We are amending our vending machine labeling regulations in part 101 (21 CFR part 101) by revising the type size requirement in § 101.8(b)(2) (21 CFR 101.8(b)(2)) when FOP labeling is used to meet the calorie declaration requirements for articles of food sold from glass-front vending machines. Our regulations previously required that the FOP calorie declaration type size for articles of food sold from glass-front vending machines be at least 50 percent of the size of the largest printed matter on the label. The final rule requires, instead, that the FOP calorie declaration type size be at least 150 percent (one and one-half times) the minimum required size of the net quantity of contents ( i.e., net weight) declaration on the package of the vended food. This change will reduce regulatory burdens on, and increase flexibility for, industry, while ensuring that calorie information is visible to consumers to help them make informed dietary decisions.

The final rule revises the type size requirement for calories labeled on the front of the package of vended foods in § 101.8(b)(2) by amending the type size to 150 percent (one and one-half times) the minimum required type size of the net quantity of contents declaration.

This action is consistent with our authority in section 403(q)(5)(H) of the Federal Food, Drug, and Cosmetic Act (FD&C Act) (21 U.S.C. 343(q)(5)(H)). Section 403(q)(5)(H) requires certain vending machine operators to provide calorie declarations for certain articles of food sold from vending machines. In addition, we are issuing this rule consistent with our authority in sections 201(n) (21 U.S.C. 321(n)) and 403(a)(1) and (f) of the FD&C Act. Further, we are issuing this rule under section 701(a) of the FD&C Act (21 U.S.C. 371(a)), which gives us the authority to issue regulations for the efficient enforcement of the FD&C Act. We discuss our legal authority in greater detail in section III, “Legal Authority.”

Because this final rule only requires minor revisions to FOP calorie labeling type size requirements when FOP labeling is used to meet the calorie declaration requirements for articles of food sold from glass-front vending machines, we estimate there are no costs to vending machine operators and potential cost savings to vending machine operators and packaged food manufacturers. We expect the cost savings of this revision to outweigh the costs, with no significant effect on consumer behavior or health.

Section 403(q)(5)(H) of the FD&C Act requires certain vending machine operators to provide calorie declarations for certain articles of food sold from vending machines. Under section 403(q)(5)(H)(viii) of the FD&C Act, a vending machine operator must provide a sign in close proximity to each article of food or the selection button that includes a clear and conspicuous statement disclosing the number of calories contained in the article if: (1) An article of food is sold from the vending machine that does not permit a prospective purchaser to examine the Nutrition Facts label before purchasing the article, or does not otherwise provide visible nutrition information at the point of purchase and (2) the machine is operated by a person who is engaged in the business of owning or operating 20 or more vending machines.

In the Federal Register of December 1, 2014 (79 FR 71259), we issued a final rule to implement these labeling requirements (“2014 final rule”). The 2014 final rule, which became effective on December 1, 2016, requires vending machine operators that own or operate 20 or more vending machines (or that voluntarily register with us to be subject to the 2014 final rule) to provide calorie declarations for certain foods sold from vending machines. If FOP calorie labeling is used to meet that requirement, the 2014 final rule requires the calorie labeling be clear and conspicuous and easily read on the article of food while in the vending machine, in a type size at least 50 percent of the size of the largest printed matter on the label (79 FR 71259 at 71291).

After the 2014 final rule's publication, some trade associations and food manufacturers stated that the FOP type size requirement presented significant technical challenges to the packaged food industry and asked us to: (1) Amend the requirement and (2) provide additional flexibility for providing FOP calorie information.

In the Federal Register of July 12, 2018 (83 FR 32221), we issued a proposed rule to revise the type size labeling requirements for FOP calorie declarations for packaged food sold from glass-front vending machines such that the minimum type size would be 150 percent (one and one-half times) the size of the net quantity of contents declaration, instead of being based on the largest printed matter on the label. We also asked for comment on two alternate approaches: Requiring the visible nutrition information to be in a type size that is at least 100 percent of the size of the net quantity of contents declaration (Alternate Approach A) and not specifying any size for the visible nutrition information (Alternate Approach B). We proposed a compliance date of January 1, 2020, and announced our intent to exercise enforcement discretion pending completion of the rulemaking for products sold in glass-front vending machines that: (1) Provided FOP calorie disclosures and (2) complied with all aspects of the 2014 final rule except the type size requirement. Finally, we announced our intent to exercise enforcement discretion, at least until January 1, 2020, for calorie disclosures for gums, mints, and roll candy products sold in glass-front machines in packages that are too small to bear FOP labeling.

The proposed rule provided a 90-day comment period. We received more than 120 comments. The comments came from individual consumers, academia, healthcare professionals, consumer advocacy groups, industry, public health groups, and trade associations. Among other things, the comments discussed:

• FOP labeling type size. Some comments said that larger FOP calorie labeling type size would help consumers read the information and make an informed dietary decision, while other comments noted that larger type size would reduce industry flexibility and may have no effect on consumer decisions.

• Regulatory burdens to industry. Some comments said we should reduce regulatory burdens and provide additional flexibility for industry while still giving consumers the information they need to make informed dietary decisions; other comments wanted a larger minimum type size for FOP calorie disclosures regardless of any burden to industry.

• Compliance dates. Some comments wanted an extended compliance date to allow companies to bring their FOP labeling into compliance with the rule.

• Whether FDA should: (1) Maintain the 2014 final rule's type size requirement, (2) finalize the proposed requirement, (3) finalize Alternate Approach A, or (4) finalize Alternate Approach B. Some comments wanted to retain the 2014 final rule's type size requirements and stated that the requirements were the most beneficial to public health. The comments supporting either our proposed type size requirement or an alternate approach generally did not support Alternate Approach B. Many supported the proposed type size, while some said Alternate Approach A would reduce the regulatory burden on industry while still giving consumers the information they need to make informed dietary decisions.

We discuss the comments and our responses to the comments in more detail in part IV of this document.

We are revising the labeling requirements for providing calorie declarations for food sold from certain vending machines, as set forth in this final rule, consistent with our authority in section 403(q)(5)(H) of the FD&C Act. Under section 403(q)(5)(H) of the FD&C Act, certain vending machine operators must provide calorie declarations for certain articles of food sold from vending machines. Under section 403(a)(1) of the FD&C Act, such information must be truthful and non-misleading. Under section 403(f) of the FD&C Act, any word, statement, or other information required by or under the FD&C Act to appear on the label or labeling of an article of food must be prominently placed thereon with such conspicuousness (as compared with other words, statements, designs, or devices, in the labeling) and in such terms as to render it likely to be read and understood by the ordinary individual under customary conditions of purchase and use. Under section 403(a), (f), or (q) of the FD&C Act, food to which these requirements apply is deemed misbranded if these requirements are not met. In addition, under section 201(n) of the FD&C Act, the labeling of food is misleading if it fails to reveal facts that are material in light of representations made in the labeling or with respect to consequences that may result from use. Thus, we are issuing this rule under sections 201(n) and 403(a)(1), (f), and (q)(5)(H) of the FD&C Act, as well as under section 701(a) of the FD&C Act, which gives us the authority to issue regulations for the efficient enforcement of the FD&C Act.

We received more than 120 comments on the proposed rule. The comments came from individual consumers, academia, healthcare professionals, consumer advocacy groups, industry, public health groups, and trade associations.

We describe and respond to comments in subsections B through F of this section. We preface each comment discussion with a numbered “Comment” and each response by the word “Response” to make it easier to identify comments and our responses. We have numbered each comment to help distinguish among different topics. The number assigned is for organizational purposes only and does not signify the comment's value, importance, or the order in which it was received.

Many comments generally supported or opposed the proposed rule without focusing on a particular provision. In the following paragraphs, we discuss and respond to such general comments.

(Comment 1) Some comments supported the 2014 final rule's requirement that the calorie labeling type size be at least 50 percent of the size of the largest printed matter on the label. The comments expressed concern that the proposed type size of 150 percent of the minimum required net weight declaration may be too small for consumers to see or could be easily missed by hurried consumers or by children. The comments said that the larger type sizes required by the 2014 final rule make it easier for consumers to make informed dietary decisions. One comment suggested that there is no evidence that a reduction in calorie type size will benefit consumers. Another comment said that reducing the type size could lead to less consumer use of FOP calorie declarations and said we should conduct consumer studies to determine the appropriate type size.

(Response 1) The preamble to the proposed rule explained that several industry representatives indicated that the 50 percent type size requirement for FOP calorie labeling presented significant technical challenges to the packaged foods industry (83 FR 32221 at 32223). These challenges included calorie declarations that would be very large on some products and difficulties in label redesign (id.). Additionally, several voluntary FOP labeling programs presented calorie information in sizes ranging from 100 to 150 percent of the minimum size of the net quantity of contents statement, and these FOP labeling programs would be disrupted significantly if the label had to comply with the 50 percent type size requirement in addition to having the voluntary FOP information. For these reasons, we proposed to amend the 50 percent type size requirement. The comments suggesting that we keep the 50 percent type size requirement did not address the technical challenges described in the preamble to the proposed rule or the potential impact to voluntary FOP nutrition labeling programs. Consequently, the final rule revises § 101.8(b)(2) to require the type size of the calorie declaration for articles for food sold from certain vending machines be at least 150 percent of the minimum required size of the net quantity of contents declaration on the package.

Regarding the comments stating that changing the type size requirement would result in declarations that are too small or less useful to consumers, we note that the final rule requires the visible nutrition information to be in a type size “at least 150 percent” of the size of the net quantity of contents declaration. This means that the information may be larger than 150 percent, and so the rule gives manufacturers the flexibility to make the most efficient and effective use of their label space in presenting the required nutrition information. We also note that both section 403(q)(5)(H)(viii) of the FD&C Act and the final rule require the information to be “clear and conspicuous.” Thus, given that a type size of at least 150 percent of the size of the net quantity of contents declaration ensures that the FOP calorie declaration is clear and conspicuous and visible to consumers at the point of purchase, and given that the rule does not limit how large the nutrition information must be, we disagree that the rule will result in declarations that are too small or not useful to consumers.

(Comment 2) Some comments expressed concern that vending operators could assume that simply stocking glass-front machines with products that have FOP declarations complies with vending machine labeling requirements (§ 101.8) and may not provide calorie information in cases where the coil or positioning of a product prevents a consumer from being able to read the FOP calorie declarations before purchasing a product.

(Response 2) We affirm that vending machine operators stocking glass-front machines with products that have FOP declarations in order to satisfy vending machine labeling requirements in § 101.8 must comply with all requirements set forth in § 101.8(b)(2). This means not only complying with minimum type size requirements set forth in this final rule, but also requirements that the prospective purchaser can view the total number of calories for the article of food as sold at the point of purchase. Our regulations, at § 101.8(b)(2), require that FOP calorie declarations be clear and conspicuous and able to be easily read on the article of food in the vending machine, among other requirements. Additionally, our regulations, at § 101.8(b)(1), effectively require that the calories, serving size, and servings per container listed in the Nutrition Facts label be visible to prospective purchasers “without any obstruction.” Both § 101.8(b)(1) and (2) are clear that calorie declarations on the food label must be visible, without obstruction, such that we do not find it necessary to further amend or add requirements in § 101.8(b) specifying how a product is to be placed in a vending machine when FOP labeling is used to meet vending machine labeling requirements.

We proposed to require that FOP calorie information be clear and conspicuous and able to be easily read on the article of food while in the vending machine, in a type size at least 150 percent of the size of the net quantity of contents declaration on the front of the package, and with sufficient color and contrasting background to other print on the label to permit the prospective purchaser to clearly distinguish the information (proposed § 101.8(b)(2)) (83 FR 32221 at 32226 through 32227).

We also proposed two editorial corrections to § 101.8(b)(2): Substituting the word “prospective” in place of “perspective,” and revising the first sentence of §  101.8(b)(2) by inserting a comma after the word “minimum.”

(Comment 3) Many comments supported a proposed type size of at least 150 percent (one and one-half times) the minimum required size of the net quantity of contents declaration. The comments noted that the 150 percent type size requirement gives industry flexibility, reduces regulatory burdens, provides visible calorie information to consumers so that they can make informed dietary choices, is easy to enforce, allows for the continuation of voluntary FOP labeling initiatives, and standardizes FOP calorie type size.

(Response 3) As we noted in the preamble to the proposed rule (83 FR 32221 at 32223) and in our response to comment 1, the 50 percent type size requirement presented significant technical challenges to the packaged foods industry and also had the potential to significantly disrupt voluntary FOP labeling programs. We agree that revising our regulations to require the type size of FOP calorie declarations to be at least 150 percent the minimum required size of the net quantity of contents declaration will provide flexibility to industry and reduce regulatory burden while continuing to provide visible calorie information to consumers. We reiterate that the rule, by using the terms “at least 150 percent,” creates a minimum size requirement and that manufacturers can make the calorie disclosures on FOP labeling even larger if they choose.

(Comment 4) Some comments asked that we clarify our proposed requirement to state that: (1) The type size must be 150 percent of the size required for the net quantity of contents declaration and (2) the type size requirement refers to the quantitative value for calories for FOP declarations and not the word “calories” itself. For example, one comment recommended the following language: “The visible nutrition information must be clear and conspicuous and able to be easily read on the article of food while in the vending machine, with the numeric value for calories appearing in a type size at least 150 percent of the size required by section 101.7(i) of this title for the net quantity of contents declaration on the front of the package.”

(Response 4) We agree, in part, and disagree, in part, with the comments.

With respect to the comment suggesting that we clarify the rule to require the type size to be 150 percent of the size required for the net quantity of contents declaration, we have revised the rule to state that type size must be “at least 150 percent of the size required by § 101.7(i) for the net quantity of contents declaration” on the front of the package. By adding language to refer explicitly to our net quantity of contents regulation at § 101.7(i) (21 CFR 101.7(i)), we establish a minimum value on which the visible nutrition information is to be based. In other words, the size requirements set forth in § 101.7(i), rather than the size of the net quantity of contents declaration that is actually used on the package (because § 101.7(i) establishes minimum size requirements rather than specific size requirements), become the starting point for the size of the visible nutrition information in § 101.8(b)(2). We decided to retain the words “at least” before “150 percent” so that firms can make the visible nutrition information larger if they so choose.

Regarding the comment asking us to clarify that the type size requirement refers to the quantitative value for calories for FOP declarations and not the word “calories” itself, we interpret “visible nutrition information,” which is the subject of § 101.8(b)(2), to mean “total calories in the article of food” (79 FR 71259 at 71266 through 71267). Therefore, the numerical value indicating the total calories, rather than the word “calories,” is subject to this final rule's type size requirements.

We invited comment on two alternate approaches in the proposed rule's preamble: Requiring the visible nutrition information to be in a type size that is at least 100 percent of the size of the net quantity of contents declaration (Alternate Approach A), and not specifying any size for the visible nutrition information (Alternate Approach B) (83 FR 32221 at 32224). Several comments addressed these alternate approaches.

(Comment 5) Some comments supported Alternate Approach A (requiring the visible nutrition information to be in a type size that is at least 100 percent of the size of the net quantity of contents declaration). One comment said that larger calorie labeling places undue importance on calories and could give a competitive advantage to products with fewer calories and smaller or lighter packages. Another comment said that the approach would ensure the calorie information is visible for consumers while creating a consistent size requirement that is not overly burdensome on industry.

(Response 5) The area of the principal display panel (calculated in square inches or square centimeters) determines the minimum type size that is permitted for the net quantity declaration, which § 101.7(i) further explains. As such, both the 150 percent requirement we are finalizing and Alternate Approach A's 100 percent requirement would be based on the size of the principal display panel. We do not agree that a calorie declaration size based on the overall size of the principal display panel gives a competitive advantage to any particular product because the minimum declaration size will be proportionate to the package size (§ 101.7(i)).

Regarding the comment suggesting that a package with a larger calorie declaration could be at a competitive disadvantage relative to products in smaller or lighter packages, we disagree. The calorie disclosure applies to the food as vended; the weight of the package does not affect the caloric value of the food itself. Furthermore, we do not have (and the comment did not provide) evidence indicating that the size of the calorie disclosure itself will influence a consumer's decision to purchase a food.

We decided not to adopt Alternate Approach A because adopting a type size of at least 150 percent of the minimum required size of the net quantity of contents declaration provides a larger minimum calorie declaration type size, versus Alternate Approach A's 100 percent minimum type size, to the purchaser when they are viewing the vended product through the glass front of a vending machine. When a vending machine food is in a vending machine, a prospective purchaser cannot handle the product to make it easier for the purchaser to read the nutrition information. Therefore, visible nutrition information on the front of package must be large enough, and prominent enough, for prospective purchasers to see and use the information (79 FR 71259 at 71269). We believe that the 150 percent type size requirement for FOP calorie disclosures on foods sold from glass-front vending machines will ensure that the declarations are visible, clear, and conspicuous and able to be easily read by a prospective purchaser, satisfying section 403(q)(5)(H)(viii)(I)(aa) of the FD&C Act requirements that nutrition information be visible to a prospective purchaser at the point of purchase.

The 150 percent requirement also provides sufficient flexibility and reduces the regulatory burden for industry, particularly because many manufacturers already use this type size for calorie disclosures. We note that industry comments, particularly comments from small- and medium-sized vended food manufacturers, supported the 150 percent requirement, and such support reinforces our decision to adopt the 150 percent requirement instead of Alternate Approach A.

(Comment 6) Some comments disagreed with Alternate Approach A, saying it would limit the visibility of calorie information. The comments stated that calorie disclosures of this size would be difficult for consumers to read even from a short distance, particularly through the glass front of a vending machine. One comment said that Alternate Approach A would make FOP calorie information generally less prominent in vended food items, reducing the overall efficacy of FOP labeling.

(Response 6) We agree that Alternate Approach A would make FOP calorie declarations less prominent on vended food items because of Alternate Approach A's smaller minimum type size requirement, and for the reasons stated in our response to comment 5, we decline to adopt Alternate Approach A. The comments disagreeing with Alternate Approach A also did not provide, and we are not aware of, data or evidence regarding the limited visibility of calorie information, consumers' impaired ability to read calorie disclosures, or comparative efficacy of FOP labeling under Alternate Approach A as compared to the 150 percent minimum type size requirement.

(Comment 7) Many comments disagreed with Alternate Approach B (FOP calorie disclosures without a type size requirement). For example, some comments advocated a minimum FOP calorie type size requirement that ensures readability by consumers rather than a “no type size” requirement in Alternate Approach B. Other comments said that Alternate Approach B would not help the public, with one comment saying that Alternate Approach B would deny consumers the caloric content transparency that is necessary to make informed decisions about their health. Other comments said that a lack of size specifications would introduce inconsistent labeling across brands and products.

Some comments supported Alternate Approach B and stated that it would provide maximum flexibility for industry.

(Response 7) We have decided not to adopt Alternate Approach B. Vending machine operators that choose products that have FOP labeling must ensure that the visible nutrition information is clear and conspicuous, as required by both section 403(q)(5)(H)(viii) of the FD&C Act and our regulations. Alternate Approach B would provide vending machine operators with no clear standard on what type size is sufficient to be visible, clear, and conspicuous to a prospective purchaser, thus making it difficult for an operator to determine whether a vended food manufacturer's FOP labeling satisfies section 403(q)(5)(H)(viii) of the FD&C Act and our regulations. Conversely, a minimum type size, such as the 150 percent standard that we are adopting in the final rule, provides a workable type size that industry can implement that ensures visibility to consumers.

In addition, amending our type size requirements in § 101.8(b)(2) is consistent with voluntary FOP labeling programs that already present calorie information in type sizes of 150 percent of the minimum size of the net quantity of contents statement on the principal display panel.

We proposed that covered vending machine operators comply with any finalized requirements from this rulemaking by January 1, 2020 (83 FR 32221 at 32224 through 32225).

(Comment 8) Some comments noted that some products have extended shelf lives, and those products may be in distribution or vending machines, without updated labeling, on the final rule's compliance date. Some comments suggested that we should enforce the final requirements only on those products manufactured after the rule's compliance date. Other comments supported extending the final rule's compliance date to align with the compliance dates for the Nutrition Facts labeling final rule. The comments noted that harmonizing the compliance dates provides for more efficient implementation of the final rules, so that companies must revise labels only once to comply with all requirements.

Conversely, other comments did not support any extension of the final rule's compliance date. One comment stated that the final rule's effective date should be no later than January 20, 2020, because FDA has been working on this matter since 2011 and because the rule is required by the Patient Protection and Affordable Care Act (ACA) (Pub. L. 111-148). Another comment said that we should finalize a standard and adhere to whatever compliance date we set.

(Response 8) We agree that manufacturers that intend to add FOP calorie disclosures that are consistent with this final rule should have time to revise or update their labeling. Therefore, we have determined that a compliance date of July 1, 2021, is appropriate. This will give industry time to make label changes and move any existing products through distribution chains before the compliance date. We believe this date will have limited impact on consumers' health in the interim because: (1) Any FOP labeling used to meet calorie disclosure requirements must still comply with all aspects of the 2014 final rule except the type size requirement and (2) many manufacturers already use the 150 percent type size for calorie disclosures.

(Comment 9) Some comments asked that we either allow alternate calorie labeling for gums, mints, and roll candy products sold in glass-front machines in packages that are too small to bear FOP labeling or exercise enforcement discretion from the vending machine calorie labeling requirements for these products.

(Response 9) In section VI, we announce our intent to exercise enforcement discretion regarding the calorie disclosure requirements for gums, mints, and roll candy products sold in glass-front machines in packages that are too small to bear FOP labeling.

Many comments addressed aspects of vending labeling other than FOP calorie disclosure type size. Some of these, such as comments on the 2014 final rule's effective date, impacts, and economic burdens, and calorie units of measure, fall outside the scope of this rule and many were addressed directly in the 2014 final rule. Other comments, such as those pertaining to additional FOP declarations (such as information on specific nutrients or voluntary disclosures of calories per serving) and other activities that FDA might or should pursue in conjunction with the rule, also are outside the scope of the rule, and we will not address them here.

We discuss the other miscellaneous comments in the following paragraphs.

(Comment 10) Some comments discussed alternate methods of providing calorie information that would comply with the 2014 final rule's requirements, such as on a sign posted near the vending machine. They noted, for instance, that the placement of products within vending machines changes frequently, and so the use of signage generally is impracticable. Some comments said that the vending industry is largely looking to packaged food manufacturers to provide FOP calorie labeling to satisfy our vending machine calorie disclosure requirements.

(Response 10) There are options other than FOP calorie labeling that vending machine operators may choose to satisfy section 403(q)(5)(H)(viii) of the FD&C Act and current vending machine labeling requirements in §  101.8, including allowing the prospective purchaser to view the calories, serving size, and servings per container listed in the Nutrition Facts label on the vending machine food without any obstruction or using reproductions of Nutrition Facts labels, as provided in §  101.8(b)(1), or posting signage with calorie declarations, in, on, or adjacent to the machine, as provided in §  101.8(c). To the extent a vending machine operator provides calorie information for a vending machine food in such an alternate way and otherwise meets the requirements of §  101.8, the vending machine operator would be in compliance with our calorie disclosure requirements.

(Comment 11) Some comments questioned who is subject to the 2014 final rule's requirements, and, by extension, this rule's requirements. One comment asked for clarification on the respective responsibilities of food manufacturers and vending machine companies in complying with this rule; other comments implied that this final rule imposes requirements on manufacturers of food sold from vending machines. Another comment encouraged us to apply our vending labeling requirements to all vending machine operators, regardless of the number of machines they operate.

(Response 11) We stated in the 2014 final rule that section 403(q)(5)(H)(viii) of the FD&C Act and the 2014 final rule do not apply to suppliers of vending machine food; instead, section 403(q)(5)(H)(viii) of the FD&C Act and the 2014 final rule establish requirements for certain vending machine operators (79 FR 71259 at 71284). The type size requirement in this final rule therefore also establishes requirements for certain vending machine operators and does not apply to suppliers of vending machine food. We recognize that a manufacturer of covered vending machine food may provide calorie information via FOP labeling on their product label and such calorie information may constitute visible nutrition information in accordance with section 403(q)(5)(H)(viii)(I)(aa) of the FD&C Act, provided that the applicable requirements of § 101.8(b) are satisfied. However, section 403(q)(5)(H)(viii) of the FD&C Act, the 2014 final rule, and this final rule do not require manufacturers to provide such information. As such, the 2014 final rule and this final rule do not impose requirements on suppliers of vending machine food.

Section 403(q)(5)(H)(viii)(I)(bb) of the FD&C Act states that an article of food requires a calorie declaration if it is from a vending machine that, among other things, is operated by a person who is engaged in the business of owning or operating 20 or more vending machines. Accordingly, our vending calorie disclosure regulations only apply to food sold from vending machines operated by a person: (1) Engaged in the business of owning or operating 20 or more vending machines subject to the requirements of section 403(q)(5)(H)(viii) of the FD&C Act or (2) not subject to the requirements of section 403(q)(5)(H)(viii) of the FD&C Act who voluntarily elects to be subject to those requirements by registering biannually under section 403(q)(5)(H)(ix) of the FD&C Act.

(Comment 12) One comment expressed concern that allowing voluntary display of calories per serving, along with the required display of calories per package, on vended foods could allow vending machine operators and food manufacturers to bypass the requirement that total caloric contents of the package be clearly labeled in such terms as to render it likely to be read and understood by the ordinary individual under customary conditions of purchase and use. The comment recommended that we amend § 101.8(c)(2)(i)(C) to include the following sentence: “If voluntarily disclosed, the calories per serving label shall appear on the food packaging separately and distinctly from the calories per package label such that a prospective purchaser may readily and easily discern between the two.”

(Response 12) As explained in the preamble to the 2014 final rule, our requirements regarding calorie declarations for covered vending machine food mandate declaration of the total calories (79 FR 71259 at 71276). It does not allow vending machine operators to bypass the requirement that total caloric contents of the package be clearly labeled in such terms as to render it likely to be read and understood by the ordinary individual under customary conditions of purchase and use.

However, as noted in the preamble to the 2014 final rule, we would not object to food manufacturers or vending machine operators voluntarily providing information in addition to total calories to consumers at the point of purchase, provided that such information is truthful and not misleading and otherwise complies with the FD&C Act and FDA regulations (79 FR 71259 at 71267).

The final rule amends our vending machine labeling regulations in part 101 by revising the type size requirement in § 101.8(b)(2) when FOP labeling is used to meet the calorie declaration requirements for articles of food sold from glass-front vending machines. The final rule requires that the FOP calorie declaration type size be at least 150 percent (one and one-half times) the minimum required size of the net quantity of contents ( i.e., net weight) declaration on the package of the vended food.

This final rule is effective November 27, 2019. The compliance date for type size FOP labeling requirements (§ 101.8(b)(2)) for articles of food sold from glass-front vending machines is July 1, 2021. We are finalizing this compliance date to provide sufficient time for the packaged food industry to revise their labels, as appropriate, consistent with the new requirements.

In the preamble to the proposed rule, we announced our intent to exercise enforcement discretion, at least until January 1, 2020, with respect to gums, mints, and roll candy products sold in glass-front machines in packages that are too small to bear FOP labeling (83 FR 32221 at 32225). Although the calorie disclosure requirements in § 101.8(c)(2) cover these products, we advise manufacturers of these products and operators of vending machines containing these products of our intent to exercise enforcement discretion beyond January 1, 2020, with respect to compliance with the 2014 final rule's calorie disclosure requirements. We are continuing our enforcement discretion policy for these products because we recognize the challenges of adding compliant calorie information on packages that are too small to bear FOP labeling. As we previously stated, we acknowledge that these products tend to be sold in small packages that do not lend themselves to FOP labeling and are often located or placed in a small space in glass-front machines that may make it difficult to add calorie disclosure signage. For example, we are aware that some glass-front vending machines have trays that are different sizes; the tray width for bags of potato chips is larger than the tray width for a roll of mints or hard candies or for a small package of gum that can make it difficult to add calorie information (81 FR 50303 at 50305). Because we are continuing our enforcement discretion policy for these products, this means that we do not currently intend to pursue actions against vending machine operators that sell gums, mints, and roll candy products that do not meet the calorie disclosure requirements of the 2014 final rule.

We have examined the impacts of the final rule under Executive Order 12866, Executive Order 13563, Executive Order 13771, the Regulatory Flexibility Act (5 U.S.C. 601-612), and the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4). Executive Orders 12866 and 13563 direct us to assess all costs and benefits of available regulatory alternatives and, when regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity). Executive Order 13771 requires that the costs associated with significant new regulations “shall, to the extent permitted by law, be offset by the elimination of existing costs associated with at least two prior regulations.” This rule is not a significant regulatory action as defined by Executive Order 12866. This rule is an Executive Order 13771 deregulatory action.

