Unknown. Final rule

52,412 words·~238 min read·/register/2007/10/04/07-4935

A research copy — for the controlling text, always check the official state or federal source. Not legal advice.

--- schema: federal-register doc_type: fedreg source_file: FR-2007-10-04.xml --- 72 192 Thursday, October 4, 2007 Contents Agricultural Agricultural Marketing Service PROPOSED RULES Leafy greens; handling regulations, 56678-56680 E7-19629 Agriculture Agriculture Department See Agricultural Marketing Service See Animal and Plant Health Inspection Service PROPOSED RULES Import quota and fees: Dairy Import Licensing Program, 56677-56678 07-4780 NOTICES Agency information collection activities; proposals, submissions, and approvals, 56718 E7-19628 Animal Animal and Plant Health Inspection Service NOTICES Agency information collection activities; proposals, submissions, and approvals, 56718-56719 E7-19651 Environmental statements; availability, etc.:

Arugula leaves with stems from Panama; importation; pest risk analysis, 56719-56720 E7-19652 Emerald ash borer; biological control, 56720-56721 E7-19647 Centers Centers for Disease Control and Prevention NOTICES Agency information collection activities; proposals, submissions, and approvals, 56763-56764 E7-19620 Meetings: National Institute for Occupational Safety and Health— U.S. truck driver safety and health; survey, 56764-56765 E7-19613 Reports and guidance documents; availability, etc.:

Multiple infant vaccines; consolidated vaccine information materials, 56765-56767 E7-19615 Sanitation inspection of cruise ships; fees, 56768 E7-19609 Centers Centers for Medicare & Medicaid Services See Inspector General Office, Health and Human Services Department Civil Civil Rights Commission NOTICES Meetings; Sunshine Act, 56721 07-4949 Commerce Commerce Department See Foreign-Trade Zones Board See International Trade Administration See National Oceanic and Atmospheric Administration Commodity Commodity Futures Trading Commission NOTICES Meetings;

Sunshine Act, 56727 07-4948 Defense Defense Department NOTICES Base closures and realignments; list, 56727-56728 07-4912 Federal Acquisition Regulation (FAR): Agency information collection activities; proposals, submissions, and approvals, 56728 07-4908 Energy Energy Department See Energy Information Administration See Federal Energy Regulatory Commission NOTICES Privacy Act; systems of records, 56728-56730 E7-19608 Energy Energy Information Administration NOTICES Agency information collection activities; proposals, submissions, and approvals; correction, 56730 E7-19614 EPA Environmental Protection Agency RULES Air programs:

Stratospheric ozone protection— Significant New Alternatives Policy

(SNAP)Program; list additions, 56628-56632 E7-19545 Air quality implementation plans; approval and promulgation; various States: Kentucky, 56623-56628 E7-19327 PROPOSED RULES Acquisition regulations: Award term incentives use, guidance; administrative amendments, 56708-56713 E7-19632 Air quality implementation plans; approval and promulgation; various States: Kentucky, 56706-56707 E7-19328 Maryland, 56707-56708 E7-19626 NOTICES Meetings: Association of American Pesticide Control Officials/State FIFRA Issues Research and Evaluation Group, 56754-56755 E7-19640 Ozone Transport Commission, 56755 E7-19625 Reports and guidance documents; availability, etc.: Causal Analysis/Diagnosis Decision Information System; 2007 release, 56755-56756 E7-19624 Ceramic art studios; modeled dioxin exposure assessment; exploratory study, 56756-56757 E7-19638 Observational exposure studies; scientific and ethical approaches, 56757-56758 E7-19635 Executive Executive Office of the President See Presidential Documents FAA Federal Aviation Administration RULES Airworthiness directives: Rolls-Royce plc; correction, 56618-56619 E7-19610 PROPOSED RULES Airworthiness directives: Aircraft Industries, a.s., 56700-56701 E7-19619 FCC Federal Communications Commission RULES Television broadcasting: Cable Television Consumer Protection and Competition Act; implementation— Video programming distribution; competition and diversity; exclusive programming contracts prohibition, 56645-56664 07-4935 NOTICES Agency information collection activities; proposals, submissions, and approvals, 56758-56762 E7-19519 E7-19520 E7-19532 Federal Energy Federal Energy Regulatory Commission NOTICES Electric rate and corporate regulation combined filings, 56733-56735 E7-19586 Electric utilities (Federal Power Act): Electric quarterly reports; public utility filing requirements, 56735-56752 E7-19484 Hydroelectric applications, 56752-56754 E7-19590 E7-19591 *Applications, hearings, determinations, etc.:* Bobcat Gas Storage, 56730-56731 E7-19592 El Paso Natural Gas Co., 56731-56732 E7-19588 MoGas Pipeline LLC, 56732 E7-19589 National Fuel Gas Distribution Corp., 56732-56733 E7-19587 Federal Reserve Federal Reserve System PROPOSED RULES Prohibition on funding of unlawful Internet gambling (Regulation GG): Unlawful Internet Gambling Act of 2006; implementation, 56680-56699 07-4914 NOTICES Banks and bank holding companies: Formations, acquisitions, and mergers, 56762 E7-19623 Federal Retirement Federal Retirement Thrift Investment Board NOTICES Meetings; Sunshine Act, 56762-56763 07-4941 Fish Fish and Wildlife Service NOTICES Endangered and threatened species: Houghton goldenrod, etc. (Midwest Region); 5-year reviews, 56787-56788 E7-19603 Endangered and threatened species permit applications, determinations, etc., E7-19597 56785-56787 E7-19598 E7-19621 Marine mammal permit applications, determinations, etc., 56788-56789 E7-19605 Food Food and Drug Administration PROPOSED RULES Medical devices: Cardiovascular devices— Electrocardiograph electrode; special controls designation, 56702-56704 E7-19580 NOTICES Food additive petitions: Dean Foods Co., 56768-56769 E7-19576 Meetings: Behind-the-counter availability of drugs, 56769-56770 E7-19329 Reports and guidance documents; availability, etc.: Biological indicator premarket notification submissions, 56770-56771 E7-19573 Electrocardiograph electrodes; Class II special controls, 56771-56772 E7-19578 Vaccines used for pandemic influenza; safety and effectiveness assessments development, 56772-56773 E7-19577 MISSING FOR: Foreign-Trade Zones Board Foreign-Trade Zones Board NOTICES *Applications, hearings, determinations, etc.:* Iowa Deere & Co.; articulated dump truck manufacturing plant, 56721-56722 E7-19653 Minnesota MAPE USA, Inc.; crankshafts and related engine components warehousing and distribution facility, 56722 E7-19643 Mississippi Lane Furniture Industries, Inc., et al.; upholstered furniture manufacturing facilities, 56722 E7-19658 Oklahoma, 56722-56723 E7-19657 Puerto Rico, 56723 E7-19654 GSA General Services Administration NOTICES Environmental statements; availability, etc.: Nogales, AZ; Nogales Mariposa U.S. port of entry improvements, 56763 E7-19662 Federal Acquisition Regulation (FAR): Agency information collection activities; proposals, submissions, and approvals, 56728 07-4908 Health Health and Human Services Department See Centers for Disease Control and Prevention See Food and Drug Administration See Health Resources and Services Administration See Inspector General Office, Health and Human Services Department See National Institutes of Health Health Health Resources and Services Administration NOTICES Agency information collection activities; proposals, submissions, and approvals, 56773-56774 E7-19599 Homeland Homeland Security Department See U.S. Citizenship and Immigration Services See U.S. Customs and Border Protection Housing Housing and Urban Development Department NOTICES Agency information collection activities; proposals, submissions, and approvals, E7-19581 56784-56785 E7-19583 Inspector Inspector General Office, Health and Human Services Department RULES Medicare and State healthcare programs; fraud and abuse: Qualified health centers arrangements; safe harbor under Federal anti-kickback statute, 56632-56644 E7-19636 Interior Interior Department See Fish and Wildlife Service See Land Management Bureau See Surface Mining Reclamation and Enforcement Office IRS Internal Revenue Service RULES Income taxes: Tentative carryback adjustment computation and allowance; Section 6411 clarification Correction, 56619 E7-19572 PROPOSED RULES Procedure and administration: Taxpayers filing timely income tax returns to whom IRS does not provide timely notice stating additional tax liability; suspension provisions Hearing cancelled, 56704 E7-19570 NOTICES Agency information collection activities; proposals, submissions, and approvals, E7-19565 56829-56830 E7-19567 International International Trade Administration NOTICES Antidumping: Forged stainless steel flanges from— India, 56723-56724 E7-19660 Tapered roller bearings and parts, finished or unfinished, from— China, 56724-56726 E7-19659 Export trade certificates of review, 56726-56727 E7-19562 Export trade certificates of review; correction, 56727 E7-19585 International International Trade Commission NOTICES Meetings: Sunshine Act, 56790 E7-19617 Justice Justice Department PROPOSED RULES Privacy Act; implementation, 56704-56706 E7-19458 NOTICES Pollution control; consent judgments: East Kentucky Power Cooperative, Inc., 56790-56791 07-4902 Morera, Alexander, 56791 07-4900 Transformer Services Inc., 56791-56792 07-4903 Upjohn Co. et al., 56792 07-4901 Privacy Act; systems of records, 56793-56795 E7-19461 Labor Labor Department See Labor Statistics Bureau NOTICES Agency information collection activities; proposals, submissions, and approvals, 56795-56796 E7-19575 MISSING FOR: Labor Statistics Bureau Labor Statistics Bureau NOTICES Agency information collection activities; proposals, submissions, and approvals, 56796-56797 E7-19600 Land Land Management Bureau NOTICES Meetings: Resource Advisory Councils— Southwest, 56789 07-4880 Realty actions; sales, leases, etc.: Nevada, 56789-56790 E7-19584 NASA National Aeronautics and Space Administration NOTICES Federal Acquisition Regulation (FAR): Agency information collection activities; proposals, submissions, and approvals, 56728 07-4908 National Highway National Highway Traffic Safety Administration PROPOSED RULES Motor vehicle safety standards: Controls, telltales, and indicators, 56713-56717 E7-19365 NOTICES Motor vehicle safety standards; exemption petitions, etc.: DaimlerChrysler Corp., 56824-56825 E7-19602 Ford Motor Co., 56825-56826 E7-19606 Mazda North American Operations, 56826-56827 E7-19604 NIH National Institutes of Health NOTICES Inventions, Government-owned; availability for licensing, 56774-56775 E7-19649 Meetings: Council of Councils Planning Group, 56775-56776 07-4932 National Cancer Institute, 56776 07-4925 National Heart, Lung, and Blood Institute, 07-4920 56776 07-4930 National Institute of Biomedical Imaging and Bioengineering, 56777 07-4918 National Institute of Child Health and Human Development, 07-4926 56778-56779 07-4927 National Institute of Dental and Craniofacial Research, 56777 07-4921 National Institute of Diabetes and Digestive and Kidney Diseases, 56777-56778 07-4923 07-4924 National Institute of Mental Health, 56779-56780 07-4929 National Institute on Deafness and Other Communication Disorders, 56777 07-4922 National Institute on Drug Abuse, 56780 07-4931 Scientific Review Center, 07-4919 56780-56782 07-4928 NOAA National Oceanic and Atmospheric Administration RULES Fishery conservation and management: West Coast States and Western Pacific fisheries— Pacific Coast groundfish, 56664-56676 07-4917 National Science National Science Foundation NOTICES Antarctic Conservation Act of 1978; permit applications, etc., 56797-56798 E7-19611 E7-19622 Nuclear Nuclear Regulatory Commission NOTICES Meetings: Nuclear Waste and Materials Advisory Committee, 56802-56804 E7-19618 *Applications, hearings, determinations, etc.:* Entergy Nuclear Operations, Inc., 56798-56801 E7-19663 Exelon Generation Co., LLC, 56801-56802 E7-19666 Presidential Presidential Documents PROCLAMATIONS *Special observances:* Child Health Day (Proc. 8184), 56881-56882 07-4963 National Domestic Violence Awareness Month (Proc. 8183), 56877-56880 07-4962 ADMINISTRATIVE ORDERS Afghanistan, Pakistan, Saudi Arabia, and certain education abroad; assignment of reporting and determination functions (Memorandum of September 28, 2007), 56869-56871 07-4952 Iraq; waiver of limitation on use of economic support funds (Presidential Determination) No. 2007-35 of September 28, 2007, 56875-56876 07-4954 North Korea; energy assistance (Presidential Determination) No. 2007-34 of September 28, 2007, 56873-56874 07-4953 SEC Securities and Exchange Commission NOTICES Agency information collection activities; proposals, submissions, and approvals, E7-19546 56804-56806 E7-19547 E7-19548 E7-19549 Investment Company Act of 1940: Ameritor Investment Fund et al., 56806-56808 E7-19579 Fidelity Rutland Square Trust et al., 56808-56811 E7-19631 Van Eck Associates Corp. et al., 56811-56813 E7-19630 Vanguard STAR Funds et al., 56813-56814 E7-19639 Self-regulatory organizations; proposed rule changes: American Stock Exchange LLC et al., 56814-56815 E7-19558 Chicago Stock Exchange, Inc., 56816 E7-19559 Financial Industry Regulatory Authority, Inc, 56816-56817 E7-19593 Special Special Counsel Office RULES Privacy Act; implementation, 56617-56618 E7-19571 State State Department NOTICES Grants and cooperative agreements; availability, etc.: Congress-Bundestag Youth Exchange Program, 56818-56824 E7-19642 Surface Surface Mining Reclamation and Enforcement Office RULES Permanent program and abandoned mine land reclamation plan submissions: Pennsylvania, 56619-56623 E7-19661 Surface Surface Transportation Board NOTICES Agency information collection activities; proposals, submissions, and approvals, 56827-56828 E7-19612 Railroad services abandonment: Union Pacific Railroad Co., 56828-56829 E7-19504 Transportation Transportation Department See Federal Aviation Administration See National Highway Traffic Safety Administration See Surface Transportation Board Treasury Treasury Department See Internal Revenue Service PROPOSED RULES Prohibition on funding of unlawful Internet gambling: Unlawful Internet Gambling Act of 2006; implementation, 56680-56699 07-4914 MISSING FOR: U.S. Citizenship and Immigration Services U.S. Citizenship and Immigration Services RULES Immigration: Intercountry adoptions by U.S. citizens; citizenship classification of alien children under Hague Convention, 56832-56867 E7-18992 Customs U.S. Customs and Border Protection NOTICES IRS interest rates used in calculating interest on overdue accounts and refunds, 56782-56784 E7-19607 Separate Parts In This Issue Part II Homeland Security Department, U.S. Citizenship and Immigration Services, 56832-56867 E7-18992 Part III Executive Office of the President, Presidential Documents, 56869-56871, 56873-56874, 56875-56876 07-4952 07-4953 07-4954 Part IV Executive Office of the President, Presidential Documents, 56877-56882 07-4962 07-4963 Reader Aids Consult the Reader Aids section at the end of this issue for phone numbers, online resources, finding aids, reminders, and notice of recently enacted public laws. To subscribe to the Federal Register Table of Contents LISTSERV electronic mailing list, go to http://listserv.access.gpo.gov and select Online mailing list archives, FEDREGTOC-L, Join or leave the list (or change settings); then follow the instructions. 72 192 Thursday, October 4, 2007 Rules and Regulations OFFICE OF SPECIAL COUNSEL 5 CFR Part 1830 Privacy Act of 1974; Implementation AGENCY: Office of Special Counsel. ACTION: Final rule. SUMMARY: The U.S. Office of Special Counsel

(OSC)is publishing notice of the final rule revising its regulations dealing with the agency's implementation of the Privacy Act, at 5 U.S.C. 552a. The regulation, as revised, provides additional information about access to OSC records under the Privacy Act. DATES: This rule is effective on October 4, 2007. FOR FURTHER INFORMATION CONTACT: Kathryn Stackhouse, General Law Counsel, in writing at: U.S. Office of Special Counsel, Legal Counsel and Policy Division, 1730 M Street, N.W., Suite 218, Washington, DC 20036-4505; by telephone at

(202)254-3690; or by facsimile at

(202)653-5151. SUPPLEMENTARY INFORMATION: OSC published notice of proposed revisions to its regulations at 5 C.F.R. Part 1830, dealing with the agency's implementation of the Privacy Act, at 5 U.S.C. 552a, with a request for comments and a description of the proposed revisions, in the Federal Register on August 14, 2007 (72 FR 45388). The regulation, as revised:

(1)modifies and updates contact information for requests and appeals to OSC, adding fax delivery as a means by which they may be sent, and specifies the OSC point of receipt for such matters;

(2)modifies the description of information needed for effective processing of requests and appeals;

(3)revises the description of proof of identity information needed by OSC (including by deletion of the requirement that all requests must include a date and place of birth and a Social Security number, while retaining the option for OSC to request some or all of that data if needed to confirm a requester's identity);

(4)clarifies that Privacy Act requests for records may also be processed under the Freedom of Information Act;

(5)extends the appeal period for requests and revises the description of the response time for appeals;

(6)clarifies that exempt material in OSC case files includes all matters within OSC's jurisdiction (including alleged violations of the Uniformed Services Employment and Reemployment Rights Act) and information included in background investigations conducted for OSC employees and others;

(7)adds two new sections (on general provisions and other rights and services), moves updated information about fees to a new section, and revises section headings throughout the regulation. OSC is submitting a report on this final rule to Congress and the Government Accountability Office pursuant to the Congressional Review Act. Procedural determinations were published in the notice of proposed rulemaking for the Congressional Review Act, Regulatory Flexibility Act, Unfunded Mandates Reform Act, Paperwork Reduction Act, Executive Order 12866 (Regulatory Planning and Review), Executive Order 13132 (Federalism), and Executive Order 12988 (Civil Justice Reform). There have been no changes in these procedural determinations. List of Subjects in 5 CFR Part 1830 Administrative practice and procedure, Government employees, Privacy. For the reasons stated in the preamble, OSC is revising 5 CFR Part 1830 to read as follows: PART 1830--PRIVACY Sec. 1830.1 General provisions. 1830.2 Requirements for making Privacy Act requests. 1830.3 Medical records. 1830.4 Requirements for requesting amendment of records. 1830.5 Appeals. 1830.6 Exemptions. 1830.7 Fees. 1830.8 Other rights and services. Authority: 5 U.S.C. 552a(f), 1212(e). § 1830.1 General provisions. This part contains rules and procedures followed by the Office of Special Counsel

(OSC)in processing requests for records under the Privacy Act (PA), at 5 U.S.C. 552a. Further information about access to OSC records generally is available on the agency's web site (http://www.osc.gov/foia.htm ). § 1830.2 Requirements for making Privacy Act requests.

(a)*How made and addressed.* A request for OSC records under the Privacy Act should be made by writing to the agency. The request should be sent by regular mail addressed to: Privacy Act Officer, U.S. Office of Special Counsel, 1730 M Street, N.W. (Suite 218), Washington, DC 20036-4505. Such requests may also be faxed to the Privacy Act Officer at the number provided on the FOIA/PA page of OSC's web site (see 1830.1). For the quickest handling, both the request letter and envelope or any fax cover sheet should be clearly marked “Privacy Act Request.” A Privacy Act request may also be delivered in person at OSC's headquarters office in Washington, DC. Whether sent by mail or by fax, or delivered in person, a Privacy Act request will not be considered to have been received by OSC until it reaches the Privacy Act Officer.

(b)*Description of records sought.* Requesters must describe the records sought in enough detail for them to be located with a reasonable amount of effort. Whenever possible, requests should describe any particular record sought, such as the date, title or name, author, recipient, and subject matter.

(c)*Proof of identity.* Requests received by mail, fax, or personal delivery should contain sufficient information to enable OSC to determine that the requester and the subject of the record are one and the same. To assist in this process, an individual should submit his or her name and home address, business title and address, and any other known identifying information such as an agency file number or identification number, a description of the circumstances under which the records were compiled, and any other information deemed necessary by OSC to properly process the request. An individual delivering a request in person may be required to present proof of identity, preferably a government- issued document bearing the individual's photograph.

(d)*Freedom of Information Act processing.* OSC also processes all Privacy Act requests for access to records under the Freedom of Information Act, 5 U.S.C. 552, following the rules contained in part 1820 of this chapter, which gives requesters the benefit of both statutes. § 1830.3 Medical records. When a request for access involves medical records that are not otherwise exempt from disclosure, the requesting individual may be advised, if it is deemed necessary by OSC, that the records will be provided only to a physician designated in writing by the individual. Upon receipt of the designation, the physician will be permitted to review the records or to receive copies by mail upon proper verification of identity. § 1830.4 Requirements for requesting amendment of records.

(a)*How made and addressed.* Individuals may request amendment of records pertaining to them that are subject to amendment under the Privacy Act and this part. The request should be sent by regular mail addressed to: Privacy Act Officer, U.S. Office of Special Counsel, 1730 M Street, N.W. (Suite 218), Washington, DC 20036-4505. Such requests may also be faxed to the Privacy Act Officer at the number provided on the FOIA/PA page of OSC's web site (see 1830.1). For the quickest handling, both the request letter and envelope or any fax cover sheet should be clearly marked “Privacy Act Amendment Request.” Whether sent by mail or by fax, a Privacy Act amendment request will not be considered to have been received by OSC until it reaches the Privacy Act Officer. A Privacy Act amendment request may also be delivered by person at OSC's headquarters office in Washington, DC.

(b)*Description of amendment sought.* Requests for amendment should include identification of records together with a statement of the basis for the requested amendment and all available supporting documents and materials. Requesters must describe the amendment sought in enough detail for the request to be evaluated.

(c)*Proof of identity.* Rules and procedures set forth in 1830.2(c) apply to requests made under this section.

(d)*Acknowledgement and response.* Requests for amendment shall be acknowledged by OSC not later than 10 days (excluding Saturdays, Sundays, and legal holidays) after receipt by the Privacy Act Officer and a determination on the request shall be made promptly. § 1830.5 Appeals.

(a)*Appeals of adverse determinations.* A requester may appeal a denial of a Privacy Act request for access to or amendment of records to the Legal Counsel and Policy Division, U.S. Office of Special Counsel, 1730 M Street, N.W. (Suite 218), Washington, DC 20036-4505. The appeal must be in writing, and sent by regular mail or by fax. The appeal must be received by the Legal Counsel and Policy Division within 45 days of the date of the letter denying the request. For the quickest possible handling, the appeal letter and envelope or any fax cover sheet should be clearly marked “Privacy Act Appeal.” An appeal will not be considered to have been received by OSC until it reaches the Legal Counsel and Policy Division. The appeal letter may include as much or as little related information as the requester wishes, as long as it clearly identifies the OSC determination (including the assigned request number, if known) being appealed. An appeal ordinarily will not be acted on if the request becomes a matter of litigation.

(b)*Responses to appeals.* The agency decision on an appeal will be made in writing. A final determination will be issued within 30 days (excluding Saturdays, Sundays, and legal holidays), unless, for good cause shown, OSC extends the 30-day period. § 1830.6 Exemptions. OSC will claim exemptions from the provisions of the Privacy Act at subsections (c)(3) and

(d)as permitted by subsection

(k)for records subject to the act that fall within the category of investigatory material described in paragraphs

(2)and

(5)and testing or examination material described in paragraph

(6)of that subsection. The exemptions for investigatory material are necessary to prevent frustration of inquiries into allegations in prohibited personnel practice, unlawful political activity, whistleblower disclosure, Uniformed Services Employment and Reemployment Rights Act, and other matters under OSC's jurisdiction, and to protect identities of confidential sources of information, including in background investigations of OSC employees, contractors, and other individuals conducted by or for OSC. The exemption for testing or examination material is necessary to prevent the disclosure of information which would potentially give an individual an unfair competitive advantage or diminish the utility of established examination procedures. OSC also reserves the right to assert exemptions for records received from another agency that could be properly claimed by that agency in responding to a request. OSC may also refuse access to any information compiled in reasonable anticipation of a civil action or proceeding. § 1830.7 Fees. Requests for copies of records shall be subject to duplication fees set forth in part 1820 of this chapter. § 1830.8 Other rights and services. Nothing in this part shall be construed to entitle any person, as of right, to any service or to the disclosure of any record to which such person is not entitled under the Privacy Act. Dated: September 28, 2007 James Byrne, Deputy Special Counsel. [FR Doc. E7-19571 Filed 10-3-07; 8:45 am] BILLING CODE 7405-01-S DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2007-27955; Directorate Identifier 2007-NE-15-AD; Amendment 39-15201; AD 2007-19-10] RIN 2120-AA64 Airworthiness Directives; Rolls-Royce plc RB211 Trent 500 Series Turbofan Engines; Correction AGENCY: Federal Aviation Administration (FAA), Department of Transportation (DOT). ACTION: Final rule; correction. SUMMARY: The FAA is correcting airworthiness directive

(AD)2007-19-10. That AD applies to Rolls-Royce plc RB211 Trent 500 series turbofan engines. We published that AD in the **Federal Register** on September 18, 2007 (72 FR 53108). The compliance limit of 2,190 cycles-since-new is incorrect in two places. This document corrects that compliance limit to 2,910 cycles-since-new. In all other respects, the original document remains the same. DATES: *Effective Date:* Effective October 4, 2007. FOR FURTHER INFORMATION CONTACT: Christopher Spinney, Aerospace Engineer, Engine Certification Office, FAA, Engine and Propeller Directorate, 12 New England Executive Park, Burlington, MA 01803; e-mail: *Christopher.spinney@faa.gov* ; telephone

(781)238-7175; fax

(781)238-7199. SUPPLEMENTARY INFORMATION: On September 18, 2007 (72 FR 53108), we published a final rule AD, FR Doc. E7-18324, in the **Federal Register** . That AD applies to Rolls-Royce plc RB211 Trent 500 series turbofan engines. We need to make the following corrections: § 39.13 [Corrected] On page 53109, in the second column, in the FAA's Determination and Requirements of This AD paragraph, in the 22nd line, “2,190 cycles-since-new” is corrected to read “2,910 cycles-since-new”. On page 53110, in the second column, in paragraph (e)(1), in the 7th line, “2,190 cycles-since-new” is corrected to read “2,910 cycles-since-new”. Issued in Burlington, Massachusetts, on September 28, 2007. Francis A. Favara, Manager, Engine and Propeller Directorate, Aircraft Certification Service. [FR Doc. E7-19610 Filed 10-3-07; 8:45 am] BILLING CODE 4910-13-P DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 1 [TD 9355] RIN 1545-BF66 Clarification of Section 6411 Regulations; Correcting Amendment AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Correcting amendment. SUMMARY: This document contains corrections to final and temporary regulations that were published in the **Federal Register** on Monday, August 27, 2007 (72 FR 48933) clarifying that for purposes of allowing a tentative adjustment, the IRS may credit or reduce the tentative adjustment by an assessed tax liability. DATES: This correction is effective October 4, 2007. FOR FURTHER INFORMATION CONTACT: Cynthia McGreevy at

(202)622-4910 (not a toll-free number). SUPPLEMENTARY INFORMATION: Background The final and temporary regulations (TD 9355) that are the subject of these corrections are under section 6411 of the Internal Revenue Code. Need for Correction As published, these final and temporary regulations (TD 9355) contain errors that may prove to be misleading and are in need of clarification. List of Subjects in 26 CFR Part 1 Income taxes, Reporting and recordkeeping requirements. PART 1—INCOME TAXES Correction of Publication Accordingly, the final and temporary regulations (TD 9355) that are the subject of FR. Doc. E7-16878 are corrected as follows: **Paragraph 1.** The authority citation for part 1 continues to read in part as follows: Authority: 26 U.S.C. 7805 * * * § 1.6411-2 [Corrected] **Par. 2.** Section § 1.6411-2(b), fourth sentence is amended by removing the language “District director” in the second column of the chart and adding the language “district director” in its place. § 1.6411-3 [Corrected] **Par. 3.** Section § 1.6411-3(b), first sentence is amended by removing the language “Deemed” in the third column of the chart and adding the language “deemed” in its place. **Par. 4.** Section § 1.6411-3(b), second sentence is amended by removing the language “he” in the second column of the chart and adding the language “He” in its place. **Par. 5.** Section § 1.6411-3(b), fifth sentence is amended by removing the language “May” in the third column of the chart and adding the language “may” in its place. **Par. 6.** Section § 1.6411-3(d)(2), fifth sentence is amended by removing the language “The Commissioner” in the third column of the chart and adding the language “the Commissioner” in its place. La Nita Van Dyke, Branch Chief, Publications and Regulations Branch, Legal Processing Division, Office of Associate Chief Counsel (Procedure and Administration). [FR Doc. E7-19572 Filed 10-3-07; 8:45 am] BILLING CODE 4830-01-P DEPARTMENT OF THE INTERIOR Office of Surface Mining Reclamation and Enforcement 30 CFR Part 938 [PA-149-FOR] Pennsylvania Regulatory Program AGENCY: Office of Surface Mining Reclamation and Enforcement (OSM), Interior. ACTION: Final rule; approval of amendment. SUMMARY: We are approving an amendment to the Pennsylvania regulatory program (the “Pennsylvania program”) regulations under the Surface Mining Control and Reclamation Act of 1977 (SMCRA or the Act). The amendment adds new section 25 Pennsylvania Code (PA Code) 86.6 which provides for the exemption from the permitting requirements of 25 PA Code Chapters 87 and 88, relating to surface mining of coal, when extraction of coal is incidental to government-financed construction or government-financed reclamation projects and specified requirements are met. DATES: *Effective Date:* October 4, 2007. FOR FURTHER INFORMATION CONTACT: George Rieger, Chief, Pittsburgh Field Division, Telephone:

(717)782-4036, e-mail: *grieger@osmre.gov.* SUPPLEMENTARY INFORMATION: I. Background on the Pennsylvania Program II. Submission of the Amendment III. OSM's Findings IV. Summary and Disposition of Comments V. OSM's Decision VI. Procedural Determinations I. Background on the Pennsylvania Program Section 503(a) of the Act permits a State to assume primacy for the regulation of surface coal mining and reclamation operations on non-Federal and non-Indian lands within its borders by demonstrating that its State program includes, among other things, “a State law which provides for the regulation of surface coal mining and reclamation operations in accordance with the requirements of the Act * * *; and rules and regulations consistent with regulations issued by the Secretary pursuant to the Act.” See 30 U.S.C. 1253(a)(1) and (7). On the basis of these criteria, the Secretary of the Interior conditionally approved the Pennsylvania program on July 30, 1982. You can find background information on the Pennsylvania program, including the Secretary's findings, the disposition of comments, and conditions of approval in the July 30, 1982, **Federal Register** (47 FR 33050). You can also find later actions concerning Pennsylvania's program and program amendments at 30 CFR 938.11, 938.12, 938.13, 938.15 and 938.16. II. Submission of the Amendment By letter dated December 18, 2006, the Pennsylvania Department of Environmental Protection (PADEP) sent us an amendment to revise its program regulations at 25 Pennsylvania Code (Administrative Record No. PA 891.00) under SMCRA (30 U.S.C. 1201 *et seq* .). The revisions that Pennsylvania proposed at its own initiative concern program changes to address the exemption of permitting requirements when the extraction of coal is incidental to government-financed construction or government-financed reclamation projects. We announced receipt of the proposed amendment in the February 6, 2007, **Federal Register** (72 FR 5380). In the same document, we opened the public comment period and provided an opportunity for a public hearing or meeting on the amendment's adequacy (Administrative Record No. PA 891.03). The public comment period ended on March 8, 2007. We did not hold a public hearing or meeting because no one requested one. We did not receive any public comments. We received written comments from three Federal agencies: Mine Safety and Health Administration, District 1 (Administrative Record No. 891.04); Mine Safety and Health Administration, District 2 (Administrative Record No. 891.02); and Environmental Protection Agency (Administrative Record No. 891.05). III. OSM's Findings Following are the findings we made concerning the amendment under SMCRA and the Federal regulations at 30 CFR 732.15 and 732.17. We are approving the amendment which amends Chapter 86 of the Pennsylvania Code by adding the subsection 86.6, Extraction of coal incidental to government-financed construction or government-financed reclamation. Any revisions that we do not specifically discuss below concern nonsubstantive wording, editorial, or re-numbering of section changes and are approved here without discussion. The Federal regulations regarding government-financed construction contracts are found at:

(1)30 CFR part 707, Exemption for Coal Extraction Incident to Government-Financed Highway or Other Construction. This part establishes the procedures for determining those surface coal mining and reclamation operations which are exempt from permitting requirements because the extraction of coal is an incidental part of Federal, State, or local government-financed highway or other construction and meets specified criteria that ensure that the construction is government-financed and that the extraction of coal is incidental to it; and

