received, regardless of what time during the day they are received. Currently, under Regulation Z, creditors may establish reasonable cut-off hours; if the creditor receives a payment after that time (such as 2 pm), then the creditor is not required to credit the payment as of that date. If the Board continues to allow creditors to establish reasonable cut-off hours, should the cut-off hour be disclosed on each periodic statement in close proximity to the payment due date?

Q100: Failure to make a payment on or before the required due date commonly triggers an increased APR in addition to a late payment fee. As a part of the Regulation Z review, should the Board consider requiring that any increased rate that would apply to outstanding balances accompany the late payment fee disclosure?

Q101: The late payment disclosure is required for all open-end credit products. Are there any special issues applicable to open-end accounts other than credit cards that the Board should consider?

Under the Bankruptcy Act, creditors extending home-secured credit (both open-end and closed-end) must provide additional disclosures for home-secured loans that exceed or may exceed the fair-market value of the dwelling. Section 144 and 147(b) of TILA are amended to require that each advertisement relating to an extension of credit that may exceed the fair-market value of the dwelling must include a clear and conspicuous statement that: (1) The interest on the portion of the credit extension that is greater than the fair-market value of the dwelling is not tax deductible for Federal income tax purposes; and (2) the consumer should consult a tax adviser for further information about the deductibility of interest and charges. This requirement only applies to advertisements that are disseminated in paper form to the public or through the Internet, as opposed to radio or television.

In addition, Sections 127(A) and 128 of TILA are amended to require creditors extending home-secured credit to make the above disclosures at the time of application in cases where the extension of credit exceeds or may exceed the fair-market value of the dwelling. Currently, open-end creditors extending home-secured credit already are required to disclose at the time of application that the consumer should consult a tax adviser for further information about the deductibility of interest and charges. See 15 U.S.C. 1637a(a)(13); 12 CFR 226.5b(d)(11).

Q102: What guidance should the Board provide in interpreting when an “extension of credit may exceed the fair-market value of the dwelling?” For example, should the disclosures be required only when the new credit extension may exceed the dwelling's fair-market value, or should disclosures also be required if the new extension of credit combined with existing mortgages may exceed the dwelling's fair-market value?

Q103: In determining whether the debt “may exceed” a dwelling's fair-market value, should only the initial amount of the loan or credit line and the current property value be considered? Or should other circumstances be considered, such as the potential for a future increase in the total amount of the indebtedness when negative amortization is possible?

Q104: What guidance should the Board provide on how to make these disclosures clear and conspicuous? Should the Board provide model clauses or forms with respect to these disclosures?

Q105: With the exception of certain variable-rate disclosures (12 CFR 226.17(b) and 226.19(a)), disclosures for closed-end mortgage transactions generally are provided within three days of application for home-purchase loans and before consummation for all other home-secured loans. 15 U.S.C. 1638(b). Is additional compliance guidance needed for the Bankruptcy Act disclosures that must be provided at the time of application in connection with closed-end loans?

The Bankruptcy Act amends Section 127 of TILA to prohibit an open-end creditor from terminating an account under an open-end consumer credit plan before its expiration date solely because the consumer has not incurred finance charges on the account. Under the Bankruptcy Act, this prohibition would not prevent a creditor from terminating an account for inactivity in three or more consecutive months.

Q106: What issues should the Board consider in providing guidance on when an account “expires?” For example, card issuers typically place an expiration date on the credit card. Should this date be considered the expiration date for the account?

Q107: The prohibition on terminating accounts for failure to incur finance charges applies to all open-end credit products. Are there any issues applicable to open-end accounts other than credit card accounts that the Board should consider?

Q108: The prohibition on terminating accounts does not prevent creditors from terminating an account for inactivity in three or more consecutive months (assuming the termination complies with other applicable laws and regulations, such as the rules in Regulation Z governing the termination of HELOCS, 12 CFR 226.5b(f)(2)). Should the Board provide guidance on this aspect of the statute, and what constitutes “inactivity?”

We invite you to submit any written data, views, or arguments regarding this proposed AD. Send your comments to the address listed under the caption ADDRESSES. Include the docket number “FAA-2005-22696, Directorate Identifier 2004-SW-46-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of the proposed AD. We will consider all comments received by the closing date and may amend the proposed AD in light of those comments.

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

You may examine the docket that contains the proposed AD, any comments, and other information in person at the Docket Management System (DMS) Docket Office between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The Docket Office (telephone 1-800-647-5227) is located at the plaza level of the Department of Transportation NASSIF Building in Room PL-401 at 400 Seventh Street, SW., Washington, DC. Comments will be available in the AD docket shortly after the DMS receives them.

The Direction Generale de l'Aviation Civile (DGAC), the airworthiness authority for France, notified the FAA that an unsafe condition may exist on ECF Model EC 155 helicopters. The DGAC advises of the occurrence of a short circuit that occurred in the wiring of panel 12 Alpha making the landing gear inoperative.

ECF has issued Alert Service Bulletin No. 24A011 (ASB), dated March 11, 2004, and subsequently revised on May 14, 2004, which specifies checking the condition of the wiring and modifying its routing to preclude the risk of interference and associated damage. The May 14, 2004, revision to the ASB also specifies prevention of any interference of the wiring with the head of the vent line attaching clamp by replacing wiring kit 365A0739C28.71 with wiring kit 365A0739C28.72. The DGAC classified these ASBs as mandatory and issued AD No. F-2004-057 R1, dated July 21, 2004, to ensure the continued airworthiness of these helicopters in France.

These helicopter models are manufactured in France and are type certificated for operation in the United States under the provisions of 14 CFR 21.29 and the applicable bilateral agreement. Pursuant to the applicable bilateral agreement, the DGAC has kept us informed of the situation described above. We have examined the findings of the DGAC, reviewed all available information, and determined that AD action is necessary for products of this type design that are certificated for operation in the United States.

This previously described unsafe condition is likely to exist or develop on other helicopters of the same type designs registered in the United States. Therefore, the proposed AD would require the following:

• Within 50 hours time-in-service (TIS), inspect the wiring of panel 12 Alpha electrical (wiring) cable bundle for wear. If wear is present, replace the worn cable bundle with an airworthy cable bundle.

• Modify the routing of the electrical wiring (MOD 0739C28) and replace spreaders and spacers.

The actions would be required to be accomplished in accordance with specified portions of the ASB described previously.

We estimate that this proposed AD would affect 7 helicopters of U.S. registry and would take about 16 work hours to inspect and modify the wiring per helicopter at an average labor rate of $65 per work hour. Required parts and material would cost about $240. Based on these figures, we estimate the total cost impact of the proposed AD on U.S. operators to be $8,960, assuming that all of the helicopters will be modified.

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

We prepared a draft economic evaluation of the estimated costs to comply with this proposed AD. See the DMS to examine the draft economic evaluation.

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

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

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:

We invite you to submit any written data, views, or arguments regarding this proposed AD. Send your comments to the address listed under the caption ADDRESSES . Include the docket number “FAA-2005-22696, Directorate Identifier 2005-SW-22-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of the proposed AD. We will consider all comments received by the closing date and may amend the proposed AD in light of those comments.

We will post all comments we receive, without change, to http://dms.dot.gov , including any personal information you provide. We will also post a report summarizing each substantive verbal contact with FAA personnel concerning this proposed rulemaking. Using the search function of our docket web site, you can find and read the comments to any of our dockets, including the name of the individual who sent or signed the comment. You may review the DOT's complete Privacy Act Statement in the Federal Register published on April 11, 2000 (65 FR 19477-78), or you may visit http://dms.dot.gov . The postcard will be date stamped and returned to the commenter.

You may examine the docket that contains the proposed AD, any comments, and other information in person at the Docket Management System (DMS) Docket Office between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The Docket Office (telephone 1-800-647-5227) is located at the plaza level of the Department of Transportation NASSIF Building in Room PL-401 at 400 Seventh Street, SW., Washington, DC. Comments will be available in the AD docket shortly after the DMS receives them.

On November 22, 2004, the FAA issued AD 2004-24-08, Docket No. 2004-SW-12-AD, Amendment 39-13884 (69 FR 69810, December 1, 2004). That AD requires an initial inspection and at intervals not to exceed 12 hours time-in-service (TIS), a 10X inspection or at intervals not to exceed 24 hours TIS a 10X inspection and a 3-hour TIS check between each 24 hour TIS inspection of the blade for a deformation, a crack, and a bent or deformed weight. Also, that AD requires, before further flight, replacing each blade with an airworthy blade if a deformation, a crack, or a bent or deformed weight is found. That action was prompted by three reports of skin cracks originating near the blade trailing edge balance weight. The requirements of that AD are intended to prevent blade failure and subsequent loss of control of the helicopter.

Since issuing AD 2004-24-08, BHTC has issued Alert Service Bulletin 206-04-100 for Bell Model 206A and B helicopters, and 206L-04-127 for Bell Model 206L series helicopters, both Revision C, both dated March 5, 2005 (ASB). These ASBs add two warnings in the compliance section specifying returning the blade for balancing to Rotor Blades, Inc., and introduce new skin damage limits that supersede the previous damage limits. The ASB also gives a new address for Rotor Blades Inc.

When we issued AD 2004-24-08, we intentionally did not include the long-term requirement (no later than April 27, 2007) for removing and sending the affected blades to Rotor Blades, Inc. as specified by the manufacturer. We are including in this proposal a long-term requirement that the affected blades be replaced on or before April 27, 2007, as terminating action. This will allow public comments before any adoption of the long-term proposal. Additionally, in AD 2004-24-08, we inadvertently omitted blade serial numbers 10102 through 10114 from the applicability. We propose to correct that oversight with this action.

Transport Canada, the airworthiness authority for Canada, notified the FAA that an unsafe condition may exist on these helicopter models. Transport Canada advises of three reports of skin cracks originating near the blade trailing edge balance weight. Two of the occurrences caused a loss of the weight and a strip of material along the trailing edge leading to an imbalance, which caused the fracture of three of the four tail rotor gearbox attachments. One of these occurrences resulted in the gearbox shifting that caused failure of the drive shaft and resulting loss of yaw control. Transport Canada issued AD No. CF-2004-05R1, dated June 28, 2004, to ensure the continued airworthiness of these helicopters in Canada.

These helicopter models are manufactured in Canada and are type certificated for operation in the United States under the provisions of 14 CFR 21.29 and the applicable bilateral agreement. Pursuant to the applicable bilateral agreement, Transport Canada has kept the FAA informed of the situation described above. The FAA has examined the findings of Transport Canada, reviewed all available information, and determined that AD action is necessary for products of these type designs that are certificated for operation in the United States.

Interested persons were afforded an opportunity to participate in the making of AD 2004-24-08, Amendment 39-13884, Docket No. 2004-SW-12-AD, which we are proposing to supersede. Due consideration has been given to the one comment received.