The Regulatory Flexibility Act requires us to analyze regulatory options that would minimize any significant impact of a rule on small entities. The 2014 final rule does not impose burdens on the suppliers of vending machine foods. While suppliers are not obliged to engage in FOP calorie labeling, this rule will allow for greater flexibility for the use of FOP calorie labeling in glass-front vending machines than our previous requirements, potentially reducing the burden on covered vending machine operators of providing additional calorie labeling. Thus, we certify that the rule will not have a significant economic impact on a substantial number of small entities.

The Unfunded Mandates Reform Act of 1995 (section 202(a)) requires us to prepare a written statement, which includes an assessment of anticipated costs and benefits, before issuing “any rule that includes any Federal mandate that may result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100,000,000 or more (adjusted annually for inflation) in any one year.” The current threshold after adjustment for inflation is $154 million, using the most current (2018) Implicit Price Deflator for the Gross Domestic Product. This final rule will not result in an expenditure in any year that meets or exceeds this amount.

In response to requests from the vending and the packaged foods industries to reduce regulatory burden and increase flexibility, we are revising the existing type size requirements when FOP labeling is used to meet the calorie declaration requirements for articles of food sold from glass-front vending machines. The final regulatory impact analysis qualitatively discusses the economic impacts of this final rule, including potential costs, cost savings, and benefits.

Because this final rule only requires minor revisions to FOP calorie labeling type size when FOP labeling is used to meet the calorie declaration requirements for articles of food sold from glass-front vending machines, we estimate there are no costs to vending machine operators and potential cost savings to vending machine operators and packaged food manufacturers. We expect the cost savings of this revision to outweigh the costs, with no significant effect on consumer behavior or health. We have developed a comprehensive Economic Analysis of Impacts that assesses the impacts of the final rule. The full analysis of economic impacts is available in the docket for this final rule (Ref. 1) and at https://www.fda.gov/AboutFDA/ReportsManualsForms/Reports/EconomicAnalyses/default.htm.

We have determined under 21 CFR 25.30(k) that this action is of a type that does not individually or cumulatively have a significant effect on the human environment. Therefore, neither an environmental assessment nor an environmental impact statement is required.

This final rule contains no new collection of information beyond what was described in the December 2014 final rule and is now approved under OMB control number 0910-0782. Therefore, clearance by the Office of Management and Budget under the Paperwork Reduction Act of 1995 is not required.

We have analyzed this final rule in accordance with the principles set forth in Executive Order 13132. Section 4(a) of the Executive Order requires Agencies to construe a Federal statute to preempt State law only where the statute contains an express preemption provision or there is some other clear evidence that the Congress intended preemption of State law, or where the exercise of State authority conflicts with the exercise of Federal authority under the Federal statute. Federal law includes an express preemption provision that preempts any nutrition labeling requirement of food that is not identical to the requirement of section 403(q) of the FD&C Act, except that this provision does not apply to food that is offered for sale in a restaurant or similar retail food establishment that is not part of a chain with 20 or more locations doing business under the same name and offering for sale substantially the same menu items unless such restaurant or similar retail food establishment elects to comply voluntarily with the nutrition information requirements under section 403(q)(5)(H)(ix) of the FD&C Act. This final rule creates requirements for nutrition labeling of food under section 403(q) of the FD&C Act that preempts certain non-identical State and local nutrition labeling requirements.

Section 4205 of the ACA (124 Stat. 119, 576), which amended the FD&C Act to require certain vending machine operators to provide calorie declarations for certain articles of food sold from vending machines, also included a Rule of Construction providing that nothing in the amendments made by section 4205 of the ACA shall be construed: (1) To preempt any provision of State or local law, unless such provision establishes or continues into effect nutrient content disclosures of the type required under section 403(q)(5)(H) of the FD&C Act and is expressly preempted under subsection (a)(4) of such section; (2) to apply to any State or local requirement respecting a statement in the labeling of food that provides for a warning concerning the safety of the food or component of the food; or (3) except as provided in section 403(q)(5)(H)(ix) of the FD&C Act, to apply to any restaurant or similar retail food establishment other than a restaurant or similar retail food establishment described in section 403(q)(5)(H)(i) of the FD&C Act.

We interpret the provisions of section 4205 of the ACA related to preemption to mean that States and local governments may not impose nutrition labeling requirements for food sold from vending machines that must comply with the Federal requirements of section 403(q)(5)(H) of the FD&C Act, unless the State or local requirements are identical to the Federal requirements. In other words, States and localities cannot have additional or different nutrition labeling requirements for food sold either: (1) From vending machines that are operated by a person engaged in the business of owning or operating 20 or more vending machines subject to the requirements of section 403(q)(5)(H)(viii) of the FD&C Act or (2) from vending machines operated by a person not subject to the requirements of section 403(q)(5)(H)(viii) of the FD&C Act who voluntarily elects to be subject to those requirements by registering biannually under section 403(q)(5)(H)(ix) of the FD&C Act.

Otherwise, for food sold from vending machines not subject to the nutrition labeling requirements of section 403(q)(5)(H)(viii) of the FD&C Act, States and localities may impose nutrition labeling requirements. Under our interpretation of section 4205(d)(1) of the ACA, nutrition labeling for food sold from these vending machines is not nutrient content disclosures of the type required under section 403(q)(5)(H)(viii) of the FD&C Act and, therefore, is not preempted. Under this interpretation, States and localities can continue to require nutrition labeling for food sold from vending machines that are exempt from nutrition labeling under section 403(q)(5) of the FD&C Act. This interpretation is consistent with the fact that Congress included vending machine operators in the voluntary registration provision of section 403(q)(5)(H)(ix) of the FD&C Act. There would have been no need to include vending machine operators in the provision that allows opting into the Federal requirements if States and localities could not otherwise require non-identical nutrition labeling for food sold from any vending machines.

In addition, the express preemption provisions of 21 U.S.C. 343-1(a)(4) do not preempt any State or local requirement respecting a statement in the labeling of food that provides for a warning concerning the safety of the food or component of the food. This is clear from both the literal language of 21 U.S.C. 343-1(a)(4) with respect to the scope of preemption and from the Rule of Construction at section 4205(d)(2) of the ACA.

The following reference is on display at the Dockets Management Staff (see ADDRESSES ) and is available for viewing by interested persons between 9 a.m. and 4 p.m., Monday through Friday; it is also available electronically at https://www.regulations.gov. FDA has verified the website addresses, as of the date this document publishes in the Federal Register , but websites are subject to change over time.

Therefore, under the Federal Food, Drug, and Cosmetic Act and under authority delegated to the Commissioner of Food and Drugs, 21 CFR part 101 is amended as follows:

I. Background

Upon request, FDA has classified the self-fitting air-conduction hearing aid as class II (special controls), which we have determined will provide a reasonable assurance of safety and effectiveness. In addition, we believe this action will enhance patients' access to beneficial innovation, in part by reducing regulatory burdens by placing the device into a lower device class than the automatic class III assignment.

The automatic assignment of class III occurs by operation of law and without any action by FDA, regardless of the level of risk posed by the new device. Any device that was not in commercial distribution before May 28, 1976, is automatically classified as, and remains within, class III and requires premarket approval unless and until FDA takes an action to classify or reclassify the device (see 21 U.S.C. 360c(f)(1)). We refer to these devices as “postamendments devices” because they were not in commercial distribution prior to the date of enactment of the Medical Device Amendments of 1976, which amended the Federal Food, Drug, and Cosmetic Act (FD&C Act).

FDA may take a variety of actions in appropriate circumstances to classify or reclassify a device into class I or II. We may issue an order finding a new device to be substantially equivalent under section 513(i) of the FD&C Act to a predicate device that does not require premarket approval (see 21 U.S.C. 360c(i)). We determine whether a new device is substantially equivalent to a predicate by means of the procedures for premarket notification under section 510(k) of the FD&C Act (21 U.S.C. 360(k)) and part 807 (21 CFR part 807).

FDA may also classify a device through “De Novo” classification, a common name for the process authorized under section 513(f)(2) of the FD&C Act (21 U.S.C. 360c(f)(2)). Section 207 of the Food and Drug Administration Modernization Act of 1997 established the first procedure for De Novo classification (Pub. L. 105-115). Section 607 of the Food and Drug Administration Safety and Innovation Act modified the De Novo application process by adding a second procedure (Pub. L. 112-144). A device sponsor may utilize either procedure for De Novo classification.

Under the first procedure, the person submits a 510(k) for a device that has not previously been classified. After receiving an order from FDA classifying the device into class III under section 513(f)(1) of the FD&C Act, the person then requests a classification under section 513(f)(2).

Under the second procedure, rather than first submitting a 510(k) and then a request for classification, if the person determines that there is no legally marketed device upon which to base a determination of substantial equivalence, that person requests a classification under section 513(f)(2) of the FD&C Act.

Under either procedure for De Novo classification, FDA is required to classify the device by written order within 120 days. The classification will be according to the criteria under section 513(a)(1) of the FD&C Act. Although the device was automatically within class III, the De Novo classification is considered to be the initial classification of the device.

We believe this De Novo classification will enhance patients' access to beneficial innovation, in part by reducing regulatory burdens. When FDA classifies a device into class I or II via the De Novo process, the device can serve as a predicate for future devices of that type, including for 510(k)s (see 21 U.S.C. 360c(f)(2)(B)(i)). As a result, other device sponsors do not have to submit a De Novo request or premarket approval application in order to market a substantially equivalent device (see 21 U.S.C. 360c(i), defining “substantial equivalence”). Instead, sponsors can use the 510(k) process, when necessary, to market their device.

On May 11, 2018, Bose Corp. submitted a request for De Novo classification of the Bose Hearing Aid. FDA reviewed the request in order to classify the device under the criteria for classification set forth in section 513(a)(1) of the FD&C Act.

We classify devices into class II if general controls by themselves are insufficient to provide reasonable assurance of safety and effectiveness, but there is sufficient information to establish special controls that, in combination with the general controls, provide reasonable assurance of the safety and effectiveness of the device for its intended use (see 21 U.S.C. 360c(a)(1)(B)). After review of the information submitted in the request, we determined that the device can be classified into class II with the establishment of special controls. FDA has determined that these special controls, in addition to the general controls, will provide reasonable assurance of the safety and effectiveness of the device.

Therefore, on October 5, 2018, FDA issued an order to the requester classifying the device into class II. FDA is codifying the classification of the device by adding 21 CFR 874.3325. We have named the generic type of device self-fitting air-conduction hearing aid, and it is identified as a wearable sound amplifying device that is intended to compensate for impaired hearing and incorporates technology, including software, that allows users to program their hearing aids. This technology integrates user input with a self-fitting strategy and enables users to independently derive and customize their hearing aid fitting and settings.

FDA has identified the following risks to health associated specifically with this type of device and the measures required to mitigate these risks in table 1.

FDA has determined that special controls, in combination with the general controls, address these risks to health and provide reasonable assurance of safety and effectiveness. In order for a device to fall within this classification, and thus avoid automatic classification in class III, it would have to comply with the special controls named in this final order. The necessary special controls appear in the regulation codified by this order. This device is subject to premarket notification requirements under section 510(k) of the FD&C Act.

The Agency has determined under 21 CFR 25.34(b) that this action is of a type that does not individually or cumulatively have a significant effect on the human environment. Therefore, neither an environmental assessment nor an environmental impact statement is required.

This final order establishes special controls that refer to previously approved collections of information found in other FDA regulations and guidance. These collections of information are subject to review by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). The collections of information in the guidance document “De Novo Classification Process (Evaluation of Automatic Class III Designation)” have been approved under OMB control number 0910-0844; the collections of information in 21 CFR part 820, regarding quality system regulation, have been approved under OMB control number 0910-0073; the collections of information in 21 CFR part 814, subparts A through E, regarding premarket approval, have been approved under OMB control number 0910-0231; the collections of information in part 807, subpart E, regarding premarket notification submissions, have been approved under OMB control number 0910-0120; and the collections of information in 21 CFR part 801, regarding labeling, have been approved under OMB control number 0910-0485.

Therefore, under the Federal Food, Drug, and Cosmetic Act and under authority delegated to the Commissioner of Food and Drugs, 21 CFR part 874 is amended as follows:

I. General Information A. Does this action apply to me?

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

• Manufacturers or processors of one or more subject chemical substances (NAICS codes 325 and 324110), e.g., chemical manufacturing and petroleum refineries.

This action may also affect certain entities through pre-existing import certification and export notification rules under TSCA. Chemical importers are subject to the TSCA section 13 (15 U.S.C. 2612) import certification requirements promulgated at 19 CFR 12.118 through 12.127 and 19 CFR 127.28. Chemical importers must certify that the shipment of the chemical substance complies with all applicable rules and Orders under TSCA. Importers of chemicals subject to these SNURs must certify compliance with the SNUR requirements. The EPA policy in support of import certification appears at 40 CFR part 707, subpart B. In addition, any persons who export or intend to export a chemical substance that is the subject of this rule on or after November 27, 2019 are subject to the export notification provisions of TSCA section 12(b) (15 U.S.C. 2611(b)) (see 40 CFR 721.20), and must comply with the export notification requirements in 40 CFR part 707, subpart D.

The docket includes information considered by the Agency in developing the proposed and final rules. The docket for this action, identified by docket identification (ID) number EPA-HQ-OPPT-2017-0560, is available at http://www.regulations.gov or at the Office of Pollution Prevention and Toxics Docket (OPPT Docket), Environmental Protection Agency Docket Center (EPA/DC), West William Jefferson Clinton Bldg., Rm. 3334, 1301 Constitution Ave. NW, Washington, DC. The Public Reading Room is open from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding legal holidays. The telephone number for the Public Reading Room is (202) 566-1744, and the telephone number for the OPPT Docket is (202) 566-0280. Please review the visitor instructions and additional information about the docket available at http://www.epa.gov/dockets.

EPA is finalizing these SNURs under TSCA section 5(a)(2) for eight substances which were the subject of PMNs. These SNURs require persons who intend to manufacture or process any of these chemical substances for an activity that is designated as a significant new use to notify EPA at least 90 days before commencing that activity.

In the Federal Register of August 27, 2018 (83 FR 43606) (FRL-9982-78), EPA proposed a SNUR for 10 chemical substances in 40 CFR part 721 subpart E. More information on the specific chemical substances subject to this final rule can be found in the Federal Register documents for the direct final SNUR of August 27, 2018 (83 FR 43527) (FRL-9982-77), which is referenced in the proposed SNUR. The direct final rule was withdrawn in the Federal Register of October 26, 2018 (83 FR 54032) (9985-56). Note that the SNUR for PMN P-16-455 was erroneously included as proposed 40 CFR 721.11121 and will not be finalized, because it was already codified as 40 CFR 721.11017. In addition, the SNUR for PMN P-16-503 was erroneously included as proposed 40 CFR 721.11122 and will not be finalized, because it is already codified as 40 CFR 721.11018.

TSCA section 5(a)(2) (15 U.S.C. 2604(a)(2)) authorizes EPA to determine that a use of a chemical substance is a “significant new use.” EPA must make this determination by rule after considering all relevant factors, including the four TSCA section 5(a)(2) factors listed in Unit III.

General provisions for SNURs appear in 40 CFR part 721, subpart A. These provisions describe persons subject to the rule, recordkeeping requirements, exemptions to reporting requirements, and applicability of the rule to uses occurring before the effective date of the rule. Provisions relating to user fees appear at 40 CFR part 700. According to 40 CFR 721.1(c), persons subject to these SNURs must comply with the same SNUN requirements and EPA regulatory procedures as submitters of PMNs under TSCA section 5(a)(1)(A). These requirements include the information submission requirements of TSCA sections 5(b) and 5(d)(1), the exemptions authorized by TSCA sections 5(h)(1), (h)(2), (h)(3), and (h)(5), and the regulations at 40 CFR part 720. Once EPA receives a SNUN, EPA must either determine that the use is not likely to present an unreasonable risk of injury under the conditions of use for the chemical substance or take such regulatory action as is associated with an alternative determination before the manufacture or processing for the significant new use can commence. In the case of a determination other than not likely to present unreasonable risk, the applicable review period must also expire before manufacturing or processing for the new use may commence. If EPA determines that the use is not likely to present an unreasonable risk, EPA is required under TSCA section 5(g) to make public, and submit for publication in the Federal Register , a statement of EPA's findings.

When the Agency issues an Order under TSCA section 5(e), section 5(f)(4) requires that the Agency consider whether to promulgate a SNUR for any use not conforming to the restrictions of the Order or publish a statement describing the reasons for not initiating the rulemaking. TSCA section 5(a)(2) states that EPA's determination that a use of a chemical substance is a significant new use must be made after consideration of all relevant factors, including:

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

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

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

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

In determining what would constitute a significant new use for the chemical substances that are the subject of these SNURs, EPA considered relevant information about the toxicity of the chemical substances, likely human exposures and environmental releases associated with possible uses, and the four TSCA section 5(a)(2) factors listed in this unit.

EPA received public comments from four entities on the proposed rule. The Agency's responses are described in a separate Response to Public Comments document contained in the public docket for this rule, EPA-HQ-OPPT-2017-0560. In addition, EPA is withdrawing the proposed SNURs for the substances described in PMN P-16-455 and P-16-503 because they were previously regulated under final SNURs at 40 CFR 721.11017 and 721.11018, respectively. Furthermore, the response to comments will describe changes to the proposed SNURs for PMN P-16-342, P16-406 and P16-407 to include an exemption from SNUR requirements when these PMN substances have been fully reacted (cured). This makes the SNURs consistent with the same exemption contained in the underlying TSCA section 5 Orders for those substances.

EPA is establishing significant new use and recordkeeping requirements for eight chemical substances in 40 CFR part 721, subpart E. In Unit IV. of the original direct final rule (83 FR 43527; August 27, 2018) (FRL-9982-77), EPA provides the following information for each chemical substance:

• PMN number.

• Chemical name (generic name, if the specific name is claimed as CBI).

• Chemical Abstracts Service (CAS) Registry number (if assigned for non-confidential chemical identities).

• Basis for the TSCA section 5(e) Order.

• Potentially Useful Information. This is information identified by EPA that would help characterize the potential health and/or environmental effects of the chemical substance in support of a request by the PMN submitter to modify the TSCA Order, or if a manufacturer or processor is considering submitting a SNUN for a significant new use designated by the SNUR.

• CFR citation assigned in the regulatory text section of this rule.

The regulatory text section of each rule specifies the activities designated as significant new uses. Certain new uses, including exceedance of production volume limits ( i.e., limits on manufacture volume) and other uses designated in this rule, may be claimed as CBI. Unit IX. discusses a procedure companies may use to ascertain whether a proposed use constitutes a significant new use.

These final rules include eight PMN substances that are subject to Orders under TSCA section 5(e)(1)(A)(ii)(I) where EPA determined that activities associated with the PMN substances may present unreasonable risk to human health or the environment. Those Orders require protective measures to limit exposures or otherwise mitigate the potential unreasonable risk. The SNURs identify as significant new uses any manufacturing, processing, use, distribution in commerce, or disposal that does not conform to the restrictions imposed by the underlying Orders, consistent with TSCA section 5(f)(4).

Where EPA determined that the PMN substance may present an unreasonable risk of injury to human health via inhalation exposure, the underlying TSCA section 5(e) Order usually requires that potentially exposed employees wear specified respirators unless actual measurements of the workplace air show that air-borne concentrations of the PMN substance are below the New Chemical Exposure Limit (NCEL). The comprehensive NCELs provisions in TSCA section 5(e) Orders include requirements addressing performance criteria for sampling and analytical methods, periodic monitoring, respiratory protection, and recordkeeping. No comparable NCEL provisions currently exist in 40 CFR part 721, subpart B, for SNURs. Therefore, for these cases, the individual SNURs in 40 CFR part 721, subpart E, will state that persons subject to the SNUR who wish to pursue NCELs as an alternative to the 40 CFR 721.63 respirator requirements may request to do so under 40 CFR 721.30. EPA expects that persons whose 40 CFR 721.30 requests to use the NCELs approach for SNURs that are approved by EPA will be required to comply with NCELs provisions that are comparable to those contained in the corresponding TSCA section 5(e) Order.

During review of the PMNs submitted for the chemical substances that are subject to these SNURs, EPA concluded that regulation was warranted under TSCA section 5(e), pending the development of information sufficient to make reasoned evaluations of the health or environmental effects of the chemical substances. The basis for such findings is outlined in Unit IV. Based on these findings, TSCA section 5(e) Orders requiring the use of appropriate exposure controls were negotiated with the PMN submitters. As a general matter, EPA believes it is necessary to follow TSCA section 5(e) Orders with a SNUR that identifies the absence of those protective measures as Significant New Uses to ensure that all manufacturers and processors—not just the original submitter—are held to the same standard.

EPA is issuing these SNURs because the Agency wants:

• To identify as significant new uses any manufacturing, processing, use, distribution in commerce, or disposal that does not conform to the restrictions imposed by the underlying Orders, consistent with TSCA section 5(f)(4).

• To receive notice of any person's intent to manufacture or process a listed chemical substance for the described significant new use before that activity begins.

• To have an opportunity to review and evaluate data submitted in a SNUN before the notice submitter begins manufacturing or processing a listed chemical substance for the described significant new use.

• To be able to either determine that the prospective manufacture or processing is not likely to present an unreasonable risk, or to take necessary regulatory action associated with any other determination, before the described significant new use of the chemical substance occurs.

Issuance of a SNUR for a chemical substance does not signify that the chemical substance is listed on the TSCA Chemical Substance Inventory (TSCA Inventory). Guidance on how to determine if a chemical substance is on the TSCA Inventory is available on the internet at http://www.epa.gov/opptintr/existingchemicals/pubs/tscainventory/index.html.

To establish a significant new use, EPA must determine that the use is not ongoing. The chemical substances subject to this rule have undergone premanufacture review. In cases where EPA has not received a notice of commencement (NOC) and the chemical substance has not been added to the TSCA Inventory, no person may commence such activities without first submitting a PMN. Therefore, for chemical substances for which an NOC has not been submitted EPA concludes that the designated significant new uses are not ongoing.

When chemical substances identified in this rule are added to the TSCA Inventory, EPA recognizes that, before the rule is effective, other persons might engage in a use that has been identified as a significant new use. However, TSCA section 5(e) Orders have been issued for all the chemical substances, and the PMN submitters are prohibited by the TSCA section 5(e) Orders from undertaking activities which will be designated as significant new uses. The identities of six of the eight chemical substances subject to this rule have been claimed as confidential. Based on this, the Agency believes that it is highly unlikely that any of the significant new uses described in the regulatory text of this rule are ongoing.

Furthermore, EPA designated August 27, 2018 (the date of public release of the original direct final and proposed rules) as the cutoff date for determining whether the new use is ongoing. The objective of EPA's approach has been to ensure that a person could not defeat a SNUR by initiating a significant new use before the effective date of the final rule.

In the unlikely event that a person began commercial manufacture or processing of the chemical substances for a significant new use identified as of August 27, 2018, that person will have to cease any such activity upon the effective date of the final rule. To resume their activities, these persons will have to first comply with all applicable SNUR notification requirements and wait until EPA has conducted a review of the notice, made an appropriate determination on the notice, and has taken such actions as are required with that determination.

EPA recognizes that TSCA section 5 does not require developing any particular new information ( e.g., generating test data) before submission of a SNUN. There is an exception: If a person is required to submit information for a chemical substance pursuant to a rule, Order or consent agreement under TSCA section 4 (15 U.S.C. 2603), then TSCA section 5(b)(1)(A) (15 U.S.C. 2604(b)(1)(A)) requires such information to be submitted to EPA at the time of submission of the SNUN.

In the absence of a rule, Order, or consent agreement under TSCA section 4 covering the chemical substance, persons are required only to submit information in their possession or control and to describe any other information known to or reasonably ascertainable (40 CFR 720.50). However, upon review of PMNs and SNUNs, the Agency has the authority to require appropriate testing, under 40 CFR part 721, subpart E. In Unit IV. of the original direct final rule (83 FR 43527; August 27, 2018) (FRL-9982-77), lists potentially useful information that will be useful to EPA's evaluation. Companies who are considering submitting a SNUN are encouraged, but not required, to develop the information on the substance. EPA strongly encourages persons, before performing any testing, to consult with the Agency. Furthermore, pursuant to TSCA section 4(h), which pertains to reduction of testing on vertebrate animals, EPA encourages consultation with the Agency on the use of alternative test methods and strategies (also called New Approach Methodologies, or NAMs), if available, to generate the recommended test data. EPA encourages dialog with Agency representatives to help determine how best the submitter can meet both the data needs and the objective of TSCA section 4(h).

In some of the TSCA section 5(e) Orders for the chemical substances regulated under this rule, EPA has established production volume limits. These limits cannot be exceeded unless the PMN submitter submits the results of specified tests. The SNURs contain the same production volume limits as the TSCA section 5(e) Orders. Exceeding these production limits is defined as a significant new use. Persons who intend to exceed the production limit must notify the Agency by submitting a SNUN at least 90 days in advance of commencement of non-exempt commercial manufacture or processing.

Any request by EPA for the triggered and pended testing described in the Orders was made based on EPA's consideration of available screening-level data, if any, as well as other available information on appropriate testing for the PMN substances. Further, any such testing request on the part of EPA that includes testing on vertebrates was made after consideration of available toxicity information, computational toxicology and bioinformatics, and high-throughput screening methods and their prediction models.

The potentially useful information identified in Unit IV. of the original direct final rule may not be the only means of addressing the potential risks of the chemical substance. However, submitting a SNUN without any test data or other information may increase the likelihood that EPA will take action under TSCA section 5(e) or 5(f). EPA recommends that potential SNUN submitters contact EPA early enough so that they will be able to conduct the appropriate tests. SNUN submitters should provide detailed information on the following:

• Human exposure and environmental release that may result from the significant new use of the chemical substances.

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

By this rule, EPA is establishing certain significant new uses which have been claimed as CBI subject to Agency confidentiality regulations at 40 CFR part 2 and 40 CFR part 720, subpart E. Absent a final determination or other disposition of the confidentiality claim under 40 CFR part 2 procedures, EPA is required to keep this information confidential. EPA promulgated a procedure to deal with the situation where a specific significant new use is CBI, at 40 CFR 721.1725(b)(1).

Under these procedures a manufacturer or processor may request EPA to determine whether a proposed use would be a significant new use under the rule. The manufacturer or processor must show that it has a bona fide intent to manufacture or process the chemical substance and must identify the specific use for which it intends to manufacture or process the chemical substance. If EPA concludes that the person has shown a bona fide intent to manufacture or process the chemical substance, EPA will tell the person whether the use identified in the bona fide submission would be a significant new use under the rule. Since most of the chemical identities of the chemical substances subject to these SNURs are also CBI, manufacturers and processors can combine the bona fide submission under the procedure in 40 CFR 721.1725(b)(1) with that under 40 CFR 721.11 into a single step.

If EPA determines that the use identified in the bona fide submission would not be a significant new use, i.e., the use does not meet the criteria specified in the rule for a significant new use, that person can manufacture or process the chemical substance so long as the significant new use trigger is not met. In the case of a production volume trigger, this means that the aggregate annual production volume does not exceed that identified in the bona fide submission to EPA. Because of confidentiality concerns, EPA does not typically disclose the actual production volume that constitutes the use trigger. Thus, if the person later intends to exceed that volume, a new bona fide submission would be necessary to determine whether that higher volume would be a significant new use.

According to 40 CFR 721.1(c), persons submitting a SNUN must comply with the same notification requirements and EPA regulatory procedures as persons submitting a PMN, including submission of test data on health and environmental effects as described in 40 CFR 720.50. SNUNs must be submitted on EPA Form No. 7710-25, generated using e-PMN software, and submitted to the Agency in accordance with the procedures set forth in 40 CFR 720.40 and 721.25. E-PMN software is available electronically at http://www.epa.gov/opptintr/newchems.

EPA has evaluated the potential costs of establishing SNUN requirements for potential manufacturers and processors of the chemical substances subject to this rule. EPA's complete economic analysis is available in the docket under docket ID number EPA-HQ-OPPT-2017-0560.

Additional information about these statutes and Executive Orders can be found at https://www.epa.gov/laws-regulations-and-executive-orders.

This action establishes SNURs for several new chemical substances that were the subject of PMNs and TSCA section 5(e) Orders. The Office of Management and Budget (OMB) has exempted these types of actions from review under Executive Orders 12866 (58 FR 51735, October 4, 1993) and 13563 (76 FR 3821, January 21, 2011).