(2)30 CFR 874.17, Abandoned Mine Land agency procedures for reclamation projects receiving less than 50% government financing. This section sets forth the requirements for the AML agency when considering an abandoned mine land reclamation project as government-financed construction under 30 CFR part 707. This section only applies if the level of funding for the construction will be less than 50% of the total cost because of planned coal extraction. Pennsylvania had previously adopted the provisions of 30 CFR part 874 in prior rulemaking. This amendment concerns the provisions of 30 CFR part 707. This amendment concerns the exemption from the permitting requirements of 25 Pa Code Chapters 87 and 88 when the extraction of coal is incidental to government-financed construction contracts or government-financed abandoned mine land reclamation projects. Pennsylvania has added a new section, 25 Pa Code 86.6, to address the definitions, eligibility requirements (applicability) for exemption, and information to be maintained on-site. With a few exceptions, this new section contains language that mirrors the Federal definitions, eligibility requirements, etc. provided at 30 CFR part 707. The specific sections and findings are provided below. *25 Pa Code 86.6(a)(1)* provides that the PADEP be provided an opportunity to provide comments to the government entity financing the construction or reclamation during the site selection process and prior to development of final construction plans regarding the potential environmental impacts of the project. There is no Federal counterpart to this requirement. However, this change requires additional coordination to assure that environmental impacts are considered. Therefore, we find that the addition of 25 Pa Code 86.6(a)(1) does not render the Pennsylvania program inconsistent with SMCRA or the Federal regulations and can be approved. *25 Pa Code 86.6(a)(2)* provides for the eligibility limits of the extraction of coal as it pertains to the right-of-way for roads, utility lines, or other similar construction. This is consistent with the Federal regulations at 707.5, Definitions. However, there is no mention that any extraction outside of the right-of-way or boundary of the area is subject to the requirements of the Act as mentioned in the Federal regulations at 707.5. One can deduce that once it is determined that the exemption criteria cannot be met, the exemption does not apply and the applicability of this chapter does not exist. Therefore, we find that the addition of 25 Pa Code 86.6(a)(2) is no less stringent than SMCRA and no less effective than the Federal regulations and can be approved. *25 Pa Code 86.6(a)(3) and (a)(4)* provide the cost sharing requirements necessary for the construction project or reclamation to be eligible for consideration under this subchapter. The language provides that the construction or reclamation be funded by a unit of government and it be funded 50% or more by funds appropriated from the government unit's budget or obtained from general revenue bonds. Funding at less than 50% may qualify if the construction is undertaken as a Department-approved reclamation contract or project. There is no mention of the requirement for the project to meet the eligibility requirements of Title IV of SMCRA. However, the Pennsylvania statute [PA SMCRA Section 4.8(c)(1)] makes specific reference to abandoned mine land reclamation eligibility as a condition to secure special authorization under this section and the regulations must be read in the context of the authorizing statute, as it serves to limit the application of 86.6(a)(4) to abandoned mine land reclamation. Furthermore, the AML plan as amended in 1999 includes provisions requiring coordination between the AML and Title V Agency and an authorization which includes the requirement that the project be an abandoned mine land reclamation project. Because the AML eligibility requirement is provided in the statute and in the AML plan, we find that the addition of 25 Pa Code 86.6(a)(3) and

(4)is no less stringent than SMCRA and no less effective than the Federal regulations and can be approved. *25 Pa Code 86.6(a)(5) and (a)(6)* provide that the construction be performed under a bond, contract and specifications that substantially provide for and require protection of the environment, reclamation of the affected area, and handling of excavated materials in a manner consistent with the acts and regulations implementing the acts. In addition, it provides that the Department approve the standards and specifications for protection of the environment that will apply to the project when potential adverse environmental impacts have been identified. There is no Federal counterpart to this requirement. However, these requirements provide additional assurance that reclamation will be performed in a satisfactory manner. Therefore, we find that the addition of 25 Pa Code 86.6(a)(5) and (a)(6) do not render the Pennsylvania program inconsistent with SMCRA or the Federal regulations and can be approved. *25 Pa Code 86.6(b)* provides that construction funded through government financing agency guarantees, insurance, loans, funds obtained through industrial revenue bonds or their equivalent or in-kind payments does not qualify as government-financed construction. This is consistent with the Federal regulations at 30 CFR 707.5, Definitions. We find that the addition of 25 Pa Code 86.6(b) is no less stringent than SMCRA and no less effective than the Federal regulations and can be approved. *25 Pa Code 86.6(c)* provides that documentation must be available for inspection on-site when a person extracting coal incidental to government-financed construction or government-financed reclamation extracts more than 250 tons of coal or affects more than 2 acres. The required documentation is provided in subsections 86.6(c)(1) through (c)(4). Subsections 86.6(c)(1) through (c)(3) are consistent with the Federal regulations at 30 CFR 707.12(a), (b), and (c). Therefore, we find that addition of 25 Pa Code 86.6(c)(1) through (c)(3) is no less stringent than SMCRA and no less effective than the Federal regulations and can be approved. There is no Federal counterpart for subsection 86.6(c)(4), which requires that when an area is wholly or partially within an area designated unsuitable for mining by the Environmental Quality Board under 86.130, a copy of the detailed report required by subsection 86.124(e) relating to procedures (initial processing, recordkeeping and notification requirements) must be maintained on the site and made available for inspection. The change reflects an additional information requirement and therefore, we find that the addition of 25 Pa Code 86.6(c)(4) does not render the Pennsylvania program inconsistent with SMCRA or the Federal regulations and can be approved. *25 Pa Code 86.6(d)* provides that government-financed construction projects and government-financed reclamation must comply with Chapters 91-96, 102 and 105. The reference requires that the project and reclamation comply with the State regulations pertaining to water quality, National Pollutant Discharge Elimination System, sediment control, waste management, and dam safety. There is no Federal counterpart for subsection 86.6(d). The Pennsylvania regulations require compliance with other environmental standards and, therefore, we find that the addition of 25 Pa Code 86.6(d) does not render the Pennsylvania program inconsistent with SMCRA or the Federal regulations and can be approved. IV. Summary and Disposition of Comments Public Comments We asked for public comments on the amendment through the **Federal Register** Notice dated February 6, 2007, (72 FR 5380) (Administrative Record No. PA 891.03). We did not receive any comments from the public. Federal Agency Comments Under Federal regulations at 30 CFR 732.17(h)(11)(i) and section 503(b) of SMCRA, we requested comments on the amendment from various Federal agencies with an actual or potential interest in the Pennsylvania program (Administrative Record No. PA 891.01). The Mine Safety and Health Administration (MSHA), District 1, responded (Administrative Record No. PA 891.04) and stated that it did not have any comments or concerns regarding this request. The Mine Safety and Health Administration (MSHA), District 2, responded (Administrative Record No. PA 891.02) and stated that in the case of government-financed construction or other government-financed reclamation projects, MSHA reserves the right to assess each project where the extraction of coal is incidental to the project, to determine jurisdictional standing. Environmental Protection Agency

(EPA)Concurrence and Comments Under Federal regulations at 30 CFR 732.17(h)(11)(i) and (ii), we are required to get a written concurrence from EPA for those provisions of the program amendment that relate to air or water quality standards issued under the authority of the Clean Water Act (33 U.S.C. 1251 *et seq.* ) or the Clean Air Act (42 U.S.C. 7401 *et seq.* ). None of the revisions that Pennsylvania proposed to make in this amendment pertain to air or water quality standards. Therefore, we did not ask EPA to concur on the amendment. On December 20, 2006, we requested comments on the amendment from EPA (Administrative Record No. PA 891.01). The EPA, Region III, responded (Administrative Record No. 891.05) and stated that it did not identify any inconsistencies with the Clean Water Act or any other statutes or regulations under its jurisdiction. V. OSM's Decision Based on the above findings, we approve the amendment Pennsylvania sent to us on December 18, 2006. We are approving the changes to the Pennsylvania program at 25 Pa. Code 86.6. To implement this decision, we are amending the Federal regulations at 30 CFR part 938, which codify decisions concerning the Pennsylvania program. We find that good cause exists under 5 U.S.C. 553(d)(3) to make this final rule effective immediately. Section 503(a) of SMCRA requires that the State's program demonstrate that the State has the capability of carrying out the provisions of the Act and meeting its purposes. Making this regulation effective immediately will expedite that process. SMCRA requires consistency of State and Federal standards. VI. Procedural Determinations Executive Order 12630—Takings This rule does not have takings implications. This determination is based on the analysis performed for the counterpart Federal regulations. Executive Order 12866—Regulatory Planning and Review This rule is exempted from review by the Office of Management and Budget under Executive Order 12866. Executive Order 12988—Civil Justice Reform The Department of the Interior has conducted the reviews required by Section 3 of Executive Order 12988 and has determined that, to the extent allowable by law, this rule meets the applicable standards of Subsections

(a)and

(b)of that Section. However, these standards are not applicable to the actual language of State regulatory programs and program amendments because each program is drafted and promulgated by a specific State, not by OSM. Under Sections 503 and 505 of SMCRA (30 U.S.C. 1253 and 1255) and the Federal regulations at 30 CFR 730.11, 732.15, and 732.17(h)(10), decisions on proposed State regulatory programs and program amendments submitted by the States must be based solely on a determination of whether the submittal is consistent with SMCRA and its implementing Federal regulations and whether the other requirements of 30 CFR parts 730, 731, and 732 have been met. Executive Order 13132—Federalism This rule does not have Federalism implications. SMCRA delineates the roles of the Federal and State governments with regard to the regulation of surface coal mining and reclamation operations. One of the purposes of SMCRA is to “establish a nationwide program to protect society and the environment from the adverse effects of surface coal mining operations.” Section 503(a)(1) of SMCRA requires that State laws regulating surface coal mining and reclamation operations be “in accordance with” the requirements of SMCRA. Section 503(a)(7) requires that State programs contain rules and regulations “consistent with” regulations issued by the Secretary pursuant to SMCRA. Executive Order 13175—Consultation and Coordination With Indian Tribal Governments In accordance with Executive Order 13175, we have evaluated the potential effects of this rule on Federally-recognized Indian tribes and have determined that the rule does not have substantial direct effects on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian Tribes. The basis for this determination is that our decision is on a State regulatory program and does not involve a Federal program involving Indian lands. Executive Order 13211—Regulations That Significantly Affect the Supply, Distribution, or Use of Energy On May 18, 2001, the President issued Executive Order 13211 which requires agencies to prepare a Statement of Energy Effects for a rule that is

(1)considered significant under Executive Order 12866, and

(2)likely to have a significant adverse effect on the supply, distribution, or use of energy. Because this rule is exempt from review under Executive Order 12866 and is not expected to have a significant adverse effect on the supply, distribution, or use of energy, a Statement of Energy Effects is not required. National Environmental Policy Act Section 702(d) of SMCRA (30 U.S.C. 1292(d)) provides that a decision on a proposed State regulatory program provision does not constitute a major Federal action within the meaning of Section 102(2)(C) of the National Environmental Policy Act (42 U.S.C. 4332(2)(c)). A determination has been made that such decisions are categorically excluded from the NEPA process (516 DM 8.4.A). Paperwork Reduction Act This rule does not contain information collection requirements that require approval by OMB under the Paperwork Reduction Act (44 U.S.C. 3507 *et seq.* ). Regulatory Flexibility Act The Department of the Interior certifies that this rule will not have a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 *et seq.* ). The State amendment that is the subject of this rule is based on counterpart Federal regulations for which an economic analysis was prepared and certification made that such regulations would not have a significant economic effect upon a substantial number of small entities. Accordingly, this rule will ensure that existing requirements previously promulgated by OSM will be implemented by the State. In making the determination as to whether this rule would have a significant economic impact, the Department relied upon the data and assumptions for the counterpart Federal regulations. Small Business Regulatory Enforcement Fairness Act This rule is not a major rule under 5 U.S.C. 804(2), the Small Business Regulatory Enforcement Fairness Act. This rule:

(a)Does not have an annual effect on the economy of $100 million;

(b)Will not cause a major increase in costs or prices for consumers, individual industries, geographic regions, or Federal, State, or local government agencies; and

(c)Does not have significant adverse effects on competition, employment, investment, productivity, innovation, or the ability of U.S.-based enterprises to compete with foreign-based enterprises. This determination is based upon the fact that the State submittal, which is the subject of this rule, is based upon counterpart Federal regulations for which an analysis was prepared and a determination made that the Federal regulation was not considered a major rule. Unfunded Mandates This rule will not impose a cost of $100 million or more in any given year on any governmental entity or the private sector. List of Subjects in 30 CFR Part 938 Intergovernmental relations, Surface mining, Underground mining. Dated: August 30, 2007. H. Vann Weaver, Acting Regional Director, Appalachian Region. For the reasons set out in the preamble, 30 CFR part 938 is amended as set forth below: PART 938—PENNSYLVANIA 1. The authority citation for part 938 continues to read as follows: Authority: 30 U.S.C. 1201 *et seq.* 2. Section 938.15 is amended by adding a new entry in the table in chronological order by “Date of final publication” to read as follows: § 938.15 Approval of Pennsylvania regulatory program amendments. Original amendment submission date Date of final publication Citation/description * * * * * * * December 18, 2006 October 4, 2007 25 Pa. Code 86.6 [add]. [FR Doc. E7-19661 Filed 10-3-07; 8:45 am] BILLING CODE 4310-05-P ENVIRONMENTAL PROTECTION AGENCY 40 CFR Part 52 [EPA-R04-OAR-2007-0835-200740(a); FRL-8475-4] Approval of Implementation Plans of Kentucky: Clean Air Interstate Rule AGENCY: Environmental Protection Agency (EPA). ACTION: Direct final rule. SUMMARY: EPA is approving a revision to the Kentucky State Implementation Plan

(SIP)submitted on July 19, 2007. This revision addresses the requirements of EPA's Clean Air Interstate Rule (CAIR), promulgated on May 12, 2005 and subsequently revised on April 28, 2006, and December 13, 2006. EPA has determined that the SIP revision fully implements the CAIR requirements for Kentucky. Therefore, as a consequence of the SIP approval, EPA will also withdraw the CAIR Federal Implementation Plans

(FIPs)concerning sulfur dioxide (SO 2 ), nitrogen oxides (NO X ) annual, and NO X ozone season emissions for Kentucky. The CAIR FIPs for all States in the CAIR region were promulgated on April 28, 2006, and subsequently revised on December 13, 2006. CAIR requires States to reduce emissions of SO 2 and NO X that significantly contribute to, and interfere with maintenance of, the national ambient air quality standards for fine particulates and/or ozone in any downwind state. CAIR establishes State budgets for SO 2 and NO X and requires States to submit SIP revisions that implement these budgets in States that EPA concluded did contribute to nonattainment in downwind states. States have the flexibility to choose which control measures to adopt to achieve the budgets, including participating in the EPA-administered cap-and-trade programs. In the SIP revision that EPA is approving, Kentucky would meet CAIR requirements by participating in the EPA-administered cap-and-trade programs addressing SO 2 , NO X annual, and NO X ozone season emissions. DATES: This direct final rule is effective December 3, 2007 without further notice, unless EPA receives adverse comment by November 5, 2007. If EPA receives such comments, it will publish a timely withdrawal of the direct final rule in the **Federal Register** and inform the public that the rule will not take effect. ADDRESSES: Submit your comments, identified by Docket ID No. EPA-R04-OAR-2007-0835, by one of the following methods: 1. *http://www.regulations.gov* : Follow the on-line instructions for submitting comments. 2. *E-mail:* *Lesane.Heidi@epa.gov.* 3. *Fax:*

(404)562-9019. 4. *Mail:* “EPA-R04-OAR-2007-0835”, Regulatory Development Section, Air Planning Branch, Air, Pesticides and Toxics Management Division, U.S. Environmental Protection Agency, Region 4, 61 Forsyth Street, SW., Atlanta, Georgia 30303-8960. 5. *Hand Delivery or Courier:* Heidi Lesane, Regulatory Development Section, Air Planning Branch, Air, Pesticides and Toxics Management Division, U.S. Environmental Protection Agency, Region 4, 61 Forsyth Street, SW., Atlanta, Georgia 30303-8960. Such deliveries are only accepted during the Regional Office's normal hours of operation. The Regional Office's official hours of business are Monday through Friday, 8:30 to 4:30, excluding Federal holidays. *Instructions:* Direct your comments to Docket ID No. “EPA-R04-OAR-2007-0835”. EPA's policy is that all comments received will be included in the public docket without change and may be made available online at *www.regulations.gov* , including any personal information provided, unless the comment includes information claimed to be Confidential Business Information

(CBI)or other information whose disclosure is restricted by statute. Do not submit through *www.regulations.gov* or e-mail, information that you consider to be CBI or otherwise protected. The *www.regulations.gov* Web site is an “anonymous access” system, which means EPA will not know your identity or contact information unless you provide it in the body of your comment. If you send an e-mail comment directly to EPA without going through *www.regulations.gov,* your e-mail address will be automatically captured and included as part of the comment that is placed in the public docket and made available on the Internet. If you submit an electronic comment, EPA recommends that you include your name and other contact information in the body of your comment and with any disk or CD-ROM you submit. If EPA cannot read your comment due to technical difficulties and cannot contact you for clarification, EPA may not be able to consider your comment. Electronic files should avoid the use of special characters and any form of encryption and should be free of any defects or viruses. For additional information about EPA's public docket visit the EPA Docket Center homepage at *http://www.epa.gov/epahome/dockets.htm.* *Docket:* All documents in the electronic docket are listed in the *www.regulations.gov* index. Although listed in the index, some information is not publicly available, i.e., CBI or other information whose disclosure is restricted by statute. Certain other material, such as copyrighted material, is not placed on the Internet and will be publicly available only in hard copy form. Publicly available docket materials are available either electronically in *www.regulations.gov* or in hard copy at the Regulatory Development Section, Air Planning Branch, Air, Pesticides and Toxics Management Division, U.S. Environmental Protection Agency, Region 4, 61 Forsyth Street, SW., Atlanta, Georgia 30303-8960. EPA requests that if at all possible, you contact the person listed in the FOR FURTHER INFORMATION CONTACT section to schedule your inspection. The Regional Office's official hours of business are Monday through Friday, 8:30 to 4:30, excluding Federal holidays. FOR FURTHER INFORMATION CONTACT: If you have questions concerning today's action, please contact Heidi LeSane, Regulatory Development Section, Air Planning Branch, Air, Pesticides and Toxics Management Division, U.S. Environmental Protection Agency, Region 4, 61 Forsyth Street, SW., Atlanta, Georgia 30303-8960. The telephone number is

(404)562-9074. Mrs. LeSane can also be reached via electronic mail at *LeSane.Heidi@epa.gov.* SUPPLEMENTARY INFORMATION: Table of Contents I. What Action Is EPA Taking? II. What Is the Regulatory History of CAIR and the CAIR FIPs? III. What Are the General Requirements of CAIR and the CAIR FIPs? IV. What Are the Types of CAIR SIP Submittals? V. Analysis of Kentucky's CAIR SIP Submittal A. State Budgets for Allowance Allocations B. CAIR Cap-and-Trade Programs C. Applicability Provisions for non-EGU NO X SIP Call Sources D. NO X Allowance Allocations E. Allocation of NO X Allowances From the Compliance Supplement Pool F. Individual Opt-In Units VI. Final Action VII. Statutory and Executive Order Reviews I. What Action Is EPA Taking? EPA is approving a revision to Kentucky's SIP, submitted on July 19, 2007. In its SIP revision, Kentucky meets CAIR requirements by requiring certain electric generating units

(EGUs)to participate in the EPA-administered State CAIR cap-and-trade programs addressing SO 2 , NO X annual, and NO X ozone season emissions. EPA has determined that the SIP as revised meets the applicable requirements of CAIR. As a consequence of this SIP approval, EPA will also issue a final rule to withdraw the FIPs concerning SO 2 , NO X annual, and NO X ozone season emissions for Kentucky. This action will delete and reserve 40 CFR 52.940 and 40 CFR 52.941. The withdrawal of the CAIR FIPs for Kentucky is a conforming amendment that must be made once the SIP is approved because EPA's authority to issue the FIPs was premised on a deficiency in the SIP for Kentucky. Once the SIP is fully approved, EPA no longer has authority for the FIPs. Thus, EPA will not have the option of maintaining the FIPs following the full SIP approval. Accordingly, EPA does not intend to offer an opportunity for a public hearing or an additional opportunity for written public comment on the withdrawal of the FIPs. II. What Is the Regulatory History of the CAIR and the CAIR FIPs? The CAIR was published by EPA on May 12, 2005 (70 FR 25162). In this rule, EPA determined that 28 States and the District of Columbia contribute significantly to nonattainment and interfere with maintenance of the national ambient air quality standards (NAAQS) for fine particulates (PM 2.5 ) and /or 8-hour ozone in downwind States in the eastern part of the country. As a result, EPA required those upwind States to revise their SIPs to include control measures that reduce emissions of SO 2 , which is a precursor to PM 2.5 formation, and/or NO X , which is a precursor to both ozone and PM 2.5 formation. For jurisdictions that contribute significantly to downwind PM 2.5 nonattainment, CAIR sets annual State-wide emission reduction requirements (i.e., budgets) for SO 2 and annual State-wide emission reduction requirements for NO X . Similarly, for jurisdictions that contribute significantly to 8-hour ozone nonattainment, CAIR sets State-wide emission reduction requirements for NO X for the ozone season (May 1st to September 30th). Under CAIR, States may implement these reduction requirements by participating in the EPA-administered cap-and-trade programs or by adopting any other control measures. CAIR explains to subject States what must be included in SIPs to address the requirements of section 110(a)(2)(D) of the Clean Air Act

(CAA)with regard to interstate transport with respect to the 8-hour ozone and PM 2.5 NAAQS. EPA made national findings, effective on May 25, 2005, that the States had failed to submit SIPs meeting the requirements of section 110(a)(2)(D). The SIPs were due in July 2000, 3 years after the promulgation of the 8-hour ozone and PM 2.5 NAAQS. These findings started a 2-year clock for EPA to promulgate a FIP to address the requirements of section 110(a)(2)(D). Under CAA section 110(c)(1), EPA may issue a FIP anytime after such findings are made and must do so within two years unless a SIP revision correcting the deficiency is approved by EPA before the FIP is promulgated. On April 28, 2006, EPA promulgated FIPs for all States covered by CAIR in order to ensure the emissions reductions required by CAIR are achieved on schedule. Each CAIR State is subject to the FIPs until the State fully adopts, and EPA approves, a SIP revision meeting the requirements of CAIR. The CAIR FIPs require EGUs to participate in the EPA-administered CAIR SO 2 , NO X annual, and NO X ozone season trading programs, as appropriate. The CAIR FIP SO 2 , NO X annual, and NO X ozone season trading programs impose essentially the same requirements as, and are integrated with, the respective CAIR SIP trading programs. The integration of the FIP and SIP trading programs means that these trading programs will work together to create effectively a single trading program for each regulated pollutant (SO 2 , NO X annual, and NO X ozone season) in all States covered by the CAIR FIP or SIP trading program for that pollutant. The CAIR FIPs also allow States to submit abbreviated SIP revisions that, if approved by EPA, will automatically replace or supplement certain CAIR FIP provisions (e.g., the methodology for allocating NO X allowances to sources in the State), while the CAIR FIP remains in place for all other provisions. On April 28, 2006, EPA published two additional CAIR-related final rules that added the States of Delaware and New Jersey to the list of States subject to CAIR for PM 2.5 and announced EPA's final decisions on reconsideration of five issues, without making any substantive changes to the CAIR requirements. III. What Are the General Requirements of CAIR and the CAIR FIPs? CAIR establishes State-wide emission budgets for SO 2 and NO X and is to be implemented in two phases. The first phase of NO X reductions starts in 2009 and continues through 2014, while the first phase of SO 2 reductions starts in 2010 and continues through 2014. The second phase of reductions for both NO X and SO 2 starts in 2015 and continues thereafter. CAIR requires States to implement the budgets by either:

(1)Requiring EGUs to participate in the EPA-administered cap-and-trade programs; or

(2)adopting other control measures of the State's choosing and demonstrating that such control measures will result in compliance with the applicable State SO 2 and NO X budgets. The May 12, 2005 and April 28, 2006 CAIR rules provide model rules that States must adopt (with certain limited changes, if desired) if they want to participate in the EPA-administered trading programs. With two exceptions, only States that choose to meet the requirements of CAIR through methods that exclusively regulate EGUs are allowed to participate in the EPA-administered trading programs. One exception is for States that adopt the opt-in provisions of the model rules to allow non-EGUs individually to opt into the EPA-administered trading programs. The other exception is for States that include all non-EGUs from their NO X SIP Call trading programs in their CAIR NO X ozone season trading programs. IV. What Are the Types of CAIR SIP Submittals? States have the flexibility to choose the type of control measures they will use to meet the requirements of CAIR. EPA anticipates that most States will choose to meet the CAIR requirements by selecting an option that requires EGUs to participate in the EPA-administered CAIR cap-and-trade programs. For such States, EPA has provided two approaches for submitting and obtaining approval for CAIR SIP revisions. States may submit full SIP revisions that adopt the model CAIR cap-and-trade rules. If approved, these SIP revisions will fully replace the CAIR FIPs. Alternatively, States may submit abbreviated SIP revisions. These SIP revisions will not replace the CAIR FIPs; however, the CAIR FIPs provide that, when approved, the provisions in these abbreviated SIP revisions will be used instead of or in conjunction with, as appropriate, the corresponding provisions of the CAIR FIPs (e.g., the NO X allowance allocation methodology). A State submitting a full SIP revision may either adopt regulations that are substantively identical to the model rules or incorporate by reference the model rules. CAIR provides that States may only make limited changes to the model rules if the States want to participate in the EPA-administered trading programs. A full SIP revision may change the model rules only by altering their applicability and allowance allocation provisions to: 1. Include NO X SIP Call trading sources that are not EGUs under CAIR in the CAIR NO X ozone season trading program; 2. Provide for allocation of NO X annual or ozone season allowances by the State, rather than the Administrator of the EPA or the Administrator's duly authorized representative (Administrator), and using a methodology chosen by the State; 3. Provide for State allocation of NO X annual allowances from the compliance supplement pool

(CSP)using the State's choice of allowed, alternative methodologies; or 4. Allow units that are not otherwise CAIR units to opt individually into the CAIR SO 2 , NO X annual, or NO X ozone season trading programs under the opt-in provisions in the model rules. An approved CAIR full SIP revision addressing EGUs' SO 2 , NO X annual, or NO X ozone season emissions will replace the CAIR FIP for that State for the respective EGU emissions. V. Analysis of Kentucky's CAIR SIP Submittal A. State Budgets for Allowance Allocations The CAIR NO X annual and ozone season budgets were developed from historical heat input data for EGUs. Using these data, EPA calculated annual and ozone season regional heat input values, which were multiplied by 0.15 pounds per million British thermal units (lb/mmBtu), for phase 1, and 0.125 lb/mmBtu, for phase 2, to obtain regional NO X budgets for 2009-2014 and for 2015 and thereafter, respectively. EPA derived the State NO X annual and ozone season budgets from the regional budgets using State heat input data adjusted by fuel factors. The CAIR State SO 2 budgets were derived by discounting the tonnage of emissions authorized by annual allowance allocations under the Acid Rain Program under title IV of the CAA. Under CAIR, each allowance allocated in the Acid Rain Program for the years in phase 1 of CAIR (2010 through 2014) authorizes 0.50 ton of SO 2 emissions in the CAIR trading program, and each Acid Rain Program allowance allocated for the years in phase 2 of CAIR (2015 and thereafter) authorizes 0.35 ton of SO 2 emissions in the CAIR trading program. In this action, EPA is approving Kentucky's SIP revision that adopts the budgets established for the Commonwealth in CAIR, i.e., 83,205 (2009-2014) and 69,337 (2015-thereafter) tons for NO X annual emissions, 36,109 (2009-2014) and 30,651 (2015-thereafter) tons for NO X ozone season emissions, and 188,773 (2010-2014) and 132,141 (2015-thereafter) tons for SO 2 emissions. Kentucky's SIP revision sets these budgets as the total amounts of allowances available for allocation for each year under the EPA-administered cap-and-trade programs. B. CAIR Cap-and-Trade Programs The CAIR NO X annual and ozone-season model trading rules both largely mirror the structure of the NO X SIP Call model trading rule in 40 CFR part 96, subparts A through I. While the provisions of the NO X annual and ozone-season model rules are similar, there are some differences. For example, the NO X annual model rule (but not the NO X ozone season model rule) provides for a CSP, which is discussed below and under which allowances may be awarded for early reductions of NO X annual emissions. As a further example, the NO X ozone season model rule reflects the fact that the CAIR NO X ozone season trading program replaces the NO X SIP Call trading program after the 2008 ozone season and is coordinated with the NO X SIP Call program. The NO X ozone season model rule provides incentives for early emissions reductions by allowing banked, pre-2009 NO X SIP Call allowances to be used for compliance in the CAIR NO X ozone-season trading program. In addition, States have the option of continuing to meet their NO X SIP Call requirement by participating in the CAIR NO X ozone season trading program and including all their NO X SIP Call trading sources in that program. The provisions of the CAIR SO 2 model rule are also similar to the provisions of the NO X annual and ozone season model rules. However, the SO 2 model rule is coordinated with the ongoing Acid Rain SO 2 cap-and-trade program under CAA title IV. The SO 2 model rule uses the title IV allowances for compliance, with each allowance allocated for 2010-2014 authorizing only 0.50 ton of emissions and each allowance allocated for 2015 and thereafter authorizing only 0.35 ton of emissions. Banked title IV allowances allocated for years before 2010 can be used at any time in the CAIR SO 2 cap-and-trade program, with each such allowance authorizing 1 ton of emissions. Title IV allowances are to be freely transferable among sources covered by the Acid Rain Program and sources covered by the CAIR SO 2 cap-and-trade program. EPA also used the CAIR model trading rules as the basis for the trading programs in the CAIR FIPs. The CAIR FIP trading rules are virtually identical to the CAIR model trading rules, with changes made to account for federal rather than state implementation. The CAIR model SO 2 , NO X annual, and NO X ozone season trading rules and the respective CAIR FIP trading rules are designed to work together as integrated SO 2 , NO X annual, and NO X ozone season trading programs. In the SIP revision, Kentucky chooses to implement its CAIR budgets by requiring EGUs to participate in EPA-administered cap-and-trade programs for SO 2 , NO X annual, and NO X ozone season emissions. Kentucky has adopted a full SIP revision that adopts, with certain allowed changes discussed below, the CAIR model cap-and-trade rules for SO 2 , NO X annual, and NO X ozone season emissions. C. Applicability Provisions for Non-EGU NO X SIP Call Sources In general, the CAIR model trading rules apply to any stationary, fossil-fuel-fired boiler or stationary, fossil-fuel-fired combustion turbine serving at any time, since the later of November 15, 1990 or the start-up of the unit's combustion chamber, a generator with nameplate capacity of more than 25 megawatt electrical

(MWe)producing electricity for sale. States have the option of bringing in, for the CAIR NO X ozone season program only, those units in the State's NO X SIP Call trading program that are not EGUs as defined under CAIR. EPA advises States exercising this option to add the applicability provisions in the State's NO X SIP Call trading rule for non-EGUs to the applicability provisions in 40 CFR 96.304 in order to include in the CAIR NO X ozone season trading program all units required to be in the State's NO X SIP Call trading program that are not already included under 40 CFR 96.304. Under this option, the CAIR NO X ozone season program must cover all large industrial boilers and combustion turbines, as well as any small EGUs (i.e. units serving a generator with a nameplate capacity of 25 MWe or less) that the State currently requires to be in the NO X SIP Call trading program. Kentucky has chosen to expand the applicability provisions of the CAIR NO X ozone season trading program to include all non-EGUs in the State's NO X SIP Call trading program. Kentucky has committed to revising the applicability section in its CAIR NO X ozone season rule in order to clarify that, as intended by the State, units subject to its NO X SIP Call program and brought into its CAIR program through the allowed expansion of the CAIR NO X ozone season applicability provisions are to be treated as CAIR NO X ozone season units and certain definitions from 401 KAR 51:001 apply to the provisions that bring these units into the CAIR program. EPA determined after review of Kentucky's final rules, and after Kentucky had adopted other necessary revisions to its CAIR rules, that these provisions needed clarification. However, while the clarifications are needed, EPA interprets Kentucky's current rule to provide that the NO X SIP Call units are subject to the requirements for CAIR NO X ozone season units and that the NO X SIP Call definitions are used in applying the applicability provisions that bring in NO X SIP Call units. In addition, Kentucky has committed to correct two citation references in its CAIR NO X ozone season allowance allocation methodology needed in order to reference correctly its applicability section. EPA interprets Kentucky's current rule as applying the correct references. Kentucky has also committed to revising the definitions of “commence commercial operation” and “commence operation” in its CAIR NO X ozone season rule in order to clarify the deadlines, for meeting monitoring and reporting requirements, that apply to the NO X SIP Call units that are brought into the CAIR program but do not serve generators producing electricity for sale, as intended by the State. EPA determined after review of Kentucky's final rules, and after Kentucky had adopted other necessary revisions to its CAIR rules, that these provisions needed clarification. EPA has outlined these necessary revisions in a technical support document. EPA received a letter from Kentucky dated September 11, 2007, that provides a commitment to make these rule revisions in its CAIR rules in 2008. Specifically, in the September 11, 2007, letter, Kentucky commits to make the revisions discussed above to its CAIR NO X Ozone Season trading rule, 401 KAR 51:220. D. NO X Allowance Allocations Under the NO X allowance allocation methodology in the CAIR model trading rules and in the CAIR FIP, NO X annual and ozone season allowances are allocated to units that have operated for five years, based on heat input data from a three-year period that are adjusted for fuel type by using fuel factors of 1.0 for coal, 0.6 for oil, and 0.4 for other fuels. The CAIR model trading rules and the CAIR FIP also provide a new unit set-aside from which units without five years of operation are allocated allowances based on the units' prior year emissions. States may establish in their SIP submissions a different NO X allowance allocation methodology that will be used to allocate allowances to sources in the States if certain requirements are met concerning the timing of submission of units' allocations to the Administrator for recordation and the total amount of allowances allocated for each control period. In adopting alternative NO X allowance allocation methodologies, States have flexibility with regard to: 1. The cost to recipients of the allowances, which may be distributed for free or auctioned; 2. The frequency of allocations; 3. The basis for allocating allowances, which may be distributed, for example, based on historical heat input or electric and thermal output; and 4. The use of allowance set-asides and, if used, their size. Kentucky has chosen to replace the provisions of the CAIR NO X annual and CAIR NO X ozone season model trading rules concerning the allocation of NO X annual and ozone season allowances with its own methodology. Kentucky has chosen to distribute 98% of its NO X annual allowances based upon adjusted heat input. In Kentucky's final CAIR SIP submittal, Kentucky already made initial allocations for the control periods spanning from 2009 to 2014. In 2009, Kentucky will submit one-year allocations for the 2015 control period, and for every control period thereafter Kentucky will continue to submit allocations six years in advance. For example, in 2010, one-year allocations will be made for the 2016 control period; in 2011, one-year allocations will be made for the 2017 control period, etc. The remaining 2% of Kentucky's allowances will be held and sold as needed by the Commonwealth of Kentucky, with the proceeds to be deposited into Kentucky's general fund. E. Allocation of NO X Allowances From the Compliance Supplement Pool The CAIR establishes a compliance supplement pool