The commenter expresses concern about the 12-hour blade inspection by a mechanic and states the inspection will make this helicopter unsuitable for its intended use. The commenter states the alternate pilot check and mechanic inspection would require them to shut down 4-5 times each day increasing engine cycles. The commenter further states that since the only difference between the pilot check and the mechanic inspection is the 10X magnifier, pilots need to be certified to perform the 12-hour inspection.

While the FAA agrees the checks and inspections could increase engine cycles, the primary purpose of issuing an AD is to correct an unsafe condition. However, the terminating action proposed in this AD would eliminate the current mandated inspections. We do not agree that pilots need to be certified to perform inspections. Current FAA policy allows pilots holding at least a private pilot certificate to perform checks that do not require the use of tools, precision measuring equipment, training, pilot logbook endorsements, or reference to technical data not contained in the body of the AD. Pilots may only perform simple maintenance tasks that do not require special maintenance training. The inspection in the AD requires the use of a 10X or higher magnifying glass, which is not considered a simple visual check. In the interest of safety, the inspection must occur at the specified intervals and be performed by a qualified mechanic until the terminating action is accomplished.

The previously described unsafe condition is likely to exist or develop on other helicopters of these same type designs. Therefore, the proposed AD would supersede AD 2004-24-08 to require:

• Before further flight, unless accomplished previously, and before installing any blade with an affected part number and serial number (S/N), cleaning the blade. Then, using a 10X or higher magnifying glass, inspecting both sides of each blade for a deformation, a crack, and a bent or deformed weight.

• Thereafter, cleaning both sides of each blade and using a 10X or higher magnifying glass, inspecting for a deformation, a crack, and a bent or deformed weight as follows:

• At intervals not to exceed 12 hours TIS, or

• At intervals not to exceed 24 hours TIS and checking both sides of each blade for a deformation, a crack, and a bent or deformed weight at intervals not to exceed 3 hours TIS between inspections. An owner/operator (pilot) holding at least a private pilot certificate may perform the 3-hour TIS check for deformed or cracked blades and for bent or deformed weights. Pilots may perform these checks because they require no tools, can be done by observation, and can be done equally well by a pilot or a mechanic. However, the pilot must enter compliance with these requirements into the helicopter maintenance records by following 14 CFR 43.11 and 91.417(a)(2)(v).

• Before further flight, replacing each blade with an airworthy blade if you find a deformation, a crack, or a bent or deformed weight.

• On or before April 27, 2007, replacing each affected blade with an airworthy blade that is identified by a “V” at the end of the blade S/N or an airworthy blade with a S/N other than one listed in the applicability section of this AD.

Replacing each blade with an airworthy blade that is identified by a “V” at the end of the blade S/N or an airworthy blade with a S/N other than one listed in the applicability section of this AD constitutes terminating action for the requirements of this AD.

The FAA estimates that this proposed AD would:

• Affect 2194 helicopters of U.S. registry,

• Take about 1/4 work hour for a blade check or inspection, and

• Take 3 work hours to replace a blade at an average labor rate of $65 per work hour. Required parts would cost about $5848 per helicopter. (In its ASB, the manufacturer states it will give warranty credit based on hour usage on the blade with remaining life hours and other restrictions.) Based on these figures, we estimate the total cost impact of the proposed AD on U.S. operators to be $19,989,973. Costs assume—200 pilot checks, 26 mechanic inspections, and one blade replacement for 90 percent of the fleet with a nonconforming blade.

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); 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 .

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

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

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:

Public Law 108-203, the SSPA, enacted March 2, 2004, requires a number of changes to representative payee policy and procedures. A representative payee is the person, agency, organization, or institution selected to receive and manage benefits on behalf of an incapable beneficiary. This includes a parent who is receiving benefits on behalf of his or her minor child. The SSPA also changes the rules for imposing penalties for false or misleading statements or for withholding information.

Section 102 of the SSPA requires non-governmental fee-for-service organizational representative payees to be both bonded and licensed, provided that licensing is available in the State.

Section 103 of the SSPA expands the scope of disqualification to prohibit an individual from serving as a representative payee if he or she: (1) Has been convicted of any offense resulting in imprisonment for more than 1 year, unless the Commissioner of Social Security determines that an exception to this prohibition is appropriate; or (2) is fleeing to avoid prosecution, or custody or confinement after conviction of a crime that is a felony.

Section 104 of the SSPA requires fee-for-service representative payees to forfeit their fees for any months during which they misuse all or part of any beneficiary's benefits.

Section 105 of the SSPA makes non-governmental representative payees liable for any benefits they misuse and requires SSA to treat such misused benefits as overpayments to the representative payees, subject to overpayment recovery authorities.

Section 106 of the SSPA authorizes the Commissioner of Social Security to require a representative payee to receive benefits in person at a Social Security field office or a United States Government facility designated by the Social Security Administration if the payee fails to provide an annual accounting of benefits report or other requested information.

In addition to the changes required by Public Law 108-203, we propose to clarify financial requirements for representative payees. Our current regulations specify that the interest earned on conserved funds belongs to the beneficiary. However, the regulations do not specifically address interest earned on current benefits or how current benefits should be held. We propose to specify that a representative payee must keep any payments received for the beneficiary separate from the representative payee's own funds and ensure that the beneficiary's ownership is shown unless the representative payee is the spouse or parent of the beneficiary and lives in the same household with the beneficiary. We also propose to provide for an exception to this requirement for State or local government agencies when we determine that their accounting structure sufficiently protects the beneficiaries' interest in the benefits ( i.e. , accounting structure clearly identifies what funds belong to the beneficiary). We further propose to specify that the payee must treat any interest earned on current benefits as the beneficiary's own property. In addition, we propose to clarify that the payee is responsible for making records available for review if requested by us. These records must be examined when conducting our site visits.

Section 201(a)(2) of the SSPA amended section 1129A of the Act to help prevent and respond to fraud and abuse in SSA's programs and operations. Prior to its amendment by the SSPA, section 1129A allowed SSA to impose a penalty against any person who makes, or causes to be made, a statement or representation of a material fact that the person knows or should know is false or misleading or that omits a material fact, or that the person makes with a knowing disregard for the truth. The statement must have been made for use in determining eligibility for or the amount of benefits under titles II or XVI. The penalty is nonpayment for 6, 12 or 24 months of benefits under title II that would otherwise be payable to the person and ineligibility for the same period of time for cash benefits under title XVI (including State supplementary payments made by SSA according to § 416.2005).

Section 201(a)(2) amended section 1129A to also allow SSA to impose this penalty against any person who withholds disclosure of information that is material for use in determining any right to or the amount of monthly benefits under titles II or XVI if the person knows, or should know, that the withholding of such disclosure is misleading. Prior to the enactment of section 201(a)(2), in order for a penalty to be imposed, the law required an affirmative act on the part of the individual of making a statement that omitted a material fact.

This new penalty under section 1129A of the Act will be effective with respect to violations committed after the date on which SSA implements the centralized computer file described in section 202 of the SSPA. This centralized computer file will electronically record information about changes in work status that a disability beneficiary (or representative) reports to SSA and is expected to be implemented in February 2006.

Because our regulations for representative payment under the title VIII program cross-reference the appropriate material in our title II representative payment rules, most of the changes we now propose to our title II representative payment regulations would also apply to title VIII. Where only a cross-reference to the title II rules would not be sufficient, we propose a specific rule for title VIII.

We are proposing the following policy changes to our representative payment regulations:

1. We propose to amend §§ 404.2022 and 416.622 to explain that a person who is convicted of an offense resulting in imprisonment for more than 1 year may not serve as a representative payee. These sections also would explain that we may make an exception to this rule if the nature of the conviction poses no risk to the beneficiary and selection of the applicant is in the beneficiary's best interest. In addition, these sections would explain that a person who is fleeing prosecution, custody or confinement for a crime, or an attempt to commit a crime that is a felony may not serve as a representative payee. If we identify a currently serving payee who is no longer qualified for this reason, we will allow them 10 days to respond to notification before making any payee change.

2. We propose to amend §§ 404.2035 and 416.635 to explain that a representative payee must keep any payments received for the beneficiary separate from the payee's own funds and ensure the beneficiary's ownership is shown unless the payee is the spouse or parent of the beneficiary and lives in the same household with the beneficiary. We also propose to provide for an exception to this requirement for State or local government agencies that use a different accounting structure. We would grant such an exception to a State or local government agency if we determine that its accounting structure sufficiently protects the beneficiaries' interest in the benefits. Also, these sections would explain that the payee must treat any interest earned on current benefits as the beneficiary's own property.

3. We propose to amend §§ 404.2035 and 416.635 to require representative payees to make available to us their records supporting their written accounting reports. We believe those records are essential to verify the written reports.

4. We propose to amend existing §§ 404.2040a and 416.640a to require fee-for-service non-governmental community-based nonprofit organizational representative payees to be both bonded and licensed (provided that licensing is available in the State). The bond would have to be of a sufficient amount to repay any funds (current social security benefits and supplemental security income payments plus any conserved funds and interest) lost by the beneficiaries in the event of misuse or theft, and the license would have to be appropriate under the laws of the State for the type of services the organization provides. These bonding and licensing requirements would not apply to the title VIII program. In addition, these sections would explain that a fee-for-service representative payee must forfeit its fee for the months during which it misused benefits.

5. We propose to amend §§ 404.2041 and 416.641 to explain that a non-governmental representative payee will be liable for any benefits it misuses and that SSA will treat the misused benefits as an overpayment to the representative payee, subject to overpayment recovery authorities.

6. We propose to amend §§ 404.2065 and 416.665 to explain that we may require a representative payee to receive benefits in person at a local Social Security field office or a United States Government facility designated by the Social Security Administration if the payee fails to provide an annual accounting of benefits or other requested information. We propose to make a similar amendment to § 408.665, but the benefits would be directed to a United States Government facility designated by the Social Security Administration.

We propose to amend §§ 404.459 and 416.1340 of our regulations by revising the heading and paragraphs (a) and (e) of each section to reflect that, as a result of section 201 of the SSPA, an individual will be subject to the penalty if he or she withholds information that is material for use in determining any right to or the amount of monthly benefits under title II or XVI if the person knows, or should know, that the withholding of the information is misleading.

Executive Order 12866, as amended by Executive Order 13258, requires each agency to write all rules in plain language. In addition to comments you may have on the substance of these proposed rules, we also invite your comments on how to make these rules easier to understand. For example:

• Have we organized the material to suit your needs?

• Are the requirements in the rules clearly stated?

• Do the rules contain technical language or jargon that is not clear?

• Would a different format (grouping and order of sections, use of headings, paragraphing) make the rules easier to understand?

• Would more (but shorter) sections be better?

• Could we improve clarity by adding tables, lists, or diagrams?

• What else could we do to make the rules easier to understand?