According to the PRA (44 U.S.C. 3501 et seq. ), an agency may not conduct or sponsor, and a person is not required to respond to a collection of information that requires OMB approval under the PRA, unless it has been approved by OMB and displays a currently valid OMB control number. The OMB control numbers for EPA's regulations in title 40 of the CFR, after appearing in the Federal Register , are listed in 40 CFR part 9, and included on the related collection instrument or form, if applicable. EPA is amending the table in 40 CFR part 9 to list the OMB approval number for the information collection requirements contained in this action. This listing of the OMB control numbers and their subsequent codification in the CFR satisfies the display requirements of PRA and OMB's implementing regulations at 5 CFR part 1320. This Information Collection Request (ICR) was previously subject to public notice and comment prior to OMB approval, and given the technical nature of the table, EPA finds that further notice and comment to amend it is unnecessary. As a result, EPA finds that there is “good cause” under section 553(b)(3)(B) of the Administrative Procedure Act (5 U.S.C. 553(b)(3)(B)) to amend this table without further notice and comment.

The information collection activities in this action have already been approved by OMB pursuant to the PRA under OMB control number 2070-0012 (EPA ICR No. 574). This action does not impose any burden requiring additional OMB approval. If an entity were to submit a SNUN to the Agency, the annual burden is estimated to average between 30 and 170 hours per response. This burden estimate includes the time needed to review instructions, search existing data sources, gather and maintain the data needed, and complete, review, and submit the required SNUN.

Send any comments about the accuracy of the burden estimate, and any suggested methods for minimizing respondent burden, including using automated collection techniques, to the Director, Regulatory Support Division, Office of Mission Support (2822T), Environmental Protection Agency, 1200 Pennsylvania Ave. NW, Washington, DC 20460-0001. Please remember to include the OMB control number in any correspondence, but do not submit any completed forms to this address.

Pursuant to RFA section 605(b) (5 U.S.C. 601 et seq. ), the Agency hereby certifies that promulgation of this SNUR will not have a significant adverse economic impact on a substantial number of small entities. The requirement to submit a SNUN applies to any person (including small or large entities) who intends to engage in any activity described in the final rule as a “significant new use.” Because these uses are “new,” based on all information currently available to EPA, it appears that no small or large entities presently engage in such activities. A SNUR requires that any person who intends to engage in such activity in the future must first notify EPA by submitting a SNUN. EPA's experience to date is that, in response to the promulgation of SNURs covering over 1,000 chemicals, the Agency receives only a small number of notices per year. For example, the number of SNUNs received was seven in Federal fiscal year (FY) 2013, 13 in FY2014, six in FY2015, 10 in FY2016, 14 in FY2017, and 18 in FY2018 and only a fraction of these were from small businesses. In addition, the Agency currently offers relief to qualifying small businesses by reducing the SNUN submission fee from $16,000 to $2,800. This lower fee reduces the total reporting and recordkeeping of cost of submitting a SNUN to about $10,116 for qualifying small firms. Therefore, the potential economic impacts of complying with this SNUR are not expected to be significant or adversely impact a substantial number of small entities. In a SNUR that published in the Federal Register of June 2, 1997 (62 FR 29684) (FRL-5597-1), the Agency presented its general determination that final SNURs are not expected to have a significant economic impact on a substantial number of small entities, which was provided to the Chief Counsel for Advocacy of the Small Business Administration.

Based on EPA's experience with proposing and finalizing SNURs, State, local, and Tribal governments have not been impacted by these rulemakings, and EPA does not have any reasons to believe that any State, local, or Tribal government will be impacted by this action. As such, EPA has determined that this action does not impose any enforceable duty, contain any unfunded mandate, or otherwise have any effect on small governments subject to the requirements of UMRA sections 202, 203, 204, or 205 (2 U.S.C. 1501 et seq. ).

This action will not have a substantial direct effect on States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132 (64 FR 43255, August 10, 1999).

This action does not have Tribal implications because it is not expected to have substantial direct effects on Indian Tribes. This action does not significantly nor uniquely affect the communities of Indian Tribal governments, nor does it involve or impose any requirements that affect Indian Tribes. Accordingly, the requirements of Executive Order 13175 (65 FR 67249, November 9, 2000), do not apply to this action.

This action is not subject to Executive Order 13045 (62 FR 19885, April 23, 1997), because this is not an economically significant regulatory action as defined by Executive Order 12866, and this action does not address environmental health or safety risks disproportionately affecting children.

This action is not subject to Executive Order 13211 (66 FR 28355, May 22, 2001), because this action is not expected to affect energy supply, distribution, or use and because this action is not a significant regulatory action under Executive Order 12866.

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

This action does not entail special considerations of environmental justice related issues as delineated by Executive Order 12898 (59 FR 7629, February 16, 1994).

Pursuant to the CRA (5 U.S.C. 801 et seq. ), EPA will submit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States prior to publication of the rule in the Federal Register . This action is not a “major rule” as defined by 5 U.S.C. 804(2).

Therefore, 40 CFR parts 9 and 721 are amended as follows:

I. General Information A. Does this action apply to me?

You may be potentially affected by this action if you are an agricultural producer, food manufacturer, or pesticide manufacturer. The following list of North American Industrial Classification System (NAICS) codes is not intended to be exhaustive, but rather provides a guide to help readers determine whether this document applies to them. Potentially affected entities may include:

• Crop production (NAICS code 111).

• Animal production (NAICS code 112).

• Food manufacturing (NAICS code 311).

• Pesticide manufacturing (NAICS code 32532).

You may access a frequently updated electronic version of EPA's tolerance regulations at 40 CFR part 180 through the Government Printing Office's e-CFR site at http://www.ecfr.gov/cgi-bin/text-idx?&c=ecfr&tpl=/ecfrbrowse/Title40/40tab_02.tpl.

Under FFDCA section 408(g), 21 U.S.C. 346a, any person may file an objection to any aspect of this regulation and may also request a hearing on those objections. You must file your objection or request a hearing on this regulation in accordance with the instructions provided in 40 CFR part 178. To ensure proper receipt by EPA, you must identify docket ID number EPA-HQ-OPP-2019-0062 in the subject line on the first page of your submission. All objections and requests for a hearing must be in writing and must be received by the Hearing Clerk on or before December 27, 2019. Addresses for mail and hand delivery of objections and hearing requests are provided in 40 CFR 178.25(b).

In addition to filing an objection or hearing request with the Hearing Clerk as described in 40 CFR part 178, please submit a copy of the filing (excluding any Confidential Business Information (CBI)) for inclusion in the public docket. Information not marked confidential pursuant to 40 CFR part 2 may be disclosed publicly by EPA without prior notice. Submit the non-CBI copy of your objection or hearing request, identified by docket ID number EPA-HQ-OPP-2019-0062, by one of the following methods:

• Federal eRulemaking Portal: http://www.regulations.gov. Follow the online instructions for submitting comments. Do not submit electronically any information you consider to be CBI or other information whose disclosure is restricted by statute.

• Mail: OPP Docket, Environmental Protection Agency Docket Center (EPA/DC), (28221T), 1200 Pennsylvania Ave. NW, Washington, DC 20460-0001.

• Hand Delivery: To make special arrangements for hand delivery or delivery of boxed information, please follow the instructions at http://www.epa.gov/dockets/contacts.html.

Additional instructions on commenting or visiting the docket, along with more information about dockets generally, is available at http://www.epa.gov/dockets.

In the Federal Register of June 7, 2019 (84 FR 26630) (FRL-9993-93), EPA issued a document pursuant to FFDCA section 408(d)(3), 21 U.S.C. 346a(d)(3), announcing the filing of a pesticide petition (PP 9F8733) by Syngenta Crop Protection, LLC, P.O. Box 18300, Greensboro, NC 27419. The petition requested that 40 CFR 180.637 be amended by establishing tolerances for residues of the fungicide mandipropamid in or on cocoa bean at 0.05 parts per million (ppm). That document referenced a summary of the petition prepared by Syngenta Crop Protection, LLC, the registrant, which is available in the docket, http://www.regulations.gov. There were no comments received in response to the notice of filing.

Based upon review of the data supporting the petition, EPA is establishing the tolerance at 0.06 ppm in or on cacao, dried bean. The reason for this change is explained in Unit IV.C.

Section 408(b)(2)(A)(i) of FFDCA allows EPA to establish a tolerance (the legal limit for a pesticide chemical residue in or on a food) only if EPA determines that the tolerance is “safe.” Section 408(b)(2)(A)(ii) of FFDCA defines “safe” to mean that “there is a reasonable certainty that no harm will result from aggregate exposure to the pesticide chemical residue, including all anticipated dietary exposures and all other exposures for which there is reliable information.” This includes exposure through drinking water and in residential settings but does not include occupational exposure. Section 408(b)(2)(C) of FFDCA requires EPA to give special consideration to exposure of infants and children to the pesticide chemical residue in establishing a tolerance and to “ensure that there is a reasonable certainty that no harm will result to infants and children from aggregate exposure to the pesticide chemical residue. . . .”

Consistent with FFDCA section 408(b)(2)(D), and the factors specified in FFDCA section 408(b)(2)(D), EPA has reviewed the available scientific data and other relevant information in support of this action. EPA has sufficient data to assess the hazards of and to make a determination on aggregate exposure for mandipropamid including exposure resulting from the tolerances established by this action.

In the Federal Register of March 22, 2019 (84 FR 10695) (FRL-9987-25), EPA established tolerances for residues of mandipropamid in or on several commodities. Because much of the safety assessment of mandipropamid for the current action remains the same, EPA is incorporating several aspects of that previous rule and relying in part upon the findings made in the March 22, 2019 final rule in support of this action.

A summary of the toxicological profile and endpoints used for human risk assessment is discussed in Units III.A. and III.B of the March 22, 2019 final rule. In evaluating dietary exposure for this action, EPA considered exposure under the petitioned-for tolerances as well as all existing mandipropamid tolerances in 40 CFR 180.637. The exposure assumptions used to assess the mandipropamid tolerances remain the same as discussed in the March 22, 2019 final rule, except to incorporate the exposure associated with the tolerance on cacao, dried beans, for which the Agency assumed 100 percent crop treated and tolerance-level residues. For a summary of those exposure assumptions, see Unit III.C.1 of the March 22, 2019 final rule. In addition, because there is no U.S. registration associated with the use of mandipropamid on cacao, dried beans, the estimated drinking water exposures reported in the March 22, 2019 final rule remain the same for this rule. A summary of EPA's assessment of drinking water exposure is discussed in Unit III.C.2. of the March 22, 2019 final rule. Similarly, the Agency's assessment of cumulative risks remains the same as in the March 22, 2019 final rule.

Because there have been no changes to the potential for prenatal and postnatal toxicity or in the completeness of data with respect to toxicity and exposure, EPA has determined that reliable data show the safety of infants and children would be adequately protected if the additional tenfold (10X) margin of safety required under section 408(b)(2)(C) (“FQPA safety factor”) were reduced to 1X. A summary of EPA's rationale for this determination is discussed in Unit III.D. of the March 22, 2019 final rule.

EPA determines whether acute and chronic dietary pesticide exposures are safe by comparing aggregate exposure estimates to the acute population-adjusted dose (aPAD) and chronic population-adjusted dose (cPAD). Short-, intermediate-, and chronic-term risks are evaluated by comparing the estimated aggregate food, water, and residential exposure to the appropriate points of departure to ensure that an adequate margin of exposure exists.

No acute effects were identified in the toxicological studies for mandipropamid; therefore, a quantitative acute dietary exposure assessment was not conducted. The chronic dietary risk is 31% of the cPAD for the general U.S. population and 49% of the cPAD for children 1 to 2 years old, the population subgroup with the highest estimated chronic dietary exposure to mandipropamid. The Agency level of concern is percentage numbers greater than 100% of the cPAD. Mandipropamid is not registered for any specific use patterns that would result in residential exposure. Therefore, all aggregate risk estimates are expected to be equivalent to the dietary (food and drinking water) risk estimates mentioned above.

Therefore, EPA concludes that there is a reasonable certainty that no harm will result to the general population, or to infants and children from aggregate exposure to mandipropamid residues.

Mandipropamid is classified as “Not Likely to be Carcinogenic to Humans.” Therefore, a dietary exposure assessment for the purpose of assessing cancer risk is unnecessary.

For a detailed discussion of the aggregate risk assessments and determination of safety for these tolerances, please refer both to the March 22, 2019 final rule and its supporting documents, available at http://www.regulations.gov in docket ID number EPA-HQ-OPP-2017-0671, and to the risk assessment for this current action, “ Mandipropamid. Human Health Risk Assessment to Support the Proposed Establishment of a Tolerance for the Fungicide (without Section 3 Registration) in/on Imported Cacao Beans.” in docket ID number EPA-HQ-OPP-2019-0062.

Adequate enforcement methodology, using method RAM 415/02, for the determination of mandipropamid using high-performance liquid chromatography with tandem mass spectrometric detection (LC/MS/MS), is available to enforce the tolerance. The method has been adequately validated by an independent laboratory, with a validated limit of quantitation (LOQ) of 0.010 ppm and a limit of detection (LOD) of 0.002 ppm in the crops tested.

The method may be requested from: Chief, Analytical Chemistry Branch, Environmental Science Center, 701 Mapes Rd., Ft. Meade, MD 20755-5350; telephone number: (410) 305-2905; email address: residuemethods@epa.gov.

In making its tolerance decisions, EPA seeks to harmonize U.S. tolerances with international standards whenever possible, consistent with U.S. food safety standards and agricultural practices. EPA considers the international maximum residue limits (MRLs) established by the Codex Alimentarius Commission (Codex), as required by FFDCA section 408(b)(4). The Codex Alimentarius is a joint United Nations Food and Agriculture Organization/World Health Organization food standards program, and it is recognized as an international food safety standards-setting organization in trade agreements to which the United States is a party. EPA may establish a tolerance that is different from a Codex MRL; however, FFDCA section 408(b)(4) requires that EPA explain the reasons for departing from the Codex level.

The Codex has not established an MRL for mandipropamid in cacao, dried bean.

The tolerance definition was revised from “cocoa bean” to “cacao, dried bean” in accordance with tolerance naming conventions. EPA has revised the tolerance level for mandipropamid residues in cacao, dried bean based on the review conducted by the European Food Safety Authority (EFSA) ( Setting of an import tolerance for mandipropamid in cocoa beans; A. Brancato et al; 31 October 2018). The EFSA review addresses the same use pattern and residue data submitted to the EPA to support this use, so the tolerance being established is harmonized with EFSA's recommended MRL (0.06 mg/kg).

Therefore, tolerances are established for residues of mandipropamid, in or on cacao, dried bean at 0.06 ppm.

This action establishes a tolerance under FFDCA section 408(d) in response to a petition submitted to the Agency. The Office of Management and Budget (OMB) has exempted these types of actions from review under Executive Order 12866, entitled “Regulatory Planning and Review” (58 FR 51735, October 4, 1993). Because this action has been exempted from review under Executive Order 12866, this action is not subject to Executive Order 13211, entitled “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355, May 22, 2001) or Executive Order 13045, entitled “Protection of Children from Environmental Health Risks and Safety Risks” (62 FR 19885, April 23, 1997), nor is it considered a regulatory action under Executive Order 13771, entitled “Reducing Regulations and Controlling Regulatory Costs” (82 FR 9339, February 3, 2017). This action does not contain any information collections subject to OMB approval under the Paperwork Reduction Act (PRA) (44 U.S.C. 3501 et seq. ), nor does it require any special considerations under Executive Order 12898, entitled “Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations” (59 FR 7629, February 16, 1994).

Since tolerances and exemptions that are established on the basis of a petition under FFDCA section 408(d), such as the tolerance in this final rule, do not require the issuance of a proposed rule, the requirements of the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq. ), do not apply.

This action directly regulates growers, food processors, food handlers, and food retailers, not States or tribes, nor does this action alter the relationships or distribution of power and responsibilities established by Congress in the preemption provisions of FFDCA section 408(n)(4). As such, the Agency has determined that this action will not have a substantial direct effect on States or tribal governments, on the relationship between the national government and the States or tribal governments, or on the distribution of power and responsibilities among the various levels of government or between the Federal Government and Indian tribes. Thus, the Agency has determined that Executive Order 13132, entitled “Federalism” (64 FR 43255, August 10, 1999) and Executive Order 13175, entitled “Consultation and Coordination with Indian Tribal Governments” (65 FR 67249, November 9, 2000) do not apply to this action. In addition, this action does not impose any enforceable duty or contain any unfunded mandate as described under Title II of the Unfunded Mandates Reform Act (UMRA) (2 U.S.C. 1501 et seq. ).

This action does not involve any technical standards that would require Agency consideration of voluntary consensus standards pursuant to section 12(d) of the National Technology Transfer and Advancement Act (NTTAA) (15 U.S.C. 272 note).

Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq. ), EPA will submit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States prior to publication of the rule in the Federal Register . This action is not a “major rule” as defined by 5 U.S.C. 804(2).

Therefore, 40 CFR chapter I is amended as follows:

I. Background

Section 262 of the Health Insurance Portability and Accountability Act of 1996 (HIPAA) (Pub. L. 104-191) added section 1173 to the Social Security Act (the Act), which requires that the Secretary of the Department of Health and Human Services (HHS or the Secretary) adopt a standard unique health plan identifier.

Congress renewed the requirement for the Secretary to adopt a standard unique health plan identifier in section 1104(c)(1) of the Patient Protection and Affordable Care Act (Pub. L. 111-148) (as amended by the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152) and collectively known as the Affordable Care Act or ACA) by requiring the Secretary to promulgate a final rule to establish a unique health plan identifier, as described in section 1173(b) of the Act and based on the input of the National Committee on Vital and Health Statistics (NCVHS), no later than October 1, 2012.

In compliance with that Affordable Care Act requirement, in the September 5, 2012 Federal Register (77 FR 54664), we published a final rule titled “Administrative Simplification: Adoption of a Standard for a Unique Health Plan Identifier; Addition to the National Provider Identifier Requirements; and a Change to the Compliance Date for the International Classification of Diseases, 10th Edition (ICD-10-CM and ICD-10-PCS) Medical Data Code Sets” (hereafter referred to as the September 2012 final rule). The September 2012 final rule adopted a standard unique health identifier for health plans (the HPID) and an “other entity identifier” (the OEID) for an entity that is not a health plan, individual, or health care provider, but that needs to be identified in a HIPAA transaction. Entities that qualified for an OEID were not required to obtain or use that identifier.

Soon after publication of the September 2012 final rule, industry stakeholders, in particular, health plans, identified a number of implementation challenges with the policy. Health plans and their provider trading partners provided substantial input to HHS and the NCVHS about barriers to implementation of the HPID. Stakeholders informed HHS that the HPID was not needed for routing HIPAA transactions nor did it provide information about health plan products and benefits. Further, they stated it would not reduce the cost of managing financial and administrative information, and that if they were to implement the HPID, it would impose significant costs instead of decreasing them. Stakeholders also indicated that the OEID had minimal value and stated they were confused about the enumeration, purpose, and use of the OEID. Since 2014, only 99 organizations have applied for and received OEIDs.

Based on industry's concerns about the September 2012 final rule, HHS issued a statement of enforcement discretion in October 2014, 1 which delayed enforcement of the requirements pertaining to HPID enumeration and use of the HPID in the HIPAA transactions. Enforcement discretion meant that HHS would not impose penalties if it determined a covered entity was out of compliance with the September 2012 final rule. Between 2014 and 2018, HHS continued to receive input from stakeholders and from the NCVHS, requesting that the regulatory mandate for the HPID be removed.

In the December 19, 2018 Federal Register (83 FR 65118), we published a proposed rule titled “Administrative Simplification: Rescinding the Adoption of the Standard Unique Health Plan Identifier and Other Entity Identifier” (hereafter referred to as the December 2018 proposed rule). There, we provided an overview of the HPID history, and described industry testimony and recommendations to the NCVHS and the NCVHS's recommendations to us about the HPID. We included specific information from stakeholders to the NCVHS that the HIPD and OEID did not, and could not, serve the purposes for which they had been adopted. In addition, we included the NCVHS's September 23, 2014 recommendation to us that the HIPD not be used in administrative transactions. We also committed to exploring options for a more effective standard unique health plan identifier in the future, and with respect to which we would collaborate with stakeholders in an open process (83 FR 65122). For more detailed information about the industry response to the adoption of the HPID and OEID and the NCVHS's recommendations to us, see the December 2018 proposed rule (83 FR 65119 through 65122).

As stated previously, the HPID and OEID were adopted in the September 2012 final rule under the statutory authorities of HIPAA and the Affordable Care Act. In the December 2018 proposed rule, we described how we came to understand, based on recommendations from the NCVHS and overwhelming industry input, that the HPID and OEID do not meet the need for which they were adopted. Therefore, we proposed to remove Subpart E—Standard Unique Health Identifier for Health Plans at 45 CFR part 162. We also proposed to remove the definitions of “Controlling health plan” (CHP) and “Subhealth plan” (SHP) at 45 CFR 162.103 as those terms are integrally related to the HPID requirements, without which they would have no application (83 FR 65123).

Finally, we proposed that if we finalized our proposal to rescind the HPID and OEID, we would deactivate each HPID and OEID record in the Health Plan and Other Entity Enumeration System (HPOES) on behalf of each enumerated entity, as opposed to each entity having to do so itself, and would notify the manager of record at the current email address in the system (83 FR 65123). In addition, we proposed to store the identifiers for 7 years in accordance with federal recordkeeping requirements, and proposed that we would not regulate any actions entities may take with their existing HPID and OEID identifiers, such that they would be free to retain and use these identifiers at their own discretion (83 FR 65123). We welcomed comments on all of our proposals.

In response to the December 2018 proposed rule, we received 19 pieces of timely correspondence from major associations representing health plans, self-funded group employer plans, and providers, as well as from large vendors and other individual organizations. All of the timely submissions supported our proposal to rescind the HPID and OEID and remove the definitions of CHP and SHP, while the late commenter opposed our proposal to rescind the identifiers. Several commenters supported our proposal that we deactivate the identifiers on behalf of the entities that had obtained them. Most of the commenters thanked us for our proposal to rescind the HPID and OEID and for HHS's continued efforts to reduce administrative burden on clinicians so they can focus on providing patient care.

Commenters' main points included the following:

• A preference for use of Payer IDs.

• No need for, or value in, the HPID.

• Reducing the burden on self-funded groups or health plans.

• The cost of implementing the HPID.

• Communications about the deactivation of the HPIDs/OEIDs.

• The importance of industry engagement in any future discussions about appropriate business or use cases for a standard health plan identifier.

A summary of the public comments received, and our responses follow.

In the December 2018 proposed rule, we provided an overview of stakeholder feedback regarding adoption of the HPID, explaining that the industry had developed best practices for the use of Payer IDs, which are non-HIPAA-based industry-derived identifiers, for purposes of conducting the HIPAA transactions, and that the HPID did not have a place in these transactions (83 FR 65122). We explained that stakeholders stated that the organizations that need to be identified in HIPAA transactions are the payers rather than the health plans, and that industry is successfully routing transactions using the Payer IDs and could not use the HPID to do so (83 FR 65122).

Comment: Several commenters stated that they appreciated HHS acknowledging the distinction between the HPID and Payer IDs, the industry's use of, and reliance on, Payer IDs in the HIPAA transactions, and the impact of having to accommodate a new identifier. A commenter noted that Payer IDs are the common denominator for payers, physicians, and the patients they serve, that permit entities to communicate effectively using HIPAA electronic transactions such as claims, eligibility, claim status, and enrollment. Another commenter wrote that, in general, the need for a health plan identifier changed between the enactment of HIPAA and HHS's adoption of the HPID. As industry gained experience with the transaction standards adopted under HIPAA, it was able to resolve, via Payer IDs, the issue of identifying the payer for routing transactions. Commenters explained that, at this point, the HPID would have been an impediment to the effective use of the HIPAA transactions. One large provider group wrote that, while the HPID had been intended to solve routing issues identified at the time HIPAA was enacted in 1996, in today's environment, using the Payer IDs, providers no longer experienced routing issues. This group further noted that expending resources on implementing the HPID would be wasteful and would hurt the industry, including providers, vendors, clearinghouses, and payers.

Response: We have acknowledged that industry is effectively using Payer IDs to route and exchange the HIPAA transactions, and appreciate the confirmation from commenters. This final rule rescinds the HPID and the implementation specifications and requirements for its use.

Comment: A commenter opposed the proposal to rescind the HPID, stating that removal of the identifiers would create more ambiguity for health care claims transactions and would obscure relationships between financially responsible entities. The commenter stressed the importance of a provider's ability to determine the entity that will be receiving eligibility requests and the entity that is financially responsible to remit payment for covered healthcare services.

Response: We acknowledged in the December 2018 proposed rule that covered entities will need to know how each party to a transaction is identified and which parties are financially responsible or will be able to respond to the transactional inquiries. According to the input we received over the past several years from health plans and providers, Payer IDs adequately identify the entity that will receive the eligibility request, be financially responsible for the claim, and remit payment. Other commenters confirmed that Payer IDs are used successfully to route transactions for these specific purposes. Within these transactions, Payer IDs identify the payer that has responsibility for the information identified in this comment (that is, routing and receiving an eligibility request or bearing financial responsibility for a claim) and other relevant information needed by the receiver. Not only do the views of stakeholders and the recommendations from the NCVHS presented to us for several years consistently run counter to this commenter's views, we also note that, due to the continuing enforcement discretion, the HPID has not seen widespread implementation, thus we question how its rescission could create ambiguity or obscure the relationships between covered entities. Nevertheless, the commenter reminds us of the critical importance of maintaining an industry-wide perspective as we explore future rulemaking pertaining to the HIPAA transactions and a unique health plan identifier.

Comment: A commenter opposed the rescission of the HPID on the basis that the HPID—(1) should be included in contractual arrangements between health plans, payers, and third-party service providers when these organizations act on behalf of self-funded employers; and (2) is important to identify the entity that has financial control or responsibility and to whom the provider may need to appeal for adverse benefit determinations.

Response: We note that the health care system is complex, particularly with respect to the arrangements between self-funded employer groups, health plans, third-party administrators, and providers. The NCVHS hearings and other public forums have yielded no information supporting the use of the HPID by self-funded employer groups or their business associates, while, by contrast, self-funded employer groups have consistently opposed the use of HPID. In response to the December 2018 proposed rule, other commenters confirmed that use of the HPID would have increased costs not only to their members, but also to providers, and that the HPID would not have improved transactions or information exchange. Rather, they reiterated that continued use of Payer IDs by their business associates on their behalf was the appropriate and correct technical and business solution.

We adopted the OEID because we believed that entities that were not health plans, but identified in HIPAA transactions in a manner similar to health plans, could use the OEID in HIPAA transactions, which we believed would increase standardization (77 FR 54665). Since publication of the September 2012 final rule, 99 OEIDs have been assigned in the HPOES. We do not have any information regarding actual use of the OEID in the HIPAA transactions.

Comment: Several commenters stated that there was no value or efficiency gained from using the OEID if an organization provided one in a transaction. A few commenters strongly agreed with our proposal that the identifier was not necessary or useful; however, they did not provide specific details in their written comments.

Response: We thank the commenters for their feedback. We also believe the low number of applications for OEIDs is an indicator that the OEID does not provide the intended value. We are finalizing our proposal to rescind the OEID as well.

Comment: Several commenters stated that the cost of implementing the HPID would have outweighed the benefits. Most of the commenters agreed that there was no return on investment for implementing the HPID because Payer IDs already serve the purpose of routing transactions. Some commenters reiterated what HHS stated in the December 2018 proposed rule regarding the costs and burden of mapping the existing Payer IDs to HPIDs. Some of these commenters from self-funded employer groups stated that they do not perform most health care transactions, such as eligibility determinations, claims status, or EFT and remittance advice, but, rather, they engage third party administrators (TPAs) to do so on their behalf. Therefore, compliance with the HPID final rule would have involved new administrative procedures and would have required extensive coordination with multiple TPAs, with the administrative and cost burden greatly outweighing any utility of the HPID.

A few commenters praised the proposal and commented that, for large organizations with numerous subparts, the HPID enumeration burden was far greater and more complex than HHS had envisioned when the HPID was adopted. These commenters explained that the HPID enumeration was further complicated by confusion about the requirements for self-funded, fully insured, and combination fully insured and self-funded groups. The commenters wrote that the policy resulted in high implementation cost projections that would have yielded little to no return on investment. The commenters believe that the traditional payers and TPAs supporting these groups would have incurred considerable cost that they likely would have passed on to the provider community had HPIDs been required in standard transactions. These commenters also confirmed that existing Payer IDs were sufficient to identify the payer and any other information needed to process HIPAA transactions.

Response: We are confirming our cost/benefit analysis that the costs to implement the HPID outweigh the return on investment. We reiterate in the Regulatory Impact Analysis that certain assumptions we made in the estimates of the 2012 proposed and final rules may have been misplaced or did not come to fruition, and that other activities have provided cost savings benefits for industry. This final rule yields cost avoidance for covered entities.