(CSP)to provide an incentive for early reductions in NO X annual emissions. The CSP consists of 200,000 CAIR NO X annual allowances of vintage 2009 for the entire CAIR region, and a State's share of the CSP is based upon the projected magnitude of the emission reductions required by CAIR in that State. States may distribute CSP allowances, one allowance for each ton of early reduction, to sources that make NO X reductions during 2007 or 2008 beyond what is required by any applicable State or Federal emission limitation. States also may distribute CSP allowances based upon a demonstration of need for an extension of the 2009 deadline for implementing emission controls. The CAIR annual NO X model trading rule establishes specific methodologies for allocations of CSP allowances. States may choose an allowed, alternative CSP allocation methodology to be used to allocate CSP allowances to sources in the States. Kentucky has chosen to modify the provisions of the CAIR NO x annual model trading rule concerning the allocation of allowances from the CSP. Kentucky has chosen to distribute CSP allowances using an allocation methodology that continues to reward early reductions, but hinges on heat input data. Initially, the portion of the CSP that is available to a given source is determined by the following formula: ER04OC07.000 Where: ERC U is the Early Reduction Credit available to the unit, BHI U is the Baseline Heat Input of the unit, BHI T is the Baseline Heat Input from all sources within Kentucky, and CSP T is 14,935 tons, the Early Reduction Credits available pursuant to 40 CFR 96.143(a). Kentucky also makes available portions of the CSP for units that are able to demonstrate need, in a manner that is identical to 40 CFR 96.143(c). Remaining credits are then distributed on a pro rata basis, up to the total early reduction credits requested pursuant to 40 CFR 96.143(b), to those CAIR NO X units with early reduction credits that exceeded the amount of credits made available by the previous calculation. F. Individual Opt-In Units The opt-in provisions of the CAIR SIP model trading rules allow certain non-EGUs (i.e., boilers, combustion turbines, and other stationary fossil-fuel-fired devices) that do not meet the applicability criteria for a CAIR trading program to participate voluntarily in (i.e., opt into) the CAIR trading program. A non-EGU may opt into one or more of the CAIR trading programs. In order to qualify to opt into a CAIR trading program, a unit must vent all emissions through a stack and be able to meet monitoring, recordkeeping, and recording requirements of 40 CFR part 75. The owners and operators seeking to opt a unit into a CAIR trading program must apply for a CAIR opt-in permit. If the unit is issued a CAIR opt-in permit, the unit becomes a CAIR unit, is allocated allowances, and must meet the same allowance-holding and emissions monitoring and reporting requirements as other units subject to the CAIR trading program. The opt-in provisions provide for two methodologies for allocating allowances for opt-in units, one methodology that applies to opt-in units in general and a second methodology that allocates allowances only to opt-in units that the owners and operators intend to repower before January 1, 2015. States have several options concerning the opt-in provisions. States may adopt the CAIR opt-in provisions entirely or may adopt them but exclude one of the methodologies for allocating allowances. States may also decline to adopt the opt-in provisions at all. Kentucky has chosen to allow non-EGUs meeting certain requirements to opt into the CAIR NO X annual trading program, including both of the opt-in allocation methods in the model rule. Kentucky has chosen to allow non-EGUs meeting certain requirements to opt into the CAIR NO X ozone season trading program, including both of the opt-in allocation methods in the model rule. Kentucky has chosen to allow certain non-EGUs to opt into the CAIR SO 2 trading program, including both of the opt-in allocation methods in the model rule. VI. Final Action EPA is approving Kentucky's full CAIR SIP revision submitted on July 19, 2007. Under this SIP revision, Kentucky is choosing to participate in the EPA-administered cap-and-trade programs for SO 2 , NO X annual, and NO X ozone season emissions. The SIP revision (interpreted and clarified as discussed above) meets the applicable requirements in 40 CFR 51.123(o) and (aa), with regard to NO X annual and NO X ozone season emissions, and 40 CFR 51.124(o), with regard to SO 2 emissions. Further, Kentucky has agreed to make the technical corrections to certain provisions as discussed above. Therefore, EPA has determined that the SIP as revised will meet the requirements of CAIR. As a consequence of the SIP approval, the Administrator of EPA will also issue, without providing an opportunity for a public hearing or an additional opportunity for written public comment, a final rule to withdraw the CAIR FIPs concerning SO 2 , NO X annual, and NO X ozone season emissions for Kentucky. This action will delete and reserve 40 CFR 52.940 and 40 CFR 52.941. EPA is approving the aforementioned changes to the SIP. EPA is publishing this rule without prior proposal because the Agency views this as a noncontroversial submittal and anticipates no adverse comments. However, in the proposed rules section of this **Federal Register** publication, EPA is publishing a separate document that will serve as the proposal to approve the SIP revision should adverse comments be filed. This rule will be effective December 3, 2007 without further notice unless the Agency receives adverse comments by November 5, 2007. If the EPA receives such comments, then EPA will publish a document withdrawing the final rule and informing the public that the rule will not take effect. All public comments received will then be addressed in a subsequent final rule based on the proposed rule. EPA will not institute a second comment period. Parties interested in commenting should do so at this time. If no such comments are received, the public is advised that this rule will be effective on December 3, 2007 and no further action will be taken on the proposed rule. VII. Statutory and Executive Order Reviews Under Executive Order 12866 (58 FR 51735, October 4, 1993), this action is not a “significant regulatory action” and therefore is not subject to review by the Office of Management and Budget. For this reason, this action is also not subject to Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355, May 22, 2001). This action merely approves state law as meeting Federal requirements and imposes no additional requirements beyond those imposed by state law. Accordingly, the Administrator certifies that this rule will not have a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 *et seq.* ). Because this rule approves pre-existing requirements under state law and does not impose any additional enforceable duty beyond that required by state law, it does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4). This rule also does not have tribal implications because it will not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes, as specified by Executive Order 13175 (65 FR 67249, November 9, 2000). This action also does not have Federalism implications because it does not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132 (64 FR 43255, August 10, 1999). This action merely approves a state rule implementing a Federal standard, and does not alter the relationship or the distribution of power and responsibilities established in the CAA. This rule also is not subject to Executive Order 13045 “Protection of Children from Environmental Health Risks and Safety Risks” (62 FR 19885, April 23, 1997), because it is not economically significant. In reviewing SIP submissions, EPA's role is to approve state choices, provided that they meet the criteria of the CAA. In this context, in the absence of a prior existing requirement for the State to use voluntary consensus standards (VCS), EPA has no authority to disapprove a SIP submission for failure to use VCS. It would thus be inconsistent with applicable law for EPA, when it reviews a SIP submission, to use VCS in place of a SIP submission that otherwise satisfies the provisions of the CAA. Thus, the requirements of section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) do not apply. This rule does not impose an information collection burden under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 *et seq.* ). The Congressional Review Act, 5 U.S.C. 801 *et seq.* , as added by the Small Business Regulatory Enforcement Fairness Act of 1996, generally provides that before a rule may take effect, the agency promulgating the rule must submit a rule report, which includes a copy of the rule, to each House of the Congress and to the Comptroller General of the United States. 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** . A major rule cannot take effect until 60 days after it is published in the **Federal Register** . This action is not a “major rule” as defined by 5 U.S.C. 804(2). Under section 307(b)(1) of the CAA, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by December 3, 2007. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this rule for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to enforce its requirements. (See section 307(b)(2).) List of Subjects 40 CFR Part 52 Environmental protection, Air pollution control, Electric utilities, Intergovernmental relations, Nitrogen oxides, Ozone, Particulate matter, Reporting and recordkeeping requirements, Sulfur dioxide. Dated: September 21, 2007. J.I. Palmer, Jr., Regional Administrator, Region 4. 40 CFR part 52 is amended as follows: PART 52—[AMENDED] 1. The authority citation for part 52 continues to read as follows: Authority: 42 U.S.C. 7401 *et seq.* Subpart S—Kentucky 2. In § 52.920(c) Table 1 is amended under Chapter 51 by adding in numerical order the entries for “401 KAR 51.210,” “401 KAR 51.220,” and “401 KAR 51.230” to read as follows: § 52.920 Identification of plan.

(c)* * * Table 1.—EPA Approved Kentucky Regulations State citation Title/subject State effective date EPA approval date Explanation * * * * * * * Chapter 51 Attainment and Maintenance of the National Ambient Air Quality Standards * * * * * * * 401 KAR 51.210 CAIR NO X Annual Trading Program 2/2/2007 10/4/2007 [Insert citation of publication]. 401 KAR 51.220 CAIR NO X Ozone Season Trading Program 6/13/2007 10/4/2007 [Insert citation of publication]. 401 KAR 51.230 CAIR SO 2 Trading Program 2/2/2007 10/4/2007 [Insert citation of publication]. * * * * * * * [FR Doc. E7-19327 Filed 10-3-07; 8:45 am] BILLING CODE 6560-50-P ENVIRONMENTAL PROTECTION AGENCY 40 CFR Part 82 [EPA-HQ-OAR-2003-0118; FRL-8477-7] RIN 2060-AG12 Protection of Stratospheric Ozone: Notice 22 for Significant New Alternatives Policy Program AGENCY: Environmental Protection Agency (EPA). ACTION: Determination of acceptability. SUMMARY: This Determination of Acceptability expands the list of acceptable substitutes for ozone-depleting substances under the U.S. Environmental Protection Agency's

(EPA)Significant New Alternatives Policy

(SNAP)program. The determinations concern new substitutes for use in the refrigeration and air conditioning sector. DATES: This action is effective on October 4, 2007. ADDRESSES: EPA has established a docket for this action under Docket ID No. EPA-HQ-OAR-2003-0118 (continuation of Air Docket A-91-42). All electronic documents in the docket are listed in the index at *http://www.regulations.gov.* Although listed in the index, some information is not publicly available, i.e., Confidential Business Information

(CBI)or other information whose disclosure is restricted by statute. Publicly available docket materials are available either electronically at *www.regulations.gov* or in hard copy at the EPA Air Docket (No. A-91-42), EPA/DC, EPA West, Room 3334, 1301 Constitution Avenue, 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 Air Docket is

(202)566-1742. FOR FURTHER INFORMATION CONTACT: Margaret Sheppard by telephone at

(202)343-9163, by facsimile at

(202)343-2362, by e-mail at *sheppard.margaret@epa.gov,* or by mail at U.S. Environmental Protection Agency, Mail Code 6205J, 1200 Pennsylvania Avenue, NW., Washington, DC 20460. Overnight or courier deliveries should be sent to the office location at 1310 L Street, NW., 10th floor, Washington, DC 20005. For more information on the Agency's process for administering the SNAP program or criteria for evaluation of substitutes, refer to the original SNAP rulemaking published in the **Federal Register** on March 18, 1994 (59 FR 13044). Notices and rulemakings under the SNAP program, as well as other EPA publications on protection of stratospheric ozone, are available at EPA's Ozone Depletion World Wide Web site at *http://www.epa.gov/ozone/* including the SNAP portion at *http://www.epa.gov/ozone/snap/* . SUPPLEMENTARY INFORMATION: I. Listing of New Acceptable Substitutes A. Refrigeration and Air Conditioning II. Section 612 Program A. Statutory Requirements B. Regulatory History Appendix A—Summary of Decisions for New Acceptable Substitutes I. Listing of New Acceptable Substitutes This section presents EPA's most recent acceptable listing decisions for substitutes in the refrigeration and air conditioning sector. For copies of the full list of ODS substitutes in all industrial sectors, visit EPA's Ozone Depletion Web site at *http://www.epa.gov/ozone/snap/lists/index.html* . The sections below discuss each substitute listing in detail. Appendix A contains a table summarizing today's listing decisions for new substitutes. The statements in the “Further Information” column in the table provide additional information, but are not legally binding under section 612 of the Clean Air Act. In addition, the “further information” may not be a comprehensive list of other legal obligations you may need to meet when using the substitute. Although you are not required to follow recommendations in the “further information” column of the table to use a substitute, EPA strongly encourages you to apply the information when using these substitutes. In many instances, the information simply refers to standard operating practices in existing industry and/or building-code standards. Thus, many of these statements, if adopted, would not require significant changes to existing operating practices. You can find submissions to EPA for the use of the substitutes listed in this document and other materials supporting the decisions in this action in docket EPA-HQ-OAR-2003-0118 at *http://www.regulations.gov* . A. Refrigeration and Air Conditioning 1. RS-45 *EPA's decision:* *RS-45[R-125/143a/134a/600a (63.2/18.0/16.0/2.8)] is acceptable for use in new and retrofit equipment as a substitute for hydrochlorofluorocarbon (HCFC)-22 in:* • Chillers (centrifugal, screw, reciprocating). • Industrial process refrigeration. • Industrial process air conditioning. • Retail food refrigeration. • Cold storage warehouses. • Refrigerated transport. • Commercial ice machines. • Ice skating rinks. • Household refrigerators and freezers. • Water coolers. • Residential dehumidifiers. • Household and light commercial air conditioning and heat pumps. RS-45 is a blend of 18.0% by weight hydrofluorocarbon (HFC)-143a (1,1,1-trifluoroethane, CAS ID #420-46-2), 63.2% by weight HFC-125 (pentafluoroethane, CAS ID #354-33-6), 16.0% by weight HFC-134a (1,1,1,2-tetrafluoroethane, CAS ID #811-97-2, and 2.8% by weight R-600a (isobutane, 2-methyl propane, CAS ID #75-28-5). The American Society of Heating, Refrigerating, and Air-Conditioning Engineers (ASHRAE) has assigned this blend the designation R-434A. You may find the submission under Docket item EPA-HQ-OAR-2003-0118-0162 at *www.regulations.gov. * *Environmental information:* The ozone depletion potential

(ODP)of R-421A is zero. The global warming potentials

(GWPs)of HFC-143a, HFC-125, HFC-134a, and isobutane are 3800, 3450, 1320, and less than 10, respectively (relative to carbon dioxide, using a 100-year time horizon (United Nations Environment Programme

(UNEP)and World Meteorological Organization

(WMO)*Scientific Assessment of Ozone Depletion: 2002* )). The atmospheric lifetimes of these constituents are 48.3, 29, and 14 years, and less than one year, respectively. The contribution of this blend to greenhouse gas emissions will be minimized through the implementation of the venting prohibition under section 608 (c)(2) of the Clean Air Act (see 40 CFR part 82, subpart F). This section and EPA's implementing regulations prohibit venting or release of substitutes for class I or class II ODSs used in refrigeration and air conditioning and require proper handling, such as recycling or recovery, and disposal of these substances. HFC-143a, HFC-125 and HFC-134a are excluded from the definition of volatile organic compound

(VOC)under Clean Air Act regulations (see 40 CFR 51.100(s)) addressing the development of State implementation plans

(SIPs)to attain and maintain the national ambient air quality standards. Isobutane is a VOC under Clean Air Act regulations. *Flammability information:* While two of the blend components, isobutane and HFC-143a, are flammable, the blend as formulated and under worst case fractionated formulation scenarios is not flammable. *Toxicity and exposure data:* HFC-143a has an 8 hour/day, 40 hour/week recommended acceptable exposure limit for the workplace from the manufacturer of 1000 ppm. HFC-125 and HFC-134a have 8 hour/day, 40 hour/week workplace environmental exposure limits (WEELs) of 1000 ppm established by the American Industrial Hygiene Association (AIHA). Isobutane has an 8 hour/day, 40 hour/week threshold limit value

(TLV)established by the American Conference of Governmental Industrial Hygienists (ACGIH) of 1000 ppm. EPA recommends that users follow all requirements and recommendations specified in the Material Safety Data Sheet

(MSDS)for the blend and the individual components and other safety precautions common in the refrigeration and air conditioning industry. EPA also recommends that users of RS-45 adhere to the AIHA's WEELs and the ACGIH's TLV. *Comparison to other refrigerants:* RS-45 is not an ozone depleter in contrast to HCFC-22, the ozone-depleting substance which it replaces. RS-45 is comparable to other substitutes for HCFC-22 in its lack of risk for ozone depletion. RS-45 has a GWP of about 3200, comparable to or lower than that of other substitutes for HCFC-22. For example, the GWP of R-407C is about 1700, the GWP of R-410A is about 2000, and the GWPs of R-404A and R-507 are about 3900. Flammability and toxicity risks are low, as discussed above. Thus, we find that RS-45 is acceptable because it does not pose a greater overall risk to public health and the environment than the other substitutes acceptable in the end uses listed above. 2. KDD5 *EPA's decision:* *KDD5 is acceptable for use in new and retrofit equipment as a substitute for HCFC-22 in: * • Chillers (centrifugal, screw, reciprocating). • Industrial process refrigeration. • Industrial process air conditioning. • Retail food refrigeration. • Cold storage warehouses. • Refrigerated transport. • Commercial ice machines. • Ice skating rinks. • Household refrigerators and freezers. • Vending machines. • Water coolers. • Residential dehumidifiers. • Household and light commercial air conditioning and heat pumps. • Motor vehicle air conditioning (buses and passenger trains only). • Non-mechanical heat transfer. The submitter of KDD5 has claimed its composition as confidential business information. You may find the submission under Docket item EPA-HQ-OAR-2003-0118-0157 at *www.regulations.gov* . *Environmental information:* The ODP of KDD5 is zero. The average 100-year integrated GWP of this blend is in the range of the GWPs for R-407C and R-410A. Some components of the blend are VOCs under Clean Air Act regulations addressing the development of State implementation plans

(SIPs)to attain and maintain the national ambient air quality standards. 40 CFR 51.100(s). The contribution of this blend to greenhouse gas emissions will be minimized through the implementation of the venting prohibition under section 608(c)(2) of the Clean Air Act (see 40 CFR part 82, subpart F). This section and EPA's implementing regulations prohibit venting or release of substitutes for class I or class II ODSs used in refrigeration and air conditioning and require proper handling, such as recycling or recovery, and disposal of these substances. *Flammability information:* As formulated and under worst-case fractionated formulation scenarios, this blend is not flammable. *Toxicity and exposure data:* The manufacturer's recommended 8-hr TWA workplace exposure limit for the blend is 995 ppm. A number of components of the blend have workplace exposure limits of 1000 ppm set by the manufacturer, the AIHA, or the ACGIH. *Comparison to other refrigerants:* KDD5 is not an ozone depleter; thus, it poses a lower risk for ozone depletion than the ODSs it replaces. KDD5 has comparable or lower risk for ozone depletion than other substitutes for HCFC-22. KDD5 has a GWP comparable to or lower than that of other substitutes for HCFC-22. For example, the GWP of R-407C is about 1700, the GWP of R-410A is about 2000, and the GWPs of R-404A and R-507 are about 3900. Flammability and toxicity risks are low, as discussed above. We find that KDD5 is acceptable because it does not pose a greater overall risk to public health and the environment than the other substitutes acceptable in the end uses listed above. 3. R-428A *EPA's decisions:* *R-428A is acceptable for use in new and retrofit equipment as a substitute for R-502, HCFC-22, and refrigerant blends containing HCFC-22, including R-402A, R-408A, R-403B, and R-411B in:* • Retail food refrigeration. • Cold storage warehouses. • Refrigerated transport. • Commercial ice machines. • Household refrigerators and freezers. *R-428A is acceptable for use in new equipment as a substitute for R-403B in:* • Industrial process refrigeration. *R-428A is acceptable for use in new and retrofit equipment as a substitute for R-502 and HCFC-22 in:* • Ice skating rinks. R-428A is a blend of 77.5% by weight HFC-125 (pentafluoroethane, CAS ID #354-33-6), 20.0% by weight HFC-143a (1,1,1,-trifluoroethane, CAS ID #420-46-2), 0.6% by weight R-290 (propane, CAS ID #74-98-6), and 1.9% by weight R-600a (isobutane, 2-methyl propane, CAS ID #75-28-5). A common trade name for this refrigerant is RS-52. You may find the submission under Docket item EPA-HQ-OAR-2003-0118-0155 at *www.regulations.gov* . *Environmental information:* The ODP of R-428A is zero. For environmental information on HFC-125, HFC-143a and isobutane, see the section on environmental information above for RS-45. The 100-year integrated GWP of propane is generally considered to be less than 10, relative to CO 2 . The atmospheric lifetime of propane is less than one year. The contribution of this blend to greenhouse gas emissions will be minimized through the implementation of the venting prohibition under section 608(c)(2) of the Clean Air Act (see 40 CFR part 82, subpart F). This section and EPA's implementing regulations prohibit venting or release of substitutes for class I or class II ODSs used in refrigeration and air conditioning and require proper handling, such as recycling or recovery, and disposal of these substances. Isobutane and propane are VOCs under Clean Air Act regulations concerning the development of SIPs to attain and maintain the national ambient air quality standards. HFC-125 and HFC-143a are exempt from the definition of VOC under these regulations. 40 CFR 51.100(s). *Flammability information:* While three components of the blend, HFC-143a, isobutane and propane, are flammable, the blend as formulated and under worst-case fractionated formulation scenarios, is not flammable. *Toxicity and exposure data:* For information on the workplace exposure limits for HFC-125 and HFC-143a, see the section on toxicity and exposure data above for RS-45. Isobutane has an 8 hour/day, 40 hour/week threshold limit value

(TLV)established by the American Conference of Governmental Industrial Hygienists (ACGIH) of 1000 ppm. Propane has an 8 hour/day, 40 hour/week TLV of 800 ppm established by the ACGIH. EPA recommends that users follow all requirements and recommendations specified in the MSDS for the blend and the individual components and other safety precautions common in the refrigeration and air conditioning industry. EPA also recommends that users of R-428A adhere to the ACGIH's TLVs. *Comparison to other refrigerants:* R-428A is not an ozone depleter in contrast to the ozone depleting substances which it replaces. R-428A has comparable or lower risk for ozone depletion than other substitutes for R-502. R-428A has a GWP of about 3500, comparable to or lower than that of other substitutes for HCFC-22 and R-502. For example, the GWP of R-407C is about 1700, the GWP of R-410A is about 2000, and the GWPs of R-404A and R-507 are about 3900. The flammability and toxicity risks are low, as discussed above. Thus, we find that R-428A is acceptable because it does not pose a greater overall risk to public health and the environment than the other substitutes acceptable in the end uses listed above. II. Section 612 Program A. Statutory Requirements Section 612 of the Clean Air Act authorizes EPA to develop a program for evaluating alternatives to ozone-depleting substances. We refer to this program as the Significant New Alternatives Policy

(SNAP)program. The major provisions of section 612 are: • *Rulemaking* —Section 612(c) requires EPA to promulgate rules making it unlawful to replace any class I (chlorofluorocarbon, halon, carbon tetrachloride, methyl chloroform, and hydrobromofluorocarbon) or class II (hydrochlorofluorocarbon) substance with any substitute that the Administrator determines may present adverse effects to human health or the environment where the Administrator has identified an alternative that

(1)reduces the overall risk to human health and the environment, and

(2)is currently or potentially available. • *Listing of Unacceptable/Acceptable Substitutes* —Section 612(c) also requires EPA to publish a list of the substitutes unacceptable for specific uses. We must publish a corresponding list of acceptable alternatives for specific uses. • *Petition Process* —Section 612(d) grants the right to any person to petition EPA to add a substance to or delete a substance from the lists published in accordance with section 612(c). The Agency has 90 days to grant or deny a petition. Where the Agency grants the petition, it must publish the revised lists within an additional six months. • *90-day Notification* —Section 612(e) directs EPA to require any person who produces a chemical substitute for a class I substance to notify the Agency not less than 90 days before new or existing chemicals are introduced into interstate commerce for significant new uses as substitutes for a class I substance. The producer must also provide the Agency with the producer's unpublished health and safety studies on such substitutes. • *Outreach* —Section 612(b)(1) states that the Administrator shall seek to maximize the use of federal research facilities and resources to assist users of class I and II substances in identifying and developing alternatives to the use of such substances in key commercial applications. • *Clearinghouse* —Section 612(b)(4) requires the Agency to set up a public clearinghouse of alternative chemicals, product substitutes, and alternative manufacturing processes that are available for products and manufacturing processes which use class I and II substances. B. Regulatory History On March 18, 1994, EPA published the final rulemaking (59 FR 13044) that described the process for administering the SNAP program and issued our first acceptability lists for substitutes in the major industrial use sectors. These sectors include: • Refrigeration and air conditioning; • Foam blowing; • Solvents cleaning; • Fire suppression and explosion protection; • Sterilants; • Aerosols; • Adhesives, coatings and inks; and • Tobacco expansion. These sectors comprise the principal industrial sectors that historically consumed the largest volumes of ozone-depleting compounds. As described in this original rule for the SNAP program, EPA does not believe that rulemaking procedures are required to list alternatives as acceptable with no limitations. Such listings do not impose any sanction, nor do they remove any prior license to use a substance. Therefore, by this notice we are adding substances to the list of acceptable alternatives without first requesting comment on new listings. However, we do believe that notice-and-comment rulemaking is required to place any substance on the list of prohibited substitutes, to list a substance as acceptable only under certain conditions, to list substances as acceptable only for certain uses, or to remove a substance from the lists of prohibited or acceptable substitutes. We publish updates to these lists as separate notices of rulemaking in the **Federal Register.** The Agency defines a “substitute” as any chemical, product substitute, or alternative manufacturing process, whether existing or new, intended for use as a replacement for a class I or class II substance. Anyone who plans to market or produces a substitute for an ODS in one of the eight major industrial use sectors must provide EPA with health and safety studies on the substitute at least 90 days before introducing it into interstate commerce for significant new use as an alternative. This requirement applies to substitute manufacturers, but may include importers, formulators, or end-users, when they are responsible for introducing a substitute into commerce. You can find a complete chronology of SNAP decisions and the appropriate **Federal Register** citations from the SNAP section of EPA's Ozone Depletion World Wide Web site at *http://www.epa.gov/ozone/snap/chron.html.* This information is also available from the Air Docket (see ADDRESSES section above for contact information). List of Subjects in 40 CFR Part 82 Environmental protection, Administrative practice and procedure, Air pollution control, Reporting and recordkeeping requirements. Dated: September 7, 2007. Edward Callahan, Acting Director, Office of Atmospheric Programs. Appendix A: Summary of Acceptable Decisions Refrigeration and Air Conditioning End-use Substitute Decision Further information Centrifugal chillers (retrofit and new) RS-45 as a substitute for HCFC-22 Acceptable KDD5 as a substitute for HCFC-22 Acceptable Screw chillers (retrofit and new) RS-45 as a substitute for HCFC-22 Acceptable KDD5 as a substitute for HCFC-22 Acceptable Reciprocating chillers (retrofit and new) RS-45 as a substitute for HCFC-22 Acceptable KDD5 as a substitute for HCFC-22 Acceptable Industrial process refrigeration (retrofit and new) RS-45 as a substitute for HCFC-22 Acceptable KDD5 as a substitute for HCFC-22 Acceptable Industrial process refrigeration (new only) R-428A as a substitute for R-403B Acceptable Industrial process air conditioning (retrofit and new) RS-45 as a substitute for HCFC-22 Acceptable KDD5 as a substitute for HCFC-22 Acceptable Retail food refrigeration (retrofit and new) RS-45 as a substitute for HCFC-22 Acceptable KDD5 as a substitute for HCFC-22 Acceptable R-428A as a substitute for R-502, HCFC-22 and refrigerant blends containing HCFC-22, including R-402A, R-403B, R-408A, and R-411B Acceptable Cold storage warehouses (retrofit and new) RS-45 as a substitute for HCFC-22 Acceptable KDD5 as a substitute for HCFC-22 Acceptable R-428A as a substitute for R-502, HCFC-22 and refrigerant blends containing HCFC-22, including R-402A, R-403B, R-408A, and R-411B Acceptable Refrigerated transport (retrofit and new) RS-45 as a substitute for HCFC-22 Acceptable KDD5 as a substitute for HCFC-22 Acceptable R-428A as a substitute for R-502, HCFC-22 and refrigerant blends containing HCFC-22, including R-402A, R-403B, R-408A, and R-411B Acceptable Commercial ice machines (retrofit and new) RS-45 as a substitute for HCFC-22 Acceptable KDD5 as a substitute for HCFC-22 Acceptable R-428A as a substitute for R-502, HCFC-22 and refrigerant blends containing HCFC-22, including R-402A, R-403B, R-408A, and R-411B Acceptable Ice skating rinks (retrofit and new) RS-45 as a substitute for HCFC-22 Acceptable KDD5 as a substitute for HCFC-22 Acceptable R-428A as a substitute for R-502 and HCFC-22 Acceptable Household refrigerators and freezers (retrofit and new) RS-45 as a substitute for HCFC-22 Acceptable KDD5 as a substitute for HCFC-22 Acceptable R-428A as a substitute for R-502, HCFC-22 and refrigerant blends containing HCFC-22, including R-402A, R-403B, R-408A, and R-411B Acceptable Vending machines (retrofit and new) KDD5 as a substitute for HCFC-22 Acceptable Water coolers (retrofit and new) RS-45 as a substitute for HCFC-22 Acceptable KDD5 as a substitute for HCFC-22 Acceptable Residential dehumidifiers (retrofit and new) RS-45 as a substitute for HCFC-22 Acceptable KDD5 as a substitute for HCFC-22 Acceptable Household and light commercial air conditioning and heat pumps (retrofit and new) RS-45 as a substitute for HCFC-22 Acceptable KDD5 as a substitute for HCFC-22 Acceptable Motor vehicle air conditioning for buses and passenger trains KDD5 as a substitute for HCFC-22 Acceptable Non-mechanical heat transfer KDD5 as a substitute for HCFC-22 Acceptable [FR Doc. E7-19545 Filed 10-3-07; 8:45 am] BILLING CODE 6560-50-P DEPARTMENT OF HEALTH AND HUMAN SERVICES Office of the Secretary Office of Inspector General 42 CFR Part 1001 Medicare and State Health Care Programs: Fraud and Abuse; Safe Harbor for Federally Qualified Health Centers Arrangements Under the Anti-Kickback Statute AGENCY: Office of Inspector General (OIG), HHS. ACTION: Final rule. SUMMARY: In accordance with section 431 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), this final rule sets forth a safe harbor under the anti-kickback statute to protect certain arrangements involving goods, items, services, donations, and loans provided by individuals and entities to certain health centers funded under section 330 of the Public Health Service Act. The goods, items, services, donations, or loans must contribute to the health center's ability to maintain or increase the availability, or enhance the quality, of services available to a medically underserved population. DATES: *Effective Date:* These regulations are effective on December 3, 2007. FOR FURTHER INFORMATION CONTACT: Spencer Turnbull, Office of Counsel to the Inspector General,

(202)619-0335. SUPPLEMENTARY INFORMATION: I. Background Overview—Establishing New Safe Harbor for Arrangements Involving Federally Qualified Health Centers This final regulation establishes safe harbor protection under the anti-kickback statute for certain arrangements involving Federally qualified health centers. Section I of this preamble contains a brief background discussion addressing the anti-kickback statute and safe harbors; a discussion of section 330-funded health centers; a summary of the relevant MMA provisions; a summary of the proposed safe harbor; and a summary of the final safe harbor. Section II of this preamble sets forth a summary of the public comments and our responses to those comments. A. The Anti-Kickback Statute and Safe Harbors The anti-kickback statute provides criminal penalties for individuals or entities that knowingly and willfully offer, pay, solicit, or receive remuneration in order to induce or reward the referral of business reimbursable under any of the Federal health care programs, as defined in section 1128B(f) of the Act. The offense is classified as a felony and is punishable by fines of up to $25,000 and imprisonment for up to five years. Violations of the anti-kickback statute may also result in the imposition of civil money penalties

(CMPs)under section 1128A(a)(7) of the Act (42 U.S.C. 1320a-7a(a)(7)), program exclusion under section 1128(b)(7) of the Act (42 U.S.C. 1320a-7(b)(7)), and liability under the False Claims Act, (31 U.S.C. 3729-33). The types of remuneration prohibited specifically include, without limitation, kickbacks, bribes, and rebates, whether made directly or indirectly, overtly or covertly, in cash or in kind. Prohibited conduct includes not only the payment of remuneration intended to induce or reward referrals of patients, but also the payment of remuneration intended to induce or reward the purchasing, leasing, or ordering of, or arranging for or recommending the purchasing, leasing, or ordering of, any good, facility, service, or item reimbursable by any Federal health care program. Because of the broad reach of the statute, concern was expressed that some relatively innocuous commercial arrangements were covered by the statute and, therefore, potentially subject to criminal prosecution. In response, Congress enacted section 14 of the Medicare and Medicaid Patient and Program Protection Act of 1987, Public Law 100-93 (section 1128B(b)(3)(E) of the Act), which specifically required the development and promulgation of regulations, the so-called “safe harbor” provisions, which would specify various payment and business practices that would not be treated as criminal offenses under the anti-kickback statute, even though they may potentially be capable of inducing referrals of business under the Federal health care programs. Since July 29, 1991, OIG has published in the **Federal Register** a series of final regulations establishing “safe harbors” in various areas. 1 These OIG safe harbor provisions have been developed “to limit the reach of the statute somewhat by permitting certain non-abusive arrangements, while encouraging beneficial or innocuous arrangements.” (56 FR 35952, 35958; July 21, 1991). 1 56 FR 35952 (July 29, 1991); 61 FR 2122 (January 25, 1996); 64 FR 63518 (November 19, 1999); 64 FR 63504 (November 19, 1999); 66 FR 62979 (December 4, 2001); and 71 FR 45110 (August 8, 2006). Health care providers and others may voluntarily seek to comply with safe harbors so that they have the assurance that their business practices will not be subject to liability under the anti-kickback statute, the CMP provision for anti-kickback violations, or the program exclusion authority related to kickbacks. In giving the Department the authority to protect certain arrangements and payment practices from penalties under the anti-kickback statute, Congress intended the safe harbor regulations to be evolving rules that would be updated periodically to reflect changing business practices and technologies in the health care industry. B. Section 330—Funded Health Centers Beginning in the 1960s, Congress enacted various health center programs to assist the large number of individuals living in medically underserved areas, as well as the growing number of special populations with limited access to preventive and primary health care services. In the Health Centers Consolidation Act of 1996, Public Law 104-299, Congress consolidated the four then-existing Federal health center grant programs (the Migrant Health Center Program, the Community Health Center Program, the Health Care for the Homeless Program, and the Health Services for Residents of Public Housing Program) into a single program under section 330 of the Public Health Service