We have consulted with the Office of Management and Budget (OMB) and determined that these proposed rules meet the criteria for a significant regulatory action under Executive Order 12866, as amended by Executive Order 13258. Thus, the rules have been reviewed by OMB.

We have reviewed the proposed rules for compliance with Executive Order 13132 and the Unfunded Mandates Reform Act of 1995 (UMRA of 1995). We have determined that the proposed rules are not significant within the meaning of the UMRA of 1995 nor will they have any substantial direct effects on the States, on the relationship between the federal government and the States, or on the distribution of power and responsibilities among the various levels of government within the meaning of Executive Order 13132.

The provision requiring a State license for certain qualified organizations seeking compensation for serving as representative payees affects a very small number of organizational payees and will not significantly impact the States. First, the total number of organizations seeking compensation is very small, approximately 800. There are a significant number of State or local government agencies within this group which we do not require to be licensed. Only the small number of remaining organizations (community-based nonprofit social service organizations) must seek State licensing. Second, such organizations should already have obtained the necessary license to be in compliance with State law. Therefore, the very small number of organizations seeking a State license will not significantly impact the States.

We certify that these proposed rules will not have a significant economic impact on a substantial number of small entities. Therefore, a regulatory flexibility analysis, as provided for in the Regulatory Flexibility Act, as amended, is not required.

These proposed rules contain reporting requirements as shown in the table below. Where the public reporting burden is accounted for in Information Collection Requests for the various forms that the public uses to submit the information to SSA, a 1-hour placeholder burden is being assigned to the specific reporting requirement(s) contained in these rules; we are seeking clearance of these burdens because they were not considered during the clearance of the forms.

An Information Collection Request has been submitted to OMB. We are soliciting comments on the burden estimate; the need for the information; its practical utility; ways to enhance its quality, utility and clarity; and on ways to minimize the burden on respondents, including the use of automated collection techniques or other forms of information technology. Comments should be submitted and/or faxed to OMB and to the Social Security Administration at the following addresses/numbers: Office of Management and Budget, Attn: Desk Officer for SSA, Fax Number: 202-395-6974. Social Security Administration, Attn: SSA Reports Clearance Officer, Rm: 1338 Annex Building, 6401 Security Boulevard, Baltimore, MD 21235-6401, Fax Number: 410-965-6400.

Comments can be received for up to 60 days after publication of this notice and will be most useful if received within 30 days of publication. To receive a copy of the OMB clearance package, you may call the SSA Reports Clearance Officer on 410-965-0454.

For the reasons set out in the preamble, we propose to amend subparts E and U of part 404, subpart F of part 408, and subparts F and M of part 416 of Title 20 of the Code of Federal Regulations as follows:

Temporary regulations in the Rules and Regulations section of this issue of the Federal Register amend 26 CFR part 801. The temporary regulations amend part 801 to clarify when quantity measures, which are not tax enforcement results, may be used in measuring organizational and employee performance. The text of those regulations also serves as the text of these regulations. The “Explanation of Provisions” section of the temporary regulations explains the temporary regulations and these proposed regulations.

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

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

The principal author of these regulations is Karen F. Keller, Office of Associate Chief Counsel (General Legal Services). However, other personnel from the IRS participated in their development.

Accordingly, 26 CFR part 801 is proposed to be amended as follows:

Many national and community service programs are dedicated to helping children learn to read, giving at-risk children better opportunities to thrive, helping the elderly maintain their independence, and otherwise serving vulnerable individuals. With that commitment comes the responsibility to safeguard the well-being of program beneficiaries, including thorough effective screening of staff, participants, and volunteers in each program. Several years ago, a Corporation-sponsored technical assistance provider published the Staff Screening Tool Kit, 2nd Edition with helpful information designed to strengthen an organization's screening process. You may download the Tool Kit at http://www.nationalservice.gov/screeningtoolkit.

Currently, only the AmeriCorps State and National grant program has a criminal background check requirement in its grant provisions. For the 2005-2006 program year, it states as follows:

Criminal Background Checks. Programs with members (18 and over) or grant-funded employees who, on a recurring basis, have access to children (usually defined under state or local law as un-emancipated minors under the age of 18) or to individuals considered vulnerable by the program (i.e. the elderly or individuals who are either physically or mentally disabled), shall, to the extent permitted by state and local law, conduct criminal background checks on these members or employees as part of the overall screening process.

The grantee must ensure, to the extent permitted by state or local law, that it maintains background check documentation for members and employees covered by this provision in the member or employee's file or other appropriate file. The documentation must demonstrate that, in selecting or placing an individual, the grantee or the grantee's designee (such as a site sponsor) reviewed and considered the background check's results.

The Corporation intends to codify a requirement for AmeriCorps through the formal rulemaking process and seeks input on whether the current provision should be maintained or amended.

Senior Corps is comprised of three separate programs: (1) The Foster Grandparent Program (FGP); (2) the Senior Companion Program (SCP); and (3) the Retired Senior Volunteer Program. We intend to codify a requirement for each program through the formal rulemaking process.

The Learn and Serve Program consists of (1) School-Based K-12 Programs; (2) Higher Education Programs, and (3) Community-Based Programs. Given the fact that participants in Learn and Serve programs are generally not individually attributable to a Corporation grant, we are considering whether and to what extent we should codify requirements relating to the screening of staff and participants in Learn and Serve America programs.

The Corporation intends to strengthen its internal procedures for its two Federally-conducted programs, AmeriCorps National Civilian Community Corps and AmeriCorps VISTA, outside the scope of this rulemaking process.

To inform the rulemaking process, the Corporation invites preliminary informal input from the public addressing a criminal background check requirement for grantees. The Corporation specifically invites input on the following questions:

(1) What are the most effective screening practices used by organizations that serve children and other vulnerable populations?

(2) Is recurring access to children and other vulnerable populations (i.e. the elderly or individuals who are either physically or mentally disabled) the most appropriate way to describe the predicate for the background check requirement?

(3) What are the costs associated with conducting criminal background checks?

(4) What are the types and levels of background checks that are available to grantees?

(5) Should the Corporation require grantees to obtain a background check from a specific data base (e.g. state registry or the Department of Justice's National Sex Offender Public Registry at http://www.nsopr.gov )?

(6) Should the Corporation codify a per se disqualification for program participants or staff based upon a particular background check finding?

(7) How should the Corporation balance the goal of including at-risk participants in national and community service programs with the need to ensure appropriate protection for vulnerable populations?

(8) What are efficient and effective ways to document background checks and how should a program document that it considered such a finding of criminal history in selecting or placing an individual?

(9) Are grantees in a particular program category already required by State or local law to have safeguards in this area that obviate or mitigate the need for a separate grant condition?

(10) Does the current language in the AmeriCorps grant provisions appropriately define the scope of the requirement and documentation of compliance?

(11) What safeguards are necessary to protect the privacy of program participants or staff?

(12) What are the best practices to monitor and enforce compliance with requirements relating to the screening of participants?

(13) Where grantees are involved in a variety of programmatic activities, as in the case of RSVP, how should the Corporation identify those programs where volunteers and staff have access to children or other vulnerable individuals on a recurring basis?

(14) To what extent do state and local laws constrain the Corporation from requiring grantees to conduct criminal background checks on national service participants or employees, who, on a recurring basis, have access to children or other vulnerable populations?

(15) How often should a criminal background check be conducted for a national service participant who serves for two or more years?

(16) Are there categories of grantees (e.g. local school districts) for whom a separate Corporation requirement for criminal background checks might not be necessary because the grantee is already independently required to have appropriate applicant screening safeguards in place?

The Corporation is planning two conference calls in October, 2005. The first will be conducted on October 21, 2005, at 3 p.m., e.s.t. and the second on October 28, 2005, also at 3 p.m. e.s.t.

The USA Toll Free Number is 1-888-790-1769. The passcode is 7282715. Each conference call will last approximately 1 hour. Please check our Web site at http://www.nationalservice.gov/about/newsroom/releases_detail.asp?tbl_pr_id=196 for additional or updated information regarding these conference calls, or contact Tom Bryant at tbryant@cns.gov.

This is a summary of the Commission's Notice of Proposed Rulemaking in WC Docket No. 05-271, FCC 05-150, adopted August 5, 2005, and released September 23, 2005. The complete text of this NPRM is available for inspection and copying during normal business hours in 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, Best Copy and Printing, Inc., 445 12th Street, SW., Room CY-B402, Washington, DC 20554, telephone (800) 378-3160 or (202) 863-2893, facsimile (202) 863-2898, or via e-mail at www.bcpiweb.com. It is also available on the Commission's Web site at http://www.fcc.gov.

Comments may be filed using: (1) The Commission's Electronic Comment Filing System (ECFS), (2) the Federal Government's eRulemaking Portal, or (3) by filing paper copies. See Electronic Filing of Documents in Rulemaking Proceedings, 63 FR 24121 (May 1, 1998).

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

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

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

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

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

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

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

All filings must be addressed to the Commission's Secretary, Marlene H. Dortch, Office of the Secretary, Federal Communications Commission, 445 12th Street, SW., Washington, DC 20554. Parties should also send a copy of their filings to Janice Myles, Competition Policy Division, Wireline Competition Bureau, Federal Communications Commission, Room 5-C140, 445 12th Street, SW., Washington, DC 20554, or by e-mail to janice.myles@fcc.gov. Parties shall also serve one copy with the Commission's copy contractor, Best Copy and Printing, Inc. (BCPI), Portals II, 445 12th Street, SW., Room CY-B402, Washington, DC 20554, (202) 488-5300, or via e-mail to fcc@bcpiweb.com.

1. In this Notice of Proposed Rulemaking (NPRM), we seek comment on the need for any non-economic regulatory requirements necessary to ensure consumer protection needs are met by all providers of broadband Internet access service, regardless of underlying technology. This includes, but is not limited to, facilities-based providers of wireline broadband Internet access service. We conclude, in the Report and Order accompanying the NPRM, that wireline broadband Internet access service is an information service under the Act.

2. Consumers' privacy needs are no less important when consumers communicate over and use broadband Internet access than when they rely on telecommunications services. For example, a consumer may have questions about whether a broadband Internet access service provider will treat his or her account and usage information as confidential, or whether the provider reserves the right to use account information for marketing and other purposes. Section 222 of the Act establishes the regulatory framework governing telecommunications carriers' use and disclosure of CPNI and other customer information obtained by those carriers in their “provision of a telecommunications service.” That section requires, in general, that telecommunications carriers use or disclose CPNI only in the provision of the telecommunications service from which the CPNI is derived, or in the provision of services necessary to, or used in, the provision of such telecommunications services.