We proposed to remove the definitions of controlling health plan (CHP) and subhealth plan (SHP) at 45 CFR 162.103 because those terms were established in association with, and were integrally related to, the HPID requirements and would no longer have application were the HPID and OEID rescinded.

Comment: A few commenters supported the proposal to remove the definitions of CHP and SHP.

Response: We thank the commenters for their support and are finalizing our proposal to remove the definitions.

We proposed to deactivate each HPID and OEID record in the Health Plan and Other Entity Enumeration System (HPOES) on behalf of each enumerated entity, and to notify the manager of record at the current email address in the system. In addition, we proposed to store the numbers for 7 years and to permit entities with HPIDs and OEIDs to retain and use them at their own discretion, such that HHS would not regulate any actions entities take with these existing identifiers (83 FR 65123).

Comment: Several commenters supported HHS's proposed role in the deactivation of HPIDs and OEIDs. A commenter requested that HHS consider notifying all authorized users on file for each HPID and OEID in HPOES in the event the individual in our records may have left an entity or changed email addresses. Another commenter suggested that HHS publicly notify the industry upon completion of the deactivation of the identifiers.

Response: We appreciate the support of our proposal to deactivate HPIDs and OEIDs on behalf of the entities who obtained them. We also agree that it is important to communicate effectively (widely broadcast) to the stakeholder community after we complete the deactivation process and thank the commenter for that suggestion.

HIOS is the Health Insurance Oversight System—a secure HHS web-based application that collects and stores information about health plans, insurance companies, and issuers for national programs. HPOES is a HIOS module that assigns and manages HPIDs and OEIDs. On or after the publication date of this final rule in the Federal Register , HHS will send an email notice to all active HIOS users explaining the deactivation of the HPIDs and OEIDs and the upcoming HPOES changes. We recognize that many HIOS users will not have enumerated for an HPID or OEID, but know it is likely that many personnel, roles, and organizational affiliations may have changed since entities enumerated (obtained their identifiers). Therefore, transmitting this information to all active HIOS users will ensure that our first communication regarding the HPID deactivation process reaches the greatest number of potentially affected entities and individuals. Through outreach to HIOS users, we believe the information about the pending HPID and OEID deactivation will most effectively reach appropriate individuals in each enumerated entity.

On or after the effective date of the final rule, HHS will deactivate all HPIDs and OEIDs. The HPOES module will remain open for an additional 60 days after HPID and OEID deactivation for viewing by HPOES module users to enable entities to capture data about their HPID or OEID.

On or after the effective date of the final rule, HHS will also do the following:

• Post a notice on the HPOES homepage and the Centers for Medicare & Medicaid Services (CMS) website indicating that the deactivation for HPIDs and OEIDs has occurred and that new HPID and OEID applications will no longer be accepted. The notices will provide contact information for a help desk and the HHS administrative simplification office email.

• Send an email to HPOES module users informing them that all HPID and OEID numbers have been deactivated and that the HPOES system will remain open for 60 days to view information.

• Update the CMS website with information about the HPID and OEID deactivation activities and timeline.

Comment: A few commenters stated that, upon deactivation of the HPIDs and OEIDs within the HPOES, the infrastructure to support the numbers would be removed and any HPIDs and OEIDs remaining in use would be rogue numbers operating outside the framework for standard code sets and electronic transactions for which HIPAA was intended. These commenters requested that HHS consider terminating the use of the HPIDs and OEIDs at the same time as their deactivation. They also suggested that, if there is a need to continue using the HPIDs and OEIDs for a period of time, the cases for use be clearly defined. The commenters requested that HPIDs and OEIDs be excluded from use within standard electronic transactions after termination.

Response: In the December 2018 proposed rule, we proposed that entities with HPIDs and OEIDs could retain and use these identifiers at their own discretion and that HHS would not regulate any actions entities take with their existing HPIDs and OEIDs (83 FR 65123). We appreciate the commenters' concerns regarding the need to define use cases for HPIDs and OEIDs after deactivation and agree that, to ensure the effectiveness of the HIPAA transactions and drive efficiency, trading partners should collaborate and agree upon the best identifiers for exchanging and routing transactions.

We have no indication that entities are using the HPIDs for any other purposes at this time. We did not receive sufficient input to warrant developing additional policies regarding the use of deactivated HPIDs or OEIDs for other purposes once the HPOES module is closed, but we will monitor our administrative simplification email box and the complaint system for any indications of issues.

In the proposed rule, we acknowledged there are statutory requirements that HHS adopt a standard unique health identifier for health plans, and that we look forward to future industry and NCVHS discussions of appropriate use or business cases regarding such an identifier that might reduce costs or burden on covered entities (83 FR 65123).

Comment: A commenter stated that, given the uncertainty and confusion about the HPID and its enumeration scheme, they strongly supported our proposal to engage industry and provide an opportunity for public input regarding any consideration of a future standard identifier for health plans. Another commenter echoed the concerns about the uncertainty of the HPID, and indicated that HIPAA requires HHS to take into account multiple uses for a health plan identifier and to specify the purposes for which such an identifier may be used. These commenters indicated that it would be very difficult to use one identifier for multiple business use cases if the use cases are not compatible. The commenters urged HHS to confer with stakeholders before considering future alternatives or proposing any future uses of an identifier, particularly if the identifier would be used for multiple purposes.

Response: We appreciate the willingness of industry to engage on this topic of unique health plan identifiers in the future. We encourage stakeholders to continue considering business cases for a standard health plan identifier and to share those options with the Secretary or NCVHS.

After review of the public comments received, we are finalizing our proposals to remove Subpart E—Standard Unique Health Identifier for Health Plans at 45 CFR part 162, as well as the definitions of “Controlling health plan” (CHP) and “Subhealth plan” (SHP) at 45 CFR part 162.103 without modification. In this final rule, we are also affirming that HHS will conduct the deactivation activities on behalf of the enumerated entities and communicate to affected organizations and stakeholders about the deactivation process.

This document does not impose information collection requirements, that is, reporting, recordkeeping or third-party disclosure requirements. Consequently, there is no need for review by the Office of Management and Budget under the authority of the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501 et seq. ).

However, it must be noted that the information collection request (ICR) associated with the HPID was previously approved under OMB control number 0938-1166 and subsequently expired May 31, 2016. HHS incurred a violation of the PRA when the ICR expired. As stated earlier in this document, we proposed to rescind the adoption of the HPID and the other entity identifier (OEID) along with the implementation specifications and requirements for the use of the HPID and OEID; therefore, we are not seeking to reinstate the ICR previously approved under 0938-1166.

We have examined the impact of this rule as required by Executive Order 12866 on Regulatory Planning and Review (September 30, 1993), Executive Order 13563 on Improving Regulation and Regulatory Review (January 18, 2011), the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), section 1102(b) of the Act, section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 1995; Pub. L. 104-4), Executive Order 13132 on Federalism (August 4, 1999), the Congressional Review Act (5 U.S.C. 804(2)), and Executive Order 13771 on Reducing Regulation and Controlling Regulatory Costs (January 30, 2017).

Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). A Regulatory Impact Analysis (RIA) is prepared for major rules with economically significant effects ($100 million or more in any 1 year). This rule does not reach the economic threshold and is not considered a major rule, thus we are not required to prepare an RIA. We provided a detailed history of the events leading to this final rule in the December 2018 proposed rule (83 FR 65120). We discuss our approach to Executive Order 12866 and demonstrate that this rule would not have economically significant effects because it not only removes requirements perceived by industry as burdensome, but it rescinds a regulation that, as a practical matter, was never operationalized or implemented by industry and thus had no demonstrable costs or savings. This final rule has been determined to be a qualitatively deregulatory action.

The RFA requires agencies to analyze options for regulatory relief of small entities. For purposes of the RFA, small entities include small businesses, nonprofit organizations, and small governmental jurisdictions. Most hospitals and most other providers and suppliers are small entities, either by nonprofit status or by having revenues of less than $7.5 million to $38.5 million in any 1 year. Individuals and states are not included in the definition of a small entity. We are not preparing an analysis for the RFA because we have determined, and the Secretary certifies, that this final rule would not have a significant economic impact on a substantial number of small entities.

In addition, section 1102(b) of the Act requires us to prepare an RIA if a rule may have a significant impact on the operations of a substantial number of small rural hospitals. This analysis must conform to the provisions of section 604 of the RFA. For purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that is located outside of a Metropolitan Statistical Area for Medicare payment regulations and has fewer than 100 beds. We are not preparing an analysis for section 1102(b) of the Act because we have determined, and the Secretary certifies, that this final rule would not have a significant impact on the operations of a substantial number of small rural hospitals.

Section 202 of the Unfunded Mandates Reform Act of 1995 also requires that agencies assess anticipated costs and benefits before issuing any rule whose mandates require spending in any 1 year of $100 million in 1995 dollars, updated annually for inflation. In 2019, that threshold is approximately $154 million. This final rule will have no consequential effect on state, local, or tribal governments or on the private sector.

Executive Order 13132 establishes certain requirements that an agency must meet when it promulgates a final rule that imposes substantial direct requirement costs on state and local governments, preempts state law, or otherwise has Federalism implications. Since this regulation does not impose any costs on state or local governments, the requirements of Executive Order 13132 are not applicable.

Executive Order 13771, titled Reducing Regulation and Controlling Regulatory Costs was issued on January 30, 2017, and requires that the costs associated with significant new regulations “shall, to the extent permitted by law, be offset by the elimination of existing costs associated with at least two prior regulations.” This final rule is an E.O. 13771 deregulatory action. Details on the estimated cost savings of this final rule are stated in the rule's economic analysis.

As stated previously, and shown in this section, we estimate that this final rule will not have economically significant effects on industry. We again point readers to the September 2012 final rule where we referred to the large measure of uncertainty in the assumptions of our original impact analysis. In some cases, we indicated that the HPID would be “foundational” to subsequent activities such as the automation of the Coordination of Benefits (COB) process (77 FR 54705). In other cases, we stated that the costs and benefits associated with the HPID were applicable only to entities that are directly involved in sending or receiving HIPAA transactions and that the cost estimates were based on the number of health plans that would use the HPID in the transactions. However, we did not have data on how health plans were being identified in HIPAA transactions (77 FR 54703). Therefore, we stated that we had no assurance of how many health plans would use the HPID in standard transactions, and took a conservative approach to the costs to health plans. We were aware that covered entities were using Payer IDs to identify the health plan or the responsible entity in transactions. Although a few commenters did not agree with the methodology we chose for our cost analysis in the April 2012 proposed rule, we did not alter it in the September 2012 final rule.

With respect to the estimated cost and benefits of implementation and use of the HPID, the December 2018 proposed rule reiterated the narrative from the April 2012 proposed rule, where we explained that the HPID would be foundational to other administrative simplification initiatives, both those initiated by industry, and those regulated by State or Federal governments. In the 2012 rulemaking, we suggested that if other initiatives did not follow, then the HPID would likely have little substantive impact (77 FR 22977). We explained that the HPID was intended to enable other initiatives, and would have been part of the larger picture of standardizing billing and insurance-related transactions and tasks (77 FR 54703). The HPID did not have the benefits or savings anticipated in the 2012 rulemaking, in part because of the longstanding enforcement discretion, and in part because industry identified other strategies to increase efficiency in how they conducted those transactions and other administrative functions.

In the April 2012 proposed rule, we stated that the possible cost and benefit impacts were reflective of the uncertainty inherent in the health care industry. To illustrate the foundational aspects of the HPID, we estimated its implementation might contribute to a: (1) 1 to 2 percent per year, for 10 years, increase in the use the eligibility for a health plan and health care claims status transactions; and (2) 1 to 3 percent increase in the use of the electronic health care electronic funds transfers (EFT) and remittance advice transaction, as routing of those transactions is especially important for the payment process (77 FR 22977). However, despite our exercise of enforcement discretion with respect to HPID compliance, the use of all three of these transactions has modestly increased, and we believe our assumptions that use of the HPID would contribute to an increase in the use of those transactions were incorrect. As we explained in the December 2018 proposed rule, some of the increases (and therefore savings) might have been due to the use of the adopted operating rules, while some might have been due to improved system capabilities.

The Council for Affordable Quality Healthcare (CAQH) conducts a study each year (the CAQH Index) to assess the utilization of the administrative transactions and operating rules, and tries to identify savings opportunities from their use. The most recent report from 2018 continues to show progressive adoption of the eligibility for a health plan, health care claim status, and health care electronic funds transfers (EFT) and remittance advice transactions. Entities conducting these transactions use Payer IDs for routing, other payer, and health plan identification purposes. While this study only includes those health plans and providers that participate by providing data, it remains indicative of a positive trend in the utilization rate for these transactions without the HPID. Table 1 shows the steady increase in industry's use of the three transactions over 6 years, which includes the 4 years when the HPID rule was in effect but, we believe, not in use due to the ongoing enforcement discretion. Recently, there has been a slight decline in use of the remittance advice transaction. CAQH is working with providers and health plans to understand reasons for that decrease in use.

We cannot attribute other cost savings to this final rule because we do not anticipate any system transition costs, testing, or other conversion costs related to the deactivation of the identifiers. Consistent with our statements in the December 2018 proposed rule, covered entities did not make expenditures to prepare for use of the HPID during the enforcement discretion period. Organizations also did not execute new contracts for the services of software system vendors, billing companies, transaction vendors, and/or health care clearinghouses to facilitate the transition to the HPID. We invited industry comment on our assumptions regarding the cost estimates, and received support for the assumption that the costs would have outweighed the benefits of implementing the HPID.

Comment: Several commenters supported our analysis in the December 2018 proposed rule, suggesting that the cost of implementing the HPID would have outweighed any benefits. These commenters agreed that there was no return on investment for implementing the HPID because Payer IDs already serve the purpose of routing transactions. The commenters also noted that it would have been costly, complicated, and burdensome to implement the HPID because it would have required the mapping of existing Payer IDs to HPIDs. Specifically, a commenter stated it did not perform most health care transactions itself and, instead, engaged TPAs to perform these functions on its behalf. The commenter noted that complying with the HPID final rule would have required new and costly administrative procedures and extensive coordination with multiple TPAs that would have outweighed the utility of the HPID.

Response: We thank commenters for validating our updated assumptions in the December 2018 proposed rule impact analysis regarding the lack of a return on investment from the September 2012 final rule. The commentary from stakeholders regarding the cost of HIPD implementation and the inability to demonstrate an improvement in administrative efficiencies from such implementation has been consistent for several years, as demonstrated by review of the HPID testimony on the NCVHS website at https://ncvhs.hhs.gov/meetings/agenda-of-the-may-3-2017-ncvhs-subcommittee-on-standards-hearing-on-health-plan-identifier-hpid/ or the December 2018 proposed rule at 83 FR 65118.

The federal government has already expended certain operating funds, as have those organizations that applied for and obtained an HPID or OEID. For example, the federal government spent $1.5 million to build the components of the enumeration system and spent $45,000 annually for operations and maintenance through 2018. As we stated in the December 2018 proposed rule, we cannot account for industry legal or administrative expenditures in the analysis of the number or type of HPIDs or OEIDs obtained following publication of the September 2012 final rule.

Costs associated with the deactivation—preparing communications, posting alerts on the HPOES web page, updating the DNS website, and programming to turn off system access to the HPOES module—are considered agency operating costs that HHS will absorb, without the need for additional funds.

We believe that this final rule rescinding the HPID and OEID will yield modest savings (cost avoidance). First, as enforcement discretion remains in effect, we assume there are no new costs for health plan or other entity enumeration of new health plans or other entities. In the December 2018 proposed rule, we acknowledged that some of the assumptions in our 2012 rulemaking were outdated and requested industry feedback on our use of those assumptions for purposes of the analysis, but received no comments. Therefore, we are using the same data to confirm that this final rule provides a modest savings/cost avoidance.

Based on the data in Chart 2 of the April 2012 proposed rule (77 FR 22970), and reprinted here for reference, we estimated there would be up to 15,000 entities that would be required, or would elect, to obtain an HPID or OEID.

As we stated in the December 2018 proposed rule, slightly fewer than 11,000 entities applied for and obtained an HPID immediately following publication of the September 2012 final rule. We explained the cost calculation for enumeration in the April 2012 proposed rule (77 FR 22970). Health plans and other entities were required to complete the application or update form online through the HPOES. We received most applications shortly after publication of the September 2012 final rule, subsequent to which the application rate slowed considerably. Between May 2016 and May 2017 we received only 156 applications for HPIDs, and, since the December 2018 proposed rule was published, we have received only 5 applications.

The HPID and OEID application is a one-time burden, and for purposes of this impact analysis, we estimated the impact of eliminating that burden.

The cost avoidance calculation associated with rescinding the HPID and OEID is premised upon the same method that we used to estimate the cost to apply for an HPID or OEID. We estimated that it took 30 minutes to complete the online application or make updates, and used an hourly labor rate of approximately $23/hour, the average wage reported for professional and business services sector, based on data from the Department of Labor, Bureau of Labor Statistics, June 2011, “Average hourly and weekly earnings of production and nonsupervisory employees (1) on private nonfarm payrolls.” ( https://www.bls.gov/news.release/empsit.t24.htm ). If we increase the rate to account for 2018 dollar values (March 2018 table), to $31/hour, this represents a unit cost of $15.00 per HPID or OEID application. For the initial enumeration of 11,000 entities, this cost would have been $165,000. Thus, to deactivate an HPID or OEID, we can assume the cost avoidance would be the same.

Additionally, we estimate the potential savings (cost avoidance) for those entities that might have already updated their HPID or OEID records before the HHS deactivation and base our assumption on the actual number of updates to the HPOES system since 2013. Each year, an average of 95 records, or 1 percent of active applications, are deactivated or updated. Using the same unit cost described earlier in this rule, if 1 percent of the current organizations (110 entities) updated their HPIDs/OEIDs, the cost would be $1,650 (110 × $15). To account for any increase in wages and benefits, we multiply this by 2, and arrive at a sum of $3,300. This final rule may result in savings of $3,300. We typically provide ranges in an impact analysis, and so provide a high range of 3 percent as well. Therefore, our calculation means 330 entities would have made updates, for a total high-end savings estimate of $9,900 (330 × $15) × 2. When this final rule becomes effective, these updates will not be necessary or possible. Organizations that have obtained HPIDs or OEIDs will not be able to make changes to their accounts after the effective date of the final rule. See Table 3 for a summary of the savings for updates that will not be made to HPIDs and OEIDs on or after the effective date of the final rule.

We proposed a cost-effective method to implement the HPID and OEID rescission, and finalize that proposal in this final rule. As described earlier, HHS will deactivate the HPIDs and OEIDs on behalf of each entity and notify designated contacts in the HIOS system, while in a second wave of communication we will notify all active users in the HPOES module that the identifiers have been deactivated.

We requested industry feedback on our assumptions and estimates regarding the deactivation of the HPIDs and OEIDs. We received support from commenters for our proposal that we would conduct the deactivation at HHS. Commenters suggested we notify several individuals on record at each company in case turnover had occurred. In Section II. E. of this final rule, we describe the deactivation process and communication strategy we will employ.

Regulations impose administrative costs on private entities, such as the time needed to read and interpret a proposed rule, and we included estimates for the costs associated with the review of our documents. We assumed that commenters on the proposed rule would be representative of HIPAA covered entities and their business associates—primarily health plans, health care clearinghouses, health care providers, and vendors. However, it was not possible to quantify or estimate the number of entities, or number of individuals within each entity, who would participate in reviewing the proposed rule. Our best method of estimation was premised on the number of organizations that submitted comments on previous HIPAA standards and operating rules-related regulations as well as organizations that had participated in NCVHS hearings. HHS has received comments from approximately 100 to 150 commenters on past HIPAA regulations, while a similar number of organizations testify at or listen to NCVHS hearings. We acknowledged our assumptions may be imperfect and might result in an under- or -overstatement of the cost calculation for the review of the proposed rule, and we also recognized that the proposed rule might affect various types of covered entities in different ways, thus influencing the numbers of individuals or entities that may have read the proposed rule. For purposes of our estimate, we assumed that each reviewer would read approximately 50 percent of the proposed rule. We estimated that multiple individuals from 150 entities would read the proposed rule and that the key readers would likely be the information systems manager and legal staff. Using the wage information from the BLS for Computer and Information Systems managers for insurance carriers (Code 11-3021), we estimated that the cost of reviewing the proposed rule would be $70.07 per hour, including overhead and fringe benefits ( https://www.bls.gov/oes/current/oes113021.htm ). Assuming an average reading speed, we estimated that it would take approximately 2.5 hours for a person to review half of the proposed rule. For each reviewer, the estimated cost was projected to be $175.17 (2.5 hours × $70.7), and we estimated the total industry cost of reviewing the proposed rule to be $175 × 150 reviewers = $26,250. We received no comments on this section of the proposed rule.

We were not required to provide alternatives for our proposal in the December 2018 proposed rule because we did not provide a full regulatory impact analysis. Furthermore, we fully discussed our reasons for proposing to rescind the HPID and OEID. However, we did consider several alternatives before making our proposal, including the effects of these alternatives. We provided our rationale for not selecting these options in accordance with OMB Circular A-4, which directs agencies to consider, among other things, a range of regulatory and non-regulatory alternatives, including different choices defined by statute, different compliance dates, market-oriented approaches, and different enforcement methods.

We considered allowing covered entities to apply for and use the HPID or OEID voluntarily for their own purposes, or between willing trading partners, but rejected this option because there had been no demand for the use of these identifiers. Industry clearly stated that there was no business use case for the HPID and OEID and there was no anticipated benefit or savings from their use in HIPAA transactions or for other purposes. A voluntary model employing the HPID and OEID likely would have resulted in confusion and disagreement between trading partners, thereby also likely engendering costs.

At the May 3, 2017 NCVHS hearing, two commenters suggested that HHS consider alternative uses of the HPID, such as placing it on health insurance identification cards to assist with better understanding of patient coverage and benefits (including its use in patient medical records to help clarify a patient's healthcare benefit package). A commenter stated that the HPID could be used for enforcement or certification of compliance of health plans.

As we have noted, the statute requires us to adopt a standard unique health plan identifier. HHS remains open to industry and NCVHS discussion and recommendations for appropriate business case(s) that meet the requirements of administrative simplification and we will explore options for a more effective standard unique health plan identifier.

We did not receive any comments on these proposals, nor were any alternatives offered.

In accordance with the provisions of Executive Order 12866, this final rule was reviewed by the Office of Management and Budget.

For the reasons set forth in the preamble, the Department of Health and Human Services amends 45 CFR part 162 to read as follows:

This is a summary of the Commission's Report and Order and Modification to Section 214 Authorizations, WC Docket No. 18-155; FCC 19-94, adopted on September 26, 2019, and released on September 27, 2019. The full text copy of this document may be obtained at the following internet address: https://docs.fcc.gov/public/attachments/FCC-19-94A1.pdf.

1. In the 1980s, after the decision to break up AT&T, the Commission adopted regulations detailing how access charges were to be determined and applied by LECs when IXCs connect their networks to the LECs' networks to carry telephone calls originated by or terminating to the LECs' customers. Those regulations also established a tariff system for access charges that mandates the payment of tariffed access charges by IXCs to LECs. In passing the Telecommunications Act of 1996 (the 1996 Act), Congress sought to establish “a pro-competitive, deregulatory national policy framework” for the United States' telecommunications industry in which implicit subsidies for rural areas were replaced by explicit ones in the form of universal service support. In response, the Commission began the process of reforming its universal service and ICC systems.

2. In the 2011 USF/ICC Transformation Order (76 FR 73830, Nov. 29, 2011), the Commission took further steps to comprehensively reform the ICC regime and established a bill-and-keep methodology as the ultimate end state for all intercarrier compensation. As part of the transition to bill-and-keep, the Commission capped most ICC access charges and adopted a multi-year schedule for moving terminating end office charges and some tandem switching and transport charges to bill-and-keep.

3. In the USF/ICC Transformation Order, the Commission found that the transition to bill-and-keep would help reduce access stimulation, and it also attacked access arbitrage directly. The Commission explained that access stimulation was occurring in areas where LECs had high switched access rates because LECs entering traffic-inflating revenue sharing agreements were not required to reduce their access rates to reflect their increased volume of minutes. The Commission found that, because access stimulation increased access minutes-of-use and access payments (at constant per-minute-of-use rates that exceed the actual average per-minute cost of providing access), it also increased the average cost of long-distance calling. The Commission explained that “all customers of these long-distance providers bear these costs, even though many of them do not use the access stimulator's services, and, in essence, ultimately support businesses designed to take advantage of . . . above-cost intercarrier compensation rates.” The Commission, therefore, found that the terminating end office access rates charged by access- stimulating LECs were “almost uniformly” unjust and unreasonable in violation of section 201(b) of the Communications Act of 1934, as amended (the Act).

4. To reduce financial incentives to engage in wasteful arbitrage, the Commission adopted rules that identify those LECs engaged in access stimulation and required that such LECs lower their tariffed access charges. Under our current rules, to be considered a LEC engaged in “access stimulation,” a LEC must have a “revenue sharing agreement,” which may be “express, implied, written or oral” that “over the course of the agreement, would directly or indirectly result in a net payment to the other party (including affiliates) to the agreement,” in which payment by the LEC is “based on the billing or collection of access charges from interexchange carriers or wireless carriers.” The LEC must also meet one of two traffic triggers. An access-stimulating LEC either has “an interstate terminating-to-originating traffic ratio of at least 3:1 in a calendar month, or has had more than a 100 percent growth in interstate originating and/or terminating switched access minutes-of-use in a month compared to the same month in the preceding year.” An access-stimulating rate-of-return LEC is required by our current rules to reduce its tariffed terminating switched access charges by adjusting those rates to account for its projected high traffic volumes. An access-stimulating competitive LEC must reduce its terminating switched access charges to those of the price cap carrier with the lowest switched access rates in the state.

5. The record makes clear that these rules were an important step toward reducing access stimulation and implicit subsidies in the ICC system. Before the rules were adopted, Verizon estimated that access arbitrage cost IXCs between $330 million and $440 million annually. By contrast, IXCs estimate that access arbitrage currently costs IXCs between $60 million and $80 million annually. In addition, the record shows that the current access stimulation rules have effectively discouraged rate-of-return LEC access stimulation activity. The access-stimulating LECs identified in the record are all competitive LECs. No rate-of-return LECs have been identified as engaging in an access stimulation scheme.

6. Terminating end office access rates have now been transitioned to bill-and-keep for price cap LECs and competitive LECs that benchmark their rates to price cap LECs, and by July 1, 2020, they will transition to bill-and-keep for rate-of-return LECs and the competitive LECs that benchmark to them. Price cap incumbent LEC terminating tandem switching and transport charges likewise have transitioned to bill-and-keep when such a LEC is the tandem provider and it, or an affiliated incumbent LEC, is the terminating end office LEC. As a result, terminating end office charges are no longer driving access stimulation.

7. At issue in this proceeding are arbitrage schemes that take advantage of those access charges that remain in place for those types of terminating tandem switching and transport services which, unlike end office switching charges, have not yet transitioned or are not transitioning to bill-and-keep. Access stimulators typically operate in those areas of the country where tandem switching and transport charges remain high and are causing intermediate access providers, including centralized equal access (CEA) providers, to be included in the call path.

8. CEA providers are a specialized type of intermediate access provider that were formed about 30 years ago to implement long-distance equal access obligations ( i.e., permitting end users to use 1+ dialing to reach the IXC of their choice) and to aggregate traffic for connection between rural incumbent LECs and other networks, particularly those of IXCs. Three CEA providers are currently in operation—Iowa Network Services, Inc. d/b/a Aureon Network Services (Aureon), South Dakota Network, LLC (SDN), and Minnesota Independent Equal Access Corporation (MIEAC). When the Commission authorized Aureon's creation as a CEA, it adopted a mandatory use requirement that requires IXCs that deliver traffic to the LECs subtending the Aureon tandem to deliver the traffic to the CEA tandem, rather than indirectly through another intermediate access provider or directly to the subtending LEC. The SDN authorization also includes a similar mandatory use requirement. MIEAC's authorization does not provide for mandatory use.

9. In 2018, to address current access stimulation schemes, the Commission adopted the Access Arbitrage Notice (83 FR 30628, June 29, 2018) and proposed to reduce access arbitrage by making the party that chooses the call path responsible for the cost of delivering the call to the access-stimulating LEC. The proposed rules offered a two-prong solution. Under the first prong, an access-stimulating LEC could choose to be financially responsible for calls delivered to its network so it, rather than IXCs, would pay for the delivery of calls to the LEC's end office, or the functional equivalent. Under the second prong, an access-stimulating LEC could choose to accept direct connections either from the IXC or from an intermediate access provider of the IXC's choice, allowing the IXC to bypass intermediate access providers selected by the access-stimulating LEC. The Commission reasoned that, if the access-stimulating LEC were made responsible for paying the costs of delivering calls to its end office, or if the LEC had to accept a more economically rational direct connection to its end office for high volumes of calls, it would be incentivized to move traffic more efficiently. In the Access Arbitrage Notice, the Commission also sought comment on possible revisions to the definition of access stimulation as well as on additional alleged ICC arbitrage schemes and ways to reduce them.