(PHS)Act. *See* S. Rep. 104-186 (December 15, 1995). In the Health Care Safety Net Amendments of 2002, Public Law 107-251, Congress reauthorized and strengthened the health centers program. In 2005, the Federal health center programs supported 954 organizations that provided care to over 14 million patients at 3,745 health care service delivery sites. 2 2 HRSA Bureau of Primary Health Care, Uniform Data System: Calendar Year 2005 Data (available upon request at *http://www.bphc.hrsa.gov/uds/default.htm* ). Section 330 grant recipients play a vital role in the health care safety net, providing cost effective care for communities with limited access to health care resources. All recipients of grants under section 330 are public, nonprofit, or tax-exempt entities. The health centers must serve “a population that is medically underserved, or a special medically underserved population comprised of migratory and seasonal agricultural workers, the homeless, and residents of public housing.” 42 U.S.C. 254b(a)(1). Health centers must be community based; to this end, a majority of a health center's governing board must be users of the center and must, as a group, represent the individuals being served by the center. 3 42 U.S.C. 254b(k)(3)(H)(i). Health centers receiving section 330 grant funding must provide, either directly or through contracts or cooperative arrangements, a broad range of required primary health care services, including clinical services by physicians, and, where appropriate, physician assistants, nurse practitioners, and nurse midwives; diagnostic laboratory and radiological services; preventive health services; emergency medical services; certain pharmaceutical services; referrals to other providers (including substance abuse and mental health services); patient case management; services that enable individuals to use the services of the health center ( *e.g.* , outreach, transportation, and translation services); and patient and community education services. 42 U.S.C. 254b(b)(1). They may also provide certain additional health services that are appropriate to serve the health needs of the population served by the health center. 42 U.S.C. 254b(b)(2). These additional health services may include mental health and substance abuse services; recuperative care services; environmental health services; special occupation-related health services for migratory and seasonal agricultural workers; programs to control infectious disease; and injury prevention programs. 3 Health centers receiving grant funding to serve migratory and seasonal agricultural workers, homeless people, or residents of public housing may, upon a showing of good cause, obtain a waiver of this requirement. 42 U.S.C. 254b(k)(3)(H). Consistent with their mission and the terms of their PHS grants, section 330 grant recipients serve predominantly low-income individuals, including some beneficiaries of the Medicare and Medicaid programs. In 2005, 36 percent of patients treated by section 330 grant recipients were beneficiaries of a Medicaid program, 7.5 percent were beneficiaries of the Medicare program, and 2.3 percent were beneficiaries of another public insurance program. 4 Section 330 grant recipients also treat a substantial and growing number of uninsured patients. In 1996, section 330 grant recipients provided services to 3.2 million uninsured patients, and by 2005, this number had increased to 5.6 million, representing nearly 40 percent of patients treated at those centers during that year. 5 4 HRSA Bureau of Primary Health Care, Uniform Data System: Calendar Year 2005 Data—Table 4: Users by Socioeconomic Characteristics (available upon request at *http://www.bphc.hrsa.gov/uds/default.htm* ). 5 HRSA Bureau of Primary Health Care, Uniform Data System: Calendar Year 2005 Data—UDS Trend Data for Years 1996 through 2005 (available upon request at *http://www.bphc.hrsa.gov/uds/default.htm* ). Section 330 grant recipients must serve all residents of their “catchment” area regardless of the patient's ability to pay and must establish a fee schedule with discounts to adjust fees on the basis of ability to pay. 42 U.S.C. 254b(a)(1)(B) and 254b(k)(3)(G)(i). Section 330 grant recipients must also make and continue “every reasonable effort to establish and maintain collaborative relationships with other health care providers in the catchment area of the center” (42 U.S.C. 254b(k)(3)(B)), and must “develop an ongoing referral relationship” with at least one hospital in the area. 42 U.S.C. 254b(k)(3)(L). Section 330 grant funds are intended to defray the costs of serving uninsured patients. Grant recipients are required to seek reimbursement from those patients who are able to pay all or a portion of the charges for their care (applying a schedule of fees and a corresponding schedule of discounts adjusted on the basis of the patient's ability to pay) or who have private insurance or public coverage, such as Medicare or Medicaid. The amount of a section 330 grant may not exceed the amount by which the costs of operation of the health center in such fiscal year exceed the total of:

(i)State, local, and other operational funding provided to the health center; and

(ii)the fees, premiums, and third-party reimbursements that the center may reasonably be expected to receive for its operations in such fiscal year. By statute, nongrant funds must be used to further the objectives of the recipient's section 330 grant. Section 330 grant funding accounts for approximately 20 percent of revenue for health centers receiving such grants. The majority of health center funding derives from charges for patient services. On average, the largest source of revenue, 37 percent comes from Medicaid payments, 6.5 percent of health center revenues come from private third-party reimbursement, 6 percent from Medicare payments, and 6.5 percent from self-payments from patients. Remaining revenue comes from a mix of other Federal, State, local, and philanthropic sources. 6 6 HRSA Bureau of Primary Health Care, Uniform Data System: Calendar Year 2005 Data—Exhibit A: Total Revenue Received by BPHC Grantees (available upon request at *http://www.bphc.hrsa.gov/uds/default.htm* ). Frequently, health centers are provided with, or seek out, opportunities to enter into arrangements with hospitals or other providers or suppliers to further the health centers' patient care mission. 7 For example, providers or suppliers may agree to provide health centers with capital development grants, low cost (or no cost) loans, reduced price services, or in-kind donations of supplies, equipment, or space. 7 Congress has previously recognized the importance of health center affiliations with hospitals and other health care service providers in promoting efficiency and quality of care. The Health Centers Consolidation Act expressly requires health centers to maintain collaborative relationships with other providers. With respect to integrated delivery systems, the Report states: “The committee believes, based on expert testimony given at the May 14, 1995, hearing, that the development of integrated health care provider networks is key to preserving and strengthening access to community-based health care services in rural areas. Provider networks offer a number of advantages: They can work to ensure that a continuum of health care services is available, reduce the duplication of services, produce savings in administrative and other costs through shared services and an enhanced ability to negotiate in the health care market place, and recruit and utilize health professionals more effectively and efficiently.” S. Rep. 104-186 at p. 11. Some providers and suppliers expressed concern that remuneration offered to health centers might be viewed as suspect under the anti-kickback statute, because the health centers are frequently in a position to refer Federal health care program beneficiaries to the provider or supplier. Accordingly, Congress enacted section 431 of MMA to enable some health centers to conserve section 330 and other monies by accepting needed goods, items, services, donations, or loans for free or at reduced rates from willing providers and suppliers. C. Section 431 of MMA Section 431 of MMA amended the anti-kickback statute to create a new safe harbor for certain agreements involving health centers. Specifically, section 431(a) of MMA excludes from the reach of the anti-kickback statute any remuneration between:

(i)A health center described under section 1905(l)(2)(B)(i) or 1905(l)(2)(B)(ii) of the Act; and

(ii)an individual or entity providing goods, items, services, donations, loans, or a combination of these to the health center pursuant to a contract, lease, grant, loan, or other agreement, provided that such agreement contributes to the health center's ability to maintain or increase the availability, or enhance the quality, of services provided to a medically underserved population served by the health center. In other words, Congress intended to permit health centers to accept certain remuneration that would otherwise implicate the anti-kickback statute when the remuneration furthers a core purpose of the Federal health centers program: ensuring the availability and quality of safety net health care services to otherwise underserved populations. As discussed in greater detail below, Congress limited the scope of the safe harbor to certain health centers engaged in arrangements involving specific types of identifiable remuneration. In establishing regulatory standards relating to the safe harbor, Congress directed the Department to consider the following factors: • Whether the arrangement results in savings of Federal grant funds or increased revenues to the health center. We believe this factor evidences Congress' intent that a protected arrangement directly benefit the health center economically and that the benefits of the arrangement primarily inure to the health center, rather than the individual or entity providing the remuneration. • Whether the arrangement restricts or limits patient freedom of choice. We believe this factor evidences Congress' intent that protected arrangements not result in inappropriate steering of patients. Under the safe harbor, patients remain free to obtain services from any provider or supplier willing to furnish them. • Whether the arrangement protects the independent medical judgment of health care professionals regarding medically appropriate treatment for patients. We believe this factor evidences Congress' intent to safeguard the integrity of medical decision-making and ensure it is untainted by direct or indirect financial interests. In all cases, the best interests of the patient should guide the medical decision-making of health centers and their affiliated health care professionals. Section 431(b)(1)(B) of MMA provides that these three factors are “among” the factors the Department may consider in establishing the safe harbor standards. The statute authorizes the Department to include “other standards and criteria that are consistent with the intent of Congress in enacting” the health center safe harbor. Accordingly, we interpret the statute to permit us to consider other relevant factors and to establish other relevant safe harbor standards consistent with the anti-kickback statute and the health center safe harbor. Among the factors we have considered is whether arrangements would pose a risk of fraud or abuse to any Federal health care programs or their beneficiaries. We believe Congress intended to protect arrangements that foster an important goal of the section 330 grant program—assuring the availability and quality of needed health care services for medically underserved populations—without adversely impacting other Federal programs or their beneficiaries. D. Summary of Proposed Safe Harbor On July 1, 2005, we issued a notice of proposed rulemaking (70 FR 38081) to set forth standards related to the safe harbor described in section 431 of MMA, in which we proposed:

(1)To protect remuneration in the form of goods, items, services, donations, loans, or a combination thereof provided by an individual or entity (hereinafter in this preamble “Donor”) to a qualifying health center;

(2)that remuneration must be medical or clinical in nature or relate directly to patient services provided by the health center as part of the scope of the health center's section 330 grant; and

(3)importantly, that a protected arrangement must contribute to the ability of the health center to maintain or increase the availability, or enhance the quality, of services provided to a medically underserved population. The proposed regulation proposed that protected arrangements must be pursuant to a comprehensive contract, lease, grant, loan, or other agreement that is written and signed by the parties, and the amount of the protected remuneration must not be conditioned on the volume or value of Federal health care program business generated between the parties. As we said in the notice of proposed rulemaking: “In the unique and limited context of arrangements described in the proposed safe harbor, we would extend safe harbor protection to arrangements where only the methodology, and not the absolute value of the remuneration, is predetermined. For example, a health center might agree to pay a supplier a set hourly or per visit fee that is below fair market value for services furnished by the supplier to the health center, provided that the formula for calculating the compensation ( *e.g.* , $ × per hour or $ × per service) is fixed in advance and not conditioned on referrals to the supplier.” 70 FR 38084. We proposed that health centers must reasonably determine before entering into an agreement that the arrangement is likely to contribute to the health center's ability to maintain or increase the availability, or enhance the quality, of services provided to a medically underserved population. We also proposed that health centers would have to periodically re-evaluate agreements to ensure ongoing compliance with this benefit standard and terminate as expeditiously as possible any arrangements that are not reasonably expected to continue to meet the standard. We proposed that the initial determination and any re-evaluations should be contemporaneously documented. Our proposed rule stated that health centers must not be required to refer patients to a particular provider or supplier. In addition, we proposed that Donors that offer to provide goods, items, or services must accept all referrals of patients from the health center who clinically qualify for the goods, items, or services, regardless of payor status or ability to pay. We proposed that protected arrangements could not be exclusive. The proposed rule also required health centers to provide effective notification to patients of their freedom to choose any willing provider or supplier and to disclose the existence and nature of protected arrangements. We proposed to give health centers the option of requiring that a Donor that enters into a protected arrangement charge a referred health center patient the same rate it charges other similarly situated persons not referred by the health center or that the items or services be furnished to health center patients at a reduced rate or free of charge. Finally, we proposed that an arrangement could not be protected under the safe harbor unless it complied with the requirements of the health center's section 330 grant funding. E. Summary of Final Safe Harbor 1. Major Changes We have modified the proposed rule in a number of areas in response to public comments. The substantial changes and clarifications being made in the final regulations include: • Clarifying the definition of the term “remuneration” for purposes of the safe harbor; • Eliminating the requirement that arrangements that do not comply with the safe harbor be terminated; • Eliminating the requirement that arrangements must comply with all relevant requirements of the health center's section 330 grant funding; • Consolidating and clarifying the documentation requirements; • Clarifying that health centers do not need to develop set standards for determining whether an arrangement is expected to contribute meaningfully to services for underserved patients; • Simplifying the safe harbor requirement pertaining to disclosures to patients; • Clarifying health centers' freedom to refer patients; and • Clarifying the conditions under which individuals and entities furnish separately billable goods, items, or services to health centers. 2. Final Safe Harbor Conditions As discussed more fully in this preamble and regulations, the health center safe harbor protects remuneration in the form of goods, items, services, donations or loans (whether the donation or loan is in cash or in-kind), or a combination thereof provided by a Donor to a qualifying health center. Qualifying health centers are health centers described under section 1905(l)(2)(B)(i) or 1905(l)(2)(B)(ii) of the Act. Remuneration must be medical or clinical in nature or relate directly to services provided by the health center as part of the scope of the health center's section 330 grant. A protected arrangement must contribute to the ability of the health center to maintain or increase the availability of, or enhance the quality of, services provided to a medically underserved population. Protected arrangements must be pursuant to a contract, lease, grant, loan, or other agreement that is written, signed by the parties, and covers all of the remuneration to be provided. The amount of the remuneration must be specified and not be conditioned on the volume or value of Federal health care program business generated between the parties. Health centers must reasonably expect before entering into an agreement that the arrangement is likely to contribute to the health center's ability to maintain or increase the availability, or enhance the quality, of services provided to a medically underserved population as defined at 42 U.S.C. 254b(b)(3). Health centers must document the basis for their determination that the arrangement will yield such a benefit. Health centers must periodically re-evaluate agreements to ensure ongoing compliance with the benefit standard. These determinations must be contemporaneously documented. Health centers must not be required to refer patients to a particular provider or supplier under the arrangement, and must be free to refer patients to any provider or supplier. In addition, Donors that offer to furnish goods, items, or services for health center patients must furnish those goods, items, or services to all health center patients who clinically qualify for them, regardless of payor status or ability to pay. Health centers are required to provide effective notification to patients of their freedom to choose any willing provider or supplier and to disclose to patients, upon request, the existence and nature of the arrangement with the Donor. The safe harbor makes clear that a health center may, at its option, require a Donor that enters into a protected arrangement to charge a referred health center patient the same rate it charges other similarly situated persons not referred by the health center or furnish items or services to health center patients at a reduced rate (where the discount applies to the total charge and not just the cost-sharing portion owed by an insured patient). II. Summary of Public Comments and OIG Responses In response to our proposed rulemaking, OIG received a total of nine timely filed comments from trade associations, hospitals, health centers, and other interested parties. We have divided the summaries of the public comments and our responses into three parts: general comments; comments on statutory elements; and comments on additional regulatory standards. A. General Comments All the commenters supported the establishment of a safe harbor for arrangements involving Federally Qualified Health Centers. While some commenters expressed their support for all of the regulatory standards in the proposed rule, other commenters took issue with one or more specific aspects of the proposal. *Comment:* A trade association objected to the number of standards in the proposed regulation. The commenter suggested that the number of standards is too high and might dissuade parties from participating in safe harbored arrangements. *Response:* As discussed in detail elsewhere in this preamble, we have reduced the number of standards from eleven in the proposed rule to nine in the final rule. We do not believe that the regulatory standards should create an undue burden or otherwise chill participation in arrangements under the safe harbor. *Comment:* Several commenters responded to the statement in the preamble to the proposed rule that OIG intended to monitor participants in safe harbored arrangements for compliance with billing rules, in order to guard against improper billing of Federal health care programs or inappropriate transfers of governmental funds. *See* 70 FR 38086. Two trade associations requested that we remove any mention of such monitoring, lest it discourage parties from participating in arrangements under this safe harbor. Another trade association suggested that, in return for safe harbor protection, it would be appropriate that health centers be monitored closely for compliance with the requirements of section 330 funding to determine whether the funding is used for its intended purpose. In particular, the commenter stated that it is important to ensure that any government benefits provided to health centers to serve uninsured patients are used to provide services to those patients and not diverted to subsidizing unrelated service lines. *Response:* Our use of the term “monitor” may have inadvertently created the misimpression that parties to arrangements under this safe harbor would be subject to a higher level of scrutiny than parties to other arrangements. We clarify that we were referring simply to our usual and customary oversight authorities and practices. Participation in a safe harbored arrangement would not necessarily make parties a target of OIG attention or subject parties to heightened scrutiny; however, as providers who receive funding from Federal health care programs, health centers remain subject to our general oversight tools, including monitoring for proper billing and appropriate transfers of governmental funds. With that clarification, we do not believe that referencing our longstanding oversight authority should discourage participation in safe harbored arrangements. We agree with the last commenter and affirm our continued commitment to ensuring that Government funding is used for its intended purposes. *Comment:* A trade association requested that we remove the proposed requirement at § 1001.952(w)(11), which would have required any safe harbored agreement to comply with all relevant requirements of the health center's section 330 grant funding. The commenter suggested that the requirement is unnecessary, because health centers already operate under an obligation to comply with all requirements of their section 330 grant funding. Moreover, the commenter observed that including this provision in the safe harbor regulations might chill a Donor's willingness to participate in safe harbored arrangements, if that Donor also becomes obligated to ensure that the arrangements comply with the terms of a health center's section 330 grant funding. *Response:* We agree with this commenter and are eliminating the standard in the final rule. The remaining safe harbor conditions, in combination with health centers' existing obligations to comply with the requirements of their section 330 grant funding, should be sufficient to minimize any risk of fraud and abuse. *Comment:* We received a comment from a health center network noting that the safe harbor only offers protection under the anti-kickback statute and does not offer protection under the physician self-referral law, section 1877 of the Act (commonly known as the “physician self-referral law” or “Stark” law). The commenter expressed concern that the need to comply with both statutes may prove burdensome for health centers, and suggested that the requirements of the two laws be consolidated. *Response:* The commenter correctly notes that the safe harbor only protects arrangements under the anti-kickback statute, and, where applicable, parties would also need to comply with the physician self-referral law. An exception under the physician self-referral law is beyond the scope of this rulemaking. The anti-kickback statute and the physician self-referral law, while similar in that they both address abuses of the Medicare and Medicaid programs, are different in scope and application. Congress has made clear that the physician self-referral law and the anti-kickback statute are separate legal authorities, and compliance with one does not necessarily ensure compliance with the other. *See, e.g.* , H.R. Conf. Rep. No. 386, 101st Cong., 1st session 856 (1989). B. Comments on Statutory Elements 1. Protected Health Centers *Comment:* A trade association suggested we broaden the scope of the safe harbor to apply to arrangements involving other types of health centers that are similar to the health centers described in sections 1905(l)(2)(B)(i) and 1905(l)(2)(B)(ii) of the Act, except for the fact that they lack section 330 funding. These other facilities are often called “look-alike” facilities. *Response:* We decline to adopt this suggestion. Congress specifically provided that the safe harbor should apply to the facilities described in sections 1905(l)(2)(B)(i) and 1905(l)(2)(B)(ii) of the Act and not to other types of facilities. Moreover, we believe the lack of section 330 funding, which entails a higher level of Government oversight, constitutes a significant distinction between section 330-funded health centers and look-alike facilities. Extending safe harbor protection to entities without such Government funding and such a level of oversight would pose a greater risk of fraud and abuse. We recognize that many look-alike facilities play important roles in the health care safety net, and we note that just because arrangements with look-alike facilities do not fall within the safe harbor does not mean they are necessarily illegal. The fact that the safe harbor does not apply simply means that such arrangements must be analyzed on a case-by-case basis to determine whether they violate the anti-kickback statute. *Comment:* A trade association asked us to commit to considering the issuance of a regulatory safe harbor protecting arrangements involving look-alike facilities. *Response:* We may consider this option in the future, depending on our experience with this safe harbor in practice. 2. Protected Remuneration *Comment:* Several commenters sought clarification as to whether community benefit grants and other types of cash donations qualify as protected remuneration under this safe harbor. A trade association asked that we add language in § 1001.952(w)(2) that clarifies that donations and loans could include cash donations, such as community benefit grants, and are not limited to in-kind donations and loans. One commenter noted that some community benefit grants entail reconciliation provisions, which allow the donor

(i)to augment the grant if grant funds fall short of actual health center expenditures or

(ii)to determine the use of excess funds where grant funds exceed actual health center spending. Two trade associations requested clarification of the definition of “remuneration” and assurance that the definition includes community benefit grants or similar payments to health centers by public hospitals and health systems, even if the amount of the payments are subject to reconciliation. *Response:* The definition of “remuneration” at § 1001.952(w) would generally extend to community benefit grants or similar payments, even where such grants or payments are subject to a reconciliation provision. So long as the reconciliation methodology is fixed in advance and does not hinge on the volume or value of referrals from the health center to the Donor, funding subject to reconciliation could comply with the condition at § 1001.952(w)(1) and be protected remuneration under this safe harbor (provided all other safe harbor conditions are satisfied). Donations and loans need not be limited to in-kind goods or services, and indeed may be in monetary form. We have clarified the scope of § 1001.952(w) to make this point more explicit: “As used in section 1128B of the Act, 'remuneration' does not include the transfer of any goods, items, services, donations or loans ( *whether the donation or loan is in cash or in-kind* ), or combination thereof from an individual or entity to a health center * * *” (emphasis added). *Comment:* A trade association suggested we expand the scope of the safe harbor to cover arrangements whereby the remuneration is provided not *to* the health center, but *from* the health center to an individual or entity related to the health center. The commenter said there are arrangements not covered by other safe harbors where a health center could provide payments or other forms of support to a provider that would result in improving the overall health outcomes of patients. *Response:* Section 431 of MMA does not protect remuneration from a health center to an individual or entity. We believe it is clear that Congress intended the safe harbor to enhance the resources available to health centers in order to help them achieve their community benefit mission, and we decline to adopt the commenter's recommendation. We recognize that there may be beneficial arrangements where remuneration flows away from the health center that may not fit within a safe harbor; such arrangements would be evaluated on a case-by-case basis to ensure compliance with the anti-kickback statute. We note that some arrangements pursuant to which a health center provides remuneration to an individual or entity may qualify for other safe harbors, including, for example, the safe harbors for personal services, employees, practitioner recruitment, and electronic health records items a nd services. *See* §§ 1001.952(d), (i), (n), and (y). *Comment:* A trade association noted that our proposed rule stated that section 431 “only protects remuneration provided to a health center and does not protect remuneration provided to individuals affiliated with a health center * * *.” 70 FR 38084. The commenter asked whether, for purposes of this safe harbor, remuneration to the health center could include funds provided by a hospital, if such funds were used to help recruit a physician to the health center. *Response:* The donation described by the commenter raises the possibility of two scenarios: one in which the donation could be used to recruit a physician to the health center primarily for the benefit of health center patients, and one where it could be used to recruit a physician primarily for the benefit of the donor hospital. If the hospital made the donation of funds to the health center primarily for the benefit of health center patients, then its donation of funds for the purpose of supporting general physician recruitment by the health center could qualify for protection under this safe harbor, if all safe harbor conditions are satisfied. Conversely, we believe Congress did not intend the safe harbor to protect arrangements where the donation primarily creates a benefit to the Donor instead of to the health center. Likewise, this safe harbor would not protect an arrangement where a Donor used the health center as a conduit to transfer remuneration to a particular recruited physician; to transfer remuneration specifically for the purpose of recruiting a physician to join the Donor's medical staff, or to practice in the Donor's service area; or to transfer remuneration to existing group practices. The safe harbor does not protect remuneration provided by Donors to individuals affiliated with the health center. Section 431 evidences Congress' intent to protect the provision of certain remuneration “to” a health center. It does not protect remuneration transferred to an individual affiliated with a health center, nor does it protect remuneration transferred from a health center to an individual or entity. We note that, depending on the circumstances, such a recruitment arrangement between a health center and a physician may be eligible for protection under another safe harbor, such as the safe harbor for practitioner recruitment at § 1001.952(n). When evaluating arrangements with potential Donors for funds to support physician recruitment, health centers should consider whether the remuneration would be used for expenses commonly or typically borne by the health center, such that the arrangement results in measurable savings that will benefit a medically underserved population, or would be used to recruit a health care professional needed by the health center to serve a medically underserved population. If a recruited physician were to join the health center's medical staff, it would be some evidence that the benefit primarily runs to medically underserved populations served by the health center as opposed to the Donor. *Comment:* We received several comments regarding the proposed regulatory text for § 1001.952(w)(2), which provides examples of “patient services furnished by the health center as part of its section 330 grant” in the parenthetical portion of the text, but does not similarly list examples of “goods, items, donations, or loans.” The commenters expressed concern that this suggested that only services could constitute protected remuneration. These commenters requested that the regulatory text also supply examples of protected goods, items, donations, and loans. *Response:* The commenters misread proposed § 1001.952(w)(2). Goods, items, donations, and loans—and services—can indeed constitute protected remuneration under this safe harbor. In the interest of clarifying § 1001.952(w)(2) so that health centers and Donors do not interpret the scope of protected remuneration to be narrower than it actually is, we have deleted the term “patient services furnished” and replaced it with the term “services provided.” Section 1001.952(w)(2) now requires that goods, items, services, donations, or loans (or combination thereof) must either

(i)Be medical or clinical in nature or

(ii)relate directly to services provided by the health center in furtherance of its section 330 grant. The parenthetical list offers illustrative examples of the kind of services that meet the latter test and makes clear that such services need not be medical or clinical in nature. For example, goods, items, services, donations, or loans directly related to a health center's billing, administrative, social services, and health information functions can qualify. We note that the term “medical or clinical in nature” broadly covers all medical or clinical services ( *e.g.* , physician services, nurse practitioner and physician assistant services, diagnostic services, therapeutic services, etc.); medical or clinical goods and items ( *e.g.* , pharmaceuticals, knee braces, stethoscopes, x-ray machines, etc.); donations of money or other forms of remuneration that the health center can use to furnish medical or clinical services or to acquire goods, items, or services that are medical or clinical in nature; and loans of money or other forms of remuneration that the health center can use to furnish medical or clinical services or to acquire goods, items, or services that are medical or clinical in nature. *Comment:* A non-profit organization and several health centers submitted comments seeking clarification that the definition of remuneration at § 1001.952(w) would include pharmaceutical manufacturers' donations of pharmaceutical products to health centers with the intent that these products be used to treat patients of the health center. They requested that we amend § 1001.952(w) specifically to include donations of pharmaceutical products from pharmaceutical manufacturers, citing concerns that absent such an explicit acknowledgement, pharmaceutical manufacturers would refuse to donate to health centers. *Response:* Nothing in § 1001.952(w) excludes donations of pharmaceuticals by pharmaceutical companies from protection by the safe harbor. To the contrary, as discussed in the preceding response, such donations are clearly within the meaning of the language “goods * * * [that] are medical or clinical in nature” in § 1001.952(w)(2). Pharmaceutical donations can play an important role in ensuring a health center safety net for vulnerable patients, and many arrangements between health centers and pharmaceutical companies may be eligible for protection. That said, we are not enumerating in the regulatory text any particular types of Donors. Whether something fits in the definition of protected “remuneration” at § 1001.952(w) turns on the nature of the remuneration, not on its source. By listing some Donors and not others, we might create a misimpression regarding the scope of the safe harbor. *Comment:* A non-profit organization sought clarification that a health center's practice of purchasing discounted drugs by means of participation in the 340B Drug Pricing Program would not preclude that health center from receiving free drugs pursuant to a donation protected under this safe harbor. *Response:* We confirm that this safe harbor could protect arrangements involving the donation of pharmaceuticals to health centers, including to health centers that participate in the 340B Drug Pricing Program. 3. Documentation Requirements *Comment:* Several commenters supported our documentation requirements at proposed §§ 1001.952(w)(1) and

(3)(consolidated at § 1001.952(w)(1) of the final rule). A trade association commented that the documentation requirements at proposed §§ 1001.952(w)(1) and

(3)are inconsistent with statements in the preamble. According to the commenter, the use of the term “written agreement” in the proposed regulatory language implies that all arrangements between a health center and a Donor must be included in a single writing, while the preamble says that all such arrangements should be memorialized “by one comprehensive writing or by means of multiple writings that cross-reference and otherwise incorporate the agreements between the parties.” *Response:* For clarity and ease of application, we have combined the documentation requirements at proposed §§ 1001.952(w)(1) and

(3)of the proposed rule into one requirement at § 1001.952(w)(1) in the final rule. We confirm that it may be satisfied by one comprehensive writing or by multiple writings that cross-reference and otherwise incorporate the agreements between the parties. We have revised the safe harbor to reflect this. We have also revised the safe harbor to provide the option of using a centralized master list in lieu of cross-referencing and incorporation of multiple agreements. The master list must be maintained centrally and in a manner that preserves the historical record of arrangements, kept up to date, and made available for review by the Secretary upon request. This flexibility should enhance the ability of Donors and health centers to use the safe harbor. The safe harbor does not require that all arrangements between a health center and a Donor be included in a single agreement that would qualify under the safe harbor. *Comment:* A trade association sought clarification that the documentation requirements at proposed §§ 1001.952(w)(1) and

(3)(§ 1001.952(w)(1) of the final rule) apply only to arrangements related to a safe harbored arrangement, and not to other interactions between the health center and the Donor that truly are unrelated to a safe harbored arrangement. The commenter believed that the documentation requirements imply that all arrangements between a health center and a Donor must be included in a single arrangement that would qualify under the safe harbor. The commenter suggested that only arrangements that “require safe harbor protection” should require documentation. *Response:* The safe harbor does not require that all arrangements between a health center and a Donor be included in a single arrangement that would qualify under the safe harbor. The documentation standards at § 1001.952(w)(1) (§§ 1001.952(w)(1) and