3.We seek comment on whether we should extend privacy requirements similar to the Act's CPNI requirements to providers of broadband Internet access services. For example, should we adopt rules under our Title I authority that forbid broadband Internet access providers from disclosing, without their customers' approval, information about their customers that they learn through the provision of their broadband Internet access service? We seek comment on what sort of customer proprietary information broadband Internet access providers possess, e.g. , information about consumers' service plans, installed equipment, or patterns of Internet access use. We note that long before Congress enacted section 222 of the Act, the Commission had recognized the need for privacy requirements associated with the provision of enhanced services and had adopted CPNI-related requirements in conjunction with other Computer Inquiry obligations.

4. Section 258 of the Act prohibits telecommunications carriers from submitting or executing an unauthorized change in a subscriber's selection of a provider of telephone exchange service or telephone toll service, a practice commonly known as “slamming.” In a series of orders, the Commission adopted various rules to implement section 258, and concluded that state authorities should have primary responsibility for administering the rules. By providing for state administration of slamming rules, the Commission recognized that state authorities are particularly well-equipped to handle such complaints because states are close to consumers and are familiar with trends in their regions. The Commission also recognized, however, that all states may not have the resources available to handle slamming complaints. Accordingly, the Commission's rules allow consumers in states that do not “opt-in” to administer the slamming rules to file slamming complaints with the Commission.

5. We seek comment on whether we should exercise our Title I authority to impose similar requirements on providers of broadband Internet access service. Commenters should explain in what circumstances subscribers to broadband Internet access could get “slammed.” Is the provisioning process for broadband Internet access service such that an unauthorized change in provider is more likely in situations where the provider relies on third-party broadband transmission facilities?

6. The Commission has adopted truth-in-billing rules to ensure that consumers receive accurate, meaningful information on their telecommunications bills that will allow consumers to better understand their bills, compare service offerings, and thereby promote a more efficient, competitive marketplace. In general, the Commission's rules require that a telecommunication carrier's bill must: (1) Be accompanied by a brief, clear, non-misleading, plain language description of the service or services rendered; (2) identify the service provider associated with each charge; (3) clearly and conspicuously identify any change in service provider; (4) identify those charges for which failure to pay will not result in disconnection of basic local service; and (5) provide a toll-free number for consumers to inquire or dispute any charges. The Commission's rules on truth-in-billing are designed to reduce slamming, cramming (which is the practice of placing unauthorized, misleading, or deceptive charges on a telecommunications bill and is most likely to occur when a carrier does not clearly or accurately describe all of the relevant charges on the consumer's bill), and other telecommunications fraud by setting standards for accuracy on bills for telecommunications service.

7. We seek comment on whether we should exercise our Title I authority to impose requirements on broadband Internet access service providers that are similar to our truth-in-billing requirements or are otherwise geared toward reducing slamming, cramming, or other types of telecommunications-related fraud. For example, during 2005, the Commission's Consumer and Governmental Affairs Bureau has received complaints about the billing practices of broadband Internet access services providers, including complaints related to double billing, billing for unexplained charges, and billing for cancelled services. Overall, parties should explain what problems customers of broadband Internet access service are likely to have with their bills and whether we should address these problems through truth-in-billing-type requirements.

8. Section 63.100(a) through (e) of the Commission's rules, 47 CFR 63.100(a)-(e), requires certain communications providers to notify the Commission of outages of thirty or more minutes that affect a substantial number of customers or involve major airports, major military installations, key government facilities, nuclear power plants, or 911 facilities. We seek comment on whether we should exercise our Title I authority to impose any similar requirements on broadband Internet access service providers. Do the purposes of our network outage reporting requirements apply to outages of broadband Internet access service? Should we adopt requirements that differ depending on the nature of the facility or the type of customer served?

9. Section 214 of the Act limits a telecommunications carrier's ability to discontinue unilaterally its service to customers. Section 63.71 of the Commission's implementing rules, 47 CFR 63.71 generally requires that domestic carriers wishing to “discontinue, reduce, or impair” services must first request authority to do so from the Commission and must notify affected customers and others of their plans.

10. We seek comment on whether we should exercise our Title I authority to impose discontinuance-type requirements on providers of broadband Internet access service. As customers grow more dependent on broadband Internet access services, does the need for notice to customers grow stronger? Or do the multiplicity and availability of broadband Internet access providers mitigate the need for such notice?

11. Finally, we seek to ensure that our actions today do not jeopardize the policies of section 254(g). That section required the Commission to adopt rules “to require that the rates charged by providers of interexchange telecommunications services to subscribers in rural and high cost areas * * * be no higher than the rates charged by each such provider to its subscribers in urban areas.” The provision further required that the rules “require that a provider of interstate interexchange telecommunications services * * * provide such services to its subscribers in each State at rates no higher than the rates charged to its subscribers in any other State.” The Commission has forborne from the requirements of section 254(g) with regard to private line services, of which DSL is one. Because the policies underlying section 254(g) remain important, however, we ask whether we should exercise our Title I authority to impose any similar requirements on providers of broadband Internet access services, particularly as consumers substitute broadband services and applications for narrowband services that were covered by section 254(g).

12. We recognize that the states play an important role in ensuring that public safety and consumer protection goals are met. The Commission has recently announced the creation of a federal-state task force on VoIP E911 enforcement, and we believe that this NPRM may give rise to additional areas in which cooperation between this Commission and the states can achieve the best results. We note in this regard that NARUC has recently advocated for a “functional” approach to questions of federal and state jurisdiction, particularly with respect to consumer protection issues. For example, with respect to CPNI, NARUC recommends that the Commission be primarily responsible for establishing rules, while state or local authorities assume responsibility for enforcing those rules. To the extent that the Commission finds it necessary to impose consumer protection and related regulations on broadband Internet access service providers, we seek comment on how best to harmonize federal regulations with the states' efforts and expertise in these areas. Do commenters support NARUC's functional approach? In what other ways can the federal and state governments cooperate in order to ensure the best results for consumers?

13. We note that consumers have various methods of pursuing complaints with the Commission against entities subject to our jurisdiction. In particular, the Commission's informal complaint process permits consumers to submit complaints to the Commission by any reasonable means, including by telephone, facsimile, postal mail, e-mail and an Internet complaint form. Consumer Center representatives, known as Consumer Advocacy and Mediation Specialists or CAMSs, are available to assist consumers in filing complaints if needed. CAMSs staff review complaints for subject matter content and determine appropriate handling of the complaints.

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

15. As required by the Regulatory Flexibility Act of 1980, as amended (RFA), the Commission has prepared the present Initial Regulatory Flexibility Analysis (IRFA) of the possible significant economic impact on small entities that might result from this NPRM. Written public comments are requested on this IRFA. Comments must be identified as responses to the IRFA and must be filed by the deadlines for comments on the NPRM provided above. The Commission will send a copy of the NPRM, including this IRFA, to the Chief Counsel for Advocacy of the Small Business Administration. In addition, the NPRM and IRFA (or summaries thereof) will be published in the Federal Register .

16. The broadband marketplace before us today is an emerging and rapidly changing one. Nevertheless, consumer protection remains a priority for the Commission. We initiate this rulemaking to ensure that consumer protection objectives in the Act are met as the industry shifts from narrowband to broadband services. Through this NPRM, the Commission's objective is to develop a framework for consumer protection in the broadband age—a framework that ensures that consumer protection needs are met by all providers of broadband Internet access service, regardless of the underlying technology. The NPRM seeks comment on whether the Commission should impose, for example, privacy requirements similar to the Act's CPNI requirements, slamming, truth-in-billing, network outage reporting, § 214 discontinuance, or § 254(g) rate averaging requirements on providers of broadband Internet access service. We also seek comment on how best to harmonize federal regulations with the states' efforts and expertise in consumer protection issues.

17. The legal basis for any action that may be taken pursuant to the NPRM is contained in sections 1-4, 201-205, 251, 252, 254, 256, 303(r) of the Communications Act of 1934, as amended, 47 U.S.C. 151-154, 201-205, 251, 252, 254, 256, 303(r), and section 706 of the Telecommunications Act of 1996, 47 U.S.C. 157 nt.

18. The RFA directs agencies to provide a description of and, where feasible, an estimate of the number of small entities that may be affected by the proposed rules. 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).

19. Small Businesses. Nationwide, there are a total of approximately 22.4 million small businesses, according to SBA data.

20. Small Organizations. Nationwide, there are approximately 1.6 million small organizations.

21. Small Governmental Jurisdictions. The term “small governmental jurisdiction” is defined as “governments of cities, towns, townships, villages, school districts, or special districts, with a population of less than fifty thousand.” As of 1997, there were approximately 87,453 governmental jurisdictions in the United States. This number includes 39,044 county governments, municipalities, and townships, of which 37,546 (approximately 96.2%) have populations of fewer than 50,000, and of which 1,498 have populations of 50,000 or more. Thus, we estimate the number of small governmental jurisdictions overall to be 84,098 or fewer.

22. We note that the list of potentially affected entities below is perhaps more expansive than is necessary. We have, for instance, included services that are apparently currently not a part of the Internet industry, as well as manufacturers.

23. Wireline Carriers and Service Providers. We have included small incumbent local exchange carriers in this present RFA analysis. As noted above, a “small business” under the RFA is one that, inter alia, meets the pertinent small business size standard ( e.g. , a telephone communications business having 1,500 or fewer employees), and “is not dominant in its field of operation.” The SBA's Office of Advocacy contends that, for RFA purposes, small incumbent local exchange carriers are not dominant in their field of operation because any such dominance is not “national” in scope. We have therefore included small incumbent local exchange carriers in this RFA analysis, although we emphasize that this RFA action has no effect on Commission analyses and determinations in other, non-RFA contexts.

24. Incumbent Local Exchange Carriers (LECs). Neither the Commission nor the SBA has developed a small business size standard specifically for incumbent local exchange services. The appropriate size standard under SBA rules is for the category Wired Telecommunications Carriers. Under that size standard, such a business is small if it has 1,500 or fewer employees. According to Commission data, 1,303 carriers have reported that they are engaged in the provision of incumbent local exchange services. Of these 1,303 carriers, an estimated 1,020 have 1,500 or fewer employees and 283 have more than 1,500 employees. Consequently, the Commission estimates that most providers of incumbent local exchange service are small businesses that may be affected by our action. In addition, limited preliminary census data for 2002 indicate that the total number of wired communications carriers increased approximately 34 percent from 1997 to 2002.