10. In this document, we adopt rules aimed at eliminating the financial incentives to engage in access arbitrage created by our current ICC system. Under our existing rules, IXCs must pay tandem switching and transport charges to access-stimulating LECs and to intermediate access providers chosen by the access-stimulating LEC to carry the traffic to the LEC's end office or functional equivalent. This creates an incentive for intermediate access providers and access-stimulating LECs to increase tandem switching and transport charges. The result, as AT&T explains, is that “ billions of minutes of long distance traffic are routed through a handful of rural areas, not for any legitimate engineering or business reasons, but solely to allow the collection and dispersal of inflated intercarrier compensation revenues to access-stimulating LECs and their partners, as well as intermediate providers.”

11. Commenters offer evidence that there are at least 21 competitive LECs currently involved in access stimulation. Although there are access-stimulating LECs operating in at least 11 different states, there is wide agreement that the vast majority of access-stimulation traffic is currently bound for LECs that subtend Aureon or SDN. To put the number of access stimulation minutes in perspective, AT&T observes that “twice as many minutes were being routed per month to Redfield, South Dakota (with its population of approximately 2,300 people and its 1 end office) as is routed to all of Verizon's facilities in New York City (with its population of approximately 8,500,000 people and its 90 end offices).” Sprint explains, that while Iowa contains less than 1% of the U.S. population, it accounts for 11% of Sprint's long-distance minutes-of-use and 48% of Sprint's total switched access payments across the United States. Similarly, South Dakota contains 0.27% of the U.S. population, but accounts for 8% of Sprint's total switched access payments across the United States.

12. The record shows that CEA providers' tariffed charges for tandem switching and tandem switched transport serve as a price umbrella for services offered on the basis of a commercial agreement by other providers, meaning the commercially negotiated rates need only be slightly under the “umbrella” CEA provider rate to be attractive to those purchasing the service(s). As AT&T explains:

Some access stimulation LECs (either directly or via least cost routers) offer commercial arrangements for transport. The rates in these agreements, however, are well above the economic cost of providing transport. Because the only other available alternative is the tariffed transport rate of the intermediate provider selected by the LEC (such as a centralized equal access provider), that tariffed rate acts as a “price umbrella,” which permits the access stimulation LEC to overcharge for transport service. The access stimulation LEC or least cost router can attract business merely by offering a slight discount from the applicable tariffed rate for tandem switching and transport. Because the Commission's rules disrupt accurate price signals, tandem switching and transport providers for access stimulation have no economic incentives to meaningfully compete on price.

13. To reduce further the financial incentive to engage in access stimulation, we adopt rules requiring an access-stimulating LEC to designate in the Local Exchange Routing Guide (LERG) or by contract the route through which an IXC can reach the LEC's end office or functional equivalent and to bear financial responsibility for all interstate and intrastate tandem switching and transport charges for terminating traffic to its own end office(s) or functional equivalent whether terminated directly or indirectly. These rules effectuate a slightly modified version of the first prong of the access-stimulation rule proposed by the Commission in the Access Arbitrage Notice and properly align financial incentives by making the access-stimulating LEC responsible for paying for the part of the call path that it dictates.

14. After reviewing the record, we decline to adopt the second prong of the Commission's proposal that would allow an access-stimulating LEC to avoid paying for tandem switching and tandem switched transport by permitting an IXC to directly or indirectly connect to the LEC and pay for that connection, rather than having the LEC pay the cost of receiving traffic. We are persuaded by the substantial number of commenters that argue that adoption of the first prong of the proposal will better address the problem of access stimulation and that allowing LECs the alternative of permitting direct or indirect connections paid for by the IXC would create a substantial risk of stranded investment.

15. We also modify our definition of access stimulation to capture the possibility of access stimulation occurring even without a revenue sharing agreement between a LEC and a high-volume calling service provider.

16. The approach we adopt in this document—shifting financial responsibility for all tandem switching and transport services to access-stimulating LECs for the delivery of terminating traffic from the point where the access-stimulating LEC directs an IXC to hand off the LEC's traffic—has broad support in the record. This shift in financial responsibility from IXCs to access-stimulating LECs for intermediate access provider charges and access-stimulating LECs' tandem switching and tandem switched transport charges is aimed at addressing the changes that have occurred in access arbitrage since the adoption of the USF/ICC Transformation Order. The record shows that billions of minutes of access arbitrage every year are being directed to access-stimulating LECs using expensive tandem switching providers for conference calling and other services offered for “free” to the callers, but at an annual cost of $60 million to $80 million in access charges to IXCs and their customers. Although only a small proportion of consumers call access-stimulating LECs, the costs are spread across an IXC's customers. As a result, long-distance customers are forced to bear the costs of “free” conferencing and other services that only some customers use. In attacking this form of cross-subsidization, we follow the lead set by the Commission in the USF/ICC Transformation Order.

17. Our new rules eliminate the incentives that access-stimulating LECs have to switch and route stimulated traffic inefficiently, including by using intermediate access providers to do the same. Because IXCs currently pay the LECs' tandem switching and tandem switched transport charges and the intermediate access provider's access charges, the terminating LEC has an incentive to inflate its own charges, and is, at a minimum, insulated from the cost implications of its decision to use a given intermediate access provider. Indeed, in some cases the terminating LEC may not be merely indifferent to what interconnection option is most efficient but may have incentives to select less efficient alternatives if doing so would lead it to benefit, whether directly or on a corporation-wide basis.

18. As AT&T observes, making access-stimulating LECs financially responsible for traffic terminating to their end offices will be effective because it will “reduce the ability of terminating LECs and access stimulators to force IXCs, wireless carriers, and their customers [to subsidize], via revenues derived from inefficient transport routes, the costs of access stimulation schemes.” In addition, the costs of access stimulation are not limited to the access charges paid by IXCs and their customers. Costs also are incurred by IXCs in trying to avoid payments to access stimulation schemes whether through litigation or seeking regulatory intervention.

19. Commenters argue that placing the financial responsibility on the access-stimulating LEC for delivery of traffic to its end office, or functional equivalent, will reduce inefficiencies created by access-stimulating LECs that subtend intermediate access providers and choose to work with high-volume calling service providers that locate equipment in remote rural areas without a reason independent of arbitraging the current ICC system. We agree with these commenters. As CenturyLink explains, this change will “properly recognize[] that the responsibility to pay for the traffic delivery should be assigned to the entity that stimulated the traffic in the first place.”

20. We find unpersuasive arguments that as a result of the USF/ICC Transformation Order and the Aureon tariff investigation proceeding (addressing rate setting by CEA providers), there are few to no problems arising from arbitrage that need to be solved today. The record shows that access stimulation schemes are operating in at least 11 states and are costing IXCs between $60 million and $80 million per year in access charges. The record also shows that access stimulation is particularly concentrated where CEA providers Aureon and SDN received authority from the Commission to construct their CEA networks. In granting that authority, the Commission included a mandatory use requirement that requires IXCs to route telecommunications traffic through the CEA tandems to terminate traffic to the participating LECs that subtend those tandems. The CEA providers' tariffed rates to terminate traffic “are premised on typical volumes to high-cost rural exchanges.” We find that these high CEA rates create a price umbrella: A price that other intermediate access providers can “slightly undercut” but still make a profit. As a result, “AT&T and other carriers routinely discover that carriers located in remote areas with long transport distances and high transport rates enter into arrangements with high volume service providers . . . for the sole purpose of extracting inflated ICC rates due to the distance and volume of traffic.” The record shows that access stimulation also occurs in states not served by CEA providers but to a lesser extent.

21. Nor do we find persuasive arguments that access stimulation is beneficial. The Joint CLECs, for example, allege that more than 5 million people “enjoy the benefits” of high-volume services hosted by them on a monthly basis. For its part, HD Tandem claims that “75 million unique users this year . . . have called voice application services at the rural LECs that HD Tandem terminates to.” The Joint CLECs argue that “nonprofit organizations, small businesses, religious institutions, government agencies, and everyday Americans . . . will undoubtedly suffer if these [access stimulation] services are put out of business.” Other parties, including several thousand individual users of “free” conferencing and other high-volume calling services, have filed comments expressing concern that such “free-to-the-user” services will be eliminated by this action and urging us to retain the current regulatory system in light of the purported benefits such “free” services provide. As commenters explain, these arguments are both self-serving and inconsistent with our goals in reforming the ICC system. The benefits of “free” services enjoyed by an estimated 75 million users of high-volume calling services are paid for by the more than 455 million subscribers of voice services across the United States, most of whom do not use high-volume calling services. According to Sprint, for example, less than 0.2% of its subscribers place calls to access stimulation numbers, but 56% of Sprint's access charge payments are paid to access-stimulating LECs—leaving IXC customers paying for services that the vast majority will never use. We find that while “free” services are of value to some users, these services are available at no charge because of the implicit subsidies paid by IXCs, and their costs are ultimately born by IXC customers whether those customers benefit from the “free” services or not.

22. Access-stimulating LECs also argue that the Commission should find beneficial their use of access-stimulation revenue to subsidize rural broadband network deployment. These implicit subsidies are precisely what the Commission sought to eliminate in the USF/ICC Transformation Order, as directed by Congress in the 1996 Act. Indeed, the Commission addressed similar arguments in the USF/ICC Transformation Order, where it found that although “expanding broadband services in rural and Tribal lands is important, we agree with other commenters that how access revenues are used is not relevant in determining whether switched access rates are just and reasonable in accordance with section 201(b).” As Sprint explains, “this sort of implicit cross-subsidy is contrary to the principle that access rates should reasonably reflect the cost of providing access service, and that subsidies, including universal service support, be explicit and `specific.'” Competition also suffers because access-stimulation revenues subsidize the costs of high-volume calling services, granting providers of those services a competitive advantage over companies that collect such costs directly from their customers.

23. Eliminating the implicit subsidies that allow these “free” services will lead to more efficient provision of the underlying services and eliminate the waste generated by access stimulation. After the implicit subsidies are eliminated, customers who were using the “free” services, and who value these services by more than the cost of providing them, will continue to purchase these services at a competitive price. Thus, the value of the services purchased by these customers will exceed the cost of the resources used to produce them, which implies both that customers benefit from purchasing these services and that network resources are used efficiently. Further, users who do not value these services by as much as the cost of providing them, including those who undertook fraudulent usages designed only to generate access charges, will no longer purchase them in the competitive market. Thus, valuable network resources that were used to provide services that had little or no value will no longer be assigned to such low-value use, increasing efficient utilization of network resources.

24. We find misplaced or, in other cases, simply erroneous, the arguments offered by the Joint CLECs in an expert report by Daniel Ingberman that argues economic efficiency is enhanced when access-stimulated traffic is brought to a network with otherwise little traffic volume because this allows the small network to obtain scale economies. The result, Ingberman claims, would be substantially lower prices for local end users, producing relatively large increases in consumer surplus. In contrast, if the traffic were placed on a network that already carries substantial traffic volumes, the scale effects are minimal, and so the benefits to end users of lower prices are also minimal. Thus, according to Ingberman, siting new traffic on smaller (rural) networks, as access stimulators do, must raise economic well-being.

25. We reject Ingberman's claim that lower consumer prices from siting new traffic on a smaller network are likely to be significant, if they arise at all. The Commission's high cost universal service program provides support to carriers in rural, insular, and high cost areas as necessary to ensure that consumers in such areas pay rates that are reasonably comparable to rates in urban areas. Thus, smaller rural carrier rates for end users will always be comparable to larger carrier rates whether the smaller carrier is a rural incumbent LEC that receives universal service support or is a competitive LEC that does not receive such support but competes on price against a rural incumbent LEC that does. Given reasonably comparable rates, siting new traffic on a smaller network is not likely to significantly lower, and may make no difference to, rates charged to end users of the smaller network.

26. Ingberman also fails to establish the validity of his claim that increased access traffic on a LEC network would result in lower prices to its end-user customers. In particular, he has not established that as a practical matter, increasing access traffic on a LEC's network lowers the LEC's cost of serving its end-user customers. Without lowering such costs, a LEC would have no incentive to lower prices to its end-user customers. The access-stimulating LEC would simply continue to charge its profit-maximizing price to its retail customers, while pocketing the windfall from access arbitrage.

27. We find several other fundamental problems with the Ingberman Report. Although Ingberman acknowledges that IXCs pay terminating switched access charges (which are often paid both to intermediate access providers and access-stimulating LECs), his model assumes bill-and-keep pricing. That is, Ingberman assumes away the central issue this proceeding must deal with: The use of intercarrier compensation charges to fund access stimulators' operations. Consequently, his analysis does not take into account the cost that access stimulators impose on larger networks and their subscribers. It also fails to model access-stimulating services, beyond assuming they bring traffic to the smaller network. But these services are delivered in highly inefficient ways, relying on unusually expensive calling paths. These services also are sold in highly inefficient ways, almost always below the efficient cost of delivery of such services. Nor does Ingberman's model account for the time and effort taken to generate traffic, often fraudulent, for access stimulation, and to develop the complex schemes and contracting relationships that generate access-stimulating LEC profits. Moreover, there is no recognition of the cost of IXCs engaging in otherwise unnecessary, and hence, wasteful, efforts to identify fraudulent traffic or to find ways to avoid the abuses of our tariffing regime perpetrated by access stimulators. Similarly, the model provides no means for estimating the efficiency costs of allowing terminating switched access charges that not only exceed marginal cost, but also total costs. These are all significant costs for which any model should account.

28. Further, we find misplaced arguments by some commenters that there is no evidence that IXCs' customers will benefit from reduced access arbitrage. Reducing the costs created by access arbitrage by reducing the incentives that lead carriers to engage in such arbitrage is a sufficient justification for adopting our rules, regardless of how IXCs elect to use their cost savings. The Commission has recognized for many years that long-distance service is competitive, and we generally expect some passthrough of any decline in costs, marginal or otherwise. To the extent passthrough does not occur, IXC shareholders are presently subsidizing users of access-stimulating services, which distorts economic efficiency in the supply of those services. Even if we cannot precisely quantify the effects of past reforms (given the many simultaneously occurring technological and marketplace developments), as a matter of economic theory, we expect some savings to flow through to IXCs' customers or the savings to be available for other, beneficial purposes. For example, IXCs will no longer have to expend resources in trying to defend against access-stimulation schemes, and consumers will be provided with more-accurate pricing signals for high-volume calling services. More fundamentally, these commenters fail to explain how a policy that enables a below-cost (sometimes zero) price for services supplied by high-volume calling service providers and general telephone rates that subsidize these high-volume calling services could be expected to produce efficient production and consumption outcomes.

29. We also find no merit to arguments that IXCs will be able to seize new arbitrage opportunities as a result of the rules we adopt in this document. Aureon, for example, argues that IXCs will be “incentivized to increase arbitrage traffic volume,” without explaining how IXCs would accomplish such a task. The Joint CLECs argue that if the new rules decrease the use of “free” conference calling services, IXCs will realize greater use of their own conference calling products and greater revenue while also benefiting from reduced access charges. If our amended rules force “free” service providers to compete on the merits of their services, rather than survive on implicit subsidies, that outcome is to be welcomed because it would represent competition driving out inefficient suppliers in favor of efficient ones. Nothing we do in this document shifts arbitrage opportunities to the IXCs or to any provider; we are attacking implicit subsidies that allow high-volume calling services to be offered for free, sending incorrect pricing signals and distorting competition. In addition, as AT&T explains, IXCs have engaged in a decade-long campaign to end the practice of access arbitrage because they and their customers are the targets of such schemes.

30. AT&T expresses concern that IXCs will be obligated to deliver access-stimulated traffic to remote tandem locations and to pay the related excessive transport fees for connecting to that remote tandem if access-stimulating LECs decide to build new end office switches in remote areas, and their affiliates decide to deploy new tandem switches in similarly remote locations. AT&T therefore suggests that we limit the IXCs' delivery obligations to only those tandem switches in existence as of January 1, 2019. AT&T does not point to any existing legal requirements that an IXC must agree to a new point of interconnection designated by an access-stimulating LEC should the access-stimulating LEC unilaterally attempt to move the point of interconnection. As such, we decline to address AT&T's hypothetical concern at this time.

31. Various commenters have described a practice wherein calls routed to an access-stimulating LEC are blocked or otherwise rejected by the high-volume calling service provider served by the access-stimulating LEC and/or the terminating LEC, but then successfully completed when rerouted. We make clear that in the case of traffic destined for an access-stimulating LEC, when the access-stimulating LEC is designating the route to reach its end office and paying for the tandem switching and transport, the IXC or intermediate access provider may consider its call completion duties satisfied once it has delivered the call to the tandem designated by the access-stimulating LEC, either in the LERG or in a contract.

32. We also reject several suggestions that we should not move forward with this rulemaking. For example, commenters suggest that we issue a further notice of proposed rulemaking to seek additional comment on the issues raised in the proceeding, decline to adopt changes to address access arbitrage, refocus the proceeding to ensure that tandem switching and tandem switched transport access charges remain available to subsidize their access stimulation-fueled operations, or “revisit” the rule's trigger and explore a different, mileage-based mechanism. The Joint CLECs, a set of access-stimulating LECs, go as far as arguing that we should close this docket without taking action. For its part, T-Mobile suggests that we address ongoing arbitrage and fraud by enforcing current rules without further rulemaking. We disagree with these suggestions; the record shows that access arbitrage schemes have adapted to the reforms adopted in 2011. We will not postpone adoption of amendments to our rules that address the way today's access arbitrage schemes use implicit subsidies in our ICC system to warp the economic incentives to provide service in the most efficient manner.

33. We also decline to adopt Wide Voice's alternative suggestions that we either cap transport miles charged by access-stimulating LECs to 15 miles or hold access-stimulating LECs responsible only for transport mileage charges, not switching charges. In support of these positions, Wide Voice alleges, without offering any support, that transport charges are the primary driver of access stimulation. Nor does Wide Voice explain how a mileage cap would reduce access arbitrage. By contrast, the record demonstrates that reversing the financial responsibility for both transport and tandem switching charges will help eliminate access arbitrage. Either of these proposals would, however, benefit Wide Voice which does not charge for transport.

34. We also decline to adopt Aureon's suggestion that would allow IXCs to charge their subscribers an extra penny per minute for calls to access stimulators. There is no evidence that access-stimulating calls currently cost a penny per minute, so the proposal would simply trade one form of inefficiency for another. We are also concerned that adopting such an overbroad proposal to address the stimulation of tandem switching and transport charges would confuse consumers and unnecessarily spill into, and potentially negatively affect, the operation of the more-competitive wireless marketplace and the choices consumers have made when selecting wireless calling plans.

35. At the same time, we remain unwilling to adopt an outright ban on access stimulation. As the Commission concluded in the USF/ICC Transformation Order, prohibiting access stimulation in its entirety or finding that revenue sharing is a per se violation of section 201 of the Act would be an overbroad solution “and no party has suggested a way to overcome this shortcoming.” Instead, the Commission chose to prescribe narrowly focused conditions for providers engaged in access stimulation. We adhere to that view in this document because there is still no suggestion as to how a blanket prohibition could be tailored to avoid it being overbroad. We believe the rules we adopt in this document strike an appropriate balance between addressing access stimulation and the use of intermediate access providers while not affecting those LECs that are not engaged in access stimulation. The rules adopted in this document are not overbroad. They are consistent with the policies adopted in the USF/ICC Transformation Order and are the product of notice and record support.

36. Having concluded that a modified version of the first prong of the Commission's proposal in the Access Arbitrage Notice will adequately address current access arbitrage practices, we decline to adopt the second prong of the proposal. Prong 2 of that proposal would have provided access-stimulating LECs an opportunity to avoid financial responsibility for the delivery of traffic from an intermediate access provider to the access-stimulating LEC's end office or functional equivalent by offering to accept direct connections from IXCs or an intermediate access provider of the IXC's choice. The record offers no support for the adoption of Prong 2 as drafted, and we agree with various concerns raised in the record that access-stimulating LECs could nullify any benefits of this approach. For example, Prong 2 could allow access-stimulating LECs to avoid financial responsibility by operating in remote locations where direct connections would be prohibitively expensive or infeasible and alternative intermediate access providers may be nonexistent or prohibitively expensive. Under such circumstances, Prong 2 would be ineffective at curbing the practice while increasing disputes over the terms of direct connections before the courts and the Commission.

37. Likewise, even where establishing a direct connection may initially appear cost-effective, the ease with which access stimulation traffic may be shifted from one carrier to another undermines the value of making the investment. After a direct connection premised on high traffic volume has been established at an access-stimulating LEC's original end office, the access-stimulating LEC or providers of access-stimulating services could move traffic to a different and more distant end office, thus stranding the financial investment to build that direct connection with minuscule traffic volume after the access stimulation activity has shifted locations. We conclude that requiring a shift in financial responsibility for the delivery of traffic from the IXC to the access-stimulating LEC end office or its functional equivalent is sufficient, at this time, to address the inefficiencies caused by access stimulation relating to intermediate access providers. The attractiveness of these schemes will necessarily wane once the responsibility of paying for any intermediate access provider's charges is shifted to access-stimulating LECs. As a general matter, we acknowledge that companies can currently, and will continue to be able to, negotiate individual direct connection agreements and leave the possibility of a policy pronouncement regarding direct connections for consideration as part of our broader intercarrier compensation reform efforts.

38. In the Access Arbitrage Notice, the Commission sought comment on moving to a bill-and-keep regime all terminating tandem switching and tandem switched transport rate elements for access-stimulating LECs or the intermediate access providers they choose. Contrary to the claims of some commenters, the rules we adopt in this document are consistent with our goal of moving toward bill-and-keep. They prohibit access-stimulating LECs from recovering their tandem switching and transport costs from IXCs, leaving access-stimulating LECs to recover their costs from high-volume calling service providers that use the LECs' facilities. Likewise, the rules we adopt treat access-stimulating LECs as the customers of the intermediate access providers they select to terminate their traffic and allow those intermediate access providers to recover their costs from access-stimulating LECs. Thus, we allow intermediate access providers to continue to apply their tandem switching and transport rates to traffic bound for access-stimulating LECs, but those rates must be charged to the access-stimulating LEC, not the IXC that delivers the traffic to the intermediate access provider for termination.

39. In recognition of the evolving nature of access-stimulation schemes, we amend the definition of “access stimulation” in our rules to include situations in which the access-stimulating LEC does not have a revenue sharing agreement with a third party. In so doing, we leave the current test for access stimulation in place. That test requires, first, that the involved LEC has a revenue sharing agreement and, second, that it meets one of two traffic triggers. The LEC must either have an interstate terminating-to-originating traffic ratio of at least 3:1 in a calendar month or have had more than a 100% growth in interstate originating and/or terminating switched access minutes-of-use in a month compared to the same month in the preceding year. We add two, alternate tests that require no revenue sharing agreement. First, under our newly amended rules, competitive LECs with an interstate terminating-to-originating traffic ratio of at least 6:1 in a calendar month will be defined as engaging in access stimulation. Second, under our newly amended rules, we define a rate-of-return LEC as engaging in access stimulation if it has an interstate terminating-to-originating traffic ratio of at least 10:1 in a three calendar month period and has 500,000 minutes or more of interstate terminating minutes-of-use per month in an end office in the same three calendar month period. These factors will be measured as an average over the same three calendar-month period. Our decision to adopt different triggers for competitive LECs as compared to rate-of-return LECs reflects the evidence in the record that there are structural barriers to rate-of-return LECs engaging in access stimulation, and at the same time, a small but significant set of rate-of-return LECs can experience legitimate call patterns that would trip the 6:1 trigger.

40. We adopt these alternate tests for access stimulation because, as one commenter explains, as terminating end office access charges move toward bill-and-keep, “many entities engaged in access stimulation have re-arranged their business to circumvent the existing rules by reducing reliance on direct forms of revenue sharing.” Or, as another commenter explains, the revenue sharing trigger is creating incentives for providers to “become more creative in how they bundle their services to win business and evade” the rules. We also are concerned about a prediction in the record that if we were to adopt the rules originally proposed in the Access Arbitrage Notice, without more, access-stimulating LECs will cease revenue sharing in an effort to avoid triggering the proposed rules, even while continuing conduct that is equivalently problematic.

41. A number of commenters describe ways that carriers and their high-volume calling service partners may be profiting from arbitrage where their actions may not appear to fit the precise provisions of our revenue sharing requirement. For example, T-Mobile reports that some LECs create “shell companies to serve as their intermediate provider, and then force carriers to send traffic to that intermediate provider, who charges a fee shared with the ILEC.” Aureon posits that tandem provider HD Tandem could receive payment from a LEC or an IXC to provide intermediate access service and then share its revenues directly with its high-volume calling service affiliate without sharing any revenue with the terminating LEC. Also, an access-stimulating LEC that is co-owned with a high-volume calling service provider could retain the stimulated access revenues for itself, while letting the high-volume calling service provider operate at a loss. In those situations, the LEC would not directly share any revenues. Likewise, Inteliquent suggests that there would be no revenue sharing if the same corporate entity that owns a high-volume calling service provider also owns an end office, or if switch management is outsourced to a high-volume calling platform or its affiliate. In those cases, the revenue would remain under the same corporate entity and not come from separate entities sharing “billing or collection of access charges from interexchange carriers or wireless carriers.” Because of these concerns, we find it reasonable and practical to adopt additional triggers in our rules that define access stimulation to exist when a LEC has a highly disproportionate terminating-to-originating traffic ratio. We, therefore, keep the revenue sharing requirement of § 61.3(bbb)(1)(i) as is, and adopt two alternative prongs of the definition of access stimulation that do not require revenue sharing.

42. Some commenters have “no objection if the revenue sharing aspect of the definition is eliminated” and if the Commission were to rely solely on traffic measurement data. However, the record shows that the current definition has accurately identified LECs engaged in access stimulation. We therefore find that the better course is to leave the current test in place and add two alternate tests for access stimulation that do not include revenue sharing, and have higher traffic ratios.

43. A Higher Traffic Ratio Is Justified When No Revenue Sharing Agreement Is in Place. In adopting two alternative tests for access stimulation that do not include a revenue sharing component, we are mindful of the importance of identifying those LECs engaging in access stimulation while not creating a definition that is overbroad, resulting in costly disputes between carriers and confusion in the market. First, in an effort to be conservative and not overbroad, we adopt an alternative test of the access-stimulation definition for competitive LECs, which requires a higher terminating-to-originating traffic ratio than the 3:1 ratio currently in place. We find that a 6:1 or higher terminating-to-originating traffic ratio for competitive LECs provides a clear indication that access stimulation is occurring, even absent a revenue sharing agreement. We could establish a smaller ratio; however, we agree with Teliax that tightening the ratio “would most certainly catch normal increases in traffic volumes,” and thus be overinclusive. We also want to protect non-access-stimulating LECs from being misidentified. We have selected a 6:1 ratio, which is twice the existing ratio and is the ratio recommended by Inteliquent. The 6:1 ratio should help to capture any access-stimulating competitive LECs that decide to cease revenue sharing, as well as any access-stimulating competitive LECs that already may have ceased revenue sharing, or that currently are not doing so.

44. This larger ratio is sufficient to prevent the definition from ensnaring competitive LECs that have traffic growth solely due to the development of their communities. We do not find compelling Wide Voice's suggestion that an access-stimulating LEC that exceeds the 6:1 ratio would have an incentive to try to game the system by obtaining more originating traffic, such as 8YY traffic, to stay below the 6:1 ratio or move traffic to other LECs to avoid tripping the trigger. All LECs, not just access-stimulating LECs, should have an incentive to obtain more traffic, whether it's originating 8YY traffic or terminating traffic. However, there is no evidence that access-stimulating LECs are currently able to avoid the 3:1 trigger by simply carrying more originating traffic or moving traffic, and Wide Voice offers no evidence that doing so will be a simple matter for LECs seeking to avoid the 6:1 ratio that we are adding to capture LECs engaging in this scheme without a revenue sharing agreement. We do not include a threshold for number of minutes of interstate traffic carried by a competitive LEC to meet the test for an access-stimulating competitive LEC because there is no justification in the record for a specific number.

