Rules and Regulations. Final rule; correction

53,259 words·~242 min read·/register/2008/01/24/08-262

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

BILLING CODE 4910-13-M DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Parts 71 [Docket FAA No. FAA-2007-27430; Airspace Docket No. 07-ANM-4] Establishment of Class E Airspace; Springfield, CO AGENCY: Federal Aviation Administration (FAA), DOT. ACTION: Final rule; correction. SUMMARY: This action corrects a final rule published in the **Federal Register** October 30, 2007 (72 FR 61300), Airspace Docket No. 07-ANM-4, FAA Docket No. FAA-2007-27430. In that rule, an error was made in the legal description for Springfield, CO.

Specifically, the longitude referencing Springfield, Municipal Airport, CO stated “* * * long. 103°37′05″ W.” instead of “* * * long. 102°37′05″ W.” Also added to the legal description is the location of the TOBE VORTAC. This action corrects those errors. DATES: *Effective Date:* 0901 UTC, February 14, 2008. The Director of the Federal Register approves this incorporation by reference action under 1 CFR part 51, subject to the annual revision of FAA Order 7400.9 and publication of conforming amendments.

FOR FURTHER INFORMATION CONTACT: Eldon Taylor, Federal Aviation Administration, System Support Group, Western Service Area, 1601 Lind Avenue, SW., Renton, WA 98057; telephone

(425)917-6726. SUPPLEMENTARY INFORMATION: History On October 30, 2007, a final rule for Airspace Docket No. 07-ANM-4, FAA Docket No. FAA-2007-27430 was published in the **Federal Register** (72 FR 61300), establishing Class E airspace in Springfield, CO. The longitude referencing Springfield Municipal Airport, CO was incorrect in that the longitude stated “* * * long. 103°37′05″ W.” instead of “* * * long. 102°37′05″ W.”. Also added to the legal description is the location of the TOBE VORTAC. This action corrects those errors. Correction to Final Rule Accordingly, pursuant to the authority delegated to me, the legal description as published in the **Federal Register** on October 30, 2007 (72 FR 61300), Airspace Docket No. 07-ANM-4, FAA Docket No. FAA-2007-27430, and incorporated by reference in 14 CFR 71.1, is corrected as follows: § 71.1 [Amended] On page 61301, correct the legal description for Springfield, CO, to read as follows: *Paragraph 6005 Class E airspace areas extending upward from 700 feet or more above the surface of the earth.* ANM CO, E5 Springfield, CO [New] Springfield Municipal Airport, CO (Lat. 37°27′31″ N., long. 102°37′05″ W.) TOBE VORTAC (Lat. 37°15′31″ N., long. 103°36′00″ W.) That airspace extending upward from 700 feet above the surface within a 7.0-mile radius of Springfield Municipal Airport; that airspace extending upward from 1,200 feet above the surface beginning at TOBE VORTAC, thence north along V-169 to lat. 38°34′00″ N., thence to lat. 38°34′00″ N., long. 102°00′00″ W., thence to lat. 36°30′00″ N., long. 102°00′00″ W., thence west on lat. 36°30′00″ N. to V-81, thence northwest along V-81 to point of beginning. Issued in Seattle, Washington, on January 3, 2008. Clark Desing Manager, System Support Group, Western Service Center. [FR Doc. E8-846 Filed 1-23-08; 8:45 am] BILLING CODE 4910-13-P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 97 [Docket No. 30587; Amdt. No. 3251] Standard Instrument Approach Procedures, and Takeoff Minimums and Obstacle Departure Procedures; Miscellaneous Amendments AGENCY: Federal Aviation Administration (FAA), DOT. ACTION: Final rule. SUMMARY: This Rule establishes, amends, suspends, or revokes Standard Instrument Approach Procedures (SIAPs) and associated Takeoff Minimums and Obstacle Departure Procedures for operations at certain airports. These regulatory actions are needed because of the adoption of new or revised criteria, or because of changes occurring in the National Airspace System, such as the commissioning of new navigational facilities, adding new obstacles, or changing air traffic requirements. These changes are designed to provide safe and efficient use of the navigable airspace and to promote safe flight operations under instrument flight rules at the affected airports. DATES: This rule is effective January 24, 2008. The compliance date for each SIAP, associated Takeoff Minimums, and ODP is specified in the amendatory provisions. The incorporation by reference of certain publications listed in the regulations is approved by the Director of the Federal Register as of January 24, 2008. ADDRESSES: Availability of matters incorporated by reference in the amendment is as follows: *For Examination* — 1. FAA Rules Docket, FAA Headquarters Building, 800 Independence Avenue, SW., Washington, DC 20591; 2. The FAA Regional Office of the region in which the affected airport is located; 3. The National Flight Procedures Office, 6500 South MacArthur Blvd., Oklahoma City, OK 73169 or, 4. The National Archives and Records Administration (NARA). For information on the availability of this material at NARA, call 202-741-6030, or go to: *http://www.archives.gov/federal_register/code_of_federal_regulations/ibr_locations.html* . *Availability* —All SIAPs and Takeoff Minimums and ODPs are available online free of charge. Visit *nfdc.faa.gov* to register. Additionally, individual SIAP and Takeoff Minimums and ODP copies may be obtained from: 1. FAA Public Inquiry Center (APA-200), FAA Headquarters Building, 800 Independence Avenue, SW., Washington, DC 20591; or 2. The FAA Regional Office of the region in which the affected airport is located. FOR FURTHER INFORMATION CONTACT: Harry. J. Hodges, Flight Procedure Standards Branch (AFS-420), Flight Technologies and Programs Division, Flight Standards Service, Federal Aviation Administration, Mike Monroney Aeronautical Center, 6500 South MacArthur Blvd., Oklahoma City, OK 73169 (Mail Address: P.O. Box 25082, Oklahoma City, OK 73125) telephone:

(405)954-4164. SUPPLEMENTARY INFORMATION: This rule amends Title 14 of the Code of Federal Regulations, Part 97 (14 CFR part 97), by establishing, amending, suspending, or revoking SIAPs, Takeoff Minimums and/or ODPs. The complete regulatory description of each SIAP and its associated Takeoff Minimums or ODP for an identified airport is listed on FAA form documents which are incorporated by reference in this amendment under 5 U.S.C. 552(a), 1 CFR part 51, and 14 CFR part 97.20. The applicable FAA Forms are FAA Forms 8260-3, 8260-4, 8260-5, 8260-15A, and 8260-15B when required by an entry on 8260-15A. The large number of SIAPs, Takeoff Minimums and ODPs, in addition to their complex nature and the need for a special format make publication in the **Federal Register** expensive and impractical. Furthermore, airmen do not use the regulatory text of the SIAPs, Takeoff Minimums or ODPs, but instead refer to their depiction on charts printed by publishers of aeronautical materials. Thus, the advantages of incorporation by reference are realized and publication of the complete description of each SIAP, Takeoff Minimums, and ODP listed on FAA forms is unnecessary. This amendment provides the affected CFR sections and specifies the types of SIAPs and the effective dates of the SIAPs, the associated Takeoff Minimums, and ODPs. This amendment also identifies the airport and its location, the procedure, and the amendment number. The Rule This amendment to 14 CFR part 97 is effective upon publication of each separate SIAP, Takeoff Minimums and ODP as contained in the transmittal. Some SIAP and Takeoff Minimums and textual ODP amendments may have been issued previously by the FAA in a Flight Data Center

(FDC)Notice to Airmen (NOTAM) as an emergency action of immediate flight safety relating directly to published aeronautical charts. The circumstances which created the need for some SIAP and Takeoff Minimums and ODP amendments may require making them effective in less than 30 days. For the remaining SIAPs and Takeoff Minimums and ODPs, an effective date at least 30 days after publication is provided. Further, the SIAPs and Takeoff Minimums and ODPs contained in this amendment are based on the criteria contained in the U.S. Standard for Terminal Instrument Procedures (TERPS). In developing these SIAPs and Takeoff Minimums and ODPs, the TERPS criteria were applied to the conditions existing or anticipated at the affected airports. Because of the close and immediate relationship between these SIAPs, Takeoff Minimums and ODPs, and safety in air commerce, I find that notice and public procedure before adopting these SIAPs, Takeoff Minimums and ODPs are impracticable and contrary to the public interest and, where applicable, that good cause exists for making some SIAPs effective in less than 30 days. Conclusion The FAA has determined that this regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore—(1) Is not a “significant regulatory action” under Executive Order 12866;