25. Competitive Local Exchange Carriers, Competitive Access Providers (CAPs), “Shared-Tenant Service Providers,” and “Other Local Service Providers.” Neither the Commission nor the SBA has developed a small business size standard specifically for these service providers. The appropriate size standard under SBA rules is for the category Wired Telecommunications Carriers. Under that size standard, such a business is small if it has 1,500 or fewer employees. According to Commission data, 769 carriers have reported that they are engaged in the provision of either competitive access provider services or competitive local exchange carrier services. Of these 769 carriers, an estimated 676 have 1,500 or fewer employees and 93 have more than 1,500 employees. In addition, 12 carriers have reported that they are “Shared-Tenant Service Providers,” and all 12 are estimated to have 1,500 or fewer employees. In addition, 39 carriers have reported that they are “Other Local Service Providers.” Of the 39, an estimated 38 have 1,500 or fewer employees and one has more than 1,500 employees. Consequently, the Commission estimates that most providers of competitive local exchange service, competitive access providers, “Shared-Tenant Service Providers,” and “Other Local Service Providers” are small entities that may be affected by our action. In addition, limited preliminary census data for 2002 indicate that the total number of wired communications carriers increased approximately 34 percent from 1997 to 2002.

26. Local Resellers. The SBA has developed a small business size standard for the category of Telecommunications Resellers. Under that size standard, such a business is small if it has 1,500 or fewer employees. According to Commission data, 143 carriers have reported that they are engaged in the provision of local resale services. Of these, an estimated 141 have 1,500 or fewer employees and two have more than 1,500 employees. Consequently, the Commission estimates that the majority of local resellers are small entities that may be affected by our action.

27. Toll Resellers. The SBA has developed a small business size standard for the category of Telecommunications Resellers. Under that size standard, such a business is small if it has 1,500 or fewer employees. According to Commission data, 770 carriers have reported that they are engaged in the provision of toll resale services. Of these, an estimated 747 have 1,500 or fewer employees and 23 have more than 1,500 employees. Consequently, the Commission estimates that the majority of toll resellers are small entities that may be affected by our action.

28. Payphone Service Providers (PSPs). Neither the Commission nor the SBA has developed a small business size standard specifically for payphone services providers. The appropriate size standard under SBA rules is for the category Wired Telecommunications Carriers. Under that size standard, such a business is small if it has 1,500 or fewer employees. According to Commission data, 654 carriers have reported that they are engaged in the provision of payphone services. Of these, an estimated 652 have 1,500 or fewer employees and two have more than 1,500 employees. Consequently, the Commission estimates that the majority of payphone service providers are small entities that may be affected by our action. In addition, limited preliminary census data for 2002 indicate that the total number of wired communications carriers increased approximately 34 percent from 1997 to 2002.

29. Interexchange Carriers (IXCs). Neither the Commission nor the SBA has developed a small business size standard specifically for providers of interexchange services. The appropriate size standard under SBA rules is for the category Wired Telecommunications Carriers. Under that size standard, such a business is small if it has 1,500 or fewer employees. According to Commission data, 316 carriers have reported that they are engaged in the provision of interexchange service. Of these, an estimated 292 have 1,500 or fewer employees and 24 have more than 1,500 employees. Consequently, the Commission estimates that the majority of IXCs are small entities that may be affected by our action. In addition, limited preliminary census data for 2002 indicate that the total number of wired communications carriers increased approximately 34 percent from 1997 to 2002.

30. Operator Service Providers (OSPs). Neither the Commission nor the SBA has developed a small business size standard specifically for operator service providers. The appropriate size standard under SBA rules is for the category Wired Telecommunications Carriers. Under that size standard, such a business is small if it has 1,500 or fewer employees. According to Commission data, 23 carriers have reported that they are engaged in the provision of operator services. Of these, an estimated 20 have 1,500 or fewer employees and three have more than 1,500 employees. Consequently, the Commission estimates that the majority of OSPs are small entities that may be affected by our action. In addition, limited preliminary census data for 2002 indicate that the total number of wired communications carriers increased approximately 34 percent from 1997 to 2002.

31. Prepaid Calling Card Providers. Neither the Commission nor the SBA has developed a small business size standard specifically for prepaid calling card providers. The appropriate size standard under SBA rules is for the category Telecommunications Resellers. Under that size standard, such a business is small if it has 1,500 or fewer employees. According to Commission data, 89 carriers have reported that they are engaged in the provision of prepaid calling cards. Of these, 88 are estimated to have 1,500 or fewer employees and one has more than 1,500 employees. Consequently, the Commission estimates that all or the majority of prepaid calling card providers are small entities that may be affected by our action.

32. 800 and 800-Like Service Subscribers. Neither the Commission nor the SBA has developed a small business size standard specifically for 800 and 800-like service (“toll free”) subscribers. The appropriate size standard under SBA rules is for the category Telecommunications Resellers. Under that size standard, such a business is small if it has 1,500 or fewer employees. The most reliable source of information regarding the number of these service subscribers appears to be data the Commission collects on the 800, 888, and 877 numbers in use. According to our data, at the end of January, 1999, the number of 800 numbers assigned was 7,692,955; the number of 888 numbers assigned was 7,706,393; and the number of 877 numbers assigned was 1,946,538. We do not have data specifying the number of these subscribers that are not independently owned and operated or have more than 1,500 employees, and thus are unable at this time to estimate with greater precision the number of toll free subscribers that would qualify as small businesses under the SBA size standard. Consequently, we estimate that there are 7,692,955 or fewer small entity 800 subscribers; 7,706,393 or fewer small entity 888 subscribers; and 1,946,538 or fewer small entity 877 subscribers.

33. International Service Providers. The Commission has not developed a small business size standard specifically for providers of international service. The appropriate size standards under SBA rules are for the two broad categories of Satellite Telecommunications and Other Telecommunications. Under both categories, such a business is small if it has $12.5 million or less in average annual receipts. For the first category of Satellite Telecommunications, Census Bureau data for 1997 show that there were a total of 324 firms that operated for the entire year. Of this total, 273 firms had annual receipts of under $10 million, and an additional 24 firms had receipts of $10 million to $24,999,999. Thus, the majority of Satellite Telecommunications firms can be considered small.

34. The second category—Other Telecommunications—includes “establishments primarily engaged in * * * providing satellite terminal stations and associated facilities operationally connected with one or more terrestrial communications systems and capable of transmitting telecommunications to or receiving telecommunications from satellite systems.” According to Census Bureau data for 1997, there were 439 firms in this category that operated for the entire year. Of this total, 424 firms had annual receipts of $5 million to $9,999,999 and an additional six firms had annual receipts of $10 million to $24,999,990. Thus, under this second size standard, the majority of firms can be considered small.

35. Wireless Telecommunications Service Providers. Below, for those services subject to auctions, we note that, as a general matter, the number of winning bidders that qualify as small businesses at the close of an auction does not necessarily represent the number of small businesses currently in service. Also, the Commission does not generally track subsequent business size unless, in the context of assignments or transfers, unjust enrichment issues are implicated.

36. Wireless Service Providers. The SBA has developed a small business size standard for wireless firms within the two broad economic census categories of “Paging” and “Cellular and Other Wireless Telecommunications.” Under both SBA categories, a wireless business is small if it has 1,500 or fewer employees. For the census category of Paging, Census Bureau data for 1997 show that there were 1,320 firms in this category, total, that operated for the entire year. Of this total, 1,303 firms had employment of 999 or fewer employees, and an additional 17 firms had employment of 1,000 employees or more. Thus, under this category and associated small business size standard, the majority of firms can be considered small. For the census category Cellular and Other Wireless Telecommunications, Census Bureau data for 1997 show that there were 977 firms in this category, total, that operated for the entire year. Of this total, 965 firms had employment of 999 or fewer employees, and an additional 12 firms had employment of 1,000 employees or more. Thus, under this second category and size standard, the majority of firms can, again, be considered small. In addition, limited preliminary census data for 2002 indicate that the total number of paging providers decreased approximately 51 percent from 1997 to 2002. In addition, limited preliminary census data for 2002 indicate that the total number of cellular and other wireless telecommunications carriers increased approximately 321 percent from 1997 to 2002.

37. Cellular Licensees. The SBA has developed a small business size standard for wireless firms within the broad economic census category “Cellular and Other Wireless Telecommunications.” Under this SBA category, a wireless business is small if it has 1,500 or fewer employees. For the census category Cellular and Other Wireless Telecommunications firms, Census Bureau data for 1997 show that there were 977 firms in this category, total, that operated for the entire year. Of this total, 965 firms had employment of 999 or fewer employees, and an additional 12 firms had employment of 1,000 employees or more. Thus, under this category and size standard, the great majority of firms can be considered small. Also, according to Commission data, 437 carriers reported that they were engaged in the provision of cellular service, Personal Communications Service (PCS), or Specialized Mobile Radio (SMR) Telephony services, which are placed together in the data. We have estimated that 260 of these are small, under the SBA small business size standard.

38. Common Carrier Paging. The SBA has developed a small business size standard for wireless firms within the broad economic census category, “Cellular and Other Wireless Telecommunications.” Under this SBA category, a wireless business is small if it has 1,500 or fewer employees. For the census category of Paging, Census Bureau data for 1997 show that there were 1,320 firms in this category, total, that operated for the entire year. Of this total, 1,303 firms had employment of 999 or fewer employees, and an additional 17 firms had employment of 1,000 employees or more. Thus, under this category and associated small business size standard, the majority of firms can be considered small. In the Paging Third Report and Order, we developed 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. The SBA has approved these small business size standards. An auction of Metropolitan Economic Area licenses commenced on February 24, 2000, and closed on March 2, 2000. Of the 985 licenses auctioned, 440 were sold. Fifty-seven companies claiming small business status won. Also, according to Commission data, 375 carriers reported that they were engaged in the provision of paging and messaging services. Of those, we estimate that 370 are small, under the SBA-approved small business size standard.

39. Wireless Communications Services. This service can be used for fixed, mobile, radiolocation, and digital audio broadcasting satellite uses. The Commission established small business size standards for the wireless communications services (WCS) auction. A “small business” is an entity with average gross revenues of $40 million for each of the three preceding years, and a “very small business” is an entity with average gross revenues of $15 million for each of the three preceding years. The SBA has approved these small business size standards. The Commission auctioned geographic area licenses in the WCS service. In the auction, there were seven winning bidders that qualified as “very small business” entities, and one that qualified as a “small business” entity.

40. Wireless Telephony. Wireless telephony includes cellular, personal communications services (PCS), and specialized mobile radio (SMR) telephony carriers. As noted earlier, the SBA has developed a small business size standard for “Cellular and Other Wireless Telecommunications” services. Under that SBA small business size standard, a business is small if it has 1,500 or fewer employees. According to Commission data, 445 carriers reported that they were engaged in the provision of wireless telephony. We have estimated that 245 of these are small under the SBA small business size standard.

41. Broadband Personal Communications Service. The broadband Personal Communications Service (PCS) spectrum is divided into six frequency blocks designated A through F, and the Commission has held auctions for each block. The Commission defined “small entity” for Blocks C and F as an entity that has average gross revenues of $40 million or less in the three previous calendar years. For Block F, 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 standards defining “small entity” 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 re-auctioned 347 C, D, E, and F Block licenses. There were 48 small business winning bidders. On January 26, 2001, the Commission completed the auction of 422 C and F Broadband PCS licenses in Auction No. 35. Of the 35 winning bidders in this auction, 29 qualified as “small” or “ small” businesses. Subsequent events, concerning Auction 35, including judicial and agency determinations, resulted in a total of 163 C and F Block licenses being available for grant.