45. We adopt a separate alternative test for determining whether a rate-of-return LEC is engaged in access stimulation in part to address NTCA and other commenters' concerns that “eliminating the revenue sharing component of the definition of access stimulation . . . could immediately have the inadvertent effect of treating innocent RLECs as access stimulators when they do not engage in that practice at all.” In adopting a second alternate access-stimulation definition applicable only to rate-of-return LECs we recognize that the majority of those carriers are small, rural carriers with different characteristics than competitive LECs. For example, unlike access-stimulating LECs that only serve high-volume calling providers, rate-of-return carriers, which serve small communities and have done so for years, would not be able to freely move stimulated traffic to different end offices. In addition, as NTCA explains, such carriers also may have traffic ratios that are disproportionately weighted toward terminating traffic because their customers have shifted their originating calls to wireless or VoIP technologies. This trend is reflected in the Commission's Voice Telephone Services Report-June 2017. We also agree with NTCA that small rate-of-return LECs' traffic may be more sensitive to seasonal changes in the ratio of their terminating-to-originating access minutes because of the unique geographical areas they serve and thus may have spikes in call volume with a greater impact on traffic ratios than would be experienced by carriers with a larger base of traffic spread over a larger, more populated, geographical area.

46. The second alternate definition we adopt strikes an appropriate balance. It recognizes the potential that small, non-access-stimulating, rate-of-return carriers may have larger terminating-to-originating traffic ratios than competitive LECs and “avoid[s] penalizing innocent LECs that may have increased call volumes due to new economic growth,” for example. NTCA shows that application of a 6:1 ratio to rate-of-return LECs would identify as access-stimulating LECs approximately 4% of rate-of-return LECs that participate in the National Exchange Carrier Association (NECA) pool even though they are not actually engaged in access stimulation. NTCA and AT&T therefore recommend that, for rate-of-return carriers, we adopt a second test for access stimulation that is based on a 10:1 traffic ratio combined with traffic volume that exceeds 500,000 terminating interstate minutes per end office per month averaged over three months. We agree with NTCA and AT&T that their proposed 10:1 trigger is reasonable given that a small but significant number of rate-of-return LECs that are apparently not engaged in access arbitrage would trip the 6:1 trigger; the structural disincentives for rate-of-return LECs to engage in access stimulation; and the lack of evidence that rate-of-return LECs are currently engaged in access stimulation. We also think that a threshold of 500,000 terminating interstate minutes per month is a reasonable trigger for rate-of-return LECs. By its very nature, access stimulation involves termination of a large number of minutes per month, as such, excluding the smallest rate-of-return carriers from the definition is a sensible approach. Thus, for rate-of-return LECs, we adopt a 10:1 ratio as demonstrating access stimulation activity when combined with more than 500,000 interstate terminating minutes-of-use per month, per end office, averaged over three calendar months.

47. We also agree with NTCA that “any access stimulation trigger be based on actual minutes of use as measured by the LEC traversing the switch, rather than by reference to billing records.” This is how the ratio is currently calculated and it should remain the case that when calculating the current 3:1 terminating-to-originating traffic trigger, or the 6:1 or 10:1 triggers adopted in this Order, carriers must look to the actual minutes traversing the LEC switch. This combination of a traffic ratio and a minutes-of-use threshold for rate-of-return carriers is consistent with the Commission's approach in the USF/ICC Transformation Order to ensure that the definition is not over-inclusive but is enforceable. In addition, we find that measuring this ratio and the average monthly minutes-of-use threshold over three months will adequately account for the potential seasonal spikes in calling volumes identified by NTCA.

48. Although no party has raised concerns about how the existing 3:1 traffic ratio is calculated, we received specific questions about calculating the 6:1 ratio. We clarify that all traffic should be counted regardless of how it is routed. Contrary to Wide Voice's assertions, originating traffic using tariffed access services counts as does originating traffic using a “least cost router under negotiated billing arrangements outside of the access regime.” All originating and terminating interstate traffic should be counted in determining the interstate terminating-to-originating traffic ratio. This also means that all terminating traffic from all sources, not just one IXC, should be counted in determining a traffic ratio.

49. We recognize the possibility that a LEC may experience significant traffic growth and if, for example, such customers include one or more inbound call centers, the result could be that its traffic exceeds one of the new traffic ratio triggers we adopt. We are not aware of any similar problems occurring with the existing 3:1 ratio and the record contains no evidence of that happening. Nonetheless, consistent with the Commission's decision in the USF/ICC Transformation Order, should a non-access-stimulating LEC experience a change in its traffic mix such that it exceeds one of the ratios we use to define access-stimulating LECs, that LEC will have “an opportunity to show that they are in compliance with the Commission's rules.” In addition, as Sprint correctly points out if a LEC, not engaged in arbitrage, finds that its traffic will exceed a prescribed terminating-to-originating traffic ratio, the LEC may request a waiver. We find these alternatives will protect non-access-stimulating LECs from false identification as being engaged in access stimulation.

50. Identifying When a LEC Is No Longer Engaged in Access Stimulation. Because we are adding two alternate bases for identifying access stimulation, we also must modify the rule that defines when a LEC is no longer engaged in access stimulation. The existing rule provides that a LEC is no longer engaged in access stimulation when it ceases revenue sharing. We amend our rules to provide that a competitive LEC that has met the first set of triggers for access stimulation will continue to be considered to be engaging in access stimulation until it terminates all revenue sharing arrangements and does not meet the 6:1 terminating-to-originating traffic ratio; and a competitive LEC that has met the 6:1 ratio will continue to be considered to be engaging in access stimulation until it falls below that ratio for six consecutive months, and it does not qualify as an access-stimulating LEC under the first set of triggers.

51. We amend our rules to provide that a rate-of-return LEC that has met the first set of triggers for access stimulation will continue to be considered to be engaging in access stimulation until it: (1) Terminates all revenue sharing arrangements; (2) does not meet the 10:1 terminating-to-originating traffic ratio; and (3) has less than 500,000 minutes of average monthly interstate terminating traffic in an end office (measured over the three-month period). A rate-of-return LEC that has met the 10:1 ratio and 500,000 minutes-per-month threshold will continue to be considered to be engaging in access stimulation until its traffic balance falls below that ratio and that monthly traffic volume for six consecutive months, and it does not qualify as an access-stimulating LEC under the first set of triggers. We find that a six-month time frame will accurately signal a change in either a competitive LEC's or a rate-of-return LEC's business practices rather than identify a short-term variation in traffic volumes that may not repeat in the following months.

52. We also make a minor modification to § 61.3(bbb)(4) which states that LECs engaged in access stimulation are subject to revised interstate switched access rates. When the rule was adopted in the USF/ICC Transformation Order, the Commission stated that revised interstate switched access rates applied to both rate-of-return LECs and competitive LECs. However, the rule adopted in that Order, § 61.3(bbb)(2), refers to the rate regulations applicable only to rate-of-return carriers. In the Access Arbitrage Notice, we asked for comments on the rules, and received no comments on this issue. We therefore modify (now relabeled) § 61.3(bbb)(4) to refer to the rate regulations for competitive LECs as well as rate-of-return LECs. The revised § 61.3(bbb)(4) therefore specifies that a LEC engaging in access stimulation is subject to revised interstate switched access charge rules under § 61.26(g) (for competitive LECs), or §§ 61.38 and 69.3(e)(12) (for rate-of-return LECs).

53. In response to comments, the rule we adopt specifically states that a LEC that is not itself engaged in access stimulation, but is an intermediate access provider for a LEC engaged in access stimulation, shall not itself be deemed a LEC engaged in access stimulation. In addition, some commenters express concern that the breadth of the proposed rules may pose adverse consequences for non-access-stimulating LECs. NTCA cautions that “LECs that do not qualify as access stimulators under the Commission's rules but which subtend the same CEA as those who do [may] be inadvertently affected by the Commission's reforms.” We do not foresee such an issue with the rules. The rules we adopt in this document do not alter the financial responsibilities of any LEC that is not engaged in access stimulation regardless of whether it subtends the same CEA provider as an access-stimulating LEC. We are nevertheless concerned about arguments that high-volume calling providers may not be considered end users. Thus, we make clear that, for purposes of the definition of access stimulation, a high-volume calling provider, such as a “free” conference calling provider or a chat line provider, is considered an end user regardless of how that term is defined in an applicable tariff. Thus, a LEC that provides service to such a high-volume calling provider will be considered a rate-of-return local exchange carrier serving end user(s), or a Competitive Local Exchange Carrier serving end user(s).

54. Having amended our access stimulation rules as they relate to the relationship among access-stimulating LECs, “interexchange carriers,” and “intermediate access providers” for the delivery of access-stimulated traffic, we agree with AT&T on the need to define those terms to provide clarity. We therefore define “interexchange carrier” to mean “a retail or wholesale telecommunications carrier that uses the exchange access or information access services of another telecommunications carrier for the provision of telecommunications” (emphasis added). We define “intermediate access provider” to mean “any entity that carries or processes traffic at any point between the final Interexchange Carrier in a call path and a local exchange carrier engaged in access stimulation, as defined by § 61.3(bbb).” In adopting this definition, we recognize the Joint CLECs' concern that there may be more than one intermediate access provider in a call path. The use of the phrases “any entity” and “any point” is broad enough to allow for more than one intermediate access provider between the final IXC and the LEC even though we question the likelihood of this hypothetical. And the access-stimulating LEC will choose the intermediate access provider(s) to deliver the traffic to the LEC. The adopted definitions are slightly different than those proposed in the Access Arbitrage Notice to help ensure clarity going forward. We have amended our rules under part 51-Interconnection and have also added conforming rules applicable to access-stimulating LECs to the relevant tariffing sections since these rules will require tariff changes. We believe these changes to the rules proposed in the Access Arbitrage Notice will allow better ease of reference.

55. Moreover, we encourage self-policing of our access-stimulation definition and rules among carriers. IXCs and intermediate access providers, including CEA providers, likely will have traffic data to demonstrate infractions of our rules, such as a LEC meeting the conditions for access stimulation but not filing a notice or revised tariffs as discussed in the Implementation section below. If an IXC or intermediate access provider has evidence that a LEC has failed to comply with our access-stimulation rules, it could file information in this docket, request that the Commission initiate an investigation, file a complaint with the Commission, or notify the Commission in some other manner.

56. Finally, we reject several arguments from commenters regarding the definition of access stimulation. First, we reject Wide Voice's suggestion that we abandon the current definition of access stimulation entirely because its usefulness has “largely expired with the sunsetting of the end office.” This sentiment is belied by commenters that confirm the current definition has worked as intended to identify LECs engaged in access stimulation. We likewise reject Wide Voice's proposed alternative, which would define access stimulation as “traffic originating from any LEC behind a CEA tandem with total minutes (inbound + outbound) in excess of 1000 times the number of its subscribers in its service area.” We agree with commenters that Wide Voice's “comments are obviously intended to further arbitrage activities, rather than stop them.” Wide Voice is certified as a competitive LEC in dozens of states, but has not built out facilities in Iowa, South Dakota, and Minnesota. By suggesting that we abandon our current definition of access stimulation in favor of one that applies only in the states with CEA tandems, Wide Voice and others would be free to stimulate access charges without federal regulatory restraint in the 47 states that do not have CEA tandems. Furthermore, the mathematical formula proposed by Wide Voice is too broad because by including originating minutes in the formula, it is not focused on eliminating terminating access stimulation.

57. Second, FailSafe and Greenway suggest that the current access-stimulation definition be made more restrictive. They both argue that the existing traffic growth trigger in the access-stimulation definition—which requires that there is more “than a 100 percent growth in interstate originating and/or terminating switched access minutes-of-use in a month compared to the same month in the preceding year”—could have the unintended consequence of labelling competitive LECs as engaged in access stimulation “simply by beginning to provide services” and thus presumably increasing their volume of traffic from no traffic to some traffic. This suggestion and the concern these parties raise fail for at least two reasons. First, the 100% traffic growth trigger compares a month's switched access minutes with the minutes-of-use from the same month in the previous year. A competitive LEC that was not in business the previous year would not qualify because the absence of any monthly demand in the prior year renders this comparison inapposite, and the requisite calculation to satisfy the trigger cannot be performed. Second, the 100% traffic growth trigger is only one part of that portion of the definition. The competitive LEC must also have a revenue sharing agreement, which presumably a new non-access-stimulating competitive LEC in Greenway's hypothetical would not have. Neither Greenway nor FailSafe cites any LEC that has been misidentified as engaged in access stimulation under the current definition using the traffic growth trigger. They also do not suggest how they would revise the current access-stimulation definition to restrict its possible application and avoid the misidentification they suggest might result. We find that this hypothetical concern is already addressed by the existing rule. FailSafe is similarly concerned that this rule would identify emergency traffic to its cloud service as access stimulation traffic. This concern is unwarranted: our rules do not define types of traffic, but rather define certain LECs as being engaged in access stimulation. Additionally, LECs that suffer legitimate traffic spikes from events such as natural disasters will have the opportunity to present relevant evidence if they file waiver requests with the Commission.

58. Third, HD Tandem takes the opposite view and argues that the access-stimulation definition should be broadened “to apply to any carrier with a call path that assesses access charges of any kind (shared or not) and unreasonably refuses to direct connect, or its functional equivalent, with other carriers with reciprocity.” Similarly, CenturyLink proposes that we shift financial responsibility to any LEC, including those not engaged in access stimulation, that declines a request for direct connection for terminating traffic. Both of these suggestions go beyond the issue of access stimulation and the current record does not provide a sufficient basis to evaluate the impact of either proposal on LECs that are not engaged in access stimulation. And, as discussed above, we do not adopt the Commission's direct connection proposal, at this time, and also find that nothing in the record would justify HD Tandem's suggested expansion of the access-stimulation definition.

59. Fourth, we reject Inteliquent's and HD Tandem's suggestions that we add a mileage cap to the access-stimulation definition. When Inteliquent proposed the 6:1 ratio, it also proposed that the access stimulation definition should require that “[m]ore than 10 miles [be] billed between the tandem and the serving end office,” and that the end office have interstate terminating minutes-of-use of “at least 1 million in one calendar month.” We are including a minutes-of-use trigger with the new alternate 10:1 traffic ratio for rate-of-return LECs. However, we decline to add a cap on transport mileage because as HD Tandem admits, a mileage cap “would not eliminate the use of intercarrier compensation to subsidize `free' or `pay services.” In supporting a mileage cap of 15 miles, Wide Voice claims that such a cap would reduce the estimated $80 million cost of access stimulation by about $54 million. However, Wide Voice's calculations appear to assume that all transport costs are eliminated not just those that exceed 15 miles, and assumes that access-stimulating LECs and the intermediate access providers that serve them would not simply adjust their business practices to take into account such a cap.

60. Indeed, a mileage cap would invite access stimulation because a LEC could avoid being designated as an access-stimulating LEC and incurring the corresponding financial responsibly by limiting its transport charges to avoid tripping the mileage cap trigger. For example, a definition of access stimulation that included a requirement that to fit the definition a LEC bill for 10 miles or more of transport would allow a LEC to bill for just under 10 miles of transport while having a terminating-to-originating traffic ratio of 1000:1. Furthermore, a mileage cap would not deter access-stimulating LECs that receive transport from intermediate access providers that do not charge mileage, such as Wide Voice and HD Tandem.

61. We also reject arguments that there was insufficient notice for the addition of additional triggers for the definition of access stimulation. The Access Arbitrage Notice clearly sought comment on changing the definition of access stimulation. Indeed, there was express notice that the Commission could adopt a rule “remov[ing] the revenue sharing portion of the definition” of access stimulation, leaving a definition triggered by either a 3:1 traffic ratio or 100% year-over-year traffic growth alone. We are not persuaded that commenters have identified concerns about a rule relying on the 6:1 or 10:1 traffic ratios that they should not already have recognized the need to raise in response to that express notice.

62. Some commenters have complained that not enough data was submitted in the record in this proceeding. However, in the Access Arbitrage Notice, the Commission asked whether there are “additional, more-current data available to estimate the annual cost of arbitrage schemes to companies, long distance rate payers, and consumers in general”; whether there are “data available to quantify the resources being diverted from infrastructure investment because of arbitrage schemes”; whether “consumers are indirectly affected by potentially inefficient networking and cost recovery due to current regulations and the exploitation of those regulations”; and whether there are “other costs or benefits” the Commission should consider. The Commission asked for the costs and benefits of its two-prong approach, and the “costs and benefits of requiring a terminating provider that requires the use of a specific intermediate access provider to pay the intermediate access provider's charges.” The Commission could not have been more clear in its request for data. If the commenters are dissatisfied with the amount of data provided to the Commission, it certainly was not due to the Commission not asking for it.

63. Contrary to several parties' assertions, the Commission's adoption of the 6:1 traffic trigger is not arbitrary and capricious. This section of the Order reviews the numerous viewpoints expressed by the parties to this proceeding and explains our rationales for our decisions. We have considered and provided reasons for rejecting a mileage cap, despite the fact that Peerless and West's emphasis on the mileage cap arguably is self-serving. Likewise, Peerless and West's alleged concern for the impact of our decision on “innocent LECs” has been addressed several times in this Order. Our concern about “innocent rate-of-return LECs” and our review of the data submitted by parties such as NTCA, AT&T, and Inteliquent supports the adoption of the 6:1 and 10:1 traffic ratios. We also have explained ways that “innocent LECs,” that have traffic patterns that would cause them to surpass the traffic ratios, may seek assistance from the Commission. As Peerless and West admit, a court's review of an agency's action is a narrow one. Peerless and West cannot discount our extensive review and consideration of the numerous viewpoints expressed in this proceeding, and our explanation for rejecting or accepting each viewpoint. The fact that Peerless and West may disagree with this agency's decision is not dispositive. The Commission has gone to great lengths to explain the facts found and to articulate a rational connection with the choices made.

64. Self-Help. Our focus here is on reducing access stimulation, and no commenters have argued that limiting self-help remedies will further that goal. As the Commission did in the USF/ICC Transformation Order, we caution parties to be mindful “of their payment obligations under the tariffs and contracts to which they are a party.” We discourage providers from engaging in self-help except to the extent that such self-help is consistent with the Act, our regulations, and applicable tariffs. Intercarrier compensation disputes involving payment for stimulated traffic have become commonplace, with IXCs engaging in self-help by withholding payment to access-stimulating LECs. As a result, several commenters request that we address self-help remedies in access arbitrage disputes, and others would like us to disallow self-help more broadly. We decline those requests. Disallowing self-help, whether in the access stimulation context or not, would be inconsistent with existing tariffs, some of which permit customers to withhold payment under certain circumstances.

65. We also decline to adopt other tariff-related recommendations made by commenters. AT&T, for example, suggests that we “eliminate tariffing of tandem and transport access services on access stimulation traffic.” We believe this suggested solution is unnecessary in light of the more narrowly drawn solutions to access stimulation that we adopt in this document. Furthermore, there are protections provided by tariffs—such as the ability to dispute charges described above—that should not be eliminated as a result of an unexplored suggestion made in passing in this proceeding. AT&T also suggests that we “make clear that LECs can include in their tariffs reasonable provisions that allow the LECs to decline to provide [telephone lines and/or access services] to a chat/conference provider.” We decline to suggest tariff language changes in this proceeding beyond those necessary to implement our rule changes. Each carrier is responsible for its own tariffs and tariff changes are subject to the tariff review process.

66. Mileage Pumping and Daisy Chaining. “Mileage pumping” occurs when a LEC moves its point of interconnection, on which its mileage-based, per-minute-of-use transport charges are based, further away from its switch for no reasonable business purpose other than to inflate mileage charges. “Daisy chaining” occurs when a provider adds superfluous network elements so as to reclassify certain network functions as tandem switching and tandem switched transport, for which terminating access is not yet scheduled to be moved to bill-and-keep. Because there is nothing in the record to indicate that mileage pumping and daisy chaining are significant issues outside of the access stimulation context, we decline to adopt a new rule specifically addressing these issues. We believe that placing the financial obligation for tandem switching and tandem switched transport charges on the access-stimulating LEC should eliminate the practices of mileage pumping and daisy chaining.

67. Because our new rules will encourage access-stimulating LECs to make more efficient decisions, the rules should negate the need for T-Mobile's proposal that would establish multiple interconnection points nationwide where providers could choose to connect either directly or indirectly, and HD Tandem's suggestion that LECs engaged in access stimulation be required to offer what HD Tandem terms an “internet Protocol Homing Tandem.” Both proposals would require us to decide what would be efficient for affected providers without the benefit of specific, relevant information about their networks. Therefore, we decline to adopt these proposals. Any remaining abuses of illegitimate mileage pumping or daisy chaining activities after the implementation of our new and modified access-stimulation rules can be addressed on a case-by-case basis in complaints brought pursuant to section 208 of the Act.

68. Finally, we do not address the merits of several other issues raised in the record because they are outside the scope of this proceeding or are insufficiently supported with data and analysis. For example, some parties used this proceeding as an opportunity to air grievances related to a dispute that was twice before the South Dakota Public Utilities Commission. We agree with the South Dakota 9-1-1 Coordination Board and SDN that it is not appropriate to raise a state dispute regarding efforts to implement next generation 911 service in this rulemaking proceeding in the hope that the Commission will include language in this Order to address that particular dispute.

69. A few parties argue that we should adopt rules regarding the rates providers charge for certain services. For example, the Joint CLECs suggest that we adopt a “uniform rate for access-stimulating traffic.” Yet those carriers provide no justification for adopting a specific rate, nor does the record otherwise provide a basis to fill that void. The Commission previously adopted rate caps for access-stimulating LECs and the result was a reduction in the cost of arbitrage but not its elimination. We therefore take a different approach in this Order. The rules we adopt in this document do not affect the rates charged for tandem switching and transport. HD Tandem and Wide Voice's arguments that we do not address “rate disparities” or “equalize compensation” are misplaced. Our goal is to eliminate the incentive for access-stimulation schemes to take advantage of rate disparities and unequal compensation opportunities, and we do so by reversing the financial responsibility for paying tandem switching and transport, from IXCs to access-stimulating LECs, but the rates for those services are unaffected. We find that by reversing the financial responsibility, customers will receive more accurate price signals and implicit subsidies will more effectively be reduced. We are not persuaded that continuing to allow access-stimulating LECs to collect revenues from access charges, even if “equalized,” would eliminate the arbitrage problem. To the contrary, such action would provide access-stimulating LECs with a protected revenue stream and thus encourage arbitrage. HD Tandem also suggests that “it would be problematic for the Commission to involve itself in consumer pricing.” We agree, and the rules we adopt in this document do not require any changes to consumer prices.

70. We amend our part 51 rules governing interconnection and our part 69 rules governing tariffs to effectuate the requirements that: (1) Access-stimulating LECs assume financial responsibility for terminating interstate or intrastate tandem switching and tandem switched access transport for any traffic between the LEC's terminating end office or equivalent and the associated access tandem switch; and (2) access-stimulating LECs provide notice of their assumption of that financial responsibility to all affected parties. To ensure that parties have enough time to come into compliance with our rules, we adopt a reasonable transition period for parties to implement any necessary changes to their tariffs and to adjust their billing systems. This Order and the rules adopted herein, except the notice provisions which require approval from the Office of Management and Budget (OMB) pursuant to the Paperwork Reduction Act (PRA), will become effective 30 days after publication of the summary of this Order in the Federal Register . We give access-stimulating LECs and affected intermediate access providers an additional 45 days to come into compliance with those rules.

71. With respect to the new notice provisions in our rules, which require OMB approval pursuant to the PRA, within 45 days of PRA approval, each existing access-stimulating LEC must provide notice to the Commission and to any affected IXCs and intermediate access providers that the LEC is engaged in access stimulation and accepts financial responsibility for all applicable terminating tandem switching and transport charges. As proposed in the Access Arbitrage Notice, notice to the Commission shall be accomplished by filing a record of its access-stimulating status and acceptance of financial responsibility in the Commission's Access Arbitrage docket on the same day that the LEC issues such notice to the IXC(s) and intermediate access provider(s). This 45-day tariffing and notice time period will begin to run for new access-stimulating LECs from the time they meet the definition of a LEC engaged in access stimulation.

72. Some commenters have suggested that a longer transition for the transfer of financial responsibility is warranted. We disagree. There is no reason to allow access-stimulating LECs and the intermediate access providers that they choose to use to continue to benefit from access arbitrage schemes. A transition period of 45 days after the effective date of the rules—or, in the case of a LEC that is newly deemed to meet the definition of a LEC engaged in access stimulation, 45 days after that date—is sufficient time for access-stimulating LECs and the affected intermediate access providers to amend their billing practices and to make any tariff changes deemed necessary, and to prepare to close out then-current billing cycles under previous arrangements at that billing cycle's natural end. Commenters have argued that a mid-cycle billing change would not be administrable, but a mid-cycle change is not required by these rules.

73. In particular, several commenters argue the draft Order leaves too little time for access-stimulating LECs to come into compliance, suggesting that an 18-24 month period is warranted to allow them to change their business models and avoid the definitional triggers. We first note that there is a distinction between how much time it will take for an entity to come into compliance with the rules and how much time it will take to change their business model in light of the change in the rules. There is contrary evidence in the record, suggesting that access-stimulating LECs are able to relocate their traffic in days, if not hours, rather than weeks and months. Further, nothing in this Order either requires or impedes an access-stimulating LEC's ability to make changes to their business model should they choose to do so in light of the rules we adopt in this document. In addition, the rules provide a clear process by which an access-stimulating LEC can transition out of being categorized as such. We also reject FailSafe's request for a three-year phaseout of access charges due to independent telephone companies' provision of services related to emergency communication. FailSafe has not identified any concrete examples under which a carrier's provision of services related to emergency communication would have or will trip the new definition(s) of access stimulation, and the record is devoid of any support of FailSafe's concern.

74. The Joint CLEC's further claim that the 45 day time period for implementation leaves “LECs with no other option but to flash cut their primary revenue stream, going from having a lawful means of earning profits to having a significant cost center in a matter of days.” As a result, the Joint CLECs argue that the new access stimulation rules violate the Takings Clause of the Fifth Amendment of the Constitution because they “eliminate[] access stimulation as a revenue stream for the CLECs and provide[] no realistic alternative means of compensation for them.” We consider the precedent on government takings and find that this argument is without merit. In the Penn Central case, the Supreme Court explained that in evaluating regulatory takings claims, three factors are particularly significant: (1) The economic impact of the government action on the property owner; (2) the degree of interference with the property owner's investment-backed expectations; and (3) the “character” of the government action. Those factors do not support a regulatory takings argument here.

75. First, we are not persuaded by the record here that the economic impact of our rules is likely to be so significant as to demonstrate a regulatory taking. Our rules leave carriers free to respond in a number of ways—including in combination—such as by changing end-user rates to account for the access-stimulating LEC assuming financial responsibility for the intermediate access providers' charges for delivering traffic under our rules; or by self-provisioning or selecting an alternative intermediate access provider or route for traffic where that would be a less costly option, or by seeking revenue elsewhere, for example, through an advertising-supported approach to offering free services or services provided at less than cost. Although certain commenters cite declarations purporting to demonstrate that the new rules would “both wipe out the value of [prior] investments and prevent the CLECs from operating as financially viable enterprises,” we find them unpersuasive. The declarations do not meaningfully grapple with the viability of the range and potential combination of alternatives for responding to the new rules through any analysis of the details of cost data or other information associated with such scenarios, instead simply asserting that customers inevitably will shift to other providers. Insofar as the declarations also express other concerns about the administration of the rules without justification for, or quantification of, the likely effects, we likewise find them unpersuasive. These shortcomings are particularly notable given “the heavy burden placed upon one alleging a regulatory taking.” In addition, we are not persuaded that declarations from three access-stimulating competitive LECs and three “free” conference calling providers would call into question our industry-wide rules in any event. Should a given carrier actually be able to satisfy the “heavy burden” of demonstrating that the rule would result in a regulatory taking as applied to it, it is free to seek a waiver of the rules.

76. Second, our actions do not improperly impinge upon investment-backed expectations of carriers that engaged in access stimulation under the 2011 rules. The Commission has been examining how best to address problems associated with access stimulation for years, taking incremental steps to address it as areas of particular concern arise and evolve. This has included seeking comment even on proposals that would declare access stimulation per se unlawful, at least in certain scenarios. Indeed, the record reveals that under the existing rules many disputes have arisen regarding intercarrier compensation obligations in the scenarios our new rules are designed to directly address. In light of this context, we are not persuaded that any reasonable investment-backed expectations can be viewed as having been upset by our actions here.

77. Finally, consistent with the reasoning of Penn Central, we find the character of the governmental action here cuts against a finding of a regulatory taking, given that it “arises from [a] public program adjusting the benefits and burdens of economic life to promote the common good,” rather than involving a “physical invasion” by government. In particular, our action in this document substantially advances the legitimate governmental interests under the Act of discouraging inefficient marketplace incentives, promoting efficient communications traffic exchange, and guarding against implicit subsidies contrary to the universal service framework of section 254 of the Act.