(3)in our proposed rule) require that the written documentation “cover all goods, items, services, donations, or loans to be provided to the health center.” In the interest of providing bright-line guidance with respect to what must be documented under § 1001.952(w)(1), we clarify that this paragraph requires the documentation of all arrangements for the transfer of goods, items, services, donations, or loans from a Donor to a health center. With respect to the commenter's assertion that certain arrangements “require safe harbor protection,” we note that, like all safe harbors, compliance with this safe harbor is voluntary and no arrangement requires safe harbor protection. Rather, arrangements must comply with the anti-kickback statute. Compliance with a safe harbor is one option for ensuring compliance with the anti-kickback statute. 4. Benefit to a Medically Underserved Population *Comment:* A trade association asked us to clarify § 1001.952(w)(4) of the proposed rule (§ 1001.952(w)(3) of the final rule), which requires that arrangements protected under the safe harbor be reasonably expected to contribute meaningfully to the health center's ability to maintain or increase the availability, or enhance the quality of, services provided to a medically underserved population. Specifically, the commenter sought confirmation that, in order to contribute meaningfully, the arrangement need not result in a financial gain for the health center. The commenter asked us to consider the case of a health center that does not offer a particular service for its patients, but enters into an arrangement with a Donor for that service for free. The commenter observed that since the health center had not previously incurred expenses for the service, the new arrangement would not offer a financial gain to the health center. Another trade association requested confirmation that proposed § 1001.952(w)(4) would not necessarily require direct savings of section 330 funding and could be satisfied without a monetary benefit to the health center. *Response:* We confirm that proposed § 1001.952(w)(4) (§ 1001.952(w)(3) of the final rule) does not require a financial gain to the health center and does not require the direct savings of section 330 funding. Whether the condition is satisfied will depend on the specific facts and circumstances. As noted in the preamble to the proposed rule at 70 FR 38085, we believe health centers are well-situated in the first instance to make a reasonable determination whether an arrangement contributes meaningfully to the health center's ability to maintain or increase the availability, or enhance the quality of, services provided to a medically underserved population, and we believe health centers should have flexibility in making these determinations. In the preamble to the proposed rule at 70 FR 38085, we listed factors that are exemplars of the type that should be considered in making these determinations: • Does the arrangement directly benefit a medically underserved population? • Does the arrangement involve goods, items, or services of a type that are commonly or typically purchased by the health center, such that the arrangement results in measurable savings that will benefit a medically underserved population? • If the arrangement involves a donation to the health center, would the donation result in the increased availability of an item, good, device, service, technology, or treatment needed by a medically underserved population but not previously available in sufficient quantities due to financial limitations? • Does the health center need the donated items, goods, or services, or the loaned funds to satisfy the scope of its section 330 grant? The arrangement described in the first commenter's example could contribute meaningfully, if it increased the availability of the service for the health center's medically underserved population. With respect to the second commenter, we observe that while an arrangement that conserves a health center's section 330 funding means the health center has more money available to provide or enhance services for a medically underserved population, there are many other ways that remuneration could maintain, increase, or enhance services for a medically underserved population without the direct savings of section 330 funding. For example, if an arrangement allowed a health center to begin delivering an important new clinical service, which the health center was not previously able to provide, a meaningful benefit to a medically underserved population would likely be achieved without a direct monetary gain to the health center. *Comment:* A trade association had a concern regarding the significance of the list of factors in the preamble that we wrote “should be considered” in determining whether an arrangement would result in a meaningful benefit to a medically underserved population. *See* 70 FR 38085. The commenter asked for confirmation that the factors in the list are only examples, and that it is not necessary to satisfy all of the factors to demonstrate a meaningful benefit under proposed § 1001.952(w)(4) (§ 1001.952(w)(3) of the final rule). *Response:* The factors listed in the proposed rule and noted in the preceding response are examples of ways to analyze the existence of a meaningful benefit, and the commenter correctly understood that it is not necessary to satisfy each exemplary factor to establish the existence of a meaningful benefit to a medically underserved population under § 1001.952(w)(3) of the final rule. *Comment:* A trade association commented that our requirement at proposed § 1001.952(w)(4) that health centers apply “reasonable, consistent, and uniform standards” when determining whether an arrangement bestows a meaningful benefit for services provided to a medically underserved population provides insufficient guidance to health centers for structuring arrangements. The commenter also objected to the proposed requirement that health centers document evaluation of such standards. It expressed concern that these requirements would have a chilling effect on parties' participation in safe harbored arrangements, as parties would be unsure whether their standards would satisfy the requirements of the safe harbor. The commenter requested that we provide examples of acceptable standards and how to document them, or eliminate the requirement all together. *Response:* We intended the language “reasonable, consistent and uniform standards” to give health centers flexibility in assessing benefits to a medically underserved population, while at the same time requiring accountability and providing safeguards against abuse. Upon further consideration and consistent with our original intent, we have determined that proposed § 1001.952(w)(4) (now § 1001.952(w)(3)) can be simplified. Under § 1001.952(w)(3) of the final rule, parties need not develop or apply any separate “standards,” nor document that they have applied them. They must, however, document the basis for the reasonable expectation of benefits to a medically underserved population prior to entering the arrangement. Parties may, as a matter of prudent business practice, develop standards that are reasonable, uniform, and consistently applied as part of the methodology they use in assessing the expected benefit to a medically underserved population. We have similarly changed the corresponding language in § 1001.952(w)(4) of the final rule, which concerns the reevaluation of arrangements. With respect to the commenter's concern that proposed § 1001.952(w)(4) (§ 1001.952(w)(3) in the final rule) will chill participation in the safe harbor, we note that our approach here is consistent with several existing safe harbors that provide parties with flexibility to determine how to satisfy key conditions ( *e.g.* , how to determine fair market value). A health center can document its determination of a meaningful benefit to a medically underserved population, for example, by maintaining written or electronic records of the data and methodology used to assess the expected maintenance of, increase in, or enhanced quality of services to a medically underserved population and the outcome of such assessment. We believe that the documentation necessary to satisfy this requirement is consistent with that generally kept in the usual and customary course of a health center's business. For example, in many cases a health center's section 330 grant documents, in combination with the agreement required under § 1001.952(w)(1), may serve as the documentation of a sufficient benefit to a medically underserved population, to the extent they transparently document that a volume of items or services specified by the section 330 grant requirements will be provided under the agreement. Parties with concerns about their specific practices can avail themselves of OIG's advisory opinion process. 5. Periodic Re-Evaluation of Arrangements *Comment:* A health network supported the requirement at proposed § 1001.952(w)(5) (§ 1001.952(w)(4) of the final rule) that parties periodically re-evaluate arrangements. The commenter stated that it seems reasonable and useful for health centers participating in these arrangements to re-evaluate agreements periodically and document such factors as fair market value of equipment or costs of providing services. A trade association requested that we eliminate the requirement that an arrangement that, upon reevaluation, fails to meet the benefit standard be terminated. This commenter also asked us to clarify that continuation of such an arrangement would not automatically constitute a violation of the anti-kickback statute. *Response:* We agree with these commenters. We have adopted the trade association's recommendation to eliminate the language in § 1001.952(w)(5) of the proposed rule that required noncompliant arrangements to be promptly terminated. We also confirm that a decision by a health center to continue participating in an arrangement that no longer satisfies the requirements of § 1001.952(w)(3) of the final rule will not necessarily give rise to a violation of the anti-kickback statute. Rather, the continuation of such an arrangement would fall outside of the safe harbor, and its legality under the anti-kickback statute would be determined on a case-by-case basis, based on all the facts and circumstances, including the intent of the parties. Finally, we agree with the commenter that, depending on the arrangement, it would be reasonable and useful for health centers participating in these arrangements to re-evaluate agreements periodically and document such factors as fair market value of equipment or costs of providing services. C. Comments on Additional Regulatory Standards 1. General Comments *Comment:* A trade association asserted that the regulatory standards OIG proposed in accordance with section 431 of MMA should be limited to the factors set forth in section 431 and should not include additional requirements. As discussed in our preamble to the proposed rule at 70 FR 38083, in addition to the standards established by Congress, section 431 of MMA authorizes OIG to add other standards or criteria consistent with Congress' intent in creating this safe harbor. The commenter stated that establishing additional safe harbor standards consistent with the anti-kickback statute contravenes the plain language of the statute and Congress' intent. The commenter asked that the regulatory standards created in accordance with section 431 not include additional requirements that health centers and their partners would have to meet to be consistent with the anti-kickback statute. Finally, the commenter contended that these standards wrongly “reconsider” whether the arrangements pose a risk of fraud and abuse. According to the commenter, by definition, all the arrangements described in the safe harbor pose a risk of fraud and abuse, which is why they require safe harbor protection in the first place. *Response:* We agree with the commenter's view that the regulatory standards we create in accordance with section 431 must be consistent with the language of section 431, and we believe that our regulations meet that test. Section 431 explicitly requires us to consider health center resources, patient freedom of choice, and independent medical judgment; however, it further states that these factors are “among” those to be considered and that “the Secretary may also include other standards and criteria that are consistent with the intent of Congress in enacting the exception established under this section.” Every safe harbor is established to protect arrangements that otherwise implicate the anti-kickback statute. Therefore, we believe Congress charged the Secretary with promulgating regulations implementing the health center safe harbor in a manner that furthers beneficial health center arrangements without posing an undue risk of fraud and abuse under the anti-kickback statute. This approach is consistent with our longstanding approach to safe harbor rulemaking. For instance, in our preamble to the proposed rule for the first ten safe harbors we stated that: “[w]e have attempted in these proposed regulations to permit physicians to freely engage in business practices and arrangements that encourage competition, innovation and economy. However, we have added criteria to each ‘safe harbor’ in order to reduce the potential for abuse.” (50 FR 3088; January 23, 1989) Congress enacted section 431 in the context of this regulatory history. Moreover, we do not believe Congress intended to protect arrangements that pose significant risk to Federal health care programs or their beneficiaries. We believe our regulations directly and reasonably derive from the guidelines specifically enacted in section 431 and Congress' invitation to include other standards consistent with the establishment of the safe harbor. With respect to the commenter's final comment, historically, regulatory safe harbors were initiated in response to concerns that the anti-kickback statute covered some relatively innocuous commercial arrangements. ( *See* 50 FR 3088; January 23, 1989 and 56 FR 35952; July 29, 1991) These safe harbors are meant to protect arrangements that do not pose undue risk for Federal health care programs or beneficiaries; they are not meant to protect arrangements that pose high risks to Federal health care programs. 2. Patient Freedom of Choice and Independent Medical Judgment *Comment:* A trade association sought clarification that proposed §§ 1001.952(w)(6) and

(8)(§§ 1001.952(w)(5) and

(7)of the final rule) would permit a health center to select a single supplier of particular goods or services if the health center followed the procurement rules applicable to health centers set forth at 45 CFR 74.40 through 74.48. The commenter presented the scenario of a health center purchasing laboratory services where the health center has a choice of suppliers, which are equal in all respects except that one prospective supplier will offer free laboratory services for uninsured patients while the other will not. The commenter suggested that it may be appropriate for the health center to enter into an exclusive contract with the supplier that offers free services. *Response:* Where a health center purchases or receives a particular good or service from a supplier, the health center may limit the number of suppliers with which it contracts, in keeping with health center procurement rules. Nothing in this safe harbor is to the contrary. We agree that in some circumstances it would be appropriate for a health center to contract with one supplier ( *e.g.* , a single supplier of laboratory services), and that such an arrangement would not be likely to impinge unduly or significantly on the freedom of choice of patients seeking care at a section 330 health center. We have made clarifying revisions to § 1001.952(w)(5) of the final rule to reflect that a Donor may not require a health center to refer patients to a particular individual or entity. Nothing in this provision limits a health center's ability to contract with one supplier consistent with the procurement rules. Similarly, proposed § 1001.952(w)(8) (§ 1001.952(w)(7) of the final rule) prohibits a Donor from requiring the health center to forego arrangements with other prospective Donors, but does not prohibit the health center from entering into an exclusive arrangement with a provider or supplier when the health center so chooses, and when it can do so in compliance with relevant procurement rules. In the commenter's example, a health center can accept the offer of free laboratory services for uninsured patients under the safe harbor, provided all other safe harbor conditions are met. We emphasize that this safe harbor is unique to Federally Qualified Health Centers. In general, arrangements where a provider or supplier offers free or discounted items or services to a potential referral source that would otherwise incur out-of-pocket costs for such items or services pose a substantial risk of fraud under the anti-kickback statute. Nevertheless, Congress enacted a law that protects such arrangements in the health center context, where the remuneration inures to the benefit of a section 330 health center and its medically underserved patients, and where other appropriate safeguards are in place. Other similar arrangements outside the health center context are fundamentally different and pose substantial risk under the anti-kickback statute. *Comment:* A trade association offered mixed reactions to proposed § 1001.952(w)(7) (§ 1001.952(w)(6) in the final rule), which provides that Donors who offer to provide goods, items, or services to health center patients cannot limit their acceptance of health center patient referrals based on a patient's insurance status. The commenter stated that asking Donors to accept all health center patients without regard to insurance status is a laudable goal, but expressed concern that this requirement would put prospective Donors at significant financial risk and could have a chilling effect on parties' willingness to participate in safe harbored arrangements. The commenter also stated that allowing Donors to “impose reasonable limits on the aggregate volume or value of referrals it will accept” might cause risk averse Donors to commit to serving a smaller number of health center patients than they otherwise would. *Response:* We are mindful of the commenter's concerns and we believe that the regulations strike an appropriate balance between preserving health center patients' access to care, allowing prospective Donors to limit their risk, and reducing the risk of parties abusing the safe harbor by “cherry picking” lucrative patients from the health centers. We believe a requirement that Donors that offer to furnish goods, items, or services to health center patients should do so for all health center patients without regard to insurance status is essential to effectuating Congress' intent that the safe harbor promote arrangements that provide a benefit to the health centers and the medically underserved populations they serve. We are mindful that this requirement could discourage prospective Donors from participating in safe harbored arrangements absent a way for them to limit their risk, which is why we have provided a mechanism for Donors to set a reasonable cap on the volume or value of items or services they will provide. Furthermore, nothing in § 1001.952(w)(6) of the final rule precludes Donors from billing for such goods, items, or services in accordance with the Donor's usual billing practice (absent an agreement between the parties as provided for in § 1001.952(w)(9)). The safe harbor does not protect arrangements through which Donors limit their financial risk by cherry picking which health center patients will receive their goods or services based on the patient's insurance status. For example, if a physician were to offer physician services to a health center, he or she could not condition the offer on treating only patients who are Federal healthcare program beneficiaries. However, the physician could cap the number of hours he or she would work at the health center. Similarly, an end stage renal disease facility cannot offer to provide free dialysis for one uninsured health center patient for every four insured patients the health center refers to the facility. However, the facility could offer to provide a fixed number of dialysis treatments to the health center. Finally, we clarified that § 1001.952(w)(6) concerns goods, items, or services furnished by Donors to the health center, and not donations or loans. *Comment:* A health system commenter asked if the requirements of proposed § 1001.952(w)(7) (§ 1001.952(w)(6) of the final rule) would apply to Donors providing remuneration in the form of loans or donations, since a patient cannot “clinically qualify” for a loan or donation. *Response:* Proposed § 1001.952(w)(7) (§ 1001.952(w)(6) of the final rule) does not apply to Donors providing donations or loans to a health center. For clarity and consistency of meaning, we have replaced the term “provide” with the term “furnish” in § 1001.952(w)(6) of the final rule. As defined at 42 CFR 1000.10, “[f]urnished refers to items or services provided or supplied, directly or indirectly, by any individual or entity.” We have further clarified the subsequent language in this paragraph by conforming it to reflect that the term “furnish” refers to items or services provided or supplied, not referrals accepted. We believe these changes better distinguish between

(i)Donors who furnish items or services for health centers patients (and may bill insurers separately for some of these items or services), who must comply with § 1001.952(w)(6) of the final rule if they want safe harbor protection, and

(ii)Donors who provide health centers with donations or loans. We note that safe harbored donations or loans may not take into account the volume or value of Federal health care program referrals, in accordance with § 1001.952(w)(1). 3. Patient Notification *Comment:* Two trade associations asked that we eliminate the patient notification requirement at proposed § 1001.952(w)(9) (§ 1001.952(w)(8) of the final rule). One commenter suggested that, if the requirement is retained, we distinguish providers of health care services from suppliers of goods and services since, in the commenter's opinion, it is less important to preserve patients' freedom of choice to select suppliers of health care goods and services. This commenter also questioned why this safe harbor requires patient notification when other safe harbors do not. Another trade association asserted that any patient notification requirement would be unworkable and would not significantly enhance patient freedom of choice. *Response:* We disagree with the commenters and decline to eliminate the notification requirement. We will not draw a distinction between providers and suppliers for purposes of this subparagraph because preserving patient freedom of choice is important for both providers and suppliers of health care items and services (we note that physicians are “suppliers” for Medicare Part B purposes. 42 CFR 400.202. We believe a patient notification requirement is consistent with our specific charge from Congress to protect patient freedom of choice. Moreover, this is not the only safe harbor that requires patient notification. *See, e.g.* , 42 U.S.C. 1001.952(v). As we noted in the preamble to the proposed rule, transparency will help protect the informed decision-making of patients, enhancing their ability to act as prudent consumers of health care services and preserving freedom of choice. (70 FR 38086; July 1, 2005) That said, we have simplified the requirements. Under the final rule, health centers must notify patients of their freedom of choice and provide information regarding the existence and nature of arrangements under this safe harbor to patients upon request. *Comment:* A trade association asked that we specify how to satisfy the patient notification requirement at proposed § 1001.952(w)(9) (§ 1001.952(w)(8) of the final rule). The commenter asked us to confirm that health centers would be allowed to notify patients strictly through broad disclosures and that an acceptable notification method would be to direct patients to a posted written disclosure notice. *Response:* We confirm that health centers can satisfy the notification requirement through broad disclosures. For example, directing patients to a written disclosure notice posted in a conspicuous place in the health center would be an acceptable disclosure method, provided that the written notice is reasonably calculated to provide effective notice and to be understood by the parties. However, since the most appropriate notification method is likely to vary from health center to health center, depending on the particular facts and circumstances, we believe it would be inappropriate for us to dictate a one-size-fits-all notification method to be used by all health centers. Accordingly, we further note that broad disclosures are not required. To further improve clarity, we replaced the general reference to arrangements under “this paragraph” with a specific cite to § 1001.952(w)(1). 4. Rates Charged to Health Center Referrals *Comment:* We received several comments concerning proposed § 1001.952(w)(10) (§ 1001.952(w)(9) of the final rule), which gives health centers the option of requiring a Donor to charge a patient referred from the health center the same rate it charges other patients or a reduced rate. A trade association requested that the entire proposed provision be deleted from the safe harbor or, if retained, clarified as optional. The same trade association sought clarification that the provision would not preclude providers or suppliers from waiving or reducing cost sharing obligations for health center patients under the safe harbor at 42 CFR 1001.952(k). *Response:* We emphasize that proposed § 1001.952(w)(10) (§ 1001.952(w)(9) of the final rule) describes an optional standard. We have revised § 1001.952(w)(9) of the final rule to make this elective clear. Health centers are not required to exercise this option, but they may choose to do so to ensure that Donors giving remuneration to a health center do not simply recoup the remuneration by overcharging health center patients. Our intent is to allow health centers to protect their patients from price gouging. (We note that a similar provision is included in the safe harbor for referral services at § 1001.952(f).) We added this provision to ensure that health centers can protect their patients from being charged prices higher than they would be charged in the absence of the health center's participation in the safe harbored arrangement. We are concerned, for example, that Donors might otherwise seek to recoup part of the cost of remuneration offered to a health center by charging health center patients inflated rates. We confirm that nothing in the provision would preclude hospitals and health centers from offering health center patients waivers or reductions of cost sharing obligations, as permitted in the safe harbor for waiver of beneficiary coinsurance and deductible amounts at § 1001.952(k). Moreover, health centers and other providers and suppliers can waive or reduce patients' cost sharing amounts based on individualized, good faith assessments of financial need. Section 1128A(i)(6)(A)(iii) of the Act. *Comment:* A health system asked whether the regulatory language “the same rate it charges other patients” at proposed § 1001.952(w)(10) (§ 1001.952(w)(9) of the final rule) means the entity's customary charges (as defined at 42 CFR 413.13(a)) or the discounted rate the provider or supplier actually charges similarly situated patients. *Response:* We clarify that “the same rate it charges other patients” refers to the rate the provider or supplier actually charges a patient similarly situated to a patient referred from a health center. We have changed the regulatory text at § 1001.952(w)(9) to reflect this clarification by inserting the words “similarly situated” after the word “other.” III. Regulatory Impact Statement A. Regulatory Analysis We have examined the impact of this rule as required by Executive Order 12866, the Unfunded Mandates Reform Act of 1995, the Regulatory Flexibility Act

(RFA)of 1980, and Executive Order 13132. Executive Order 12866 Executive Order 12866 directs agencies to assess all costs and benefits of available regulatory alternatives and, if regulations are 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 must be prepared for major rules with economically significant effects ( *i.e.* , $100 million or more in any given year). This is not a major rule, as defined at 5 U.S.C. 804(2), and it is not economically significant since the overall economic effect of the rule is less than $100 million annually. This safe harbor is designed to allow health centers to enter into certain beneficial arrangements with individuals or entities providing goods, items, services, donations, loans, or a combination thereof to the health center. In doing so, this regulation would impose no requirements on any party. Health centers may voluntarily seek to comply with this provision so that they have assurance that participating in covered agreements will not subject them to liability under the anti-kickback statute. The safe harbor facilitates health centers' ability to provide important health care services to communities in need and helps these centers fulfill their mission as integral components of the health care safety net. We believe that the aggregate economic impact of this rule will be minimal and will have no effect on the economy or on Federal or State expenditures. To the extent that there is any economic impact, that impact will likely result in savings of Federal grant dollars. Unfunded Mandates Reform Act Section 202 of the Unfunded Mandates Reform Act of 1995, Public Law 104-4, requires that agencies assess anticipated costs and benefits before issuing any rule that may result in expenditures in any one year by State, local, or tribal governments, in the aggregate, or by the private sector, of $110 million. Since compliance with safe harbor requirements is voluntary, we believe that there are no significant costs associated with this safe harbor that will impose any mandates on State, local, or tribal governments or the private sector that would result in an expenditure of $110 million or more (adjusted for inflation) in any given year, and that a full analysis under the Unfunded Mandates Reform Act is not necessary. Regulatory Flexibility Act The Regulatory Flexibility Act

(RFA)and the Small Business Regulatory Enforcement and Fairness Act of 1996, which amended the RFA, require agencies to analyze options for regulatory relief of small entities. For purposes of the RFA, small entities include small businesses, certain nonprofit organizations, and small governmental jurisdictions. Individuals and States are not included in the definition of a small entity. In accordance with the RFA, some of the health centers that may avail themselves of the protections of the safe harbor are considered to be small entities. In addition, section 1102(b) of the Act requires us to prepare a regulatory impact analysis 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. While this safe harbor may have an impact on small rural hospitals, we believe that the aggregate economic impact of this rule will be minimal, since it is the nature of the violation and not the size or type of the entity that would result in a violation of the anti-kickback statute. Moreover, the safe harbor should benefit small rural hospitals (and their patients) that have relationships with health centers by increasing their flexibility to engage in transactions involving goods, items, services, donations, and loans that result in conservation of Federal grant dollars and other funding without any risk under the anti-kickback statute. The safe harbor should effectively expand opportunities for health centers to engage in arrangements beneficial for fulfilling their mission. For these reasons, and because the vast majority of entities potentially affected by this rule do not engage in prohibited arrangements, schemes, or practices in violation of the law, we have concluded that this rule should not have a significant impact on a substantial number of small rural hospitals, and that a regulatory flexibility analysis is not required for this rulemaking. Executive Order 13132 Executive Order 13132, Federalism, establishes certain requirements that an agency must meet when it promulgates a rule that imposes substantial direct requirements or costs on State and local governments, preempts State law, or otherwise has Federalism implications. In reviewing this rule under the threshold criteria of Executive Order 13132, we have determined that this rule would not significantly limit the rights, roles, and responsibilities of State or local governments. We have determined, therefore, that a full analysis under Executive Order 13132 is not necessary. The Office of Management and Budget

(OMB)has reviewed this rule in accordance with Executive Order 12866. B. Paperwork Reduction Act In accordance with section 3506(c)(2)(A) of the Paperwork Reduction Act of 1995 (PRA), we are required to solicit public comments, and receive final OMB approval, on any information collection requirements set forth in rulemaking. In order to fairly evaluate whether an information collection should be approved by OMB, section 3506(c)(2)(A) of the PRA requires that we solicit comment on the following issues: • Whether the information collection is necessary and useful to carry out the proper functions of the agency; • The accuracy of the agency's estimate of the information collection burden; • The quality, utility, and clarity of the information to be collected; • Recommendations to minimize the information collection burden on the affected public, including automated collection techniques. On July 1, 2005, we solicited comment under this section upon publication of the 60-day notice of proposed rulemaking (70 FR 38081). We will publish the 30-day **Federal Register** notice soliciting public comment on each of these issues for the following sections of this document that contain information collection requirements following publication of this final rule. For an arrangement to fall within the safe harbor it will have to fulfill the following documentation requirements:

(1)It must be set out in writing (§ 1001.952(w)(1)(i)(A));

(2)the written agreement must be signed by the parties (§ 1001.952(w)(1)(i)(B));

(3)the written agreement must cover, and specify the amount of, all goods, items, services, donations, or loans provided by the individual or entity to the health center § 1001.952(w)(1)(i)(C));

(4)the health center must document its basis for its reasonable expectation that the arrangement will benefit a medically underserved population (§ 1001.952(w)(3)); and

(5)the health center, at reasonable intervals, must re-evaluate the arrangement to ensure that it is expected to continue to benefit a medically underserved population, and must document the re-evaluation contemporaneously (§ 1001.952(w)(4)). As required by section 3504(h) of the Paperwork Reduction Act of 1995, we will submit a copy of this document to OMB for its review and approval of these information collection requirements. We believe that the documentation requirements necessary to enjoy safe harbor protection do not qualify as an added paperwork burden, because the requirements deviate minimally, if at all, from the information these entities would routinely collect in their normal course of business. The statute applies only to the health centers' receipt of goods, items, services, donations, or loans pursuant to a contract, lease, grant, loan, or other agreement. We believe it is usual and customary for health centers to memorialize contracts, leases, grants, loans, and other similar agreements in writing. Ensuring that such writings are comprehensive and that the actual business activities are accurately reflected by documentation are standard prudent business practices. The only documentation requirement of the safe harbor that potentially imposes an additional recordkeeping burden is the requirement that health centers document the statutorily mandated expected benefit to a medically underserved population. Since serving a medically underserved population is central to the underlying mission of the health centers and the section 330 grant program (and all health centers serve at least one such population), documentation of such benefit would seem to be a prudent business practice to ensure continued compliance, not only with the safe harbor, but also with the section 330 grant program. We note that although we require health centers to provide effective notification to patients reminding patients of their freedom to choose any willing provider or supplier and to provide information about safe harbored arrangements to patients who inquire, these disclosures need not be in writing. Instead, we require that health centers provide patient disclosures in a manner reasonably calculated to provide effective notice and to be understood by the patient. The type of notice provided may vary depending on the health center and its patients. We believe the notification requirement will achieve the goal of protecting patients without imposing an added paperwork burden because the notice need not be written. Moreover, we believe the notification requirement will be consistent with health centers' existing interest in protecting their vulnerable patient populations. It should be noted that compliance with a safe harbor under the Federal anti-kickback statute is voluntary, and no party is ever required to comply with a safe harbor. Instead, safe harbors merely offer an optional framework regarding how to structure business arrangements to ensure compliance with the anti-kickback statute. All parties remain free to enter into arrangements without regard to a safe harbor, so long as the arrangements do not involve unlawful payments for referrals under the anti-kickback statute. List of Subjects in 42 CFR Part 1001 Administrative practice and procedure, Fraud, Grant programs—health, Health facilities, Health professions, Maternal and child health, Medicaid, Medicare. Accordingly, 42 CFR part 1001 would be amended as set forth below: PART 1001—[AMENDED] 1. The authority citation for part 1001 continues to read as follows: Authority: 42 U.S.C. 1302, 1320a-7, 1320a-7b, 1395u(j), 1395u(k), 1395y(d), 1395y(e), 1395cc(b)(2)(D),

(E)and (F), and 1395hh; and sec. 2455, Pub.L. 103-355, 108 Stat. 3327 (31 U.S.C. 6101 note). 2. Section 1001.952 is amended by republishing the introductory paragraph for this section and by adding a new paragraph

(w)to read as follows: § 1001.952 Exceptions. The following payment practices shall not be treated as a criminal offense under section 1128B of the Act and shall not serve as the basis for an exclusion:

(w)*Health centers.* As used in section 1128B of the Act, “remuneration” does not include the transfer of any goods, items, services, donations or loans (whether the donation or loan is in cash or in-kind), or combination thereof from an individual or entity to a health center (as defined in this paragraph), as long as the following nine standards are met—

(i)The transfer is made pursuant to a contract, lease, grant, loan, or other agreement that—

(A)Is set out in writing;

(B)Is signed by the parties; and

(C)Covers, and specifies the amount of, all goods, items, services, donations, or loans to be provided by the individual or entity to the health center.

(ii)The amount of goods, items, services, donations, or loans specified in the agreement in accordance with paragraph (w)(1)(i)(C) of this section may be a fixed sum, fixed percentage, or set forth by a fixed methodology. The amount may not be conditioned on the volume or value of Federal health care program business generated between the parties. The written agreement will be deemed to cover all goods, items, services, donations, or loans provided by the individual or entity to the health center as required by paragraph (w)(1)(i)(C) of this section if all separate agreements between the individual or entity and the health center incorporate each other by reference or if they cross-reference a master list of agreements that is maintained centrally, is kept up to date, and is available for review by the Secretary upon request. The master list should be maintained in a manner that preserves the historical record of arrangements.

(2)The goods, items, services, donations, or loans are medical or clinical in nature or relate directly to services provided by the health center as part of the scope of the health center's section 330 grant (including, by way of example, billing services, administrative support services, technology support, and enabling services, such as case management, transportation, and translation services, that are within the scope of the grant).

(3)The health center reasonably expects the arrangement to contribute meaningfully to the health center's ability to maintain or increase the availability, or enhance the quality, of services provided to a medically underserved population served by the health center, and the health center documents the basis for the reasonable expectation prior to entering the arrangement. The documentation must be made available to the Secretary upon request.

(4)At reasonable intervals, but at least annually, the health center must re-evaluate the arrangement to ensure that the arrangement is expected to continue to satisfy the standard set forth in paragraph (w)(3) of this section, and must document the re-evaluation contemporaneously. The documentation must be made available to the Secretary upon request. Arrangements must not be renewed or renegotiated unless the health center reasonably expects the standard set forth in paragraph (w)(3) of this section to be satisfied in the next agreement term. Renewed or renegotiated agreements must comply with the requirements of paragraph (w)(3) of this section.

(5)The individual or entity does not

(i)Require the health center (or its affiliated health care professionals) to refer patients to a particular individual or entity, or

(ii)restrict the health center (or its affiliated health care professionals) from referring patients to any individual or entity.

(6)Individuals and entities that offer to furnish goods, items, or services without charge or at a reduced charge to the health center must furnish such goods, items, or services to all patients from the health center who clinically qualify for the goods, items, or services, regardless of the patient's payor status or ability to pay. The individual or entity may impose reasonable limits on the aggregate volume or value of the goods, items, or services furnished under the arrangement with the health center, provided such limits do not take into account a patient's payor status or ability to pay.

(7)The agreement must not restrict the health center's ability, if it chooses, to enter into agreements with other providers or suppliers of comparable goods, items, or services, or with other lenders or donors. Where a health center has multiple individuals or entities willing to offer comparable remuneration, the health center must employ a reasonable methodology to determine which individuals or entities to select and must document its determination. In making these determinations, health centers should look to the procurement standards for recipients of Federal grants set forth in 45 CFR 74.40 through 74.48.

(8)The health center must provide effective notification to patients of their freedom to choose any willing provider or supplier. In addition, the health center must disclose the existence and nature of an agreement under paragraph (w)(1) of this section to any patient who inquires. The health center must provide such notification or disclosure in a timely fashion and in a manner reasonably calculated to be effective and understood by the patient.

(9)The health center may, at its option, elect to require that an individual or entity charge a referred health center patient the same rate it charges other similarly situated patients not referred by the health center or that the individual or entity charge a referred health center patient a reduced rate (where the discount applies to the total charge and not just to the cost-sharing portion owed by an insured patient). For purposes of this paragraph, the term “health center” means a Federally Qualified Health Center under section 1905(l)(2)(B)(i) or 1905(l)(2)(B)(ii) of the Act, and “medically underserved population” means a medically underserved population as defined in regulations at 42 CFR 51c.102(e). Dated: May 8, 2007. Daniel R. Levinson, Inspector General. Approved: June 27, 2007. Michael O. Leavitt, Secretary. [FR Doc. E7-19636 Filed 10-3-07; 8:45 am] BILLING CODE 4152-01-P FEDERAL COMMUNICATIONS COMMISSION 47 CFR Part 76 [MB Docket No. 07-29; FCC 07-169] Implementation of the Cable Television Consumer Protection and Competition Act of 1992 and Development of Competition and Diversity in Video Programming Distribution: Section 628(c)(5) of the Communications Act—Sunset of Exclusive Contract Prohibition AGENCY: Federal Communications Commission. ACTION: Final rule. SUMMARY: In this document, the Commission retains for five years the prohibition on exclusive contracts for satellite cable programming and satellite broadcast programming between vertically integrated programming vendors and cable operators and modifies the procedures for resolving program access disputes. DATES: Effective October 4, 2007, except for the amendments to § 76.1003(e)(1) and

(j)which contain information collection requirements that are not effective until approved by the Office of Management and Budget. The Commission will publish a document in the **Federal Register** announcing the effective date for those sections. FOR FURTHER INFORMATION CONTACT: For additional information on this proceeding, contact Steven Broeckaert, *Steven.Broeckaert@fcc.gov;* David Konczal, *David.Konczal@fcc.gov;* or Katie Costello, *Katie.Costello@fcc.gov;* of the Media Bureau, Policy Division,

(202)418-2120. SUPPLEMENTARY INFORMATION: This is a summary of the Commission's *Report and Order* (“ *Order* ”), FCC 07-169, adopted on September 11, 2007, and released on October 1, 2007. The full text of this document is available for public inspection and copying during regular business hours in the FCC Reference Center, Federal Communications Commission, 445 12th Street, SW., CY-A257, Washington, DC 20554. This document will also be available via ECFS ( *http://www.fcc.gov/cgb/ecfs/* ). (Documents will be available electronically in ASCII, Word 97, and/or Adobe Acrobat.) The complete text may be purchased from the Commission's copy contractor, 445 12th Street, SW., Room CY-B402, Washington, DC 20554. To request this document in accessible formats (computer diskettes, large print, audio recording, and Braille), send an e-mail to *fcc504@fcc.gov* or call the Commission's Consumer and Governmental Affairs Bureau at

(202)418-0530 (voice),

(202)418-0432 (TTY). In addition to filing comments with the Office of the Secretary, a copy of any comments on the proposed information collection requirements contained herein should be submitted to Cathy Williams, Federal Communications Commission, 445 12th St., SW., Room 1-C823, Washington, DC 20554, or via the Internet at *PRA@fcc.gov.* Paperwork Reduction Act of 1995 Analysis This document contains modified information collection requirements. The Commission will send the requirements for OMB review at a later date. The Commission, as part of its continuing effort to reduce paperwork burdens, will invite the general public to comment on the information collection requirements as required by the Paperwork Reduction Act of 1995, Public Law 104-13. In addition, pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4), we sought specific comment on how we might “further reduce the information collection burden for small business concerns with fewer than 25 employees.” We have assessed the effects of the information collection requirements resulting from the modifications to the Commission's procedures for resolving program access disputes adopted herein, and find that those requirements will benefit companies with fewer than 25 employees by facilitating the resolution of program access complaints and that these requirements will not burden those companies. Summary of the Report and Order I. Introduction and Executive Summary 1. In areas served by a cable operator, Section 628(c)(2)(D) of the Communications Act of 1934, as amended (“Communications Act”) generally prohibits exclusive contracts for satellite cable programming or satellite broadcast programming between vertically integrated programming vendors and cable operators (the “exclusive contract prohibition”). *See* 47 U.S.C. 548(c)(2)(D). In this *Order,* we find that the exclusive contract prohibition continues to be necessary to preserve and protect competition and diversity in the distribution of video programming, and accordingly, retain it again for five years, until October 5, 2012. In the *Order,* we decline to narrow the scope of the exclusive contract prohibition based on the popularity of the programming network, based on the competitive circumstances in individual geographic areas served by a cable operator, or by precluding certain competitive multichannel video programming distributors (“MVPDs”) from benefiting from the prohibition. We also decline to expand the exclusive contract prohibition to apply to non-cable-affiliated programming, and we again conclude that terrestrially delivered programming is beyond the scope of the exclusive contract prohibition in Section 628(c)(2)(D). 2. Further, we modify our procedures for resolving program access disputes by

(i)codifying the requirements that a respondent in a program access complaint proceeding that expressly relies upon a document in asserting a defense include the document as part of its answer;

(iii)codifying the Commission's authority to issue default orders granting a complaint if the respondent fails to comply with discovery requests; and