42. Narrowband Personal Communications Services. To date, two auctions of narrowband personal communications services (PCS) licenses have been conducted. For purposes of the two auctions that have already been held, “small businesses” were entities with average gross revenues for the prior three calendar years of $40 million or less. Through these auctions, the Commission has awarded a total of 41 licenses, out of which 11 were obtained by small businesses. To ensure meaningful participation of small business entities in future auctions, the Commission has adopted a two-tiered small business size standard in the Narrowband PCS Second Report and Order. 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. In the future, the Commission will auction 459 licenses to serve Metropolitan Trading Areas (MTAs) and 408 response channel licenses. There is also one megahertz of narrowband PCS spectrum that has been held in reserve and that the Commission has not yet decided to release for licensing. The Commission cannot predict accurately the number of licenses that will be awarded to small entities in future auctions. However, four of the 16 winning bidders in the two previous narrowband PCS auctions were small businesses, as that term was defined. The Commission assumes, for purposes of this analysis that a large portion of the remaining narrowband PCS licenses will be awarded to small entities. The Commission also assumes that at least some small businesses will acquire narrowband PCS licenses by means of the Commission's partitioning and disaggregation rules.

43. 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 small business size standard for 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. For the census category Cellular and Other Wireless Telecommunications, Census Bureau data for 1997 show that there were 977 firms in this category, total, that operated for the entire year. Of this total, 965 firms had employment of 999 or fewer employees, and an additional 12 firms had employment of 1,000 employees or more. Thus, under this second category and size standard, the majority of firms can, again, be considered small. Assuming 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 size standard. In addition, limited preliminary census data for 2002 indicate that the total number of cellular and other wireless telecommunications carriers increased approximately 321 percent from 1997 to 2002.

44. 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 a new service, and is subject to spectrum auctions. In the 220 MHz Third Report and Order, we adopted a small business size standard for “small” and “very small” businesses for purposes of determining their eligibility for special provisions such as bidding credits and installment payments. This small business size 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 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 business 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 licenses in the first 220 MHz auction. The second auction included 225 licenses: 216 EA licenses and 9 EAG licenses. Fourteen companies claiming small business status won 158 licenses.

45. 800 MHz and 900 MHz Specialized Mobile Radio Licenses. The Commission awards “small entity” and “very 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, or that had revenues of no more than $3 million in each of the previous calendar years, respectively. These bidding credits apply to SMR providers in the 800 MHz and 900 MHz bands that either hold geographic area licenses or have obtained extended implementation authorizations. The Commission does not know how many firms provide 800 MHz or 900 MHz geographic area SMR service 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. The Commission assumes, for purposes here, that all of the remaining existing extended implementation authorizations are held by small entities, as that term is defined by the SBA. The Commission has held auctions for geographic area licenses in the 800 MHz and 900 MHz SMR bands. There were 60 winning bidders that qualified as small or very small entities in the 900 MHz SMR auctions. Of the 1,020 licenses won in the 900 MHz auction, bidders qualifying as small or very small entities won 263 licenses. In the 800 MHz auction, 38 of the 524 licenses won were won by small and very small entities.

46. 700 MHz Guard Band Licensees. In the 700 MHz Guard Band Order, 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” as 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.

47. Rural Radiotelephone Service. The Commission has not adopted a size standard for small businesses specific to the Rural Radiotelephone Service. A significant subset of the Rural Radiotelephone Service is the Basic Exchange Telephone Radio System (BETRS). The Commission uses the SBA's small business size standard applicable to “Cellular and Other Wireless Telecommunications,” 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.

48. Air-Ground Radiotelephone Service. The Commission has not adopted a small business size standard specific to the Air-Ground Radiotelephone Service. We will use SBA's small business size standard applicable to “Cellular and Other Wireless Telecommunications,” i.e. , an entity employing no more than 1,500 persons. There are approximately 100 licensees in the Air-Ground Radiotelephone Service, and we estimate that almost all of them qualify as small under the SBA small business size standard.

49. Aviation and Marine Radio Services. Small businesses in the aviation and marine radio services use a very high frequency (VHF) marine or aircraft radio and, as appropriate, an emergency position-indicating radio beacon (and/or radar) or an emergency locator transmitter. The Commission has not developed a small business size standard specifically applicable to these small businesses. For purposes of this analysis, the Commission uses the SBA small business size standard for the category “Cellular and Other Telecommunications,” which is 1,500 or fewer employees. Most applicants for recreational licenses are individuals. Approximately 581,000 ship station licensees and 131,000 aircraft station licensees operate domestically and are not subject to the radio carriage requirements of any statute or treaty. For purposes of our evaluations in this analysis, we estimate that there are up to approximately 712,000 licensees that are small businesses (or individuals) under the SBA standard. In addition, between December 3, 1998 and December 14, 1998, the Commission held an auction of 42 VHF Public Coast licenses in the 157.1875-157.4500 MHz (ship transmit) and 161.775-162.0125 MHz (coast transmit) bands. For purposes of the auction, the Commission defined a “small” business as an entity that, together with controlling interests and affiliates, has average gross revenues for the preceding three years not to exceed $15 million dollars. In addition, a “very small” business is one that, together with controlling interests and affiliates, has average gross revenues for the preceding three years not to exceed $3 million dollars. There are approximately 10,672 licensees in the Marine Coast Service, and the Commission estimates that almost all of them qualify as “small” businesses under the above special small business size standards.

50. Fixed Microwave Services. Fixed microwave services include common carrier, private operational-fixed, and broadcast auxiliary radio services. At present, 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 created a size standard for a small business specifically with respect to fixed microwave services. For purposes of this analysis, the Commission uses the SBA small business size standard for the category “Cellular and Other Telecommunications,” which is 1,500 or fewer employees. 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 up to 22,015 common carrier fixed licensees and up to 61,670 private operational-fixed licensees and broadcast auxiliary radio licensees in the microwave services that may be small and may be affected by the rules and policies adopted herein. We noted, however, that the common carrier microwave fixed licensee category includes some large entities.

51. Offshore Radiotelephone Service. This service operates on several UHF television broadcast channels that are not used for television broadcasting in the coastal areas of states bordering the Gulf of Mexico. There are presently approximately 55 licensees in this service. We are unable to estimate at this time the number of licensees that would qualify as small under the SBA's small business size standard for “Cellular and Other Wireless Telecommunications” services. Under that SBA small business size standard, a business is small if it has 1,500 or fewer employees.

52. 39 GHz Service. The Commission created a special small business size standard for 39 GHz licenses—an entity that has average gross revenues of $40 million or less in the three previous calendar years. An additional size standard for “very small business” is: an entity that, together with affiliates, has average gross revenues of not more than $15 million for the preceding three calendar years. The SBA has approved these small business size standards. 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. Consequently, the Commission estimates that 18 or fewer 39 GHz licensees are small entities that may be affected by the rules and polices adopted herein.

53. Broadband Radio Service and Educational Broadband Service. Broadband Radio Service comprises Multichannel Multipoint Distribution Service (MMDS) systems and Multipoint Distribution Service (MDS). MMDS systems, often referred to as “wireless cable,” transmit video programming to subscribers using the microwave frequencies of MDS and Educational Broadband Service (formerly known as Instructional Television Fixed Service). In connection with the 1996 MDS auction, the Commission established a small business size standard as an entity that had annual average gross revenues of less than $40 million in the previous three calendar years. The MDS auctions resulted in 67 successful bidders obtaining licensing opportunities for 493 Basic Trading Areas (BTAs). Of the 67 auction winners, 61 met the definition of a small business. MDS also includes licensees of stations authorized prior to the auction. 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 the Broadband Radio Service category are small businesses that may be affected by the rules and policies adopted herein. This SBA small business size standard also appears applicable to Educational Broadband Service. There are presently 2,032 Educational Broadband Service licensees. All but 100 of these licenses are held by educational institutions. Educational institutions are included in this analysis as small entities. Thus, we tentatively conclude that at least 1,932 licensees are small businesses.

54. Local Multipoint Distribution Service. Local Multipoint Distribution Service (LMDS) is a fixed broadband point-to-multipoint microwave service that provides for two-way video telecommunications. The auction of the 1,030 Local Multipoint Distribution Service (LMDS) licenses began on February 18, 1998 and closed on March 25, 1998. The Commission established a small business size standard for LMDS licenses as an entity that has average gross revenues of less than $40 million in the three previous calendar years. An additional small business size standard for “very small business” was added 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 small business size standards in the context of LMDS auctions. 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 40 winning bidders. Based on this information, we conclude that the number of small LMDS licenses consists of the 93 winning bidders in the first auction and the 40 winning bidders in the re-auction, for a total of 133 small entity LMDS providers.

55. 218-219 MHz Service. The first auction of 218-219 MHz spectrum resulted in 170 entities winning licenses for 594 Metropolitan Statistical Area (MSA) licenses. Of the 594 licenses, 557 were won by entities qualifying as a small business. For that auction, the small business size standard was 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 the 218-219 MHz Report and Order and Memorandum Opinion and Order, we established a small business size standard for 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 to exceed $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 to exceed $3 million for the preceding three years. We cannot estimate, however, 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.

56. 24 GHz—Incumbent Licensees. This analysis may 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 applicable SBA small business size standard is that of “Cellular and Other Wireless Telecommunications” companies. This category provides that such a company is small if it employs no more than 1,500 persons. According to Census Bureau data for 1997, there were 977 firms in this category, total, that operated for the entire year. Of this total, 965 firms had employment of 999 or fewer employees, and an additional 12 firms had employment of 1,000 employees or more. Thus, under this size standard, the great majority of firms can be considered small. These broader census data 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.

57. 24 GHz—Future Licensees. With respect to new applicants in the 24 GHz band, the small business size standard for “small business” is an entity that, together with controlling interests and affiliates, has average annual gross revenues for the three preceding years not in excess of $15 million. “Very small business” in the 24 GHz band is 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 small business size standards. These size standards will apply to the future auction, if held.

58. Cable and OVS Operators: Cable and Other Program Distribution. This category includes cable systems operators, closed circuit television services, direct broadcast satellite services, multipoint distribution systems, satellite master antenna systems, and subscription television services. The SBA has developed small business size standard for this census category, which includes all such companies generating $12.5 million or less in revenue annually. 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, the Commission estimates that the majority of providers in this service category are small businesses that may be affected by the rules and policies adopted herein.