78. Turning to the other implementation issues. No commenter opposed the proposed notice requirements, and others agreed that having access-stimulating LECs notify the Commission at the same time they notify affected intermediate access providers and IXCs will provide transparency and also address concerns raised in the record about confusion over whether a LEC is an access-stimulating LEC. Affected carriers have had ample notice of these changes, and the PRA approval process will provide additional time for carriers to prepare before the notice requirement comes into effect.

79. We further amend our rules to require that when a LEC ceases engaging in access stimulation in accordance with § 61.3(bbb), the LEC must also notify affected IXCs and intermediate access providers of its status as a non-access-stimulating LEC and of the end of its financial responsibility. We also require that an access-stimulating LEC publicly file a record of the end of its access-stimulating status and the end of its financial responsibility in the Commission's Access Arbitrage docket on the same day that the LEC issues such notice to the IXC(s) and intermediate access provider(s). We decline to further prescribe the steps necessary to reverse the financial responsibility and leave it to the parties to work with each other to make the necessary changes in a reasonable period of time.

80. We believe these changes will reduce complications that could arise from coterminous dates for giving notice and for shifting financial responsibility. We decline to further prescribe any elements of this notice obligation and instead leave it to the parties to clearly and publicly manifest their status and intent when providing the requisite notice.

81. Implementation Concerns Are Surmountable. We are not persuaded that there are implementation concerns significant enough for us to reject the Commission's proposal regarding the shifting of financial responsibility as an undue burden on providers. In its comments, SDN correctly observes that our rules may well require SDN to amend its tariff so that SDN can bill access-stimulating LECs for its services. There is no reason to believe that this will be onerous, and SDN has not provided evidence of material incremental costs of making the necessary changes to implement billing arrangements with subtending access-stimulating LECs.

82. SDN expresses concern that disputes may arise about whether certain traffic is access-stimulation traffic. However, traffic will be classified based on the status of the terminating LEC—if the terminating LEC is an access-stimulating LEC, all traffic bound for it will be subject to the changed financial responsibility. We expect that the new requirements for such carriers to self-identify will prevent the vast majority of potential disputes between IXCs and intermediate access providers concerning whether the LEC to which traffic is bound is engaged in access stimulation. An intermediate access provider's duty to cease billing an IXC for tandem switching and transport services attaches only after receiving written notice from an access-stimulating LEC. Thus, if a LEC engaged in access stimulation fails to notify the intermediate access provider (either due to a good faith belief that it does not meet the definition of being an access-stimulating LEC or simply failing to provide the notice, for whatever reason), an IXC's recourse is against the LEC, not the intermediate access provider.

83. In their comments, the Joint CLECs assert that the explanation in the Access Arbitrage Notice of the intermediate access provider's costs that must be borne by an access-stimulating LEC is vague. We disagree. The Joint CLECs appear primarily to take issue with the use of the word “normally” in such an explanation but fail to recognize that the explanation that they quote is from the text of the Access Arbitrage Notice, not the proposed rule. The proposed rule refers to “the applicable Intermediate Access Provider terminating tandem switching and terminating tandem switched transport access charges relating to traffic bound for the access-stimulating local exchange carrier.” It is a relatively simple matter to determine the charges applicable to intermediate access service being provided by an intermediate access provider, particularly when the relevant service has already been provided for years (albeit with a different billed party).

84. We are similarly unpersuaded that the implementation issues raised by the Joint CLECs create issues of real concern. The issues raised by the Joint CLECs include: (1) Identifying the relevant intermediate access provider when an access-stimulating LEC connects to IXCs through multiple such providers; (2) determining how financial responsibility should be split when an intermediate access provider provides more than the functional equivalent of tandem switching and tandem switched transport in the delivery of the call; and (3) the CEA providers' rates. We nonetheless clarify that an access-stimulating LEC is responsible for all of the charges for tandem switching and tandem switched transport of traffic from any intermediate access provider(s) in the call path between the IXC and the access-stimulating LEC.

85. The Commission last attacked access arbitrage in the 2011 USF/ICC Transformation Order, as part of comprehensive reform of the ICC system. The Commission undertook ICC reform informed by three principles and interrelated goals, all of which inform the Order we adopt in this document. First, the Commission sought to ensure that the entities choosing what network to use would have appropriate incentives to make efficient decisions. In that regard, in the USF/ICC Transformation Order, the Commission found that “[b]ill-and-keep brings market discipline to intercarrier compensation because it ensures that the customer who chooses a network pays the network for the services the subscriber receives. . . . Thus, bill-and-keep gives carriers appropriate incentives to serve their customers efficiently.” As one of the first steps toward bill-and-keep, the Commission adopted a multi-year transition period to move terminating end office access charges to bill-and-keep.

86. Second, the Commission endeavored to eliminate implicit subsidies, consistent with the mandates of section 254 of the Act. The Commission recognized the historical role access charges played in advancing universal service policies, finding that “bill-and-keep helps fulfill the direction from Congress in the 1996 Act that the Commission should make support explicit rather than implicit” by requiring any such subsidies, if necessary, be provided explicitly through policy choices made by the Commission under section 254 of the Act.

87. Third, the Commission weighed the regulatory costs of the steps it took in reforming the ICC regime. In so doing, it recognized that “[i]ntercarrier compensation rates above incremental cost” were enabling “much of the arbitrage” that was occurring. The Commission adopted rules aimed at reducing an access-stimulating LEC's ability to unreasonably profit from providing access to high-volume calling services. Although the Commission concluded that it might theoretically have been possible to establish some reasonable, small intercarrier compensation rate based on incremental cost, it rejected that approach because doing so would lead to significant regulatory burdens to identify and establish the appropriate rate(s), an approach the Commission sought to avoid in adopting a move toward a bill-and-keep methodology. Instead, to address access stimulation, the Commission capped the end office termination rates access-stimulating LECs could charge.

88. Based on our review of the record, we find that requiring IXCs to pay the tandem switching and tandem switched transport charges for access-stimulation traffic is an unjust and unreasonable practice that we have authority to prohibit pursuant to section 201(b) of the Act. In 2011, when the Commission adopted the access-stimulation rules, its focus was on terminating end office access charges and it found that the high access rates being collected by LECs for access-stimulation traffic were unjust and unreasonable under section 201(b) of the Act. Building on that legal authority and the Commission's goals for ICC reform in the USF/ICC Transformation Order here, we extend that logic to the practice of imposing tandem switching and tandem switched transport access charges on IXCs for terminating access-stimulation traffic. We find that that practice is unjust and unreasonable under section 201(b) of the Act and is therefore prohibited.

89. In the USF/ICC Transformation Order, the Commission sought to ensure that the entities choosing the network and traffic path would have the appropriate incentives to make efficient decisions and recognized that ICC rates above cost enable arbitrage. The Commission also sought to eliminate implicit subsidies allowed by arbitrage, consistent with section 254 of the Act. Given changes in the access-stimulation “market” after 2011, the access-stimulation rules adopted as part of the broader intercarrier compensation reforms in the USF/ICC Transformation Order now fail to adequately advance those goals. Allowing access-stimulating LECs to continue to avoid the cost implications of their decisions regarding which intermediate access providers IXCs must use to deliver access-stimulated traffic to the LECs drives inefficiencies and leaves IXCs to pass the resultant inflated costs on to their customer bases. The rules we adopt in this Order, requiring the access-stimulating LEC to be responsible for paying those charges, counter the perverse incentives the current rules create for LECs to choose expensive and inefficient call paths for access-stimulation traffic and better advance the goals and objectives articulated by the Commission in the USF/ICC Transformation Order.

90. Of course, the Commission's focus on the importance of efficient interconnection did not begin with the USF/ICC Transformation Order. It can also be found, for example, in the initial Commission Order implementing the 1996 Act. In that Order, in considering telecommunications carriers' interconnection obligations, the Commission specified that carriers should be permitted to employ direct or indirect interconnection to satisfy their obligations under section 251(a)(1) of the Act “based upon their most efficient technical and economic choices.” The focus on efficient interconnection is consistent with Congressional direction to the Commission in, for example, section 256 of the Act which requires the Commission to oversee and promote interconnection by providers of telecommunications services that is not only “effective” but also “efficient.” By adopting rules crafted to encourage terminating LECs to make efficient choices in the context of access stimulation schemes, the rules are thus consistent with longstanding Commission policy and Congressional direction.

91. Likewise, the record reveals that the incentives associated with access stimulation lead to artificially high levels of demand, often in rural areas where such levels of demand are anomalous and largely unaccounted-for by existing network capabilities. This, in turn, can result in call completion problems and dropped calls. For a number of years, the Commission has sought to address concerns about rural call completion problems—a concern that Congress recently reinforced through its enactment of section 262 of the Act. Adopting rules that help mitigate call completion problems in rural (and other) areas thus also harmonizes our approach to access stimulation under section 201(b) with those broader policies.

92. We also conclude that our new rules are more narrowly targeted at our concerns regarding the terminating LECs' reliance on inefficient intermediate access providers in circumstances that present the greatest concern—those involving access stimulation—compared to other alternatives suggested in the record, such as adopting rules that would regulate the rates of access-stimulating LECs or of the intermediate access providers they rely on. The record does not reveal any rate benchmarking mechanism that would effectively address our concerns, and establishing regulatory mechanisms to set rates based on incremental cost, as some parties have suggested, would implicate the same administrability concerns that dissuaded the Commission from embarking on such an approach in the USF/ICC Transformation Order. We also are guided by past experience where attempts to address access stimulation through oversight of rate levels have had short-lived success that quickly was undone through new marketplace strategies by access-stimulating LECs.

93. To the extent that access stimulation activities have the effect of subsidizing certain end-user services—allowing providers to offer the services to their customers at no charge in many instances—we also conclude that regulatory reforms that eliminate those implicit subsidies better accord with the objectives of section 254 of the Act. Specifically, Congress directed that universal service support “should be explicit and sufficient to achieve the purposes” of section 254. Congress established a framework in section 254 for deciding not only how to provide support— i.e., explicitly, rather than implicitly—but also for deciding what to support. Any implicit subsidies resulting from access stimulation are based solely on the whims of the individual service providers, which are no substitute for the considered policy judgments the Commission makes consistent with the framework Congress established in section 254.

94. These same considerations also independently persuade us that it is in the public interest to adopt the access stimulation rules in this Order under section 251(b)(5) of the Act. The USF/ICC Transformation Order already “br[ought] all traffic within the section 251(b)(5) regime.” In other words, under that precedent “when a LEC is a party to the transport and termination of access traffic, the exchange of traffic is subject to regulation under the reciprocal compensation framework” of section 251(b)(5). And it clearly is traffic exchanged with LECs that is at issue here. Our rules govern financial responsibility for access services that traditionally have been considered “exchange access,” and providers of such services meet the definition of a LEC.

95. In particular, just as we conclude that our rules reasonably implement the “just and reasonable” framework of section 201(b) of the Act as workable rules to strengthen incentives for efficient marketplace behavior and advance policies in sections 251, 254, and 256 of the Act, we likewise conclude that they are in the public interest as rules implementing section 251(b)(5). The Commission explained in the USF/ICC Transformation Order that section 201(b)'s statement that “[t]he Commission may prescribe such rules and regulations as may be necessary in the public interest to carry out the provisions of this Act” gives the Commission broad “rulemaking authority to carry out the `provisions of this Act,' which include § [ ] 251.” Indeed, the Commission elaborated at length on the theory of its legal authority to implement section 251(b)(5) in the USF/ICC Transformation Order, which applies to our reliance on that authority here, as well.

96. We reject arguments that section 251 of the Act does not provide authority for our action here. Although the Joint CLECs contend the action here falls outside the scope of “reciprocal compensation” under section 251(b)(5) because it “deprives [certain] carriers of access revenues without providing any reciprocal benefit,” they approach the issue from an incorrect perspective. In evaluating whether a new approach to reciprocal compensation is in the public interest, the Act does not require us to ensure that each carrier receives some benefit from the change relative to the status quo. Furthermore, our actions here are one piece of a broader system of intercarrier compensation that takes the form of reciprocal arrangements among carriers. As part of this overall framework, carriers have packages of rights and obligations that, in some defined cases allow them to recover revenues from other carriers and in other cases anticipate recovery from end users. By this Order, we simply modify discrete elements of that overall framework. We thus reject claims that our actions here are not part of reciprocal compensation arrangements for purposes of section 251(b)(5).

97. Nor are we persuaded by arguments that section 251(b)(5) authority is absent here because the Commission “promised a bill-and-keep regime that is `technologically' and `competitively neutral' ” and our rules here allegedly fall short. As a threshold matter, this Order does not purport to adopt a bill-and-keep regime for access-stimulation traffic, but continues the Commission's efforts to address arbitrage or other concerns on an interim basis pending the completion of comprehensive intercarrier compensation reform. Agencies are free to proceed incrementally, “whittl[ing] away at them over time, [and] refining their preferred approach as circumstances change and they develop a more nuanced understanding of how best to proceed” rather than attempting to “resolve massive problems in one fell regulatory swoop.” Further, although this Order cites illustrative examples of the types of traffic and types of carriers that have been the focus of many access stimulation disputes, the rules we adopt apply by their terms whenever they are triggered, without regard to the content or type of traffic ( e.g., conference calling traffic or otherwise) and regardless of the size or location of the access-stimulating carrier.

98. Finally, even assuming arguendo that the specific Commission rules adopted to address access stimulation here were viewed as falling outside the scope of section 251(b)(5), our action would, at a minimum, fall within the understanding of the Commission's role under section 251(g) reflected the USF/ICC Transformation Order. As the Commission stated there, section 251(g) grandfathers historical exchange access requirements “until the Commission adopts rules to transition away from that system,” including through transitional rules that apply pending the completion of comprehensive reform moving to a new, permanent framework under section 251(b)(5). The access stimulation concerns raised here arise, in significant part, because of ways in which the Commission's planned transition to bill-and-keep is not yet complete and, in that context, we find it necessary to address problematic conduct that we observe on a transitional basis until that comprehensive reform is finalized.

99. We also find unpersuasive arguments that the proposed and existing access-stimulation rules are “discriminatory” because they treat access-stimulating LECs differently than other LECs. Section 202(a) of the Act prohibits carriers from “unjust or unreasonable discrimination in charges, practices, classifications, regulations, facilities, or services for or in connection with like communication service, directly or indirectly, by any means or device, or to make or give any undue or unreasonable preference or advantage to any particular person, class of persons, or locality, or to subject any particular person, class of persons, or locality to any undue or unreasonable prejudice or disadvantage.” It is neither unjust nor unreasonable to treat access-stimulating LECs differently from non-access-stimulating LECs. Section 202(a) does not apply to actions carriers take in compliance with requirements adopted by the Commission, particularly where, as here, the Commission finds those rules necessary under an analysis of what is “just and reasonable.” More generally, actions by the Commission are subject to the Administrative Procedure Act requirement that they must not be arbitrary and capricious, and courts have found only that the Commission “must provide adequate explanation before it treats similarly situated parties differently.” The existing access-stimulation rules adopted by the Commission in 2011, which treat access-stimulating LECs differently than other LECs, have been reviewed and approved by the Tenth Circuit Court of Appeals, which specifically held that the rules were not arbitrary and capricious and that the Commission had explained its rationale for the differing treatment. The rules we adopt in this document, treating access-stimulating LECs differently from other LECs, are similarly well-reasoned and justified.

100. Contrary to the Joint CLECs' claim, making the access-stimulating LEC, rather than the IXC, responsible for paying intermediate access provider(s)' terminating tandem access charges simply changes the party responsible for paying the CEA, or other intermediate access provider(s), for carrying that traffic. We make the party responsible for selecting the terminating call path responsible for paying for its terminating tandem switching and tandem switched transport. The act of stimulating traffic to generate excessive access revenues requires that we treat that traffic differently than non-stimulated traffic to address the unjust and unreasonable practices it fosters, as well as the implicit subsidies access stimulation creates. Further, we are not failing to recognize the potential impacts on CEA providers if access-stimulation traffic is removed from their networks. If a CEA provider's demand changes, the existing tariff rules, applicable to the calculation of a CEA provider's tariffed charges, will apply—on a nondiscriminatory basis.

101. Equally meritless is the Wide Voice claim that sections 201(b) and 251(b)(5) of the Act “permit the Commission to establish rate uniformity, not rate disparity, which is what would result were the Commission to make access stimulators switched access purchasers rather than switched access providers. . . . ” Nothing in the text of those provisions requires rates to be uniform, however. And, more fundamentally, shifting the responsibility for paying a rate does not change the rate. In addition, we are moving toward the stated goal of a bill-and-keep methodology, not toward establishing a rate for access-stimulation traffic. We make no changes to rates here and sections 201(b) and 251(b)(5) of the Act support our adoption of the modified access-stimulation rules in this Order. The Joint CLECs also argue that making access-stimulating LECs financially responsible for the terminating tandem switching and transport of traffic delivered to their end offices by adopting the Commission's Prong 1 proposal would violate the Tenth Circuit Court of Appeals' holding that section 252(d) of the Act reserves to the states the determination of carriers' network “edge.” Shifting the financial responsibility for the delivery of traffic to access-stimulating LEC end offices does not move the network edge or affect a state's ability to determine that edge. The Joint CLECs' argument is misguided. Section 252(d) governs “agreements arrived at through negotiation.” Just as the Commission's adoption of bill-and-keep as the ultimate end state for intercarrier compensation shifts the recovery of costs from carriers to end users, here we shift the recovery of costs associated with the delivery of traffic to an access-stimulating LEC's end office from IXCs to the LEC. Our determination to shift the recovery of costs associated with the delivery of traffic to an access-stimulating LEC's end office from IXCs to the LEC does not interfere with “agreements arrived at through negotiation” and therefore does not affect a state's rights or responsibilities under section 252 of the Act with respect to voluntarily negotiated interconnection agreements.

102. To facilitate the implementation of the rules we adopt in this document, we modify the section 214 authorizations for Aureon and SDN—the only CEA providers with mandatory use requirements—to permit traffic terminating at access-stimulating LECs that subtend those CEA providers' tandems to bypass the CEA tandems. By eliminating the mandatory use requirements, we enable IXCs to use whatever intermediate access provider an access-stimulating LEC that otherwise subtends Aureon or SDN chooses. Eliminating the mandatory use requirements for traffic bound for access-stimulating LECs will also allow IXCs to directly connect to access-stimulating LECs where such connections are mutually negotiated and where doing so would be more efficient and cost-effective.

103. Historically, IXCs delivering traffic to LECs that subtended the CEA tandems were required to use Aureon's and SDN's tandems, because terminating traffic to those LECs was subject to mandatory use requirements contained in the CEA providers' section 214 authorizations. Wide Voice suggests that we “[b]reak[ ] the CEA monopoly” to the extent needed so that other providers can serve the access-stimulating LECs. This Order does that. Sprint suggests that we eliminate the CEA mandatory use requirements for the termination of all traffic. There is no evidence that doing so would be in the public interest, or even that there are other tandem switching and transport providers available to serve other LECs subtending the CEA providers. This proceeding is focused on access stimulation. We, therefore, adopt rules that are narrowly focused on access stimulation.

104. Aureon and SDN present seemingly opposing views. Aureon wants to continue to carry access-stimulation traffic on its CEA network because it believes the traffic volumes will drive down its rates to a point where arbitrage will not be profitable. At the outset, we note there is nothing preventing a CEA provider from voluntarily reducing its rates to keep such traffic on its network rather than completely forgoing the revenue opportunity. Unlike Aureon, SDN wants the Commission to prohibit access-stimulating LECs from using SDN's tandem. Because we expect that our adopted rules will effectively remedy the incentives associated with the differences in tandem switching and tandem switched transport rates between CEA providers and other intermediate access providers, we decline to prohibit access-stimulating LECs from subtending CEA providers.

105. Aureon complains that if the subtending LECs use direct connections instead of the CEA network, there will be increased arbitrage, and it would put Aureon out of business. However, evidence in the record shows that much of the access-stimulation traffic is currently bypassing Aureon's and SDN's networks. Also, intermediate access providers, such as the CEA providers, remain free to collect payment for their tandem switching and transport services if the access-stimulating LEC chooses to use their services. In that situation, the intermediate access provider will receive payment from the access-stimulating LEC, and may not collect from IXCs. If access-stimulating LECs decide to move their traffic off of a CEA network and the CEA provider has significantly less traffic on its network, the CEA provider may file tariffs with higher rates provided that such tariff revisions are consistent with our rules applicable to CEA providers. Furthermore, neither Aureon nor SDN has provided any data that would show that operating a CEA network without the access-stimulating LECs would be economically unviable.

106. Aureon and SDN ask us to reject any proposals that would modify their section 214 authorizations. Aureon voices concern that requiring access-stimulating LECs to pay for the use of the CEA tandem would be a drastic modification to its section 214 authorization. Aureon does not explain what would need to change in its section 214 authorization, and we are not aware of any change that needs to be made in this regard. Aureon expresses concern that a modification to its section 214 authorization will impact its ability to provide competitive services to rural areas, and to maintain its investment in its fiber-optic network. Our decision to permit traffic being delivered to an access-stimulating LEC to be routed around a CEA tandem does not affect traffic being delivered to non-access-stimulating LECs that remain on the CEA network, and will not impact Aureon's ability to serve rural areas, contrary to Aureon's concern. Similarly, Aureon argues that if LECs pay for the terminating traffic, Aureon would need to make “significant changes to the compensation arrangements for CEA service, which would render it financially infeasible for the CEA network to remain operational.” But Aureon provides no supporting detail for these claims.

107. When the section 214 authorizations were granted three decades ago, there were no individual LECs subtending these CEA providers exchanging traffic, particularly terminating traffic, with IXCs at close to access-stimulation levels—and no reports of subtending LECs that would be sharing excess switched access charge revenue with anyone. In fact, the original applications of the Iowa and South Dakota CEA providers stated that the majority of their revenues would be for intrastate calls. Now, AT&T reports that “twice as many minutes were being routed per month to Redfield, South Dakota (with its population of approximately 2,300 people and its 1 end office) as is routed to all of Verizon's facilities in New York City (with its population of approximately 8,500,000 people and its 90 end offices).” Access stimulation has upended the original projected interstate-to-intrastate traffic ratios carried by the CEA networks.

108. The Commission may modify or revoke section 214 authority to address abusive practices or actions when necessary. In this document, we find that the public interest will be served by changing any mandatory use requirement for traffic bound to access-stimulating LECs to be voluntary usage. We determine that access stimulation presents a reasonable circumstance for departing from the mandatory use policy.

109. In sum, it is in the public convenience and necessity that we modify the section 214 authorizations for Aureon and SDN to state: “The mandatory use requirement does not apply to interexchange carriers delivering terminating traffic to a local exchange carrier engaged in access stimulation, as that term is defined in section 61.3(bbb) of the Commission's rules.” We find that this modification is an appropriate exercise of our authority under sections 4(i), 214 and 403 of the Act. Only those LECs engaged in access stimulation and IXCs delivering traffic to access-stimulating LECs will be affected by these changes to Aureon's and SDN's section 214 authorizations. Our methodology reflects the “surgical approach” that GVNW Consulting requested the Commission to use to address access stimulation. We remind Aureon and SDN that all other relevant section 214 obligations remain.

110. Legal Authority. In addition to our broad legal authority to adopt our rules applicable to access stimulation traffic, we have specific legal authority to modify the section 214 authorizations for Aureon and SDN to eliminate any mandatory use requirements that may be applicable to traffic bound for access-stimulating LECs. The Common Carrier Bureau (Bureau) adopted the original section 214 certificates for Aureon and SDN pursuant to section 214 of the Act. Indeed, whether section 214 of the Act was applicable to Aureon's application (which preceded SDN's application) was an issue in that proceeding. In the end, the Bureau agreed with Aureon's “view that [Aureon] requires Section 214 authority prior to acquiring and operating any interstate lines of communications.” Our modifications to the Aureon and SDN section 214 authorizations are an appropriate exercise of the Commission's authority under section 214, which gives the Commission authority to “attach to the issuance of the certificate such terms and conditions as in its judgment the public convenience and necessity may require,” as well as our authority under sections 4 and 403 of the Act.

111. Paperwork Reduction Act Analysis. This document contains modified information collection requirements subject to the Paperwork Reduction Act of 1995 (PRA), Public Law 104-13. It will be submitted to the Office of Management and Budget (OMB) for review under section 3507(d) of the PRA. OMB, the general public, and other Federal agencies will be invited to comment on the modified information collection requirements contained in this proceeding. In addition, we note that pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 107-198; see 44 U.S.C. 3506(c)(4), we previously sought specific comment on how the Commission might further reduce the information collection burden for small business concerns with fewer than 25 employees.

112. In this Order, we have assessed the effects of requiring an access-stimulating LEC to take financial responsibility for the delivery of traffic to its end office or the functional equivalent and find that the potential modifications required by our rules are both necessary and not overly burdensome. We do not believe there are many access-stimulating LECs operating today but note that of the small number of access-stimulating LECs in existence, many will be affected by this Order. We believe that access-stimulating LECs are typically smaller businesses and may employ less than 25 people. However, we find the benefits that will be realized by a decrease in the problematic consequences associated with access stimulation outweigh any burden associated with the changes (such as submitting a notice and making tariff or billing changes) required by this Report and Order and Modification of Section 214 Authorizations.

113. Congressional Review Act. The Commission has determined, and the Administrator of the Office of Information and Regulatory Affairs, Office of Management and Budget concurs, that these rules are non-major under the Congressional Review Act, 5 U.S.C. 804(2). The Commission will send a copy of this Report and Order and Modification of 214 Authorization to Congress and the Government Accountability Office pursuant to 5 U.S.C. 801(a)(1)(A).

114. Final Regulatory Flexibility Analysis. As required by the Regulatory Flexibility Act of 1980 (RFA), as amended, the Commission has prepared a Final Regulatory Flexibility Analysis (FRFA) relating to this Report and Order and Modification to Section 214 Authorizations.

115. As required by the Regulatory Flexibility Act of 1980, as amended (RFA), an Initial Regulatory Flexibility Analysis (IRFA) was incorporated in the notice of proposed rulemaking for the access arbitrage proceeding (83 FR 30628, June 29, 2018). The Commission sought written public comments on the proposals in the Access Arbitrage Notice, including comment on the IRFA. This present Final Regulatory Flexibility Analysis (FRFA) conforms to the RFA.

116. Although the Commission's earlier rules, adopted in the USF/ICC Transformation Order, made significant strides in reducing access stimulation, arbitragers have reacted to those reforms by revising their schemes to take advantage of access charges that remain in place for tandem switching and transport services. New forms of arbitrage now command significant resources and create significant costs, which together raise costs for consumers. In general, the intercarrier compensation regime allows access-stimulating local exchange carriers (LECs) to shift the costs of call termination to interexchange carriers (IXCs) and their customers via tandem switching and transport rates, creating perverse incentives for access-stimulating LECs to route network traffic inefficiently in a manner that maximizes those rates. IXCs are obligated to pay these charges but are left without any choice about how the traffic is routed, and pass those inflated costs along to their customers in turn, raising the price for consumers generally.

117. In this Order, to reduce the incentives to engage in the latest iteration of access stimulation, as well as to continue the reforms of the USF/ICC Transformation Order, we adopt rules making access-stimulating LECs, rather than IXCs, financially responsible for the tandem switching and transport service access charges associated with the delivery of traffic from the IXC to the access-stimulating LEC end office or its functional equivalent.

118. The rules adopted in this Order will thus require switched tandem and transport costs to be charged to the carrier that chooses the transport route. This change will encourage cost-efficient network routing and investment decisions, and remove the incentives that lead to inefficient interconnection and call routing requirements. We also modify the definition of access stimulation to include two additional traffic volume triggers. We add two higher ratios to capture access-stimulating LECs that do not have a revenue sharing agreement, which would have escaped our current definition.

119. The Commission did not receive comments specifically addressing the rules and policies proposed in the IRFA. FailSafe Communications, Inc., a self-described “end-user” and small business “disaster recovery” service provider, articulated related concerns elsewhere. It requested an exemption from our rules “for CABS access traffic associated with bona-fide SMB [small and medium-sized businesses] end users with less than 24 phone lines,” arguing it and its “Independent Telephone Company” and competitive LEC partners would be adversely affected by the Order and the requirements for access-stimulating LECs, but failing to propose a less burdensome alternative that would mitigate their concerns. FailSafe offers no evidence in support of its concern nor any explanation for why the exemption it proposes would resolve its concerns. We thus decline to grant such an exemption at this time, but note here, as we do in the Order, that affected rate-of-return LECs and competitive LECs may seek a waiver of our rules, particularly in compelling cases that may implicate the provision of emergency services.

120. Pursuant to the Small Business Jobs Act of 2010, which amended the RFA, the Commission is required to respond to any comments filed by the Chief Counsel for Advocacy of the Small Business Administration (SBA), and to provide a detailed statement of any change made to the proposed rules as a result of those comments.