(i)mandate electronic filings of pleadings at this time (but we note that parties currently may voluntarily submit electronic copies of their pleadings to staff via e-mail);

(ii)adopt a more expedited pleading cycle for program access complaints;

(iii)mandate weekly status conferences;

(iv)shift resolution of program access complaints to the Enforcement Bureau; or

(v)adopt mandatory arbitration. II. Background A. Exclusive Contract Prohibition 3. In enacting the program access provisions, adopted as part of the Cable Television Consumer Protection and Competition Act of 1992 (“1992 Cable Act”), Congress intended to encourage entry into the MVPD market by existing or potential competitors to traditional cable systems by making available to those entities the programming necessary to enable them to become viable competitors. The 1992 Cable Act and its legislative history reflect Congressional findings that increased horizontal concentration of cable operators, combined with extensive vertical integration (which means the combined ownership of cable systems and suppliers of cable programming), created an imbalance of power, both between cable operators and program vendors and between incumbent cable operators and their multichannel competitors. Congress concluded at that time that vertically integrated program suppliers had the incentive and ability to favor their affiliated cable operators over other MVPDs, such as other cable systems, home satellite dish (“HSD”) distributors, direct broadcast satellite (“DBS”) providers, satellite master antenna television (“SMATV”) systems, and wireless cable operators. 4. When the Commission promulgated regulations implementing the program access provisions of Section 628, it recognized that Congress placed a higher value on new competitive entry into the MVPD marketplace than on the continuation of exclusive distribution practices when such practices impede this entry. Congress absolutely prohibited exclusive contracts for satellite cable programming or satellite broadcast programming between vertically integrated programming vendors and cable operators in areas unserved by cable, and generally prohibited exclusive contracts within areas served by cable: With respect to distribution to persons in areas served by a cable operator, [the Commission shall] prohibit exclusive contracts for satellite cable programming or satellite broadcast programming between a cable operator and a satellite cable programming vendor in which a cable operator has an attributable interest or a satellite broadcast programming vendor in which a cable operator has an attributable interest, unless the Commission determines * * * that such contract is in the public interest. 47 U.S.C. 548(c)(2)(D); *see also* 47 CFR 76.1002(c)(2). Congress recognized that, in areas served by cable, some exclusive contracts may serve the public interest by providing offsetting benefits to the video programming market or assisting in the development of competition among MVPDs. *See* 47 U.S.C. 548(c)(2)(4). Any cable operator, satellite cable programming vendor in which a cable operator has an attributable interest, or satellite broadcast programming vendor in which a cable operator has an attributable interest seeking to enforce or enter into an exclusive contract in an area served by a cable operator must submit a “petition for exclusivity” to the Commission for approval. *See* 47 CFR 76.1002(c)(5). 5. Congress directed that the exclusive contract prohibition would cease to be effective on October 5, 2002, unless the Commission found in a proceeding conducted between October 2001 and October 2002 that the prohibition “continues to be necessary to preserve and protect competition and diversity in the distribution of video programming.” *See* 47 U.S.C. 548(c)(5). In October 2001, the Commission sought comment on this issue ( *2001 Sunset NPRM,* 66 FR 54972, October 31, 2001) and ultimately concluded that the exclusive contract prohibition did continue to be “necessary.” *See 2002 Extension Order,* 67 FR 49247, July 30, 2002. The Commission therefore extended the prohibition for five years (i.e., through October 5, 2007). 6. The Commission further provided that, during the year before the expiration of the five-year extension of the exclusive contract prohibition, it would conduct another review to determine whether the exclusive contract prohibition continues to be necessary to preserve and protect competition and diversity in the distribution of video programming. We issued a *Notice of Proposed Rulemaking* (“ *NPRM* ”) in February 2007 to initiate this review (72 FR 9289, March 1, 2007). B. Program Access Complaint Procedures 7. Section 628 of the Communications Act prohibits unfair methods of competition or unfair or deceptive practices that hinder or prevent any MVPD from providing satellite-delivered programming to consumers. Section 628(b) provides: It shall be unlawful for a cable operator, a satellite cable programming vendor in which a cable operator has an attributable interest, or a satellite broadcast programming vendor to engage in unfair methods of competition or unfair or deceptive acts or practices, the purpose or effect of which is to hinder significantly or to prevent any multichannel video programming distributor from providing satellite cable programming or satellite broadcast programming to subscribers or consumers. As part of the Telecommunications Act of 1996, Congress expanded program access protection to include common carriers and their affiliates that provide video programming by any means directly to subscribers, and to satellite cable programming vendors in which a common carrier has an attributable interest. *See* 47 U.S.C. 548(j). Section 628, among other things, protects access to vertically integrated cable programming services by competing MVPDs in order to increase competition and diversity in the MVPD market and foster the development of competition to traditional cable systems. 8. Parties aggrieved by conduct alleged to violate the program access provisions have the right to commence an adjudicatory proceeding before the Commission. As instructed by Section 628(c), the Commission promulgated regulations implementing a program access complaint process. The Commission determined that a streamlined program access complaint process, with limited discovery procedures and adjudication based on a complaint, answer, and reply, would provide the most flexible and expeditious means of enforcing the anti-discrimination program access provisions. The Commission further addressed program access complaint process issues in response to a petition for rulemaking filed by Ameritech New Media, Inc. The Commission resolved these and other issues in the *1998 Program Access Order* (13 FCC Rcd 15822). 9. In the *1998 Program Access Order,* the Commission affirmed its authority to impose damages on a case-by-case basis for program access violations and adopted guidelines for resolving program access disputes so that denial of programming cases, such as unreasonable refusal to sell, petitions for exclusivity, and exclusivity complaints, are resolved within five months of the submission of the complaint to the Commission and all other program access complaints, including price discrimination cases, are resolved within nine months of the submission of the complaint to the Commission. The Commission subsequently amended the program access rules as part of an overhaul of the Commission's pleading and complaint rules. 10. In the *NPRM,* in addition to seeking comment on extension of the exclusive contract prohibition, we sought comment on whether and how our procedures for resolving program access disputes under Section 628 should be modified. We sought comment on the costs associated with the complaint process and whether the pre-filing notice, pleading requirements, evidentiary standards, timing, and potential remedies are appropriate and effective. We also sought comment on whether specific time limits on the Commission, the parties, or others would promote a speedy and just resolution of program access complaints. We asked whether the program access complaint rules and procedures, including those governing discovery and protection of confidential information, are adequate. We also asked whether we should adopt alternative procedures or remedies such as mandatory standstill agreements or arbitration, as the Commission has done in recent mergers. III. Discussion A. Exclusive Contract Prohibition 11. Our analysis of whether the exclusive contract prohibition “continues to be necessary to preserve and protect competition and diversity in the distribution of video programming” proceeds in five parts. Based on this five-part analysis, we conclude as explained below that the exclusive contract prohibition continues to be necessary to preserve and protect competition and diversity in the distribution of video programming and, accordingly, retain it again for five years. 1. Standard of Review 12. Various cable MSOs repeat arguments made in response to the *2001 Sunset NPRM* that the Commission should construe the term “necessary” as used in Section 628(c)(5) as requiring the exclusive contract prohibition to be “indispensable” or “essential” to prevent harm to competition. In the *2002 Extension Order,* the Commission explained that the term “necessary” has been interpreted differently depending on the statutory context. In some cases, courts have interpreted the term to mean “useful,” “convenient,” or “appropriate” while in other contexts courts have interpreted the term in a more restrictive sense to mean “indispensable” or “essential.” Consistent with judicial precedent, the Commission construed the term “necessary” in its statutory context and determined that the exclusive contract prohibition continues to be “necessary” if, in the absence of the prohibition, competition and diversity in the distribution of video programming would not be preserved and protected. We find no basis to revisit the conclusions reached in the *2002 Extension Order,* which, we note, were never challenged. We continue to believe that Section 628(c)(5), when construed in its statutory context, requires the exclusive contract prohibition to be extended if we find that, in the absence of the prohibition, competition and diversity in the distribution of video programming would not be preserved and protected. 2. Status of the MVPD Market: 2002-2007 13. We examine below the changes that have occurred in the programming and distribution markets since 2002 when the Commission last reviewed whether the exclusive contract prohibition continued to be necessary to preserve and protect competition. 14. *Satellite-Delivered National Programming Networks.* The number of satellite-delivered national programming networks available to MVPDs has increased by 237 since 2002, from 294 networks to 531 networks. This amounts to an eighty percent increase in satellite-delivered national programming networks available to MVPDs. 15. *Vertically Integrated Satellite-Delivered National Programming Networks.* The number of satellite-delivered national programming networks that are vertically integrated with cable operators has increased by twelve since 2002, from 104 networks to 116 networks. The percentage of all satellite-delivered national programming networks that are vertically integrated with cable operators has declined since 2002, from 35 percent to 22 percent. 16. The amount of the most popular programming that is vertically integrated with cable operators has declined slightly since 2002. While nine of the Top 20 (45 percent) satellite-delivered national programming networks (as ranked by subscribership) were vertically integrated in 2002 when the Commission last reviewed the exclusive contract prohibition, commenters state that this number has decreased to seven (35 percent). As discussed below, we find that this number has decreased to six. These networks are The Discovery Channel, CNN, TNT, TBS, TLC, and Headline News. 17. Only the largest cable MSOs tend to own vertically integrated programming. In the *2002 Extension Order,* the Commission noted that all vertically integrated programming was attributable to five cable operators, four of which were among the seven largest cable MSOs. Today, all vertically integrated programming is attributable to five cable operators, all of which are among the six largest cable MSOs: Comcast, Time Warner, Cox, Cablevision, and Advance/Newhouse. 18. *Regional Programming Networks.* The number of regional programming networks available to MVPDs has increased by sixteen since 2002, from 80 networks to 96 networks. This amounts to a 20 percent increase since 2002 in regional programming networks available to MVPDs. The number of regional sports networks (“RSNs”) has increased by approximately 36 percent since 2002, from 28 networks to 39 networks, by some estimates. We note that, according to the Commission's most recent annual competition report, there were 37 RSNs as of June 2005. *See 12th Annual Report,* 21 FCC Rcd at 2510 and 2586. More recent data indicates that there are now 39 RSNs. 19. *Vertically Integrated Regional Programming Networks.* The number of regional programming networks that are vertically integrated with cable operators has increased by five since 2002, from 39 networks to 44 networks. The percentage of all regional programming networks that are vertically integrated with cable operators, however, has declined slightly since 2002, from 49 percent to 46 percent. The number of RSNs that are vertically integrated with cable operators has decreased by six since 2002, from 24 networks to 18 networks, by some estimates. We note that, according to the Commission's most recent annual competition report, there were 17 vertically integrated RSNs as of June 2005. *See* 12th *Annual Report,* 21 FCC Rcd at 2510 and 2586. More recent data indicates that there are now 18 vertically integrated RSNs. The percentage of all RSNs that are vertically integrated has declined since 2002, from 86 percent to approximately 46 percent. We note that, according to the Commission's most recent annual competition report, 45.9 percent of RSNs were vertically integrated as of June 2005. If the unaffiliated MASN and the cable-affiliated SportsNet New York are included, then 18 out of 39 RSNs, or 46.1 percent, are vertically integrated. 20. *MVPD Market.* Since the Commission last examined the exclusive contract prohibition in 2002, the percentage of MVPD subscribers receiving their video programming from a cable operator has declined from 78 percent to 67 percent, by some estimates. We note that, according to the Commission's annual competition reports, the percentage of MVPD subscribers receiving their video programming from a cable operator was 78.11 percent as of June 2001 and 69.41 percent as of June 2005. More recent data indicates that the portion of MVPD subscribers served by cable operators is now approximately 67 percent. The number of cable subscribers has declined by 3.4 million since 2002, from 69 million to 65.4 million. During this same period, the percentage of MVPD subscribers receiving their video programming from a DBS operator has increased from 18 percent to over 30 percent, by some estimates. We note that, according to the Commission's annual competition reports, the percentage of MVPD subscribers receiving their video programming from a DBS operator was 18.2 percent as of June 2001 and 27.72 percent as of June 2005. Compare *8th Annual Report* , 17 FCC Rcd at 1388, Table C-1 (18.2 percent) with *12th Annual Report* , 21 FCC Rcd at 2617, Table B-1 (27.72 percent). More recent data indicates that the portion of MVPD subscribers served by DBS operators is now over 30 percent. The number of DBS subscribers has increased by 11.6 million since 2002, from 18 million to 29.6 million, by some estimates. We note that, according to the Commission's annual competition reports, the number of MVPD subscribers receiving their video programming from a DBS operator was 16.07 million as of June 2001 and 26.12 million as of June 2005. More recent data indicate that the number of DBS subscribers is now 29.6 million. 21. A significant development since 2002 is the emergence of video services offered by telephone companies, including AT&T, Qwest, and Verizon. As of the end of the second quarter of 2007, AT&T's U-Verse fiber-based video and Internet service passed over 4 million households. AT&T also recently announced that its U-Verse video service has more than 100,000 customers. Qwest has twenty-one cable franchises and provides nearly 60,000 subscribers with multichannel video service in Arizona, Colorado, Nebraska, and Utah. Verizon, which introduced its fiber-based FiOS TV service in September 2005, had 515,000 video subscribers at the end of the second quarter of 2007. Verizon's FiOS TV was available for sale to nearly 3.9 million premises in nearly 500 communities in 12 states as of the end of the second quarter of 2007. Other wireline Broadband Service Providers (“BSPs”) also offer video services in competition with cable operators, including RCN, WideOpenWest, Knology, and Grande. Some wireline entrants cite a 2004 Government Accountability Office (“GAO”) Report which concludes that wireline video entry provides more price discipline to cable than DBS and is more likely to cause cable operators to enhance their own services and to improve customer service. In response, cable MSOs argue that wireline entry does not have a greater impact on cable prices than DBS entry. Despite the significant investments made in competitive wireline networks, AT&T notes NCTA's estimate that wireline entrants have no more than 1.9 percent of all MVPD subscribers. 22. The cable industry also cites other potential sources of video competition, such as SMATV systems, providers of video on the Internet (such as YouTube, Google, and Akimbo), over-the-air broadcast television, DVDs and videotape purchases and rentals, municipal and non-municipal utilities, and providers of mobile video services. Comcast also argues that in every community, consumers can choose from a minimum of three MVPDs, and states that in many communities a fourth or fifth MVPD is available or will be soon. Cablevision states that DIRECTV and EchoStar have at least double the number of subscribers of every cable MSO, with the exception of Time Warner and Comcast. 23. Commenters in favor of extending the prohibition state that the figures cited by the cable industry are misleading. EchoStar claims that national DBS penetration figures obscure the extent of competition on a local or regional basis where DBS penetration is much lower than the national average. While the number of DBS subscribers has increased by 11.6 million since the *2002 Extension Order* , CA2C notes that cable subscribership during the same period decreased by less than one million, demonstrating that cable operators have maintained their position in the market. Some competitive MVPDs argue that the continued ability of cable operators to raise prices in excess of inflation demonstrates the lack of competition in the video marketplace. Competitive MVPDs also assert that barriers in the MVPD market still persist, as demonstrated by the Commission's efforts to promote greater competition. CA2C notes that the Commission in its decision on cable franchising reform found that in the vast majority of communities around the country, “cable competition simply does not exist.” Some competitive MVPDs disagree with the assertion by the cable industry that mobile video, Internet video, and DVDs are substitutes for cable television. Moreover, competitive MVPDs state that only 2.9 percent of MVPD subscribers receive service from an alternative provider to cable or DBS. 24. *Consolidation of the Cable Industry* . The cable industry has continued to consolidate since 2002. During this period, the percentage of MVPD subscribers receiving their video programming from one of the four largest cable MSOs (Comcast, Time Warner, Cox, and Charter) has increased from 48 percent to between 53 and 60 percent, by some estimates, after taking into account the recent acquisition by Comcast and Time Warner of cable systems formerly owned by Adelphia. We note that, according to the Commission's annual competition reports, the percentage of MVPD subscribers receiving their video programming from one of the four largest cable MSOs was 47.67 percent as of June 2001 and 47.78 percent as of June 2005. More recent data indicates that the percentage of MVPD subscribers receiving their video programming from one of the four largest cable MSOs (Comcast, Time Warner, Cox, and Charter) has increased to between 53 and 60 percent. Moreover, the percentage of MVPD subscribers receiving their video programming from one of the four largest *vertically integrated* cable MSOs (Comcast, Time Warner, Cox, and Cablevision) has increased significantly since 2002, from 34 percent to between 54 and 56.75 percent, by some estimates. We note that, according to the Commission's annual competition reports, the percentage of MVPD subscribers receiving their video programming from one of the four largest vertically integrated cable MSOs was 34.26 percent as of June 2001 and 44.63 percent as of June 2005. *Compare 8th Annual Report* , 17 FCC Rcd at 1341, Table C-3 (34.26 percent) with *12th Annual Report* , 21 FCC Rcd at 2620, Table B-3 (44.63 percent). More recent data indicates that the percentage of MVPD subscribers receiving their video programming from one of the four largest vertically integrated cable MSOs (Comcast, Time Warner, Cox, and Cablevision) has increased to between 54 and 56.75 percent. 25. *Clustering of Cable Systems* . The amount of regional clustering of cable systems has remained significant. Clustering refers to a strategy whereby cable MSOs concentrate their operations in regional geographic areas by acquiring cable systems in regions where the MSO already has a significant presence, while giving up other holdings scattered across the country. This strategy is accomplished through purchases and sales of cable systems, or by system “swapping” among MSOs. The percentage of cable subscribers that are served by systems that are part of regional clusters has increased since 2002, from 80 percent to as much as 85 to 90 percent, by some estimates, taking into account the acquisition by Comcast and Time Warner of cable systems formerly owned by Adelphia. We note that, according to the Commission's annual competition reports, the percentage of cable subscribers served by systems that are part of regional clusters was 80.4 percent as of 2000 and 77.9 percent as of 2004. *Compare 8th Annual Report* , 17 FCC Rcd at 1340, Table C-2 (stating that, as of 2000, 108 cable system clusters were serving 54.4 million subscribers, or 80.4 percent of cable subscribers) *with 12th Annual Report* , 21 FCC Rcd at 2619, Table B-2 (stating that, as of 2004, 118 cable system clusters were serving 51.5 million subscribers, or 78.7 percent of cable subscribers). More recent data indicates that the percentage of cable subscribers that are served by systems that are part of regional clusters has increased to between 85 and 90 percent. 3. Ability and Incentive 26. Our analysis of whether the exclusive contract prohibition continues to be necessary requires us to assess whether, in the absence of the exclusive contract prohibition, vertically integrated programmers would have the ability and incentive to favor their affiliated cable operators over nonaffiliated competitive MVPDs and, if so, whether such behavior would result in a failure to protect and preserve competition and diversity in the distribution of video programming. a. Ability 27. As discussed in this section, we conclude that satellite-delivered vertically integrated programming remains programming for which there are often no good substitutes and that such programming is necessary for viable competition in the video distribution market. In assessing the ability of satellite-delivered vertically integrated programmers to favor their affiliated cable operators to the detriment of competing MVPDs, we consider whether developments in the last five years have diminished the importance of satellite-delivered vertically integrated programming or have affected the ability of satellite-delivered vertically integrated programmers to favor their affiliated cable operators over other MVPDs. 28. *Discussion.* Despite some pro-competitive developments over the past five years, we find that access to vertically integrated programming continues to be necessary in order for competitive MVPDs to remain viable substitutes to the incumbent cable operator in the eyes of consumers. What is most significant to our analysis is not the percentage of total available programming that is vertically integrated with cable operators, but rather the popularity of the programming that is vertically integrated and how the inability of competitive MVPDs to access this programming will affect the preservation and protection of competition in the video distribution marketplace. While there has been a decrease since 2002 in the percentage of the most popular programming networks that are vertically integrated, we find that the four largest cable MSOs (Comcast, Time Warner, Cox, and Cablevision) still have

(i)an interest in six of the Top 20 satellite-delivered networks as ranked by subscribership (The Discovery Channel, CNN, TNT, TBS, TLC, and Headline News);

(ii)seven of the Top 20 satellite-delivered networks as ranked by prime time ratings (TNT, Adult Swim, HBO, TBS, American Movie Classics, Cartoon Network, and The Discovery Channel);

(iii)almost half of all RSNs;

(iv)popular subscription premium networks, such as HBO and Cinemax (competitive MVPDs argue that first-run programming produced by HBO and other premium networks are essential for a competitive MVPD to offer to potential subscribers in order to compete with the incumbent cable operator); and

(v)video-on-demand (“VOD”) networks, such as iN DEMAND (competitive MVPDs argue that movie libraries owned by VOD networks are essential for a competitive MVPD to offer to potential subscribers in order to compete with the incumbent cable operator). The record thus reflects that popular national programming networks, such as CNN, TNT, TBS, and The Discovery Channel, among many others, in addition to premium programming networks, RSNs, and VOD networks, are affiliated with the four largest vertically integrated cable MSOs and that such programming networks are demanded by MVPD subscribers. We thus find that cable-affiliated programming continues to represent some of the most popular and significant programming available today. 29. We find that access to vertically integrated programming is essential for new entrants in the video marketplace to compete effectively. If the programming offered by a competitive MVPD lacks “must have” programming that is offered by the incumbent cable operator, subscribers will be less likely to switch to the competitive MVPD. We give little weight to the claims by cable operators that recent entrants, such as telephone companies, have not experienced “any trouble” to date in acquiring access to satellite-delivered vertically integrated programming. As an initial matter, we note that competitive MVPDs state that they pay significant amounts for access to satellite-delivered vertically integrated programming. Moreover, because the exclusive contract prohibition is currently in effect and has been since 1992, vertically integrated programmers delivering programming to MVPDs via satellite were not able to deny competitors access to their programming. We also reject the cable MSOs' suggestion that the resources of some competitors in the video distribution market (i.e., telephone companies) should change our analysis of whether to extend the prohibition at this time. The competitors to which the cable operators refer are new entrants to the video distribution market, and have no established customer base. If cable operators have exclusive access to content that is essential for viable competition and for which there are no close substitutes, and they have the incentive to withhold such content, they can significantly impede the ability of new entrants to compete effectively in the marketplace, regardless of their level of resources. As competitive MVPDs note, DBS providers have been able to attract and retain millions of subscribers because of their ability to offer “must have” programming that is affiliated with cable operators. 30. For the reasons discussed above, we conclude that there are no close substitutes for some satellite-delivered vertically integrated programming and that such programming is necessary for viable competition in the video distribution market. Having made this determination, we further conclude that vertically integrated programmers continue to have the ability to favor their affiliated cable operators over competitive MVPDs such that competition and diversity in the distribution of video programming would not be preserved and protected. Accordingly, assuming vertically integrated programmers continue to have the incentive to favor their affiliated cable operators, allowing vertically integrated programmers to enter into exclusive arrangements with their affiliated cable operators will fail to protect and preserve competition and diversity in the distribution of video programming. b. Incentive 31. We next assess whether vertically integrated programmers continue to have the incentive to favor their affiliated cable operators over competitive MVPDs. This requires us to analyze

(i)whether cable operators, through the number of subscribers they serve, the number of homes they pass, and their affiliations with programmers, continue to have market dominance of sufficient magnitude that, in the absence of the prohibition, they would be able to act in an anticompetitive manner; and

(ii)whether there continues to be an economic rationale for vertically integrated programmers to engage in exclusive agreements with cable operators that will cause such anticompetitive harms. 32. While cable MSOs argue that they have no incentive to withhold programming, competitive MVPDs provide the following examples which they claim demonstrate that cable MSOs will withhold programming if advantageous and permitted. Competitive MVPDs argue that many of the examples listed below, involving terrestrially delivered programming (sports as well as non-sports)—for which the exclusive contract prohibition does not apply—demonstrate the incentive and ability of vertically integrated cable operators to deny access to programming where permitted by the statute. Sports Programming • *Comcast SportsNet Philadelphia.* Some competitive MVPDs state that Comcast refuses to make the terrestrially delivered Comcast SportsNet Philadelphia channel available to EchoStar and DIRECTV. Competitive MVPDs cite the Commission's conclusion in the *Adelphia Order* that the percentage of households that subscribe to DBS service in Philadelphia is 40 percent below what would otherwise be expected. In response, Comcast notes that Comcast SportsNet Philadelphia is available to RCN. • *Channel 4 San Diego.* Some competitive MVPDs claim that Cox makes available its Channel 4 San Diego network, which has exclusive rights to San Diego Padres baseball games, only to cable operators that do not directly compete with Cox and not to DIRECTV, EchoStar, and AT&T. While competitive MVPDs state that DIRECTV's market penetration in San Diego is half of its national average, Cablevision notes that DIRECTV in the *Adelphia* proceeding reported that it did not find a statistically significant effect on its market penetration in San Diego resulting from its inability to access this RSN. • *Overflow sports programming in New York, NY.* RCN notes that it was deprived of access to overflow sports programming from Cablevision after Cablevision revised its distribution system from satellite to terrestrial delivery. • *RSNs Affiliated with Cablevision in New York and New England.* Verizon notes that it was forced to file a program access complaint against Cablevision and its vertically integrated programming subsidiary, Rainbow Media Holdings, LLC, in order to obtain access to RSNs in the New York City metropolitan area and New England. • *High Definition (“HD”) Feeds of RSNs Affiliated with Cablevision.* While Rainbow has made available standard definition feeds of its RSNs, Verizon states that Rainbow is delivering HD feeds of this programming terrestrially to avoid the program access rules. Non-Sports Programming • *New England Cable News (“NECN”) in Boston, MA.* One commenter claims that RCN was provided with access to NECN, a terrestrially delivered network that is 50 percent owned by Comcast, only after the Senate Judiciary Committee indicated that they were considering legislative action to apply an exclusive contract prohibition to terrestrially delivered programming. • *PBS Kids Sprout.* AT&T and RCN claim that after PBS Kids Sprout became vertically integrated with Comcast, RCN lost access to the network, resulting in an 83 percent drop in the usage of its children's VOD service. • *iN DEMAND.* CA2C notes that iN DEMAND is jointly owned by Time Warner, Comcast, and Cox. CA2C argues that iN DEMAND has taken the position that its programming is beyond the scope of the exclusive contract prohibition in Section 628(c)(2)(D) because iN DEMAND programming is delivered to MVPDs terrestrially. CA2C claims that iN DEMAND initially refused to provide its service to BSPs that competed with incumbent cable operators and that it reversed this position only after meetings were held with the Antitrust Subcommittee of the Senate Judiciary Committee. • *CN8—The Comcast Network.* Qwest claims that CN8—The Comcast Network is a local news and information channel that serves 12 states and 20 television markets but is only available to Comcast and Cablevision subscribers because it is terrestrially delivered and therefore beyond the scope of Section 628(c)(2)(D). • *NRTC.* NRTC, which acts as a “buying group” on behalf of its members, claims that it has been denied access to two vertically integrated programming networks, the identities of which it claims it cannot disclose due to non-disclosure agreements. 33. *Discussion.* We conclude that vertically integrated cable programmers retain the incentive to withhold programming from their competitors. We recognize the pro-competitive developments in the MVPD market since the *2002 Extension Order* , such as the reduction in the cable industry's share of MVPD subscribers from 78 percent to an estimated 67 percent and the increase in the DBS industry's market share from 18 percent to approximately 30 percent. Despite these positive trends, however, almost seven out of ten subscribers still choose cable over competitive MVPDs, the percentage of all MVPD subscribers nationwide served by one of the four largest vertically integrated cable operators has increased substantially since 2002, and cable operators have continued to raise prices in excess of inflation. While cable MSOs claim that the emergence of telephone companies as new video competitors demonstrates that competition is flourishing, the fact is that, based on estimates provided by the cable industry, competitive MVPDs, excluding DBS operators, serve approximately three percent of all MVPD subscribers nationwide, which accounts for less than three million total MVPD subscribers. Although we are encouraged by developments since 2002, we do not believe these developments have been significant enough for us to reverse the Commission's previous conclusion that cable operators have market dominance of sufficient magnitude that, in the absence of the prohibition, they would be able to act in an anticompetitive manner. 34. We also conclude that cable-affiliated programmers continue to have an economic incentive to favor their affiliated cable operators over competitive MVPDs by entering into exclusive agreements. We agree that in many instances a cable-affiliated programmer may choose to provide its programming to as many platforms as possible in order to maximize advertising and subscription revenues. In other cases, however, cable-affiliated programmers will have an incentive to withhold programming from competitive MVPDs in order to favor their affiliated cable operator. Our conclusion that vertically integrated cable programmers retain the incentive to withhold programming from their competitors is reinforced by specific factual evidence that vertically integrated programmers have withheld and continue to withhold programming, including both sports and non-sports programming, from competitive MVPDs. If vertically integrated programmers had no economic incentive other than to distribute their programming to as many platforms as possible, then we would not expect to see such examples of withholding. 35. As the Commission did in the *2002 Extension Order* , we find that the costs (i.e., foregone revenues) incurred by a cable-affiliated programmer by refusing to sell to competitive MVPDs would be offset by

(i)revenues from increased subscriptions to the services of its affiliated cable operator resulting from subscribers that switch to cable to obtain access to the cable-exclusive programming;

(ii)revenues from increased rates charged by the affiliated cable operator in response to increased demand for its services resulting from its ability to offer exclusive programming; and

(iii)revenues resulting from the ability of the cable-affiliated programmer to raise the price it charges for programming to other cable operators in return for exclusivity. Thus, particularly where competitive MVPDs are limited in their market share, a cable-affiliated programmer will be able to recoup a substantial amount, if not all, of the revenues foregone by pursuing a withholding strategy. In the long term, a withholding strategy may result in a reduction in competition in the video distribution market, thereby allowing the affiliated cable operator to raise rates. We thus conclude that the one-third share of the MVPD market held by competitive MVPDs remains limited enough to allow cable-affiliated programmers to successfully and profitably implement a withholding strategy. 36. We also find that three additional developments since 2002 provide cable-affiliated programmers with an even greater economic incentive to withhold programming from competitive MVPDs:

(i)the increase in horizontal consolidation in the cable industry;

(ii)the increase in clustering of cable systems; and

(iii)the recent emergence of new entrants in the video market place, such as telephone companies. 37. *Horizontal Consolidation.* The cable industry has continued to consolidate since 2002. Since this time, the percentage of MVPD subscribers receiving their video programming from one of the four largest vertically integrated cable MSOs (Comcast, Time Warner, Cox, and Cablevision) has increased from 34 percent to between 54 and 56.75 percent. Moreover, the percentage of MVPD subscribers receiving their video programming from one of the four largest cable MSOs (Comcast, Time Warner, Cox, and Charter) has increased from 48 percent to between 53 and 60 percent after taking into account the recent acquisition by Comcast and Time Warner of cable systems formerly owned by Adelphia. Thus, while the evidence demonstrates that the market share of small-to-medium sized, non-vertically integrated cable operators has declined, the market share of large cable operators, and in particular those that own cable programming, has increased substantially since 2002. In the *2002 Extension Order* , the Commission observed that because four of the five largest vertically integrated cable operators served 34 percent of all MVPD subscribers, they could reap a substantial portion of the gains from withholding programming from their rivals. Now that the market share of the four largest vertically integrated cable MSOs has increased to between 54 and 56.75 percent, the largest vertically integrated cable operators stand to gain even more from a withholding strategy. Thus, the increase in horizontal consolidation in the cable industry since 2002 increases the incentive to pursue anticompetitive withholding strategies. 38. *Clustering.* The cable industry has continued to form regional clusters since the *2002 Extension Order* , when approximately 80 percent of cable subscribers were served by systems that were part of regional clusters. Today, taking into account the sale of Adelphia's systems to Comcast and Time Warner, some estimate that the percentage of cable subscribers served by systems that are part of regional clusters has increased to between 85 and 90 percent. The Commission concluded in the *2002 Extension Order* that horizontal consolidation and clustering combined with affiliation with regional programming contributed to the cable industry's overall market dominance. Given the increase in horizontal consolidation and regional clustering since 2002, this statement is no less true today. With a regional programming denial strategy, a cable-affiliated programmer foregoes only those revenues associated with the subscribers of competitive MVPDs within the cluster, not the revenues associated with subscribers of competitive MVPDs nationwide. As the Commission concluded previously, in many cities where cable MSOs have clusters, the market penetration of competitive MVPDs is much lower and cable market penetration is much higher than their nationwide penetration rates. For example, according to data from Nielsen Media Research, the collective market penetration of competitive MVPDs in many DMAs where cable MSOs have clusters is far less than their collective nationwide market penetration rate (approximately 33 percent): San Diego (13.7 percent), New York (18.2 percent), Philadelphia (19.8 percent), and San Francisco (26.9 percent). As the Commission acknowledged in the *2002 Extension Order* , this market penetration data may not correspond exactly to cable MSO cluster boundaries, and there are likely other factors, such as line-of-sight, in addition to cable competition that affect city market penetration. Nevertheless, we believe that this market penetration data provide support for the position that market penetration of competitive MVPDs is lower in certain cable cluster areas than nationwide. Moreover, due to the national distribution of DBS services and the insufficient mass of DBS subscribers on a regional basis, DBS operators do not have an economic base for substantial regional programming investments on a market-by-market basis. As a result, the cost to a cable-affiliated programmer of withholding regional programming is lower in many cases than the cost of withholding national programming. Moreover, the affiliated cable operator will obtain a substantial share of the benefits of a withholding strategy because its share of subscribers within the cluster is likely to be inordinately high. 39. As we concluded in the *2002 Extension Order* , Sections 628(b), 628(c)(2)(A), and 628(c)(2)(B) of the Communications Act are not adequate substitutes for the particularized protection afforded under Section 628(c)(2)(D). We stated that

(i)Section 628(c)(2)(D) places the burden on the party seeking exclusivity to show that an exclusive contract meets the statutory public interest standard and that no other program access provision provides this protection;