59. Cable System Operators (Rate Regulation Standard). The Commission has developed its own small business size standard for cable system operators, for purposes of rate regulation. Under the Commission's rules, a “small cable company” is one serving fewer than 400,000 subscribers nationwide. The most recent estimates indicate that there were 1,439 cable operators who qualified as small cable system operators at the end of 1995. Since then, some of those companies may have grown to serve over 400,000 subscribers, and others may have been involved in transactions that caused them to be combined with other cable operators. Consequently, the Commission estimates that there are now fewer than 1,439 small entity cable system operators that may be affected by the rules and policies adopted herein.

60. Cable System Operators (Telecom Act Standard). The Communications Act of 1934, as amended, also contains a size standard for small cable system operators, which is “a cable operator that, directly or through an affiliate, serves in the aggregate fewer than 1 percent of all subscribers in the United States and is not affiliated with any entity or entities whose gross annual revenues in the aggregate exceed $250,000,000.” The Commission has determined that there are 67,700,000 subscribers in the United States. Therefore, an operator serving fewer than 677,000 subscribers shall be deemed a small operator, if its annual revenues, when combined with the total annual revenues of all its affiliates, do not exceed $250 million in the aggregate. Based on available data, the Commission estimates that the number of cable operators serving 677,000 subscribers or fewer, totals 1,450. The Commission neither requests nor collects information on whether cable system operators are affiliated with entities whose gross annual revenues exceed $250 million, and therefore are unable, at this time, to estimate more accurately the number of cable system operators that would qualify as small cable operators under the size standard contained in the Communications Act of 1934.

61. Open Video Services. Open Video Service (OVS) systems provide subscription services. The SBA has created a small business size standard for Cable and Other Program Distribution. This standard provides that a small entity is one with $12.5 million or less in annual receipts. The Commission has certified approximately 25 OVS operators to serve 75 areas, and some of these are currently providing service. Affiliates of Residential Communications Network, Inc. (RCN) received approval to operate OVS systems in New York City, Boston, Washington, DC, and other areas. RCN has sufficient revenues to assure that they do not qualify as a small business entity. Little financial information is available for the other entities that are authorized to provide OVS and are not yet operational. Given that some entities authorized to provide OVS service have not yet begun to generate revenues, the Commission concludes that up to 24 OVS operators (those remaining) might qualify as small businesses that may be affected by the rules and policies adopted herein.

62. Internet Service Providers. The SBA has developed a small business size standard for Internet Service Providers (ISPs). ISPs “provide clients access to the Internet and generally provide related services such as Web hosting, Web page designing, and hardware or software consulting related to Internet connectivity.” Under the SBA size standard, such a business is small if it has average annual receipts of $21 million or less. According to Census Bureau data for 1997, there were 2,751 firms in this category that operated for the entire year. Of these, 2,659 firms had annual receipts of under $10 million, and an additional 67 firms had receipts of between $10 million and $24, 999,999. Consequently, we estimate that the majority of these firms are small entities that may be affected by our action. In addition, limited preliminary census data for 2002 indicate that the total number of Internet service providers increased approximately five percent from 1997 to 2002.

63. Other Internet-Related Entities: Web Search Portals. Our action pertains to VoIP services, which could be provided by entities that provide other services such as e-mail, online gaming, Web browsing, video conferencing, instant messaging, and other, similar IP-enabled services. The Commission has not adopted a size standard for entities that create or provide these types of services or applications. However, the census bureau has identified firms that “operate Web sites that use a search engine to generate and maintain extensive databases of Internet addresses and content in an easily searchable format. Web search portals often provide additional Internet services, such as e-mail, connections to other Web sites, auctions, news, and other limited content, and serve as a home base for Internet users.” The SBA has developed a small business size standard for this category; that size standard is $6 million or less in average annual receipts. According to Census Bureau data for 1997, there were 195 firms in this category that operated for the entire year. Of these, 172 had annual receipts of under $5 million, and an additional nine firms had receipts of between $5 million and $9,999,999. Consequently, we estimate that the majority of these firms are small entities that may be affected by our action.

64. Data Processing, Hosting, and Related Services. Entities in this category “primarily * * * provid[e] infrastructure for hosting or data processing services.” The SBA has developed a small business size standard for this category; that size standard is $21 million or less in average annual receipts. According to Census Bureau data for 1997, there were 3,700 firms in this category that operated for the entire year. Of these, 3,477 had annual receipts of under $10 million, and an additional 108 firms had receipts of between $10 million and $24,999,999. Consequently, we estimate that the majority of these firms are small entities that may be affected by our action.

65. All Other Information Services. This industry comprises establishments primarily engaged in providing other information services (except new syndicates and libraries and archives). Our action pertains to VoIP services, which could be provided by entities that provide other services such as e-mail, online gaming, Web browsing, video conferencing, instant messaging, and other, similar IP-enabled services. The SBA has developed a small business size standard for this category; that size standard is $6 million or less in average annual receipts. According to Census Bureau data for 1997, there were 195 firms in this category that operated for the entire year. Of these, 172 had annual receipts of under $5 million, and an additional nine firms had receipts of between $5 million and $9,999,999. Consequently, we estimate that the majority of these firms are small entities that may be affected by our action.

66. Internet Publishing and Broadcasting. This industry comprises establishments engaged in publishing and/or broadcasting content on the Internet exclusively. These establishments do not provide traditional (non-Internet) versions of the content that they publish or broadcast. The SBA has developed a small business size standard for this new (2002) census category; that size standard is 500 or fewer employees. To assess the prevalence of small entities in this category, we will use 1997 Census Bureau data for a relevant, now-superseded census category, “All Other Information Services.” The SBA small business size standard for that prior category was $6 million or less in average annual receipts. According to Census Bureau data for 1997, there were 195 firms in the prior category that operated for the entire year. Of these, 172 had annual receipts of under $5 million, and an additional nine firms had receipts of between $5 million and $9,999,999. Consequently, we estimate that the majority of the firms in this current category are small entities that may be affected by our action.

67. Software Publishers. These companies may design, develop or publish software and may provide other support services to software purchasers, such as providing documentation or assisting in installation. The companies may also design software to meet the needs of specific users. The SBA has developed a small business size standard of $21 million or less in average annual receipts for all of the following pertinent categories: Software Publishers, Custom Computer Programming Services, and Other Computer Related Services. For Software Publishers, Census Bureau data for 1997 indicate that there were 8,188 firms in the category that operated for the entire year. Of these, 7,633 had annual receipts under $10 million, and an additional 289 firms had receipts of between $10 million and $24, 999,999. For providers of Custom Computer Programming Services, the Census Bureau data indicate that there were 19,334 firms that operated for the entire year. Of these, 18,786 had annual receipts of under $10 million, and an additional 352 firms had receipts of between $10 million and $24,999,999. For providers of Other Computer Related Services, the Census Bureau data indicate that there were 5,524 firms that operated for the entire year. Of these, 5,484 had annual receipts of under $10 million, and an additional 28 firms had receipts of between $10 million and $24,999,999. Consequently, we estimate that the majority of the firms in each of these three categories are small entities that may be affected by our action.

68. Equipment Manufacturers. The equipment manufacturers described in this section are apparently merely indirectly affected by our current action, and therefore would not formally be a part of this RFA analysis. We have included them, however, to broaden the record in this proceeding and to alert them to our decisions.

69. Wireless Communications Equipment Manufacturers. The SBA has established a small business size standard for Radio and Television Broadcasting and Wireless Communications Equipment Manufacturing. Examples of products in this category include “transmitting and receiving antennas, cable television equipment, GPS equipment, pagers, cellular phones, mobile communications equipment, and radio and television studio and broadcasting equipment” and may include other devices that transmit and receive IP-enabled services, such as personal digital assistants (PDAs). Under the SBA size standard, firms are considered small if they have 750 or fewer employees. According to Census Bureau data for 1997, there were 1,215 establishments in this category that operated for the entire year. Of those, there were 1,150 that had employment of under 500, and an additional 37 that had employment of 500 to 999. The percentage of wireless equipment manufacturers in this category was approximately 61.35%, so we estimate that the number of wireless equipment manufacturers with employment of under 500 was actually closer to 706, with an additional 23 establishments having employment of between 500 and 999. Consequently, we estimate that the majority of wireless communications equipment manufacturers are small entities that may be affected by our action.

70. Telephone Apparatus Manufacturing. This category “comprises establishments primarily engaged primarily in manufacturing wire telephone and data communications equipment.” Examples of pertinent products are “central office switching equipment, cordless telephones (except cellular), PBX equipment, telephones, telephone answering machines, and data communications equipment, such as bridges, routers, and gateways.” The SBA has developed a small business size standard for this category of manufacturing; that size standard is 1,000 or fewer employees. According to Census Bureau data for 1997, there were 598 establishments in this category that operated for the entire year. Of these, 574 had employment of under 1,000, and an additional 17 establishments had employment of 1,000 to 2,499. Consequently, we estimate that the majority of these establishments are small entities that may be affected by our action.

71. Electronic Computer Manufacturing. This category “comprises establishments primarily engaged in manufacturing and/or assembling electronic computers, such as mainframes, personal computers, workstations, laptops, and computer servers.” The SBA has developed a small business size standard for this category of manufacturing; that size standard is 1,000 or fewer employees. According to Census Bureau data for 1997, there were 563 establishments in this category that operated for the entire year. Of these, 544 had employment of under 1,000, and an additional 11 establishments had employment of 1,000 to 2,499. Consequently, we estimate that the majority of these establishments are small entities that may be affected by our action.

72. Computer Terminal Manufacturing. “Computer terminals are input/output devices that connect with a central computer for processing.” The SBA has developed a small business size standard for this category of manufacturing; that size standard is 1,000 or fewer employees. According to Census Bureau data for 1997, there were 142 establishments in this category that operated for the entire year, and all of the establishments had employment of under 1,000. Consequently, we estimate that the majority or all of these establishments are small entities that may be affected by our action.

73. Other Computer Peripheral Equipment Manufacturing. Examples of peripheral equipment in this category include keyboards, mouse devices, monitors, and scanners. The SBA has developed a small business size standard for this category of manufacturing; that size standard is 1,000 or fewer employees. According to Census Bureau data for 1997, there were 1061 establishments in this category that operated for the entire year. Of these, 1,046 had employment of under 1,000, and an additional six establishments had employment of 1,000 to 2,499. Consequently, we estimate that the majority of these establishments are small entities that may be affected by our action.

74. Fiber Optic Cable Manufacturing. These establishments manufacture “insulated fiber-optic cable from purchased fiber-optic strand.” The SBA has developed a small business size standard for this category of manufacturing; that size standard is 1,000 or fewer employees. According to Census Bureau data for 1997, there were 38 establishments in this category that operated for the entire year. Of these, 37 had employment of under 1,000, and one establishment had employment of 1,000 to 2,499. Consequently, we estimate that the majority of these establishments are small entities that may be affected by our action.