121. The Chief Counsel did not file any comments in response to this proceeding.

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

123. Small Businesses, Small Organizations, Small Governmental Jurisdictions. Our actions, over time, may affect small entities that are not easily categorized at present. We therefore describe here, at the outset, three broad groups of small entities that could be directly affected herein. First, while there are industry-specific size standards for small businesses that are used in the regulatory flexibility analysis, according to data from the SBA's Office of Advocacy, in general a small business is an independent business having fewer than 500 employees. These types of small businesses represent 99.9% of all businesses in the United States which translates to 28.8 million businesses.

124. Next, the type of small entity described as a “small organization” is generally “any not-for-profit enterprise which is independently owned and operated and is not dominant in its field.” Nationwide, as of August 2016, there were approximately 356,494 small organizations based on registration and tax data filed by nonprofits with the Internal Revenue Service (IRS).

125. Finally, the small entity described as a “small governmental jurisdiction” is defined generally as “governments of cities, counties, towns, townships, villages, school districts, or special districts, with a population of less than fifty thousand.” U.S. Census Bureau data from the 2012 Census of Governments indicate that there were 90,056 local governmental jurisdictions consisting of general purpose governments and special purpose governments in the United States. Of this number there were 37, 132 General purpose governments (county, municipal and town or township) with populations of less than 50,000 and 12,184 Special purpose governments (independent school districts and special districts) with populations of less than 50,000. The 2012 U.S. Census Bureau data for most types of governments in the local government category show that the majority of these governments have populations of less than 50,000. Based on this data we estimate that at least 49,316 local government jurisdictions fall in the category of “small governmental jurisdictions.”

126. Wired Telecommunications Carriers. The U.S. Census Bureau defines this industry as “establishments primarily engaged in operating and/or providing access to transmission facilities and infrastructure that they own and/or lease for the transmission of voice, data, text, sound, and video using wired communications networks. Transmission facilities may be based on a single technology or a combination of technologies. Establishments in this industry use the wired telecommunications network facilities that they operate to provide a variety of services, such as wired telephony services, including VoIP services, wired (cable) audio and video programming distribution, and wired broadband internet services. By exception, establishments providing satellite television distribution services using facilities and infrastructure that they operate are included in this industry.” The SBA has developed a small business size standard for Wired Telecommunications Carriers, which consists of all such companies having 1,500 or fewer employees. Census data for 2012 show that there were 3,117 firms that operated that year. Of this total, 3,083 operated with fewer than 1,000 employees. Thus, under this size standard, the majority of firms in this industry can be considered small.

127. Local Exchange Carriers (LECs). Neither the Commission nor the SBA has developed a size standard for small businesses specifically applicable to local exchange services. The closest applicable NAICS Code category is Wired Telecommunications Carriers as defined above. Under the applicable SBA size standard, such a business is small if it has 1,500 or fewer employees. According to Commission data, census data for 2012 shows that there were 3,117 firms that operated that year. Of this total, 3,083 operated with fewer than 1,000 employees. The Commission therefore estimates that most providers of local exchange carrier service are small entities that may be affected by the rules adopted.

128. Incumbent LECs. Neither the Commission nor the SBA has developed a small business size standard specifically for incumbent local exchange services. The closest applicable NAICS Code category is Wired Telecommunications Carriers as defined above. Under that size standard, such a business is small if it has 1,500 or fewer employees. According to Commission data, 3,117 firms operated in that year. Of this total, 3,083 operated with fewer than 1,000 employees. Consequently, the Commission estimates that most providers of incumbent local exchange service are small businesses that may be affected by the rules and policies adopted. Three hundred and seven (1,307) Incumbent Local Exchange Carriers reported that they were incumbent local exchange service providers. Of this total, an estimated 1,006 have 1,500 or fewer employees.

129. Competitive Local Exchange Carriers (Competitive LECs), 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 NAICS Code category is Wired Telecommunications Carriers, as defined above. Under that size standard, such a business is small if it has 1,500 or fewer employees. U.S. Census data for 2012 indicate that 3,117 firms operated during that year. Of that number, 3,083 operated with fewer than 1,000 employees. Based on this data, the Commission concludes that the majority of Competitive LECS, CAPs, Shared-Tenant Service Providers, and Other Local Service Providers, are small entities. According to Commission data, 1,442 carriers reported that they were engaged in the provision of either competitive local exchange services or competitive access provider services. Of these 1,442 carriers, an estimated 1,256 have 1,500 or fewer employees. In addition, 17 carriers have reported that they are Shared-Tenant Service Providers, and all 17 are estimated to have 1,500 or fewer employees. Also, 72 carriers have reported that they are Other Local Service Providers. Of this total, 70 have 1,500 or fewer employees. Consequently, based on internally researched FCC data, 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.

130. We have included small incumbent LECs 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 LECs are not dominant in their field of operation because any such dominance is not “national” in scope. We have therefore included small incumbent LECs in this RFA analysis, although we emphasize that this RFA action has no effect on Commission analyses and determinations in other, non-RFA contexts.

131. Interexchange Carriers (IXCs). Neither the Commission nor the SBA has developed a definition for Interexchange Carriers. The closest NAICS Code category is Wired Telecommunications Carriers as defined above. The applicable size standard under SBA rules is that such a business is small if it has 1,500 or fewer employees. U.S. Census data for 2012 indicates that 3,117 firms operated during that year. Of that number, 3,083 operated with fewer than 1,000 employees. According to internally developed Commission data, 359 companies reported that their primary telecommunications service activity was the provision of interexchange services. Of this total, an estimated 317 have 1,500 or fewer employees. Consequently, the Commission estimates that the majority of IXCs are small entities that may be affected by our proposed rules.

132. Local Resellers. The SBA has developed a small business size standard for the category of Telecommunications Resellers. The Telecommunications Resellers industry comprises establishments engaged in purchasing access and network capacity from owners and operators of telecommunications networks and reselling wired and wireless telecommunications services (except satellite) to businesses and households. Establishments in this industry resell telecommunications; they do not operate transmission facilities and infrastructure. Mobile virtual network operators (MVNOs) are included in this industry. Under that size standard, such a business is small if it has 1,500 or fewer employees. Census data for 2012 show that 1,341 firms provided resale services during that year. Of that number, all operated with fewer than 1,000 employees. Thus, under this category and the associated small business size standard, the majority of these resellers can be considered small entities.

133. Toll Resellers. The Commission has not developed a definition for Toll Resellers. The closest NAICS Code Category is Telecommunications Resellers. The Telecommunications Resellers industry comprises establishments engaged in purchasing access and network capacity from owners and operators of telecommunications networks and reselling wired and wireless telecommunications services (except satellite) to businesses and households. Establishments in this industry resell telecommunications; they do not operate transmission facilities and infrastructure. Mobile virtual network operators (MVNOs) are included in this industry. 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. Census data for 2012 show that 1,341 firms provided resale services during that year. Of that number, 1,341 operated with fewer than 1,000 employees. Thus, under this category and the associated small business size standard, the majority of these resellers can be considered small entities. According to Commission data, 881 carriers have reported that they are engaged in the provision of toll resale services. Of this total, an estimated 857 have 1,500 or fewer employees. Consequently, the Commission estimates that the majority of toll resellers are small entities.

134. Other Toll Carriers. Neither the Commission nor the SBA has developed a definition for small businesses specifically applicable to Other Toll Carriers. This category includes toll carriers that do not fall within the categories of interexchange carriers, operator service providers, prepaid calling card providers, satellite service carriers, or toll resellers. The closest applicable NAICS Code category is for Wired Telecommunications Carriers as defined above. Under the applicable SBA size standard, such a business is small if it has 1,500 or fewer employees. Census data for 2012 shows that there were 3,117 firms that operated that year. Of this total, 3,083 operated with fewer than 1,000 employees. Thus, under this category and the associated small business size standard, the majority of Other Toll Carriers can be considered small. According to internally developed Commission data, 284 companies reported that their primary telecommunications service activity was the provision of other toll carriage. Of these, an estimated 279 have 1,500 or fewer employees. Consequently, the Commission estimates that most Other Toll Carriers are small entities that may be affected by rules adopted pursuant to the Access Arbitrage Notice.

135. Prepaid Calling Card Providers. The SBA has developed a definition for small businesses within the category of Telecommunications Resellers. Under that SBA definition, such a business is small if it has 1,500 or fewer employees. According to the Commission's Form 499 Filer Database, 500 companies reported that they were engaged in the provision of prepaid calling cards. The Commission does not have data regarding how many of these 500 companies have 1,500 or fewer employees. Consequently, the Commission estimates that there are 500 or fewer prepaid calling card providers that may be affected by the rules.

136. Wireless Telecommunications Carriers (except Satellite). This industry comprises establishments engaged in operating and maintaining switching and transmission facilities to provide communications via the airwaves. Establishments in this industry have spectrum licenses and provide services using that spectrum, such as cellular services, paging services, wireless internet access, and wireless video services. The appropriate size standard under SBA rules is that such a business is small if it has 1,500 or fewer employees. For this industry, U.S. Census data for 2012 show that there were 967 firms that operated for the entire year. Of this total, 955 firms had employment of 999 or fewer employees and 12 had employment of 1000 employees or more. Thus under this category and the associated size standard, the Commission estimates that the majority of wireless telecommunications carriers (except satellite) are small entities.

137. The Commission's own data—available in its Universal Licensing System—indicate that, as of October 25, 2016, there are 280 Cellular licensees that may be affected by our actions in this document. The Commission does not know how many of these licensees are small, as the Commission does not collect that information for these types of entities. Similarly, according to internally developed Commission data, 413 carriers reported that they were engaged in the provision of wireless telephony, including cellular service, Personal Communications Service, and Specialized Mobile Radio Telephony services. Of this total, an estimated 261 have 1,500 or fewer employees, and 152 have more than 1,500 employees. Thus, using available data, we estimate that the majority of wireless firms can be considered small.

138. Wireless Communications Services. This service can be used for fixed, mobile, radiolocation, and digital audio broadcasting satellite uses. The Commission defined “small business” for the wireless communications services (WCS) auction as an entity with average gross revenues of $40 million for each of the three preceding years, and a “very small business” as an entity with average gross revenues of $15 million for each of the three preceding years. The SBA has approved these definitions.

139. Wireless Telephony. Wireless telephony includes cellular, personal communications services, and specialized mobile radio telephony carriers. As noted, the SBA has developed a small business size standard for Wireless Telecommunications Carriers (except Satellite). Under the SBA small business size standard, a business is small if it has 1,500 or fewer employees. According to Commission data, 413 carriers reported that they were engaged in wireless telephony. Of these, an estimated 261 have 1,500 or fewer employees and 152 have more than 1,500 employees. Therefore, a little less than one third of these entities can be considered small.

140. Cable and Other Subscription Programming. This industry comprises establishments primarily engaged in operating studios and facilities for the broadcasting of programs on a subscription or fee basis. The broadcast programming is typically narrowcast in nature ( e.g., limited format, such as news, sports, education, or youth-oriented). These establishments produce programming in their own facilities or acquire programming from external sources. The programming material is usually delivered to a third party, such as cable systems or direct-to-home satellite systems, for transmission to viewers. The SBA has established a size standard for this industry stating that a business in this industry is small if it has 1,500 or fewer employees. The 2012 Economic Census indicates that 367 firms were operational for that entire year. Of this total, 357 operated with less than 1,000 employees. Accordingly we conclude that a substantial majority of firms in this industry are small under the applicable SBA size standard.

141. Cable Companies and Systems (Rate Regulation). The Commission has developed its own small business size standards for the purpose of cable rate regulation. Under the Commission's rules, a “small cable company” is one serving 400,000 or fewer subscribers nationwide. Industry data indicate that there are currently 4,600 active cable systems in the United States. Of this total, all but eleven cable operators nationwide are small under the 400,000-subscriber size standard. In addition, under the Commission's rate regulation rules, a “small system” is a cable system serving 15,000 or fewer subscribers. Current Commission records show 4,600 cable systems nationwide. Of this total, 3,900 cable systems have fewer than 15,000 subscribers, and 700 systems have 15,000 or more subscribers, based on the same records. Thus, under this standard as well, we estimate that most cable systems are small entities.

142. Cable System Operators (Telecom Act Standard). The Communications Act 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.” There are approximately 52,403,705 cable video subscribers in the United States today. Accordingly, an operator serving fewer than 524,037 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, we find that all but nine incumbent cable operators are small entities under this size standard. We note that the Commission neither requests nor collects information on whether cable system operators are affiliated with entities whose gross annual revenues exceed $250 million. Although it seems certain that some of these cable system operators are affiliated with entities whose gross annual revenues exceed $250 million, we are unable at this time to estimate with greater precision the number of cable system operators that would qualify as small cable operators under the definition in the Communications Act.

143. All Other Telecommunications. The “All Other Telecommunications” industry is comprised of establishments that are primarily engaged in providing specialized telecommunications services, such as satellite tracking, communications telemetry, and radar station operation. This industry also includes establishments primarily engaged in providing satellite terminal stations and associated facilities connected with one or more terrestrial systems and capable of transmitting telecommunications to, and receiving telecommunications from, satellite systems. Establishments providing internet services or voice over internet protocol (VoIP) services via client-supplied telecommunications connections are also included in this industry. The SBA has developed a small business size standard for “All Other Telecommunications,” which consists of all such firms with gross annual receipts of $32.5 million or less. For this category, U.S. Census data for 2012 show that there were 1,442 firms that operated for the entire year. Of these firms, a total of 1,400 had gross annual receipts of less than $25 million. Thus a majority of “All Other Telecommunications” firms potentially may be affected by our action can be considered small.

144. Recordkeeping and Reporting. The rule revisions adopted in the Order include notification requirements for access-stimulating LECs, which may impact small entities. Those LECs engaged in access stimulation are required to notify affected intermediate access providers and affected IXCs of their status as access stimulators and of their acceptance of financial responsibility for the tandem and transport switched access charges IXCs used to bear. An access-stimulating LEC must also publicly file a record of its access-stimulating status and acceptance of financial responsibility in the Commission's Access Arbitrage docket on the same day that it issues notice to IXC(s) and/or intermediate access provider(s).

145. Rule changes may also necessitate that affected carriers make various revisions to their billing systems. For example, intermediate access providers that serve access-stimulating LECs will now charge terminating tandem switched access rates and transport rates to the corresponding LECs, whereas IXCs that serve access-stimulating LECs will no longer be required to pay such charges. As intermediate access providers cease billing IXCs, and instead bill access-stimulating LECs, they will likely need to make corresponding adjustments to their billing systems.

146. This Order may also require access-stimulating LECs to file tariff revisions to remove any tariff provisions they have filed for terminating tandem switched access or terminating switched access transport charges. Although we decline to opine on whether this Order requires carriers to file further tariff revisions, affected carriers may nonetheless choose to file additional tariff revisions to add provisions allowing them to charge access-stimulating LECs, rather than IXCs, for the termination of traffic to the access-stimulating LEC. These revisions may necessitate some effort to revise the rates (and who pays them), including terminating tandem switching rates and transport rates. The requirement to remove related provisions, and the choice to make any additional revisions, would apply to all affected carriers, regardless of entity size. The adopted rule revisions will facilitate Commission and public access to the most accurate and up-to-date tariffs as well as lower rates paid by the public for the affected services.

147. Existing access-stimulating LECs, or LECs who later become access-stimulating LECs, will also face similar reporting and recordkeeping requirements should they later choose to cease access stimulation. These steps are virtually identical as the steps discussed above that are required or may be necessary when commencing access stimulation, including providing third-party notice, filing a notice with the Commission, potential billing system changes, removing tariff provisions, and potentially preparing and filing a revised tariff.

148. The RFA requires an agency to describe any significant alternatives that it has considered in developing its approach, which may include the following four alternatives (among others): “(1) the establishment of differing compliance or reporting requirements or timetables that take into account the resources available to small entities; (2) the clarification, consolidation, or simplification of compliance and reporting requirements under the rule for such 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 such small entities.”

149. Transition Period. To minimize the impact of the changes affected carriers may need to make under this Order, we implement up to a 45 day transition period for the related recordkeeping and reporting steps. To give effect to the financial shift of responsibility, we require that access-stimulating LECs remove any existing tariff provisions for terminating tandem switching or terminating tandem switched transport access charges within the same period, i.e., within 45 days of the effective date of the Order (or, for those carriers who later engage in access stimulation, within 45 days from the date it commences access stimulation). This will also allow time if parties choose to make additional changes to their operations as a result of our reforms to further reduce access stimulation. To ensure clarity and increase transparency, we require that access-stimulating LECs notify affected IXCs and intermediate access providers of their access-stimulating status and their acceptance of financial responsibility within 45 days of PRA approval (or, for a carrier who later engages in access stimulation, within 45 days from the date it commences access stimulation), and file a notice in the Commission's Access Arbitrage docket on the same date and to the same effect. The Commission announced the notice aspects of the transition period in the proposed rule in the Access Arbitrage Notice, and while several commenters voiced support, none cited any specific problems nor concerns associated with these notice requirements. These notice requirements for such carriers to self-identify will help parties conserve resources by limiting potential disputes between IXCs and intermediate access providers concerning whether the LEC to which traffic is bound is engaged in access stimulation. Such changes are also subject to the Paperwork Reduction Act approval process which allows for additional notice and comment on the burdens associated with the requirement. This process will occur after adoption of this Order, thus providing additional time for parties to make the changes necessary to comply with the newly adopted rules. Also, being mindful of the attendant costs of any reporting obligations, we do not require that carriers adhere to a specific notice format. Instead, we allow each responding carrier to prepare third-party notice and notice to the Commission in the manner they deem to be most cost-effective and least burdensome, provided the notice announces the carrier's access-stimulating status and acceptance of financial responsibility. Furthermore, by electing not to require carriers to fully withdraw and file entirely new tariffs and requiring only that they revise their tariffs to remove relevant provisions, we mitigate the filing burden on affected carriers.

150. We recognize that intermediate access providers may need to revise their billing systems to reflect the shift in financial responsibility and may also elect to file revised tariffs. Though we believe the potential billing system changes to be straightforward, to allow sufficient time for affected parties to make any adjustments, we also grant them the same period from the effective date for implementing such changes. Thus, affected intermediate access providers have 45 days from the effective date of this rule (or, with respect to those carriers who later engage in access stimulation, within 45 days from the date such carriers commence access stimulation) to implement any billing system changes or prepare any tariff revisions which they may see fit to file. The time granted by this period should help carriers make an orderly, less burdensome, transition.

151. These same considerations were taken into account for LECs that cease access stimulation, a change that carries concomitant reporting obligations and to which we apply associated transition periods for billing changes and/or for tariff revisions that, collectively, are virtually identical to those mentioned above.

152. In comments not identified as IRFA-related, centralized equal access (CEA) providers Aureon and SDN argued that the potential billing changes and tariff revisions that would arise from making LECs financially responsible constitute an undue burden that “would render it financially infeasible for the CEA network to remain operational.” Aureon's sole support for this assertion is that this change would “necessitate significant changes to the compensation arrangements for CEA service.” We have considered these costs but are not persuaded that these costs are significant enough to rise to an undue burden on affected carriers. We believe these changes to be straightforward, particularly because the identities of the relevant parties will already be known to one another because of existing relationships between them, and because they have previously charged others for the same services. There is no reason to believe that these changes will be onerous and the record is bereft of evidence of material incremental costs of making the necessary changes to implement billing arrangements with subtending access-stimulating LECs. We find no further evidence in the record of financial difficulties that CEAs would experience from this switch. In addition, we revise the definition of access stimulation to apply only to LECs that serve end users. This definitional change will narrow the providers who will be deemed access stimulators by excluding CEA providers, as they do not serve end users. We also adopt two alternate triggers in the access stimulation definition, one for competitive LECs and one for rate-of-return LECs, which should further limit the applicability of these new rules to small providers.

153. Report to Congress: The Commission will send a copy of the Order, including this FRFA, in a report to be sent to Congress pursuant to the Congressional Review Act. In addition, the Commission will send a copy of the Order, including this FRFA, to the Chief Counsel for Advocacy of the SBA. A copy of the Order and FRFA (or summaries thereof) will also be published in the Federal Register .

154. Accordingly, it is ordered that, pursuant to sections 1, 2, 4(i), 4(j), 201-206, 218-220, 251, 252, 254, 256, 303(r), and 403 of the Communications Act of 1934, as amended, 47 U.S.C. 151, 152, 154(i), 154(j), 201-206, 218-220, 251, 252, 254, 256, 303(r), 403 and § 1.1 of the Commission's rules, 47 CFR 1.1, this Report and Order and Modification of Section 214 Authorizations is adopted.

155. It is further ordered, pursuant to sections 4(i), 214, and 403 of the Communications Act of 1934, as amended, 47 U.S.C. 154(i), 214, 403 and §§ 1.47(h), 63.01 and 64.1195 of the Commission's rules, 47 CFR 1.47(h), 63.10, 64.1195, that the section 214 authorizations held by Iowa Network Access Division and South Dakota Network, LLC, are modified such that the mandatory use requirement contained in the authorizations does not apply to interexchange carriers delivering terminating traffic to a local exchange carrier engaged in access stimulation. These modifications are effective 30 days after publication of this Report and Order and Modification of Section 214 Authorizations in the Federal Register .

156. It is further ordered that a copy of this Order shall be sent by U.S. mail to Iowa Network Access Division and South Dakota Network, LLC, at their last known addresses. In addition, this Report and Order and Modification of Section 214 Authorizations shall be available in the Commission's Office of the Secretary.

157. It is further ordered that the amendments of the Commission's rules are adopted, effective 30 days after publication in the Federal Register . Compliance with § 51.914(b) and (e), which contain new or modified information collection requirements that require review by OMB under the PRA, is delayed. The Commission directs the Wireline Competition Bureau to announce the compliance date for those information collections in a document published in the Federal Register after OMB approval, and directs the Wireline Competition Bureau to cause § 51.914 to be revised accordingly.

158. It is further ordered that the Commission's Consumer and Governmental Affairs Bureau, Reference Information Center, shall send a copy of this Report and Order and Modification of Section 214 Authorizations, including the Final Regulatory Flexibility Analysis, to Congress and the Government Accountability Office pursuant to the Congressional Review Act, see 5 U.S.C. 801(a)(1)(A).

159. It is further ordered that the Commission's Consumer and Governmental Affairs Bureau, Reference Information Center, shall send a copy of this Report and Order and Modification of Section 214 Authorizations, including the Final Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of the Small Business Administration.

For the reasons discussed in the preamble, the Federal Communications Commission amends 47 CFR parts 51, 61, and 69 as follows:

In a final rule published on July 18, 2019, NMFS specified a 2019 limit of 2,000 t of longline-caught bigeye tuna for the U.S. Pacific Island territories of American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands (CNMI) (84 FR 34321). NMFS allows each territory to allocate up to 1,000 t of the 2,000 t limit to U.S. longline fishing vessels identified in a valid specified fishing agreement.

On August 15, 2019, NMFS received from the Council a specified fishing agreement between the Territory of American Samoa and the Hawaii Longline Association (HLA). The Council's Executive Director advised that the specified fishing agreement was consistent with the criteria set forth in 50 CFR 665.819(c)(1). On September 15, 2019, NMFS reviewed the agreement and determined that it is consistent with the Fishery Ecosystem Plan for Pelagic Fisheries of the Western Pacific, the Magnuson-Stevens Fishery Conservation and Management Act, implementing regulations, and other applicable laws. However, because at that time, vessels identified in a previous agreement between the CNMI and HLA only attained about a third of the 1,000 t CNMI allocation limit, NMFS decided to await a more accurate projection to determine the date for attributing catch to the 2019 American Samoa limit. Based on logbook data submitted by U.S. longline vessels operating under the CNMI/HLA agreement, NMFS now forecasts the CNMI allocation limit of 1,000 t will be reached by November 4, 2019.

In accordance with 50 CFR 300.224(d) and 50 CFR 665.819(c)(9), vessels in the agreement may retain and land bigeye tuna in the western and central Pacific Ocean under the American Samoa attribution limit. NMFS will begin attributing bigeye tuna caught by vessels in the agreement to American Samoa starting October 28, 2019. If NMFS determines that the fishery will reach the 1,000 t allocation limit, we will restrict the retention of bigeye tuna caught by vessels in the agreement, unless the vessels are included in a subsequent specified fishing agreement with another U.S. territory.

NMFS manages the groundfish fishery in the (BSAI) exclusive economic zone according to the Fishery Management Plan for Groundfish of the Bering Sea and Aleutian Islands Management Area (FMP) prepared by the North Pacific Fishery Management Council under authority of the Magnuson-Stevens Fishery Conservation and Management Act. Regulations governing fishing by U.S. vessels in accordance with the FMP appear at subpart H of 50 CFR part 600 and 50 CFR part 679.

The 2019 ITAC of BS Pacific ocean perch was established as 12,474 mt, the 2019 ITAC of BSAI Alaska plaice was established as 15,300 mt, the 2019 ITAC of BSAI Kamchatka flounder was established as 4,250 mt, the 2019 TAC of BSAI arrowtooth flounder was established as 9,000 mt, the 2019 TAC of BSAI northern rockfish was established as 8,525 mt, the 2019 TAC of BSAI sharks was established as 125 mt, and the 2019 TAC of BS/EAI blackspotted/rougheye rockfish was established as 75 mt by the final 2019 and 2020 harvest specifications for groundfish of the BSAI (84 FR 9000, March 13, 2019) and reserve release (84 FR 49678, September 23, 2019). In accordance with § 679.20(a)(3) the Regional Administrator, Alaska Region, NMFS, has reviewed the most current available data and finds that the ITACs and TACS for BS Pacific ocean perch, and BSAI Alaska plaice, BSAI arrowtooth flounder, BSAI Kamchatka flounder, BSAI northern rockfish, BSAI sharks, and BS/EAI blackspotted/rougheye rockfish need to be supplemented from the non-specified reserve to promote efficiency in the utilization of fishery resources in the BSAI and allow fishing operations to continue.

Therefore, in accordance with § 679.20(b)(3), NMFS apportions from the non-specified reserve of groundfish to ITACs and TACs in the BSAI management area as follows: 2,201 mt to BS Pacific ocean perch, 1,000 mt to BSAI Alaska plaice, 1,200 mt to BSAI arrowtooth flounder, 300 mt to BSAI Kamchatka flounder, 600 mt to BSAI northern rockfish, 20 mt to BSAI sharks, and 20 mt to BS/EAI blackspotted/rougheye rockfish. These apportionments are consistent with § 679.20(b)(1)(i) and do not result in overfishing of any target species because the revised ITACs and TACs are equal to or less than the specifications of the acceptable biological catch in the final 2019 and 2020 harvest specifications for groundfish in the BSAI (84 FR 9000, March 13, 2019).

The harvest specification for the 2019 ITACs and TACs included in the harvest specifications for groundfish in the BSAI are revised as follows: 14,675 mt for BS Pacific ocean perch, 16,300 mt for BSAI Alaska plaice, 10,200 mt for BSAI arrowtooth flounder, 4,550 mt for BSAI Kamchatka flounder, 9,125 mt for BSAI northern rockfish, 145 mt for BSAI sharks, and 95 mt for BS/EAI blackspotted/rougheye rockfish.

This action responds to the best available information recently obtained from the fishery. The Assistant Administrator for Fisheries, NOAA, (AA) finds good cause to waive the requirement to provide prior notice and opportunity for public comment pursuant to the authority set forth at 5 U.S.C. 553(b)(B) and § 679.20(b)(3)(iii)(A) as such a requirement is impracticable and contrary to the public interest. This requirement is impracticable and contrary to the public interest as it would prevent NMFS from responding to the most recent fisheries data in a timely fashion and would delay the apportionment of the non-specified reserves of groundfish to the BS Pacific ocean perch, the BSAI Alaska plaice, the BSAI arrowtooth flounder, the BSAI Kamchakta flounder, the BSAI northern rockfish, the BSAI sharks, and the BS/EAI blackspotted/rougheye rockfish ITACs and TACs. Immediate notification is necessary to allow for the orderly conduct and efficient operation of this fishery, to allow the industry to plan for the fishing season, and to avoid potential disruption to the fishing fleet and processors. NMFS was unable to publish a notification providing time for public comment because the most recent, relevant data only became available as of October 18, 2019.

The AA also finds good cause to waive the 30-day delay in the effective date of this action under 5 U.S.C. 553(d)(3). This finding is based upon the reasons provided above for waiver of prior notice and opportunity for public comment.

Under § 679.20(b)(3)(iii), interested persons are invited to submit written comments on this action (see ADDRESSES ) until November 7, 2019.

This action is required by § 679.20 and is exempt from review under Executive Order 12866.