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

(GPS)RWY 6, Orig Gadsden, AL, Northeast Alabama Regional, RNAV

(GPS)RWY 18, Orig Gadsden, AL, Northeast Alabama Regional, RNAV

(GPS)RWY 24, Orig Gadsden, AL, Northeast Alabama Regional, RNAV

(GPS)RWY 36, Orig Gadsden, AL, Northeast Alabama Regional, GPS RWY 24, Orig-B, CANCELLED Gadsden, AL, Northeast Alabama Regional, VOR RWY 6, Amdt 13 Gadsden, AL, Northeast Alabama Regional, Takeoff Minimums and Obstacle DP, Amdt 3 Mobile, AL, Mobile Regional, ILS OR LOC RWY 14, Amdt 30 Mobile, AL, Mobile Regional, ILS OR LOC RWY 32, Amdt 6A Mobile, AL, Mobile Regional, RNAV

(GPS)RWY 14, Amdt 1 Mobile, AL, Mobile Regional, RNAV

(GPS)RWY 32, Amdt 1 Mobile, AL, Mobile Regional, Takeoff Minimums and Obstacle DP, Orig Troy, AL, Troy Muni, RNAV

(GPS)RWY 14, Orig Troy, AL, Troy Muni, RNAV

(GPS)RWY 25, Orig Troy, AL, Troy Muni, RNAV

(GPS)RWY 32, Orig Benton, AR, Saline County/Watts Field, GPS RWY 17, Orig-A, (CANCELLED) Benton, AR, Saline County/Watts Field, GPS RWY 35, Orig-A, (CANCELLED) Benton, AR, Saline County/Watts Field, VOR-A, Amdt 6, Orig-A, (CANCELLED) Pagosa Springs, CO, Stevens Field, RNAV (GPS)-A, Orig Pagosa Springs, CO, Stevens Field, Takeoff Minimums and Obstacle DP, Orig LaVerne, CA, Brackett Field, ILS RWY 26L, Amdt 3 LaVerne, CA, Brackett Field, LOC RWY 26L, Orig Modesto, CA, Modesto City-Co-Harry Sham Fld, ILS O RLOC/DME RWY 28R, Amdt 14 Placerville, CA, Placerville, RNAV

(GPS)RWY 5, Orig Placerville, CA, Placerville, GPS RWY 5, Amdt 1A, CANCELLED Placerville, CA, Placerville, Takeoff Minimums and Obstacle DP, Amdt 2 Adel, GA, Cook County, RNAV

(GPS)RWY 5, Orig Adel, GA, Cook County, GPS RWY 5, Orig, CANCELLED Augusta, GA, Augusta Regional At Bush Field, Takeoff Minimums and Obstacle DP, Amdt 12 Augusta, GA, Daniel Field, Takeoff Minimums and Obstacle DP, Amdt 5 Canton, GA, Cherokee County, RNAV

(GPS)RWY 4, ORIG Canton, GA, Cherokee County, GPS RWY 4, Amdt 1, CANCELLED Thomson, GA, Thomson-McDuffie County, Takeoff Minimums and Obstacle DP, Orig Vidalia, GA, Vidalia Regional, Takeoff Minimums and Obstacle DP, Amdt 1 Corning, IA, Corning Muni, RNAV

(GPS)RWY 18, Orig Corning, IA, Corning Muni, NDB RWY 18, Amdt 2 Benton, KS, Lloyd Strearman Field, RNAV

(GPS)RWY 17, Orig Benton, KS, Lloyd Strearman Field, GPS RWY 17, Orig, (CANCELLED) Danville, KY, Stuart Powell Field, RNAV

(GPS)RWY 12, Orig Danville, KY, Stuart Powell Field, RNAV

(GPS)RWY 30, Orig Danville, KY, Stuart Powell Field, NDB-A, Amdt 8 Lafayette, LA, VOR RWY 4R, Amdt 2, (CANCELLED) Austin, MN, Austin Muni, RNAV

(GPS)RWY 17, Orig Austin, MN, Austin Muni, VOR/DME-A, Amdt 2 Austin, MN, Austin Muni, VOR RWY 17, Amdt 2 Austin, MN, Austin Muni, VOR RWY 35, Amdt 2 Austin, MN, Austin Muni, Takeoff Minimums and Obstacle DP, Orig Jackson, MN, Jackson Muni, RNAV

(GPS)RWY 13, Orig Jackson, MN, Jackson Muni, RNAV

(GPS)RWY 31, Orig Jackson, MN, Jackson Muni, GPS RWY 31, Amdt 1, (CANCELLED) Jackson, MN, Jackson Muni, Takeoff Minimum and Obstacle DP, Orig Harrisonville, MO, Lawrence Smith Memorial, RNAV