75. Other Communication and Energy Wire Manufacturing . These establishments manufacture “insulated wire and cable of nonferrous metals from purchased wire.” The SBA has developed a small business size standard for this category of manufacturing; that size standard is 1,000 or fewer employees. According to Census Bureau data for 1997, there were 275 establishments in this category that operated for the entire year. Of these, 271 had employment of under 1,000, and four establishments had employment of 1,000 to 2,499. Consequently, we estimate that the majority or all of these establishments are small entities that may be affected by our action.

76. Audio and Video Equipment Manufacturing. These establishments manufacture “electronic audio and video equipment for home entertainment, motor vehicle, public address and musical instrument amplifications.” The SBA has developed a small business size standard for this category of manufacturing; that size standard is 750 or fewer employees. According to Census Bureau data for 1997, there were 554 establishments in this category that operated for the entire year. Of these, 542 had employment of under 500, and nine establishments had employment of 500 to 999. Consequently, we estimate that the majority of these establishments are small entities that may be affected by our action.

77. Electron Tube Manufacturing. These establishments are “primarily engaged in manufacturing electron tubes and parts (except glass blanks).” The SBA has developed a small business size standard for this category of manufacturing; that size standard is 750 or fewer employees. According to Census Bureau data for 1997, there were 158 establishments in this category that operated for the entire year. Of these, 148 had employment of under 500, and three establishments had employment of 500 to 999. Consequently, we estimate that the majority of these establishments are small entities that may be affected by our action.

78. Bare Printed Circuit Board Manufacturing. These establishments are “primarily engaged in manufacturing bare ( i.e. , rigid or flexible) printed circuit boards without mounted electronic components.” The SBA has developed a small business size standard for this category of manufacturing; that size standard is 500 or fewer employees. According to Census Bureau data for 1997, there were 1,389 establishments in this category that operated for the entire year. Of these, 1,369 had employment of under 500, and 16 establishments had employment of 500 to 999. Consequently, we estimate that the majority of these establishments are small entities that may be affected by our action.

79. Semiconductor and Related Device Manufacturing. These establishments manufacture “computer storage devices that allow the storage and retrieval of data from a phase change, magnetic, optical, or magnetic/optical media.” The SBA has developed a small business size standard for this category of manufacturing; that size standard is 500 or fewer employees. According to Census Bureau data for 1997, there were 1,082 establishments in this category that operated for the entire year. Of these, 987 had employment of under 500, and 52 establishments had employment of 500 to 999.

80. Electronic Capacitor Manufacturing. These establishments manufacture “electronic fixed and variable capacitors and condensers.” The SBA has developed a small business size standard for this category of manufacturing; that size standard is 500 or fewer employees. According to Census Bureau data for 1997, there were 128 establishments in this category that operated for the entire year. Of these, 121 had employment of under 500, and four establishments had employment of 500 to 999.

81. Electronic Resistor Manufacturing. These establishments manufacture “electronic resistors, such as fixed and variable resistors, resistor networks, thermistors, and varistors.” The SBA has developed a small business size standard for this category of manufacturing; that size standard is 500 or fewer employees. According to Census Bureau data for 1997, there were 118 establishments in this category that operated for the entire year. Of these, 113 had employment of under 500, and 5 establishments had employment of 500 to 999.

82. Electronic Coil, Transformer, and Other Inductor Manufacturing. These establishments manufacture “electronic inductors, such as coils and transformers.” The SBA has developed a small business size standard for this category of manufacturing; that size standard is 500 or fewer employees. According to Census Bureau data for 1997, there were 448 establishments in this category that operated for the entire year. Of these, 446 had employment of under 500, and two establishments had employment of 500 to 999.

83. Electronic Connector Manufacturing. These establishments manufacture “electronic connectors, such as coaxial, cylindrical, rack and panel, pin and sleeve, printed circuit and fiber optic.” The SBA has developed a small business size standard for this category of manufacturing; that size standard is 500 or fewer employees. According to Census Bureau data for 1997, there were 347 establishments in this category that operated for the entire year. Of these, 332 had employment of under 500, and 12 establishments had employment of 500 to 999.

84. Printed Circuit Assembly (Electronic Assembly) Manufacturing. These are establishments “primarily engaged in loading components onto printed circuit boards or who manufacture and ship loaded printed circuit boards.” The SBA has developed a small business size standard for this category of manufacturing; that size standard is 500 or fewer employees. According to Census Bureau data for 1997, there were 714 establishments in this category that operated for the entire year. Of these, 673 had employment of under 500, and 24 establishments had employment of 500 to 999.

85. Other Electronic Component Manufacturing. These are establishments “primarily engaged in loading components onto printed circuit boards or who manufacture and ship loaded printed circuit boards.” The SBA has developed a small business size standard for this category of manufacturing; that size standard is 500 or fewer employees. According to Census Bureau data for 1997, there were 1,835 establishments in this category that operated for the entire year. Of these, 1,814 had employment of under 500, and 18 establishments had employment of 500 to 999.

86. Computer Storage Device Manufacturing. These establishments manufacture “computer storage devices that allow the storage and retrieval of data from a phase change, magnetic, optical, or magnetic/optical media.” The SBA has developed a small business size standard for this category of manufacturing; that size standard is 1,000 or fewer employees. According to Census Bureau data for 1997, there were 209 establishments in this category that operated for the entire year. Of these, 197 had employment of under 500, and eight establishments had employment of 500 to 999

87. Should the Commission decide to adopt any regulations to ensure that consumer protection needs are met by all providers of broadband Internet access service, the associated rules potentially could modify the reporting and recordkeeping requirements of certain broadband Internet access services providers. We could, for instance, require that broadband Internet access service providers must comply with slamming, truth-in-billing-type protections, or network outage reporting requirements. These proposals may impose additional reporting or recordkeeping requirements on entities. We seek comment on the possible burden these requirements would place on small entities. Also, we seek comment on whether a special approach toward any possible compliance burdens on small entities might be appropriate. Entities, especially small businesses, are encouraged to quantify the costs and benefits of any reporting requirement that may be established in this proceeding.

88. The RFA requires an agency to describe any significant alternatives that it has considered in reaching its proposed approach, which may include (among others) the following four alternatives: (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.

89. The Commission's primary objective is to develop a framework for consumer protection in the broadband era—a framework that ensures that consumer protection needs are met by all providers of broadband Internet access service, regardless of the underlying technology. We seek comment here on the effect the various proposals described in the NPRM, and summarized below, will have on small entities, and on what effect alternative rules would have on those entities. We invite comment on ways in which the Commission can achieve its goal of protecting consumers while at the same time impose minimal burdens on small broadband Internet access service providers. With respect to any of our consumer protection regulations already in place, has the Commission adopted any provisions for small entities that we should similarly consider here?

90. CPNI. In this NPRM, the Commission asks whether it should extend privacy requirements similar to the Act's CPNI requirements to providers of broadband Internet access services. We ask, for example, whether we should forbid broadband Internet access providers from disclosing, without their customers' approval, information about their customers that they learn through the provision of their broadband Internet access service. By developing the record with respect to privacy concerns, the Commission can appropriately determine whether providers of broadband Internet access services, including small entities, should be subject to similar privacy regulations.

91. Slamming. We seek comment on whether we should impose slamming requirements on providers of broadband Internet access service and to explain in what circumstances subscribers to broadband Internet access could get “slammed.” We also ask whether the provisioning process for broadband Internet access service is such that an unauthorized change in provider is more likely in situations where the provider relies on third-party broadband transmission facilities. We recognize that small broadband Internet access service providers may rely more on third-party broadband transmission facilities and could potentially inform the Commission as to whether slamming is likely to occur in those situations.

92. Truth-in-Billing. We invite comment on whether we should impose requirements on broadband Internet access service providers that are similar to our truth-in-billing requirements or are otherwise geared toward reducing slamming, cramming, or other types of telecommunications-related fraud. We ask parties to explain what problems customers of broadband Internet access service are likely to have with their bills and whether we should address these problems through truth-in-billing-type requirements. What effect will this proposal have on small entities, and are there alternatives to imposing truth-in-billing type regulations?

93. Network Outage Reporting. We seek comment as to whether broadband Internet access service providers should notify the Commission of outages of thirty or more minutes that affect a substantial number of customers or involve major airports, major military installations, key government facilities, nuclear power plants, or 911 facilities. We encourage small entities to identify any alternatives that would protect consumers while at the same time minimizing any burden on small broadband Internet access providers.

94. Section 214 Discontinuance. In the NPRM, the Commission stated that section 214 of the Act limits a telecommunications carrier's ability to discontinue unilaterally its service to customers. The Commission's implementing rules generally require that domestic carriers wishing to “discontinue, reduce, or impair” services must first request authority to do so from the Commission and must notify affected customers and others of their plans. We ask whether the Commission should impose discontinuance-type requirements on providers of broadband Internet access service.

95. Section 254(g) Rate Averaging Requirements. In the NPRM, the Commission explains that section 254(g) required the Commission to adopt rules “to require that the rates charged by providers of interexchange telecommunications services to subscribers in rural and high cost areas * * * be no higher than the rates charged by each such provider to its subscribers in urban areas.” We ask, for example, whether we should adopt similar rate averaging requirements on providers of broadband Internet access services, particularly as consumers substitute broadband services and applications for narrowband services that were covered by section 254(g).

96. In the NPRM, we ask commenters to address whether the imposition of regulations pursuant to our ancillary jurisdiction, and the corresponding ability of consumers to take advantage of Commission avenues for resolution of consumer protection issues, is desirable and necessary as a matter of public policy, or whether we should rely on market forces to address some or all of the areas listed. The option of relying on market forces may benefit entities, especially small entities, who may find it costly or burdensome to comply with Commission regulations. We also ask whether these types of regulations are more or less relevant in the context of broadband Internet access service than they are for traditional telephony services. In addition, we ask commenters to describe any technical, economic, or other impediments that may affect the ability of broadband Internet access service providers to comply with such regulations. We also ask whether there are areas of consumer protection not listed above for which the Commission should impose regulations.

97. Federal and State Involvement. To the extent that the Commission finds it necessary to impose consumer protection and related regulations on broadband Internet access service providers, we also seek comment on how best to harmonize federal regulations with the states' efforts and expertise in these areas.

98. None.

99. Accordingly, it is ordered that , pursuant to sections 1-4, 10, 201-205, 214, 222, 225, 251, 252, 254-256, 258, 303(r) of the Communications Act of 1934, as amended, 47 U.S.C. 151-154, 160, 201-205, 214, 222, 225, 251, 252, 254-256, 258, 303(r), and section 706 of the Telecommunications Act of 1996, 47 U.S.C. 157 nt, the Report and Order and Notice of Proposed Rulemaking are adopted.

100. It is further ordered that the Commission's Consumer and Governmental Affairs Bureau, Reference Information Center, shall 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.