(ii)these other provisions were all enacted as part of the 1992 Cable Act, indicating that, despite the existence of these other program access provisions, Congress found the exclusive contract prohibition to be necessary to preserve and protect competition and diversity;

(iii)as compared to Section 628(c)(2)(D), Section 628(b) carries with it an added burden “to demonstrate that the purpose or effect of the conduct complained of was to “hinder significantly or to prevent” an MVPD from providing programming to subscribers or customers”;

(iv)conduct of undue influence necessary to establish a violation of Section 628(c)(2)(A) “may be difficult for the Commission or complainants to establish”; and

(v)the prohibition of “non-price discrimination” in Section 628(c)(2)(B) requires the complainant to demonstrate the conduct was “unreasonable” which may be difficult to establish. No commenter provides any basis for us to revisit these conclusions. Moreover, we note that some competitive MVPDs argue that allowing the exclusive contract prohibition to sunset would provide cable-affiliated programmers with an incentive to enter into exclusive contracts with their affiliated cable operators to avoid allegations of unfair acts or practices or discrimination with respect to their dealings with unaffiliated distributors. 40. We recognize the benefits of exclusive contracts and vertical integration cited by some cable MSOs, such as encouraging innovation and investment in programming and allowing for “product differentiation” among distributors. We do not believe, however, that these purported benefits outweigh the harm to competition and diversity in the video distribution marketplace that would result if we were to lift the exclusive contract prohibition. In addition, the Commission's rules permit cable-affiliated programmers to seek approval to enter into an exclusive contract based on a demonstration that the exclusive arrangement serves the public interest consistent with factors established by Congress. c. Impact on Programming 41. We find above that the exclusive contract prohibition continues to be necessary to preserve and protect diversity in the distribution of programming. As we stated in the *2002 Extension Order* , while we recognize that the exclusive contract prohibition's impact on programming diversity is one component of our analysis, Congress directed that “our primary focus should be on preserving and protecting diversity in the *distribution* of video programming—i.e., ensuring that as many MVPDs as possible remain viable distributors of video programming.” While cable MSOs contend that the exclusive contract prohibition reduces incentives for cable operators and competitive MVPDs to create and invest in new programming, we find no evidence to support this theory. To the contrary, the number of vertically integrated satellite-delivered national programming networks has more than doubled since 1994 when the rule implementing the exclusive contract prohibition took effect and has continued to increase since 2002 when the Commission last examined the exclusive contract prohibition. There is also evidence that some competitive MVPDs have begun to invest in their own programming despite their ability to access cable-affiliated programming based on the exclusive contract prohibition and the program access rules. Accordingly, we find no basis to conclude that extending the exclusive contract prohibition will create a disincentive for the creation of new programming. 42. We are mindful that our decision to extend the exclusive contract prohibition must withstand an intermediate scrutiny test pursuant to First Amendment jurisprudence. As the D.C. Circuit explained in rejecting a facial challenge to the constitutionality of the exclusive contract prohibition in Section 628(c)(2)(D), the prohibition will survive intermediate scrutiny if it “furthers an important or substantial governmental interest; if the governmental interest is unrelated to the suppression of free expression; and if the incidental restriction on alleged First Amendment freedoms is no greater than is essential to the furtherance of that interest.” For the reasons discussed herein, our decision to extend the exclusive contract prohibition satisfies this intermediate scrutiny test. First, in *Time Warner* , the court found that the governmental interest Congress intended to achieve in enacting the exclusive contract prohibition was “the promotion of fair competition in the video marketplace,” and that this interest was substantial. Moreover, one of Congress' express findings in enacting the 1992 Cable Act was that “[t]here is a substantial governmental and First Amendment interest in promoting a diversity of views provided through multiple technology media.” Moreover, the court noted Congress' conclusion that “the benefits of these provisions—the increased speech that would result from fairer competition in the video programming marketplace—outweighed the disadvantages [resulting in] the possibility of reduced economic incentives to develop new programming.” We disagree with cable MSOs to the extent they argue that the substantial government interest in achieving competition in the video distribution market has been met. As discussed above, cable operators still have a dominant share of MVPD subscribers (approximately 67 percent), have raised prices in excess of inflation despite the emergence of new competitors, and still own significant programming networks. Accordingly, we conclude that competition and diversity in the video distribution market has not reached the level at which Congress intended the exclusive contract prohibition would sunset. Second, in *Time Warner* , the court held that the governmental objective in adopting the exclusive contract prohibition in Section 628(c)(2)(D) was unrelated to the suppression of free speech. In this *Order* , we extend the exclusive contract prohibition for an additional five years but do not otherwise modify the prohibition. Thus, the prohibition remains unrelated to the suppression of free speech, as the D.C. Circuit Court of Appeals previously held. Third, in *Time Warner* , the court rejected claims that the exclusive contract prohibition was not narrowly tailored to achieve the stated government interest. In this *Order* , we extend the exclusive contract prohibition for a term of five years but do not otherwise modify the prohibition. Thus, the prohibition remains narrowly tailored to meet the statute's objective, and any incidental restriction on alleged First Amendment freedoms is no greater than is essential to the furtherance of that objective. 43. We note that cable MSOs argue that the exclusive contract prohibition is not narrowly tailored because it is allegedly both overinclusive (in that it applies to “new,” “unpopular,” and other types of programming that are arguably not essential to the viability of competition in the video distribution market) and underinclusive (in that it does not apply to certain non-cable-affiliated programming that may be necessary for viable competition in the MVPD market). Moreover, we note that the exclusive contract prohibition in Section 628(c)(2)(D) is not absolute. Rather, cable-affiliated programmers may seek approval to enter into exclusive programming contracts that satisfy the criteria set forth by Congress in Section 628(c)(2) and (4). Despite claims that the exclusive contract prohibition deprives cable operators and others of the incentive to invest in new programming, thereby restricting the creation of new programming, the record reflects the opposite. Thus, contrary to these contentions, the prohibition has fostered, not restricted, speech. 4. Scope of Exclusive Contract Prohibition 44. Various commenters argue that the exclusive contract prohibition is both overinclusive and underinclusive with respect to the type of programming and MVPDs it covers. As discussed below, we decline to either narrow or expand the exclusive contract prohibition. a. Narrowing the Prohibition

(i)Narrowing Based on Status of Programming Network 45. For the reasons discussed below, we decline to narrow the scope of the exclusive contract prohibition based on the status of the programming network. The exclusive contract prohibition in Section 628(c)(2)(D) and the implementing rules pertain to all satellite-delivered programming networks that are vertically integrated with a cable operator, regardless of their popularity. 46. As an initial matter, we note that in adopting the exclusive contract prohibition in Section 628(c)(2)(D), Congress applied the prohibition to all cable-affiliated programming. Congress did not distinguish between different types of cable-affiliated programming. Accordingly, as the Commission concluded in the *2002 Extension Order* , we believe that treating all satellite cable programming and satellite broadcast programming uniformly for purposes of the exclusive contract prohibition is consistent with Section 628(c)(2)(D) and the definitions set forth in Sections 628(i)(1) and (3). Moreover, no commenter has provided a rational and workable definition of “must have” programming that would allow us to apply the exclusive contract prohibition to only this type of programming.

(ii)Narrowing Based on Status of Cable Operator 47. For the reasons discussed below, we decline to narrow the scope of the exclusive contract prohibition based on the status of the cable operator. Cable MSOs argue that we should narrow the exclusive contract prohibition by allowing certain types of exclusive arrangements based on the status of the cable operator, such as

(i)those involving an affiliated cable operator whose network passes only a small number of households throughout the nation;

(ii)those between a cable operator and an affiliated programming network outside the footprint of the affiliated cable operator; and

(iii)those involving affiliated cable operators that face competition from both DBS and telephone companies. 48. In adopting the exclusive contract prohibition in Section 628(c)(2)(D), Congress applied the prohibition to all cable operators. Congress did not distinguish between different types of cable operators for purposes of Section 628(c)(2)(D). Moreover, in adopting the exclusive contract prohibition, Congress has already delineated a geographic demarcation applicable to the prohibition—“areas served by a cable operator.” Congress did not provide that the exclusive contract prohibition should vary based on the competitive circumstances in individual geographic areas served by a cable operator. 49. We also find that these attempts to narrow the exclusive contract prohibition would harm competition in the video distribution marketplace. One of the key anticompetitive practices that the exclusive contract prohibition addresses is the practice of leveraging cable's market power collectively by withholding affiliated programming from rival MVPDs while selling the affiliated programming to other cable operators which do not compete with one another. A cable operator may gain by weakening a current or potential rival (such as a DBS operator) even in markets that the cable operator itself does not serve. Thus, proposals to narrow the exclusive contract prohibition by allowing exclusive arrangements outside of the footprint of the affiliated cable operator or with cable operators whose networks pass only a small number of households throughout the nation will impede competition in the video distribution marketplace. We similarly find that allowing exclusive arrangements for affiliated cable operators that face competition from both DBS and telephone companies would harm competition in the video distribution marketplace. We conclude herein that a cable operator will not lose the incentive and ability to enter into an exclusive arrangement in a given geographic area simply because it faces competition from both DBS operators and telephone companies in that area.

(iii)Narrowing Based on Status of Competitive MVPD 50. For the reasons discussed below, we decline to narrow the exclusive contract prohibition by precluding certain competitive MVPDs from benefiting from the prohibition. Comcast and Cablevision ask us to narrow the exclusive contract prohibition by precluding certain competitive MVPDs from benefiting from the prohibition, such as competitive MVPDs that

(i)have been in the MVPD market for more than five years;

(ii)have extensive resources; or

(iii)enter into exclusive contracts for programming. 51. Section 628 makes no distinction among MVPDs of the kind suggested by these commenters. Moreover, we find that adopting such restrictions on the entities that can benefit from the prohibition will limit competition in the video distribution market and will result in no discernible public interest benefits. The resources of competitors or the number of years they have spent in the market has no bearing on the goal of Section 628(c)(2)(D) to preclude exclusive contracts in order to facilitate competition in the video distribution market. Rather, if cable operators have exclusive access to non-substitutable content that is essential for viable competition and they have the incentive to withhold such content, the amount of resources of competitive MVPDs or their longevity in the market will not be able to overcome that competitive advantage. Comcast asks us to prevent competitive MVPDs that themselves enter into exclusive programming contracts from being the beneficiaries of the exclusive contract prohibition applied to cable-affiliated programmers. Section 628, however, does not exempt cable operators from its restrictions based on the contracting practices of non-cable MVPDs. b. Expanding the Prohibition

(i)Expanding the Prohibition to Non-Cable-Affiliated Programming 52. For the reasons discussed below, we decline to apply an exclusive contract prohibition to non-cable-affiliated programming. The exclusive contract prohibition in Section 628(c)(2)(D) and the implementing rules pertain only to programming networks that are vertically integrated with a “cable operator,” as that term is defined in the Communications Act. Competitive MVPDs, as well as some cable MSOs, argue that the prohibition is thus underinclusive because it does not pertain to certain non-cable-affiliated programming that is necessary for MVPDs to compete. 53. As an initial matter, to the extent that an MVPD meets the definition of a “cable operator” under the Communications Act, the exclusive contract prohibition in Section 628(c)(2)(D) already applies to its affiliated programming and, thus, no further action is required on our part. Moreover, as AT&T notes, Section 628(j) of the Communications Act provides that any provision of Section 628 that applies to a cable operator also applies to any common carrier or its affiliate that provides video programming. *See* 47 U.S.C. 548(j). We have previously explained that the exclusive contract prohibition in Section 628(c)(2)(D) does not extend to unaffiliated programming networks and programming networks affiliated with non-cable MVPDs, such as DBS operators. Moreover, the record before us in this proceeding does not provide sufficient evidence upon which to conclude that non-cable-affiliated programming is being withheld from MVPDs to a significant extent or that such withholding is adversely impacting competition in the video distribution market.

(ii)Expanding the Prohibition to Terrestrially Delivered Programming 54. We decline to apply an exclusive contract prohibition to terrestrially delivered programming at this time. Some competitive MVPDs argue that the Commission should apply the exclusive contract prohibition to terrestrially delivered programming networks, citing various provisions of the Communications Act in addition to Section 628(c) for statutory support. The Commission previously declined to address arguments regarding the Commission's statutory authority to address terrestrially delivered programming under Sections 4(i) and 303(r) of the Communications Act. Commenters have failed to provide any new evidence or arguments that would lead us to reconsider our previous conclusion that terrestrially delivered programming is “outside of the direct coverage” of Section 628(c)(2)(D). We continue to believe that the plain language of the definitions of “satellite cable programming” and “satellite broadcast programming” as well as the legislative history of the 1992 Cable Act place terrestrially delivered programming beyond the scope of Section 628(c)(2)(D). 5. Length of New Term 55. We conclude that the exclusive contract prohibition will be extended for five years subject to review during the last year of this extension period ( *i.e.* , between October 2011 and October 2012). We believe that five years could be a sufficient amount of time for competition to develop in the video distribution and programming markets. Accordingly, we believe that five years is an appropriate period of time to revisit the exclusivity prohibition. We also emphasize that, if adequate competition emerges before five years, the Commission could initiate its review earlier either on its own motion or in response to a petition. Moreover, we will continue to evaluate petitions for exclusivity under the public interest factors established by Congress. 6. Other Programming Issues 56. Small and rural telephone MVPDs raise additional concerns in their comments regarding the difficulties they face in trying to obtain access to programming, such as tying of desired with undesired programming and unwarranted security requirements. We find that these concerns are beyond the scope of the programming issues raised in the *NPRM* , which pertained only to the prohibition on exclusive contracts for satellite-delivered vertically integrated programming under Section 628(c)(2)(D) and the extension of that prohibition pursuant to Section 628(c)(5). We did not seek comment on these issues in the *NPRM* and, accordingly, do not have a sufficient record upon which to address these concerns in this *Order.* We seek further comment on these issues in the *Notice of Proposed Rulemaking* in MB Docket No. 07-198. B. Modification of Program Access Complaint Procedures 57. As discussed below, we revise our program access complaint procedures. Specifically, we codify the existing requirement that respondents to program access complaints must attach to their answers copies of any documents that they rely on in their defense; find that in the context of a complaint proceeding, it would be unreasonable for a respondent not to produce all the documents requested by the complainant or ordered by the Commission, provided that such documents are in its control and relevant to the dispute; codify the Commission's authority to issue default orders granting a complaint if a respondent fails to comply with discovery requests; and allow parties to choose, within 20 days of the close of the pleading cycle, to engage in voluntary commercial arbitration of their program access complaints. 58. In the *NPRM* , the Commission sought comment on whether and how the procedures for resolving program access disputes under Section 628 should be modified. 1. Pleading Cycle 59. In this *Order* , we retain our existing pleading cycle. The Commission's existing rules provide that an MVPD aggrieved by conduct that it believes constitutes a violation of Section 628 and the Commission's program access rules may file a complaint with the Commission. *See* 47 CFR 76.7 and 76.1003. A complainant must first notify the programming vendor that it intends to file the complaint and allow the vendor 10 days to respond. Once a complaint is filed, the cable operator or satellite programming vendor must answer within 20 days of service of the complaint. Replies to the answer are due within 15 days of service of the answer. 60. *Discussion.* A shorter pleading cycle would not necessarily improve the overall time for complaint resolution because incomplete or rushed responses could lead to the need for further pleadings and discovery. We therefore decline to adopt a more expedited pleading cycle. However, we believe that electronic filing may help improve the speed of resolution and, therefore, we will continue to study this issue internally to determine if it is technologically feasible to require electronic filing for program access complaints, which necessarily involve a number of confidential documents. Currently, parties may voluntarily submit electronic copies of their pleadings to staff via e-mail in order to expedite review. 2. Discovery 61. In this *Order* , after reviewing our discovery rules pertaining to program access disputes, we codify the existing requirement that respondents to program access complaints must attach to their answers copies of any documents that they rely on in their defense; find that in the context of a complaint proceeding, it would be unreasonable for a respondent not to produce all the documents either requested by the complainant or ordered by the Commission, provided that such documents are in its control and relevant to the dispute; and emphasize that the Commission will use its authority to issue default orders granting a complaint if a respondent fails to comply with its discovery requests. The respondent shall have the opportunity to object to any request for documents. Such request shall be heard, and determination made, by the Commission. The respondent need not produce the disputed discovery material until the Commission has ruled on the discovery request. 62. *Discussion.* We take measures to ensure that the Commission has the information necessary to expeditiously resolve program access complaints. 63. *Respondent's Answer.* In the *1998 Program Access Order* , the Commission clarified that, to the extent that a respondent expressly references and relies upon a document or documents in defending a program access claim, the respondent must attach that document or documents to its answer. In this *Order* , we expressly codify that requirement in the Commission's rules. To the extent that there has been any confusion about this requirement in the past, we clarify that a respondent must attach the necessary documentation to its answer to a program access complaint, subject to our rules on confidential filings. Subsequent to the *1998 Program Access Order* , the Commission, in the *1998 Biennial Review* (64 FR 6565, February 10, 1999), further clarified the response requirements for specific types of program access complaints. To the extent that a respondent fails to include the permissive attachments identified in our rules that are necessary to a resolution of the complaint, the Commission may require the production of further documents. *See* 47 CFR 76.1003(e); 47 CFR 76.7(e)(2). Moreover, a program access complainant is entitled, either as part of its complaint or through a motion filed after the respondent's answer is submitted, to request that Commission staff order discovery of any evidence necessary to prove its case. *See* 47 CFR 76.7(e), (f). Respondents are also free to request discovery. 64. *Submission of Necessary Information.* We believe that expanded discovery will improve the quality and efficiency of the Commission's resolution of program access complaints. Accordingly, we find that it would be unreasonable for a respondent not to produce all the documents either requested by the complainant or ordered by the Commission (indeed, in such circumstances, failure to produce the subject documents would also be a violation of a Commission order), provided that such documents are in its control and relevant to the dispute. While we retain the existing process for the Commission to order the production of documents and other discovery, we will also allow parties to a program access complaint to serve requests for discovery directly on opposing parties. 65. Parties to a program access complaint may serve requests for discovery directly on opposing parties, and file a copy of the request with the Commission. The respondent shall have the opportunity to object to any request for documents that are not in its control or relevant to the dispute. If the respondent refuses to produce the requested documents, the requesting party may file a petition with the Commission seeking to compel production of the documents. Such discovery dispute shall be heard, and determination made, by the Commission. Until the objection is ruled upon, the respondent need not produce the disputed material. Any party who fails to timely provide discovery requested by the opposing party to which it has not raised an objection as described above may be deemed in default and an order may be entered in accordance with the allegations contained in the complaint, or the complaint may be dismissed with prejudice. 66. We reiterate that respondents to program access complaints must produce in a timely manner, the contracts and other documentation that are necessary to resolve the complaint, subject to confidential treatment. *See* 47 CFR 76.9. In order to prevent abuse, the Commission will strictly enforce its default rules against respondents who do not answer complaints thoroughly or do not respond in a timely manner to permissible discovery requests with the necessary documentation attached. Respondents that do not respond in a timely manner to all discovery ordered by the Commission will risk penalties, including having the complaint against them granted by default. Likewise, a complainant that fails to respond promptly to a Commission order regarding discovery will risk having its complaint dismissed with prejudice. Finally, a party that fails to respond promptly to a request for discovery to which it has not raised a proper objection will be subject to these sanctions as well. 67. *Confidential Material.* We understand that this approach requires the submission of confidential and extremely competitively-sensitive information. *See, e.g.* , 47 CFR 0.457(d)(iv). Accordingly, in order to appropriately safeguard this confidential information we believe it is necessary to revise the standard protective order and declaration (“Protective Order”) for use in program access proceedings. 68. To ensure that confidential information is not improperly used for competitive business purposes, we intend to make an important revision to the Protective Order. Specifically, we revise it to reflect that any personnel, including in-house counsel, involved in competitive decision-making are prohibited from accessing the confidential information. 69. In order to appropriately safeguard confidential information, we revise the Protective Order for use in program access proceedings to find that any personnel, including in-house counsel,

(i)that are involved in competitive decision-making,

(ii)are in a position to use the confidential information for competitive commercial or business purposes, or

(iii)whose activities, association, or relationship with the complainant, client, or any authorized representative involve rendering advice or participation in any or all of said person's business decisions that are or will be made in light of similar or corresponding information about a competitor, are prohibited from accessing the confidential information. *See* Appendix. 70. A protective order constitutes both an order of the Commission and an agreement between the party executing the declaration and the submitting party. The Commission has full authority to fashion appropriate sanctions for violations of its protective orders, including but not limited to suspension or disbarment of attorneys from practice before the Commission, forfeitures, cease and desist orders, and denial of further access to confidential information in Commission proceedings. We intend to vigorously enforce any transgressions of the provisions of our protective orders. 3. Time Frame for Resolving Program Access Complaints 71. In this *Order* , we retain our current goals for resolving program access complaints with the intent to expedite complaints filed by small companies without existing carriage contracts. Under the current process, the Commission has set forth goals for the resolution of program access complaints as five months from the submission of a complaint for denial of programming cases, and nine months for all other program access complaints, such as price discrimination cases. 72. *Discussion.* We agree that program access complaints should be resolved in a timely manner, but the time frames for resolving complaints must be realistic. We will retain our goals of resolving program access complaints within five months from the submission of a complaint for denial of programming cases, and nine months for all other program access complaints, such as price discrimination cases. 73. However, we are concerned with delays in the resolution of complaints filed by new entrants, especially small businesses, and therefore, the Commission will expedite the resolution of such complaints and, as discussed above in Section III.B.2, will strictly enforce its default rules against respondents who do not answer complaints thoroughly with the necessary documentation attached. *See* 47 CFR 76.7(b)(2)(iii). 4. Arbitration 74. In this *Order* , we expand the use of voluntary arbitration for resolution of program access disputes, by increasing opportunities for parties to choose arbitration in lieu of Commission resolution of a pending complaint, and refrain from imposing a mandatory arbitration requirement at this time. 75. *Discussion.* We decline to impose mandatory arbitration as a rule in all program access cases at this time. We would like to see how arbitration of program access disputes, either through a merger condition or through voluntary arbitration, is working over time, to determine if modifications to the arbitration process are necessary prior to imposing a mandatory requirement on all parties to all program access complaints. Once there is a track record for arbitration of program access disputes, we will be able to determine which types of disputes lend themselves more readily to resolution by arbitration and which may be more judiciously resolved by the Commission in the first instance. 76. The current rules allow parties to voluntarily engage in ADR, including arbitration, in lieu of an administrative hearing. *See* 47 CFR 76.7(g)(2). However, we believe that parties to program access complaints should be able to voluntarily choose arbitration prior to the Commission making a determination to forward the complaint to an administrative law judge and that the *Adelphia Order* provides adequate guidance for the arbitration process. Therefore, the Commission will suspend action on a complaint where both parties agree to use ADR, including commercial arbitration, within 20 days following the close of the pleading cycle. Parties may agree that voluntary arbitration is a quick and productive way to resolve their commercial disputes. Moreover, we will continue to monitor developments in the marketplace and will, if necessary, revisit in the future whether to adopt a mandatory arbitration requirement. IV. Procedural Matters A. Paperwork Reduction Act Analysis 77. This document contains information collection requirements subject to the Paperwork Reduction Act of 1995 (PRA), Public Law 104-13. It will be submitted to the OMB for review under section 3507(d) of the PRA. OMB, the general public, and other Federal agencies are invited to comment on the 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 will seek specific comment on how the Commission might “further reduce the information collection burden for small business concerns with fewer than 25 employees.” 78. We have assessed the effects of the information collection requirements, and find that those requirements will benefit companies with fewer than 25 employees by facilitating the resolution of program access complaints and that these requirements will not burden those companies. B. Congressional Review Act 79. The Commission will send a copy of this *Order* in a report to be sent to Congress and the Government Accountability Office pursuant to the Congressional Review Act, see 5 U.S.C. 801(a)(1)(A). C. Final Regulatory Flexibility Analysis 80. As required by the Regulatory Flexibility Act (“RFA”), 5 U.S.C. 604, the Commission has prepared the following Final Regulatory Flexibility Analysis (“FRFA”) relating to the *Order.* An Initial Regulatory Flexibility Analysis (“IRFA”) was incorporated in the *NPRM* in MB Docket No. 07-29 (72 FR 9289, March 1, 2007). The Commission sought written public comment on the proposals in the *NPRM* , including comment on the IRFA. The comments received are discussed below. This present FRFA conforms to the RFA. We note that, because our action with respect to the exclusive contract prohibition in Section 628(c)(2)(D) retains the status quo in this context, we could have certified our action under the RFA. *See generally* 5 U.S.C. 605. Need for, and Objectives of, the Rules Adopted 81. *Background.* Congress enacted the program access provisions contained in Section 628 of the Communications Act of 1934, as amended (the “Communications Act”), as part of the Cable Television Consumer Protection and Competition Act of 1992 (“1992 Act”). Section 628 is intended to encourage entry into the multichannel video programming distribution (“MVPD”) market by existing or potential competitors to traditional cable operators by requiring cable operators to make available to MVPDs the programming necessary for them to become viable competitors. Specifically, this proceeding involves

(i)Section 628(c)(2)(D), which prohibits, in areas served by a cable operator, exclusive contracts for satellite cable programming or satellite broadcast programming between vertically integrated programming vendors and cable operators unless the Commission determines that such exclusivity is in the public interest; and

(ii)the Commission's procedures for resolving program access disputes under Section 628. 82. *Extension of Exclusive Contract Prohibition.* Section 628(c)(5) of the Communications Act directed that the exclusive contract prohibition in Section 628(c)(2)(D) would cease to be effective on October 5, 2002, unless the Commission found in a proceeding conducted between October 2001 and October 2002 that the prohibition “continues to be necessary to preserve and protect competition and diversity in the distribution of video programming.” 47 U.S.C. 548(c)(5). In October 2001, the Commission issued a *Notice of Proposed Rulemaking* in CS Docket No. 01-290 seeking comment on whether the exclusive contract prohibition continued to be “necessary” pursuant to the criteria set forth in Section 628(c)(5). *See* 66 FR 54972, October 31, 2001. In June 2002, the Commission issued a decision concluding that the exclusive contract prohibition continued to be “necessary” pursuant to these criteria and therefore extended the prohibition for five years ( *i.e.* , through October 5, 2007). *See* 67 FR 49247, July 30, 2002. The Commission also provided that, during the year before the expiration of the five-year extension of the exclusive contract prohibition, it would conduct another review to determine whether the exclusive contract prohibition continues to be necessary to preserve and protect competition and diversity in the distribution of video programming. We issued the *NPRM* in February 2007 to initiate this review. *See* 72 FR 9289, March 1, 2007. 83. The *Order* herein adopted retains for five years (until October 5, 2012) the prohibition on exclusive contracts for satellite cable programming and satellite broadcast programming between vertically integrated programming vendors and cable operators as set forth in Section 628(c)(2)(D) of the Communications Act and Section 76.1002(c)(2) of the Commission's rules. 84. In the *Order* , we analyze the changes that have occurred in the video programming and distribution markets since 2002 when we last decided that the exclusive contract prohibition continued to be necessary to preserve and protect competition. While the markets for both programming and distribution reflect some pro-competitive trends since 2002, we conclude that these developments are not sufficient to allow us to decide that the exclusive contract prohibition is no longer necessary to preserve and protect competition and diversity in the distribution of video programming. We then assess whether vertically integrated programmers today retain both the ability and incentive to favor their affiliated cable operators over nonaffiliated MVPDs such that competition and diversity in the distribution of video programming would not be preserved and protected. We conclude that vertically integrated programmers retain this ability and incentive. Thus, we find that the exclusive contract prohibition is necessary to preserve and protect competition and diversity in the distribution of video programming. We therefore extend the exclusive contract prohibition for five years subject to review during the last year of this extension period. 85. In the *Order* , we also reject proposals presented by some commenters to narrow the exclusive contract prohibition based on the status of the programming, the cable operator, or the competitive MVPD. We find that narrowing the prohibition in this manner is not supported by the Communications Act and would not promote competition. We also reject proposals presented by some commenters to expand the exclusive contract prohibition to non-cable-affiliated programming and unaffiliated programming. We find that expanding the prohibition is not supported by the Communications Act and that there is no record evidence to support such an expansion of the prohibition. We also considered the possibility of allowing the exclusive contract prohibition to sunset. Because we conclude that the exclusive contract prohibition is necessary to preserve and protect competition and diversity in the video distribution market, we decide not to allow the exclusive contract prohibition to sunset. The decision to retain the exclusive contract prohibition will facilitate competition in the video distribution market, thereby benefiting various competitive MVPDs including those that are smaller entities. Therefore, we conclude that our decision to retain the exclusive contract prohibition set forth in Section 628(c)(2)(D) benefits smaller entities as well as larger entities. 86. *Modification of Program Access Complaint Procedures* . The Commission's rules provide that any MVPD aggrieved by conduct that it believes constitutes a violation of Section 628 and the Commission's program access rules may file a complaint at the Commission. 47 CFR 76.7 and 76.1003. In the *NPRM* , we considered whether and how our procedures for resolving program access disputes under Section 628 should be modified. Among other things, we considered

(i)whether specific time limits on the Commission, the parties, or others would promote a speedy and just resolution of these disputes;

(ii)whether our rules governing discovery and protection of confidential information are adequate; and

(iii)whether the Commission should adopt alternative procedures or remedies such as mandatory standstill agreements and arbitration. 87. In the *Order* , to facilitate the resolution of program access complaints, we modify our procedures for resolving such complaints by

(i)codifying the requirements that a respondent in a program access complaint proceeding who expressly relies upon a document in asserting a defense must include the document as part of its answer;

(iii)codifying the Commission's authority to issue default orders granting a complaint if the respondent fails to comply with discovery requests; and

(iv)allowing parties to a program access complaint proceeding to voluntarily engage in alternative dispute resolution, including commercial arbitration, during which time Commission action on the complaint will be suspended. We also retain our goals of resolving program access complaints within five months from the submission of a complaint for denial of programming cases, and within nine months for all other program access complaints, such as price discrimination cases. Summary of Significant Issues Raised by Public Comments in Response to the IRFA 88. In its Comments on the IRFA, the Office of Advocacy of the United States Small Business Administration (“SBA Office of Advocacy”) claims that the Commission's IRFA in this proceeding was inadequate because it allegedly

(i)did not contain a complete economic analysis of the impact of a decision to allow the exclusive contract prohibition to sunset on the small entities listed in the IRFA;

(ii)failed to consider alternatives to allowing the prohibition to sunset that will achieve the Commission's goals while minimizing burdens on small entities; and

(iii)failed to collect data on the impact of a sunset of the prohibition on small businesses that offer video programming to customers, such as sports bars, smalls entities in the hospitality industry, and certain housing developments. The SBA Office of Advocacy Office argues that without access to video content demanded by subscribers, small providers of video services will not be able to compete in the MVPD market. Accordingly, the SBA Office of Advocacy urges a three-year extension of the exclusive contract prohibition. Although not filed specifically in response to the IRFA, comments were filed in response to the *NPRM* by small competitive MVPDs and small cable operators that urged the Commission to retain the exclusive contract prohibition and to revise the procedures for resolving program access complaints. These commenters argued that they will be unable to viably compete in the video distribution market if denied access to vertically integrated programming. Moreover, they argued that the current program access complaint process is costly and time-consuming such that it makes it impracticable for small carriers to pursue filing a program access complaint. Our response to all such comments is contained below. Description and Estimate of the Number of Small Entities to Which the Proposed Rules Will Apply 89. The RFA directs agencies to provide a description of, and where feasible, an estimate of the number of small entities that may be affected by the proposed rules, if adopted. The RFA generally defines the term “small entity” as having the same meaning as the terms “small business,” “small organization,” and “small governmental jurisdiction.” In addition, the term “small business” has the same meaning as the term “small business concern” under the Small Business Act. A “small business concern” is one which:

(1)Is independently owned and operated;