(GPS)RWY 17, Orig Harrisonville, MO, Lawrence Smith Memorial, RNAV

(GPS)RWY 35, Orig Harrisonville, MO, Lawrence Smith Memorial, GPS RWY 35, Orig-A, (CANCELLED) Harrisonville, MO, Lawrence Smith Memorial, Takeoff Minimums and Obstacle DP, Orig Corinth, MS, Roscoe Turner, ILS OR LOC RWY 18, Amdt 2 Corinth, MS, Roscoe Turner, RNAV

(GPS)RWY 18, Amdt 1 Corinth, MS, Roscoe Turner, RNAV

(GPS)RWY 36, Orig Corinth, MS, Roscoe Turner, Takeoff Minimums and Obstacle DP, Orig Winona, MS, Winona-Montgomery County, RNAV

(GPS)RWY 3, Orig Winona, MS, Winona-Montgomery County, RNAV

(GPS)RWY 21, Orig Winona, MS, Winona-Montgomery County, Takeoff Minimums and Obstacle DP, Orig Rutherfordton, NC, Rutherford Co/Marchman Field, LOC RWY 1, Amdt 2A Beatrice, NE, Beatrice Muni, VOR RWY 13, Amdt 17 Beatrice, NE, Beatrice Muni, VOR RWY 17, Amdt 1 Beatrice, NE, Beatrice Muni, VOR RWY 35, Amdt 8 Beatrice, NE, Beatrice Muni, Takeoff Minimums and Obstacle DP, Orig Omaha, NE, Epply Field, ILS OR LOC RWY 32L, Amdt 1 Omaha, NE, Epply Field, ILS OR LOC/DME RWY 14L, Amdt 1 Omaha, NE, Epply Field, ILS OR LOC/DME RWY 14R, ILS RWY 14R (CAT II), ILS RWY 14R (CAT III), Amdt 4 Omaha, NE, Epply Field, RNAV

(GPS)RWY 14L, Amdt 1 Omaha, NE, Epply Field, Takeoff Minimums and Obstacle DP, Orig Las Vegas, NV, North Las Vegas, Takeoff Minimums and Obstacle DP, Amdt 3 Wagoner, OK, Hefner-Easley, RNAV

(GPS)RWY 18, Amdt 1 Wagoner, OK, Hefner-Easley, RNAV

(GPS)RWY 36, Amdt 1 Wagoner, OK, Hefner-Easley, Takeoff Minimums and Obstacle DP, Orig Factoryville, PA, Seamans Field, RNAV

(GPS)RWY 4, Orig Factoryville, PA, Seamans Field, VOR OR GPS-A, Amdt 1, CANCELLED Factoryville, PA, Seamans Field, Takeoff Minimums and Obstacle DP, Amdt 2 Aiken, SC, Aiken Muni, Takeoff Minimums and Obstacle DP, Amdt 1 Charleston, SC, Charleston AFB/Intl, Takeoff Minimums and Obstacle DP, Amdt 6 Arlington, TX, Arlington Muni, ILS OR LOC/DME RWY 34, Orig-A Dallas, TX, Dallas Executive, ILS OR LOC RWY 31. Amdt 8 Ingleside, TX, T P MC Campbell, RNAV

(GPS)RWY 13, Amdt 1 Ingleside, TX, T P MC Campbell, RNAV

(GPS)RWY 31, Amdt 1 Kountze/Silsbee, TX, Hawthorne Field, RNAV

(GPS)RWY 13, Orig Kountze/Silsbee, TX, Hawthorne Field, NDB RWY 13, Amdt 3 Kountze/Silsbee, TX, Hawthorne Field, Takeoff Minimums and Obstacle DP, Orig Luray, VA, Luray Caverns, NDB-A, Amdt 6 Luray, VA, Luray Caverns, RNAV

(GPS)RWY 22, Orig Luray, VA, Luray Caverns, GPS RWY 22, Amdt 1, CANCELLED Pasco, WA, Tri-Cities, ILS OR LOC RWY 21R, Amdt 11A Pasco, WA, Tri-Cities, RNAV

(GPS)RWY 3L, Orig Pasco, WA, Tri-Cities, RNAV

(GPS)RWY 12, Orig Pasco, WA, Tri-Cities, RNAV

(GPS)RWY 30, Amdt 1 Pasco, WA, Tri-Cities, VOR RWY 21R, Amdt 5A Appleton, WI, Outagamie County Regional, ILS OR LOC RWY 3, Amdt 17 Effective 13 MAR 2008 Rockland, ME, Knox County Regional, ILS OR LOC RWY 13, Amdt 1C Waterville, MD, Waterville Robert LaFleur, ILS OR LOC RWY 5, Amdt 2B Seattle, WA, Boeing Field/King County Intl, RNAV