(2)is not dominant in its field of operation; and

(3)satisfies any additional criteria established by the Small Business Administration (“SBA”). 90. *Wired Telecommunications Carriers* . The 2007 North American Industry Classification System (“NAICS”) defines “Wired Telecommunications Carriers” (2007 NAISC Code 517110) to include the following three classifications which were listed separately in the 2002 NAICS: Wired Telecommunications Carriers (2002 NAICS Code 517110), Cable and Other Program Distribution (2002 NAISC Code 517510), and Internet Service Providers (2002 NAISC Code 518111). The 2007 NAISC defines this category as follows: “This industry comprises 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 telecommunications 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 is all firms having 1,500 employees or less. According to Census Bureau data for 2002, there were a total of 27,148 firms in the Wired Telecommunications Carriers category (2002 NAISC Code 517110) that operated for the entire year; 6,021 firms in the Cable and Other Program Distribution category (2002 NAISC Code 517510) that operated for the entire year; and 3,408 firms in the Internet Service Providers category (2002 NAISC Code 518111) that operated for the entire year. Of these totals, 25,374 of 27,148 firms in the Wired Telecommunications Carriers category (2002 NAISC Code 517110) had less than 100 employees; 5,496 of 6,021 firms in the Cable and Other Program Distribution category (2002 NAISC Code 517510) had less than 100 employees; and 3,303 of the 3,408 firms in the Internet Service Providers category (2002 NAISC Code 518111) had less than 100 employees. Thus, under this size standard, the majority of firms can be considered small. 91. *Cable and Other Program Distribution* . The 2002 NAICS defines this category as follows: “This industry comprises establishments primarily engaged as third-party distribution systems for broadcast programming. The establishments of this industry deliver visual, aural, or textual programming received from cable networks, local television stations, or radio networks to consumers via cable or direct-to-home satellite systems on a subscription or fee basis. These establishments do not generally originate programming material.” This category includes, among others, cable operators, direct broadcast satellite (“DBS”) services, home satellite dish (“HSD”) services, satellite master antenna television (“SMATV”) systems, and open video systems (“OVS”). The SBA has developed a small business size standard for Cable and Other Program Distribution, which is all such firms having $13.5 million or less in annual receipts. According to Census Bureau data for 2002, there were a total of 1,191 firms in this category that operated for the entire year. Of this total, 1,087 firms had annual receipts of under $10 million, and 43 firms had receipts of $10 million or more but less than $25 million. Thus, under this size standard, the majority of firms can be considered small. 92. *Cable System Operators (Rate Regulation Standard)* . The Commission has also developed its own small business size standards for the purpose of cable rate regulation. Under the Commission's rules, a “small cable company” is one serving 400,000 or fewer subscribers nationwide. As of 2006, 7,916 cable operators qualify as small cable companies under this standard. In addition, under the Commission's rules, a “small system” is a cable system serving 15,000 or fewer subscribers. Industry data indicate that 6,139 systems have under 10,000 subscribers, and an additional 379 systems have 10,000-19,999 subscribers. Thus, under this standard, most cable systems are small. 93. *Cable System Operators (Telecom Act Standard)* . The Communications Act of 1934, as amended, also contains a size standard for small cable system operators, which is “a cable operator that, directly or through an affiliate, serves in the aggregate fewer than 1 percent of all subscribers in the United States and is not affiliated with any entity or entities whose gross annual revenues in the aggregate exceed $250,000,000.” There are approximately 65.4 million cable subscribers in the United States today. Accordingly, an operator serving fewer than 654,000 subscribers shall be deemed a small operator, if its annual revenues, when combined with the total annual revenues of all its affiliates, do not exceed $250 million in the aggregate. Based on available data, we find that the number of cable operators serving 654,000 subscribers or less totals approximately 7,916. 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 $250,000,000, 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. 94. *Direct Broadcast Satellite (“DBS”) Service* . DBS service is a nationally distributed subscription service that delivers video and audio programming via satellite to a small parabolic “dish” antenna at the subscriber's location. Because DBS provides subscription services, DBS falls within the SBA-recognized definition of Cable and Other Program Distribution. This definition provides that a small entity is one with $13.5 million or less in annual receipts. Currently, three operators provide DBS service, which requires a great investment of capital for operation: DIRECTV, EchoStar (marketed as the DISH Network), and Dominion Video Satellite, Inc. (“Dominion”) (marketed as Sky Angel). All three currently offer subscription services. Two of these three DBS operators, DIRECTV and EchoStar Communications Corporation (“EchoStar”), report annual revenues that are in excess of the threshold for a small business. The third DBS operator, Dominion's Sky Angel service, serves fewer than one million subscribers and provides 20 family and religion-oriented channels. Dominion does not report its annual revenues. The Commission does not know of any source which provides this information and, thus, we have no way of confirming whether Dominion qualifies as a small business. Because DBS service requires significant capital, we believe it is unlikely that a small entity as defined by the SBA would have the financial wherewithal to become a DBS licensee. Nevertheless, given the absence of specific data on this point, we recognize the possibility that there are entrants in this field that may not yet have generated $13.5 million in annual receipts, and therefore may be categorized as a small business, if independently owned and operated. 95. *Private Cable Operators

(PCOs)also known as Satellite Master Antenna Television (SMATV) Systems.* PCOs, also known as SMATV systems or private communication operators, are video distribution facilities that use closed transmission paths without using any public right-of-way. PCOs acquire video programming and distribute it via terrestrial wiring in urban and suburban multiple dwelling units such as apartments and condominiums, and commercial multiple tenant units such as hotels and office buildings. The SBA definition of small entities for Cable and Other Program Distribution Services includes PCOs and, thus, small entities are defined as all such companies generating $13.5 million or less in annual receipts. Currently, there are approximately 150 members in the Independent Multi-Family Communications Council (IMCC), the trade association that represents PCOs. Individual PCOs often serve approximately 3,000-4,000 subscribers, but the larger operations serve as many as 15,000-55,000 subscribers. In total, PCOs currently serve approximately one million subscribers. Because these operators are not rate regulated, they are not required to file financial data with the Commission. Furthermore, we are not aware of any privately published financial information regarding these operators. Based on the estimated number of operators and the estimated number of units served by the largest ten PCOs, we believe that a substantial number of PCO may qualify as small entities. 96. *Home Satellite Dish (“HSD”) Service* . Because HSD provides subscription services, HSD falls within the SBA-recognized definition of Cable and Other Program Distribution, which includes all such companies generating $13.5 million or less in revenue annually. HSD or the large dish segment of the satellite industry is the original satellite-to-home service offered to consumers, and involves the home reception of signals transmitted by satellites operating generally in the C-band frequency. Unlike DBS, which uses small dishes, HSD antennas are between four and eight feet in diameter and can receive a wide range of unscrambled

(free)programming and scrambled programming purchased from program packagers that are licensed to facilitate subscribers' receipt of video programming. There are approximately 30 satellites operating in the C-band, which carry over 500 channels of programming combined; approximately 350 channels are available free of charge and 150 are scrambled and require a subscription. HSD is difficult to quantify in terms of annual revenue. HSD owners have access to program channels placed on C-band satellites by programmers for receipt and distribution by MVPDs. Commission data shows that, between June 2004 and June 2005, HSD subscribership fell from 335,766 subscribers to 206,358 subscribers, a decline of more than 38 percent. The Commission has no information regarding the annual revenue of the four C-Band distributors. 97. *Broadband Radio Service and Educational Broadband Service* . Broadband Radio Service comprises Multichannel Multipoint Distribution Service

(MMDS)systems and Multipoint Distribution Service (MDS). MMDS systems, often referred to as “wireless cable,” transmit video programming to subscribers using the microwave frequencies of MDS and Educational Broadband Service

(EBS)(formerly known as Instructional Television Fixed Service (ITFS)). We estimate that the number of wireless cable subscribers is approximately 100,000, as of March 2005. The SBA definition of small entities for Cable and Other Program Distribution, which includes such companies generating $13.5 million in annual receipts, appears applicable to MDS and ITFS. 98. The Commission has also defined small MDS (now BRS) entities in the context of Commission license auctions. For purposes of the 1996 MDS auction, the Commission defined a small business as an entity that had annual average gross revenues of less than $40 million in the previous three calendar years. This definition of a small entity in the context of MDS auctions has been approved by the SBA. In the MDS auction, 67 bidders won 493 licenses. Of the 67 auction winners, 61 claimed status as a small business. At this time, the Commission estimates that of the 61 small business MDS auction winners, 48 remain small business licensees. In addition to the 48 small businesses that hold BTA authorizations, there are approximately 392 incumbent MDS licensees that have gross revenues that are not more than $40 million and are thus considered small entities. MDS licensees and wireless cable operators that did not receive their licenses as a result of the MDS auction fall under the SBA small business size standard for Cable and Other Program Distribution, which includes all such entities that do not generate revenue in excess of $13.5 million annually. Information available to us indicates that there are approximately 850 of these licensees and operators that do not generate revenue in excess of $13.5 million annually. Therefore, we estimate that there are approximately 850 small entity MDS (or BRS) providers, as defined by the SBA and the Commission's auction rules. 99. Educational institutions are included in this analysis as small entities; however, the Commission has not created a specific small business size standard for ITFS (now EBS). We estimate that there are currently 2,032 ITFS (or EBS) licensees, and all but 100 of the licenses are held by educational institutions. Thus, we estimate that at least 1,932 ITFS licensees are small entities. 100. *Local Multipoint Distribution Service* . Local Multipoint Distribution Service

(LMDS)is a fixed broadband point-to-multipoint microwave service that provides for two-way video telecommunications. The SBA definition of small entities for Cable and Other Program Distribution, which includes such companies generating $13.5 million in annual receipts, appears applicable to LMDS. The Commission has also defined small LMDS entities in the context of Commission license auctions. In the 1998 and 1999 LMDS auctions, the Commission defined a small business as an entity that had annual average gross revenues of less than $40 million in the previous three calendar years. Moreover, the Commission added an additional classification for a “very small business,” which was defined as an entity that had annual average gross revenues of less than $15 million in the previous three calendar years. These definitions of “small business” and “very small business” in the context of the LMDS auctions have been approved by the SBA. In the first LMDS auction, 104 bidders won 864 licenses. Of the 104 auction winners, 93 claimed status as small or very small businesses. In the LMDS re-auction, 40 bidders won 161 licenses. Based on this information, we believe that the number of small LMDS licenses will include the 93 winning bidders in the first auction and the 40 winning bidders in the re-auction, for a total of 133 small entity LMDS providers as defined by the SBA and the Commission's auction rules. 101. *Open Video Systems (“OVS”)* . The OVS framework provides opportunities for the distribution of video programming other than through cable systems. Because OVS operators provide subscription services, OVS falls within the SBA-recognized definition of Cable and Other Program Distribution Services, which provides that a small entity is one with $13.5 million or less in annual receipts. The Commission has approved approximately 120 OVS certifications with some OVS operators now providing service. Broadband service providers

(BSPs)are currently the only significant holders of OVS certifications or local OVS franchises, even though OVS is one of four statutorily-recognized options for local exchange carriers

(LECs)to offer video programming services. As of June 2005, BSPs served approximately 1.4 million subscribers, representing 1.49 percent of all MVPD households. Among BSPs, however, those operating under the OVS framework are in the minority. As of June 2005, RCN Corporation is the largest BSP and 14th largest MVPD, serving approximately 371,000 subscribers. RCN received approval to operate OVS systems in New York City, Boston, Washington, DC and other areas. The Commission does not have financial information regarding the entities authorized to provide OVS, some of which may not yet be operational. We thus believe that at least some of the OVS operators may qualify as small entities. 102. *Cable and Other Subscription Programming.* The Census Bureau defines this category as follows: “This industry comprises establishments primarily engaged in operating studios and facilities for the broadcasting of programs on a subscription or fee basis * * *. These establishments produce programming in their own facilities or acquire programming from external sources. The programming material is usually delivered to a third party, such as cable systems or direct-to-home satellite systems, for transmission to viewers.” The SBA has developed a small business size standard for firms within this category, which is all firms with $13.5 million or less in annual receipts. According to Census Bureau data for 2002, there were 270 firms in this category that operated for the entire year. Of this total, 217 firms had annual receipts of under $10 million and 13 firms had annual receipts of $10 million to $24,999,999. Thus, under this category and associated small business size standard, the majority of firms can be considered small. 103. *Small Incumbent Local Exchange Carriers.* We have included small incumbent local exchange carriers in this present RFA analysis. A “small business” under the RFA is one that, inter alia, meets the pertinent small business size standard (e.g., a telephone communications business having 1,500 or fewer employees), and “is not dominant in its field of operation.” The SBA's Office of Advocacy contends that, for RFA purposes, small incumbent local exchange carriers are not dominant in their field of operation because any such dominance is not “national” in scope. We have therefore included small incumbent local exchange carriers in this RFA, although we emphasize that this RFA action has no effect on Commission analyses and determinations in other, non-RFA contexts. 104. *Incumbent Local Exchange Carriers (“LECs”).* Neither the Commission nor the SBA has developed a small business size standard specifically for incumbent local exchange services. The appropriate size standard under SBA rules is for the category Wired Telecommunications Carriers. Under that size standard, such a business is small if it has 1,500 or fewer employees. According to Commission data, 1,307 carriers have reported that they are engaged in the provision of incumbent local exchange services. Of these 1,307 carriers, an estimated 1,019 have 1,500 or fewer employees and 288 have more than 1,500 employees. Consequently, the Commission estimates that most providers of incumbent local exchange service are small businesses. 105. *Competitive Local Exchange Carriers, Competitive Access Providers (CAPs), Shared-Tenant Service Providers,” and “Other Local Service Providers.”* Neither the Commission nor the SBA has developed a small business size standard specifically for these service providers. The appropriate size standard under SBA rules is for the category Wired Telecommunications Carriers. Under that size standard, such a business is small if it has 1,500 or fewer employees. According to Commission data, 859 carriers have reported that they are engaged in the provision of either competitive access provider services or competitive local exchange carrier services. Of these 859 carriers, an estimated 741 have 1,500 or fewer employees and 118 have more than 1,500 employees. In addition, 16 carriers have reported that they are “Shared-Tenant Service Providers,” and all 16 are estimated to have 1,500 or fewer employees. In addition, 44 carriers have reported that they are “Other Local Service Providers.” Of the 44, an estimated 43 have 1,500 or fewer employees and one has more than 1,500 employees. Consequently, the Commission estimates that most providers of competitive local exchange service, competitive access providers, “Shared-Tenant Service Providers,” and “Other Local Service Providers” are small entities. 106. *Electric Power Generation, Transmission and Distribution.* The Census Bureau defines this category as follows: “This industry group comprises establishments primarily engaged in generating, transmitting, and/or distributing electric power. Establishments in this industry group may perform one or more of the following activities:

(1)Operate generation facilities that produce electric energy;

(2)operate transmission systems that convey the electricity from the generation facility to the distribution system; and

(3)operate distribution systems that convey electric power received from the generation facility or the transmission system to the final consumer.” The SBA has developed a small business size standard for firms in this category: “A firm is small if, including its affiliates, it is primarily engaged in the generation, transmission, and/or distribution of electric energy for sale and its total electric output for the preceding fiscal year did not exceed 4 million megawatt hours.” According to Census Bureau data for 2002, there were 1,644 firms in this category that operated for the entire year. Census data do not track electric output and we have not determined how many of these firms fit the SBA size standard for small, with no more than 4 million megawatt hours of electric output. Consequently, we estimate that 1,644 or fewer firms may be considered small under the SBA small business size standard. Description of Reporting, Recordkeeping and Other Compliance Requirements 107. The rules adopted in the *Report and Order* will impose additional reporting, recordkeeping, and compliance requirements on complainants and respondents in program access disputes by

(i)codifying the requirements that a respondent in a program access complaint proceeding who expressly relies upon a document in asserting a defense must include the document as part of its answer; and

(ii)finding that in the context of a complaint proceeding, it would be unreasonable for a respondent not to produce all the documents either requested by the complainant or ordered by the Commission, provided that such documents are in its control and relevant to the dispute. Steps Taken To Minimize Significant Impact on Small Entities and Significant Alternatives Considered 108. The RFA requires an agency to describe any significant alternatives that it has considered in proposing regulatory approaches, which may include the following four alternatives (among others):

(1)The establishment of differing compliance or reporting requirements or timetables that take into account the resources available to small entities;

(2)the clarification, consolidation, or simplification of compliance or reporting requirements under the rule for small entities;

(3)the use of performance, rather than design, standards; and

(4)an exemption from coverage of the rule, or any part thereof, for small entities. 109. The *NPRM* invited comment on issues that had the potential to have significant economic impact on some small entities, including

(i)whether the exclusive contract prohibition remains necessary to preserve and protect competition in the video distribution market; and

(ii)whether and how our procedures for resolving program access disputes under Section 628 should be modified. 110. *Extension of Exclusive Contract Prohibition.* As discussed above, the decision to extend the exclusive contract prohibition for five years will facilitate competition in the video distribution market by ensuring that competitive MVPDs continue to have access to the programming they need to compete. The decision therefore confers benefits upon various competitive MVPDs, including those that are smaller entities. Moreover, the decision avoids the adverse impact to smaller entities that the SBA Office of Advocacy Office and others stated would occur if the prohibition were to sunset. Therefore, we conclude that our decision to retain the exclusive contract prohibition set forth in Section 628(c)(2)(D) benefits smaller entities as well as larger entities. The alternative of allowing the exclusive contract prohibition to expire would hinder competition in the video distribution market, thereby harming smaller entities. 111. *Modification of Program Access Complaint Procedures.* As discussed above, the decision to modify the procedures for resolving program access disputes will facilitate the processing and resolution of program access complaints, thereby conferring benefits upon smaller entities as well as larger entities that seek to compete in the video distribution marketplace. The alternative of retaining the current program access complaint procedures would not facilitate the resolution of program access complaints and would thereby harm smaller entities that file such complaints. Report to Congress 112. The Commission will send a copy of the *Report and 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 *Report and Order,* including this FRFA, to the Chief Counsel for Advocacy of the SBA. A copy of the *Report and Order* and FRFA (or summaries thereof) will also be published in the **Federal Register** . V. Ordering Clauses 113. *It is ordered* that, pursuant to the authority found in Sections 4(i), 303(r), and 628 of the Communications Act of 1934, as amended, 47 U.S.C. 154(i), 303(r), and 548, this *Report and Order is adopted.* 114. *It is ordered* that, pursuant to the authority found in Sections 4(i), 303(r), and 628 of the Communications Act of 1934, as amended, 47 U.S.C. 154(i), 303(r), and 548, the Commission's rules *are hereby amended* as set forth in the Rules Changes below. 115. *It is ordered* that the rules adopted herein are effective October 4, 2007, except for § 76.1003(e)(1) and

(j)which contains information collection requirements that are not effective until approved by the Office of Management and Budget. The Commission will publish a document in the **Federal Register** announcing the effective date for those sections. 116. *It is ordered* that, pursuant to 5 U.S.C. 553(d)(3) and 47 CFR 1.427(b), the Commission finds good cause to make § 76.1002(c)(6) and § 76.1003(i) and

(k)effective upon publication in the **Federal Register** . Section 76.1002(c)(6) provides that the exclusive contract prohibition set forth in § 76.1002(c)(2) will expire on October 5, 2007. *See* 47 CFR 76.1002(c)(6). Accordingly, it is necessary for the five-year extension of this prohibition reflected in the amendment to § 76.1002(c)(6) adopted herein to take effect by October 5, 2007. We thus find good cause to make the amendment to § 76.1002(c)(6) effective upon publication in the **Federal Register** . We note further that this amendment extends an existing requirement and does not impose any new requirements on any entity. Accordingly, no entity will be harmed as a result of our decision to make this amendment effective upon publication in the **Federal Register** . We also find good cause to make the amendments to our procedural rules adopted herein, other than those that require OMB approval, effective upon publication in the **Federal Register** . These rules are

(i)new § 76.1003(i), which allows parties to a program access dispute to voluntarily engage in ADR; and

(ii)new § 76.1003(k), which pertains to the Commission's authority to issue protective orders regarding confidential material submitted in program access complaint proceedings and to issue appropriate sanctions for violations of its protective orders. These new rules are essential to our goal of expeditiously resolving program access complaints. We find good cause to make these amendments effective upon publication in the **Federal Register** so that parties to all program access complaint proceedings, including those currently pending before the Commission, can benefit from these new rules. With respect to new § 76.1003(i) regarding ADR, we note this procedure is voluntary and requires both parties to agree to engage in alternative dispute resolution; thus, no entity will be harmed as a result of our decision to make this amendment effective upon publication in the **Federal Register** . With respect to new § 76.1003(k) regarding protective orders, we note that this rule enhances existing safeguards provided under our form protective order, and will facilitate and expedite the review of privileged and/or confidential documents; thus, no entity will be harmed as a result of our decision to make this amendment effective upon publication in the **Federal Register** . 117. *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* including the Final Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of the Small Business Administration. 118. *It is further ordered* that the Commission shall send a copy of this *Report and Order* in a report to be sent to Congress and the Government Accountability Office pursuant to the Congressional Review Act, see 5 U.S.C. 801(a)(1)(A). List of Subjects in 47 CFR Part 76 Administrative practice and procedure and Cable television. Federal Communications Commission. Marlene H. Dortch, Secretary. Rule Changes For the reasons stated in the preamble, the Federal Communications Commission amends 47 CFR part 76 as follows: PART 76—MULTICHANNEL VIDEO AND CABLE TELEVISION SERVICE 1. The authority citation for part 76 continues to read as follows: Authority: 47 U.S.C. 151, 152, 153, 154, 301, 302, 302a, 303, 303a, 307, 308, 309, 312, 315, 317, 325, 338, 339, 340, 503, 521, 522, 531, 532, 533, 534, 535, 536, 537, 543, 544, 544a, 545, 548, 549, 552, 554, 556, 558, 560, 561, 571, 572 and 573. 2. Section 76.1002 is amended by revising paragraph (c)(6) to read as follows: § 76.1002 Specific unfair practices prohibited.

(c)* * *

(6)*Sunset provision.* The prohibition of exclusive contracts set forth in paragraph (c)(2) of this section shall cease to be effective on October 5, 2012, unless the Commission finds, during a proceeding to be conducted during the year preceding such date, that said prohibition continues to be necessary to preserve and protect competition and diversity in the distribution of video programming. 3. Section 76.1003 is amended by adding a sentence to the end of paragraph (e)(1) and by adding paragraphs (i),

(j)and

(k)to read as follows: § 76.1003 Program access proceedings.

(e)*Answer.*

(1)* * * To the extent that a cable operator, satellite cable programming vendor or satellite broadcast programming vendor expressly references and relies upon a document or documents in asserting a defense or responding to a material allegation, such document or documents shall be included as part of the answer.

(i)*Alternative dispute resolution.* Within 20 days of the close of the pleading cycle, the parties to the program access dispute may voluntarily engage in alternative dispute resolution, including commercial arbitration. The Commission will suspend action on the complaint if both parties agree to use alternative dispute resolution.

(j)*Discovery.* In addition to the general pleading and discovery rules contained in § 76.7 of this part, parties to a program access complaint may serve requests for discovery directly on opposing parties, and file a copy of the request with the Commission. The respondent shall have the opportunity to object to any request for documents that are not in its control or relevant to the dispute. Such request shall be heard, and determination made, by the Commission. Until the objection is ruled upon, the obligation to produce the disputed material is suspended. Any party who fails to timely provide discovery requested by the opposing party to which it has not raised an objection as described above, or who fails to respond to a Commission order for discovery material, may be deemed in default and an order may be entered in accordance with the allegations contained in the complaint, or the complaint may be dismissed with prejudice.

(k)*Protective Orders.* In addition to the procedures contained in § 76.9 of this part related to the protection of confidential material, the Commission may issue orders to protect the confidentiality of proprietary information required to be produced for resolution of program access complaints. A protective order constitutes both an order of the Commission and an agreement between the party executing the protective order declaration and the party submitting the protected material. The Commission has full authority to fashion appropriate sanctions for violations of its protective orders, including but not limited to suspension or disbarment of attorneys from practice before the Commission, forfeitures, cease and desist orders, and denial of further access to confidential information in Commission proceedings. Note: The attached Appendix *will not be included* in the Code of Federal Regulations (CFR). Appendix—Standard Protective Order and Declaration for Use in Section 628 Program Access Proceedings Before the Federal Communications Commission, Washington, DC 20554 In the Matter of [Name of Proceeding] Docket No. PROTECTIVE ORDER 1. This Protective Order is intended to facilitate and expedite the review of documents obtained from a person in the course of discovery that contain trade secrets and privileged or confidential commercial or financial information. It establishes the manner in which “Confidential Information,” as that term is defined herein, is to be treated. The Order is not intended to constitute a resolution of the merits concerning whether any Confidential Information would be released publicly by the Commission upon a proper request under the Freedom of Information Act or other applicable law or regulation, including 47 CFR § 0.442. 2. *Definitions.* a. *Authorized Representative.* “Authorized Representative” shall have the meaning set forth in Paragraph 7. b. *Commission.* “Commission” means the Federal Communications Commission or any arm of the Commission acting pursuant to delegated authority. c. *Confidential Information.* “Confidential Information” means

(i)information submitted to the Commission by the Submitting Party that has been so designated by the Submitting Party and which the Submitting Party has determined in good faith constitutes trade secrets and commercial or financial information which is privileged or confidential within the meaning of Exemption 4 of the Freedom of Information Act, 5 U.S.C. 552(b)(4) and

(ii)information submitted to the Commission by the Submitting Party that has been so designated by the Submitting Party and which the Submitting Party has determined in good faith falls within the terms of Commission orders designating the items for treatment as Confidential Information. Confidential Information includes additional copies of, notes, and information derived from Confidential Information. d. *Declaration.* “Declaration” means Attachment A to this Protective Order. e. *Reviewing Party.* “Reviewing Party” means a person or entity participating in this proceeding or considering in good faith filing a document in this proceeding. f. *Submitting Party.* “Submitting Party” means a person or entity that seeks confidential treatment of Confidential Information pursuant to this Protective Order. 2A. *Claim of Confidentiality.* The Submitting Party may designate information as “Confidential Information” consistent with the definition of that term in Paragraph 2.c of this Protective Order. The Commission may, *sua sponte* or upon petition, pursuant to 47 CFR 0.459 and 0.461, determine that all or part of the information claimed as “Confidential Information” is not entitled to such treatment. 3. *Procedures for Claiming Information is Confidential.* Confidential Information submitted to the Commission shall be filed under seal and shall bear on the front page in bold print, “CONTAINS PRIVILEGED AND CONFIDENTIAL INFORMATION—DO NOT RELEASE.” Confidential Information shall be segregated by the Submitting Party from all non-confidential information submitted to the Commission. To the extent a document contains both Confidential Information and non-confidential information, the Submitting Party shall designate the specific portions of the document claimed to contain Confidential Information and shall, where feasible, also submit a redacted version not containing Confidential Information. 4. *Storage of Confidential Information at the Commission.* The Secretary of the Commission or other Commission staff to whom Confidential Information is submitted shall place the Confidential Information in a non-public file. Confidential Information shall be segregated in the files of the Commission, and shall be withheld from inspection by any person not bound by the terms of this Protective Order, unless such Confidential Information is released from the restrictions of this Order either through agreement of the parties, or pursuant to the order of the Commission or a court having jurisdiction. 5. *Access to Confidential Information.* Confidential Information shall only be made available to Commission staff, Commission consultants and to counsel to the Reviewing Parties, or if a Reviewing Party has no counsel, to a person designated by the Reviewing Party. Before counsel to a Reviewing Party or such other designated person designated by the Reviewing Party may obtain access to Confidential Information, counsel or such other designated person must execute the attached Declaration. Consultants under contract to the Commission may obtain access to Confidential Information only if they have signed, as part of their employment contract, a non-disclosure agreement the scope of which includes the Confidential Information, or if they execute the attached Declaration. 6. *Disclosure.* Counsel to a Reviewing Party or such other person designated pursuant to Paragraph 5 may disclose Confidential Information to other Authorized Representatives to whom disclosure is permitted under the terms of paragraph 7 of this Protective Order only after advising such Authorized Representatives of the terms and obligations of the Order. In addition, before Authorized Representatives may obtain access to Confidential Information, each Authorized Representative must execute the attached Declaration. 7. *Authorized Representatives shall be limited to:* a. Subject to Paragraph 7.d, counsel for the Reviewing Parties to this proceeding, including in-house counsel, actively engaged in the conduct of this proceeding and their associated attorneys, paralegals, clerical staff and other employees, to the extent reasonably necessary to render professional services in this proceeding; b. Subject to Paragraph 7.d, specified persons, including employees of the Reviewing Parties, requested by counsel to furnish technical or other expert advice or service, or otherwise engaged to prepare material for the express purpose of formulating filings in this proceeding; and c. Subject to Paragraph 7.d, any person designated by the Commission in the public interest, upon such terms as the Commission may deem proper; except that, d. Disclosure shall be prohibited to any persons in a position to use the Confidential Information for competitive commercial or business purposes, including persons involved in competitive decision-making, which includes, but is not limited to, persons whose activities, association or relationship with the Reviewing Parties or other Authorized Representatives involve rendering advice or participating in any or all of the Reviewing Parties', Associated Representatives' or any other person's business decisions that are or will be made in light of similar or corresponding information about a competitor. 8. *Inspection of Confidential Information.* Confidential Information shall be maintained by a Submitting Party for inspection at two or more locations, at least one of which shall be in Washington, D.C. Inspection shall be carried out by Authorized Representatives upon reasonable notice not to exceed one business day during normal business hours. 9. *Copies of Confidential Information.* The Submitting Party shall provide a copy of the Confidential Material to Authorized Representatives upon request and may charge a reasonable copying fee not to exceed twenty five cents per page. Authorized Representatives may make additional copies of Confidential Information but only to the extent required and solely for the preparation and use in this proceeding. Authorized Representatives must maintain a written record of any additional copies made and provide this record to the Submitting Party upon reasonable request. The original copy and all other copies of the Confidential Information shall remain in the care and control of Authorized Representatives at all times. Authorized Representatives having custody of any Confidential Information shall keep the documents properly and fully secured from access by unauthorized persons at all times. 10. *Filing of Declaration.* Counsel for Reviewing Parties shall provide to the Submitting Party and the Commission a copy of the attached Declaration for each Authorized Representative within five

(5)business days after the attached Declaration is executed, or by any other deadline that may be prescribed by the Commission. 11. *Use of Confidential Information.* Confidential Information shall not be used by any person granted access under this Protective Order for any purpose other than for use in this proceeding (including any subsequent administrative or judicial review), shall not be used for competitive business purposes, and shall not be used or disclosed except in accordance with this Order. This shall not preclude the use of any material or information that is in the public domain or has been developed independently by any other person who has not had access to the Confidential Information nor otherwise learned of its contents. 12. *Pleadings Using Confidential Information.* Submitting Parties and Reviewing Parties may, in any pleadings that they file in this proceeding, reference the Confidential Information, but only if they comply with the following procedures: a. Any portions of the pleadings that contain or disclose Confidential Information must be physically segregated from the remainder of the pleadings and filed under seal; b. The portions containing or disclosing Confidential Information must be covered by a separate letter referencing this Protective Order; c. Each page of any Party's filing that contains or discloses Confidential Information subject to this Order must be clearly marked: “Confidential Information included pursuant to Protective Order, [cite proceeding];” and d. The confidential portion(s) of the pleading, to the extent they are required to be served, shall be served upon the Secretary of the Commission, the Submitting Party, and those Reviewing Parties that have signed the attached Declaration. Such confidential portions shall be served under seal, and shall not be placed in the Commission's Public File unless the Commission directs otherwise (with notice to the Submitting Party and an opportunity to comment on such proposed disclosure). A Submitting Party or a Reviewing Party filing a pleading containing Confidential Information shall also file a redacted copy of the pleading containing no Confidential Information, which copy shall be placed in the Commission's public files. A Submitting Party or a Reviewing Party may provide courtesy copies of pleadings containing Confidential Information to Commission staff so long as the notations required by this Paragraph 12 are not removed. 13. *Violations of Protective Order.* Should a Reviewing Party that has properly obtained access to Confidential Information under this Protective Order violate any of its terms, it shall immediately convey that fact to the Commission and to the Submitting Party. Further, should such violation consist of improper disclosure or use of Confidential Information, the violating party shall take all necessary steps to remedy the improper disclosure or use. The Violating Party shall also immediately notify the Commission and the Submitting Party, in writing, of the identity of each party known or reasonably suspected to have obtained the Confidential Information through any such disclosure. The Commission retains its full authority to fashion appropriate sanctions for violations of this Protective Order, including but not limited to suspension or disbarment of attorneys from practice before the Commission, forfeitures, cease and desist orders, and denial of further access to Confidential Information in this or any other Commission proceeding. Nothing in this Protective Order shall limit any other rights and remedies available to the Submitting Party at law or equity against any party using Confidential Information in a manner not authorized by this Protective Order. 14. *Termination of Proceeding.* Within two weeks after final resolution of this proceeding (which includes any administrative or judicial appeals), Authorized Representatives of Reviewing Parties shall, at the direction of the Submitting Party, destroy or return to the Submitting Party all Confidential Information as well as all copies and derivative materials made, and shall certify in a writing served on the Commission and the Submitting Party that no material whatsoever derived from such Confidential Information has been retained by any person having access thereto, except that counsel to a Reviewing Party may retain two copies of pleadings submitted on behalf of the Reviewing Party. Any confidential information contained in any copies of pleadings retained by counsel to a Reviewing Party or in materials that have been destroyed pursuant to this paragraph shall be protected from disclosure or use indefinitely in accordance with paragraphs 9 and 11 of this Protective Order unless such Confidential Information is released from the restrictions of this Order either through agreement of the parties, or pursuant to the order of the Commission or a court having jurisdiction. 15. *No Waiver of Confidentiality.* Disclosure of Confidential Information as provided herein shall not be deemed a waiver by the Submitting Party of any privilege or entitlement to confidential treatment of such Confidential Information. Reviewing Parties, by viewing these materials:

(a)agree not to assert any such waiver;

(b)agree not to use information derived from any confidential materials to seek disclosure in any other proceeding; and

(c)agree that accidental disclosure of Confidential Information shall not be deemed a waiver of the privilege. 16. *Additional Rights Preserved.* The entry of this Protective Order is without prejudice to the rights of the Submitting Party to apply for additional or different protection where it is deemed necessary or to the rights of Reviewing Parties to request further or renewed disclosure of Confidential Information. 17. *Effect of Protective Order.* This Protective Order constitutes an Order of the Commission and an agreement between the Reviewing Party, executing the attached Declaration, and the Submitting Party. 18. *Authority.* This Protective Order is issued pursuant to Sections 4(i) and 4(j) of the Communications Act as amended, 47 U.S.C. 154(i),

(j)and 47 CFR 0.457(d). Attachment A to Standard Protective Order DECLARATION In the Matter of [Name of Proceeding] Docket No. I, ______, hereby declare under penalty of perjury that I have read the Protective Order that has been entered by the Commission in this proceeding, and that I agree to be bound by its terms pertaining to the treatment of Confidential Information submitted by parties to this proceeding. I understand that the Confidential Information shall not be disclosed to anyone except in accordance with the terms of the Protective Order and shall be used only for purposes of the proceedings in this matter. I acknowledge that a violation of the Protective Order is a violation of an order of the Federal Communications Commission. I acknowledge that this Protective Order is also a binding agreement with the Submitting Party. I am not in a position to use the Confidential Information for competitive commercial or business purposes, including competitive decision-making, and my activities, association or relationship with the Reviewing Parties, Authorized Representatives, or other persons does not involve rendering advice or participating in any or all of the Reviewing Parties,' Associated Representatives' or other persons' business decisions that are or will be made in light of similar or corresponding information about a competitor. (signed) (printed name) (representing) (title) (employer) (address) (phone)

(date)[FR Doc. 07-4935 Filed 10-3-07; 8:45 am]

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U.S. Code