(GPS)Z RWY 13R, Orig-A Effective 10 APR 2008 Oroville, CA, Oroville Muni, NDB RWY 1, Amdt 3, CANCELLED Petaluma, CA, Petaluma Muni, VOR RWY 29, Orig, CANCELLED Red Bluff, CA, Red Bluff Muni, NDB RWY 33, Amdt 2A, CANCELLED Burlington, VT, Burlington Intl, ILS OR LOC/DME RWY 33, Amdt 1 Burlington, VT, Burlington Intl, Takeoff Minimums and Obstacle DP, Amdt 12 Newport, VT, Newport State, NDB-A, Amdt 3, CANCELLED The FAA published an Amendment in Docket No. 30583, Amdt No. 3247 to Part 97 of the Federal Aviation Regulations (Vol 72, FR No. 239, Page 70774; dated December 13, 2007) under section 97.29 effective 14 February 2008, which is hereby rescinded as follows: Cahokia/St Louis, IL, St Louis Downtown, ILS OR LOC RWY 30L, Amdt 9 [FR Doc. E8-853 Filed 1-23-08; 8:45 am] BILLING CODE 4910-13-P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 97 [Docket No. 30588; Amdt. No. 3252] Standard Instrument Approach Procedures, and Takeoff Minimums and Obstacle Departure Procedures; Miscellaneous Amendments AGENCY: Federal Aviation Administration (FAA), DOT. ACTION: Final rule. SUMMARY: This Rule establishes, amends, suspends, or revokes Standard Instrument Approach Procedures (SIAPs) and associated Takeoff Minimums and Obstacle Departure Procedures for operations at certain airports. These regulatory actions are needed because of the adoption of new or revised criteria, or because of changes occurring in the National Airspace System, such as the commissioning of new navigational facilities, adding new obstacles, or changing air traffic requirements. These changes are designed to provide safe and efficient use of the navigable airspace and to promote safe flight operations under instrument flight rules at the affected airports. DATES: This rule is effective January 24, 2008. The compliance date for each SIAP, associated Takeoff Minimums, and ODP is specified in the amendatory provisions. The incorporation by reference of certain publications listed in the regulations is approved by the Director of the Federal Register as of January 24, 2008. ADDRESSES: Availability of matters incorporated by reference in the amendment is as follows: *For Examination* — 1. FAA Rules Docket, FAA Headquarters Building, 800 Independence Avenue, SW., Washington, DC 20591; 2. The FAA Regional Office of the region in which the affected airport is located; 3. The National Flight Procedures Office, 6500 South MacArthur Blvd., Oklahoma City, OK 73169; or 4. The National Archives and Records Administration (NARA). For information on the availability of this material at NARA, call 202-741-6030, or go to: *http://www.archives.gov/federal_register/code_of_federal_regulations/ibr_locations.html* . *Availability* —All SIAPs and Takeoff Minimums and ODPs are available online free of charge. Visit *nfdc.faa.gov* to register. Additionally, individual SIAP and Takeoff Minimums and ODP copies may be obtained from: 1. FAA Public Inquiry Center (APA-200), FAA Headquarters Building, 800 Independence Avenue, SW., Washington, DC 20591; or 2. The FAA Regional Office of the region in which the affected airport is located. FOR FURTHER INFORMATION CONTACT: Harry J. Hodges, Flight Procedure Standards Branch (AFS-420), Flight Technologies and Programs Division, Flight Standards Service, Federal Aviation Administration, Mike Monroney Aeronautical Center, 6500 South MacArthur Blvd., Oklahoma City, OK 73169 (Mail Address: P.O. Box 25082, Oklahoma City, OK 73125) telephone:

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

(GPS)RWY 3, Orig-A Jonesboro, AR, Jonesboro Muni, ILS OR LOC RWY 23, Amdt 1 Jonesboro, AR, Jonesboro Muni, RNAV

(GPS)RWY 23, Orig Jonesboro, AR, Jonesboro Muni, RNAV

(GPS)RWY 31, Orig Jonesboro, AR, Jonesboro Muni, VOR RWY 23, Amdt 10 Morrilton, AR, Morrilton Muni, RNAV

(GPS)RWY 27, Orig Morrilton, AR, Morrilton Muni, NDB OR GPS RWY 27, Orig, CANCELLED Morrilton, AR, Morrilton Muni, Takeoff Minimums and Obstacle ODP, Orig North Little Rock, AR, North Little Rock Muni, RNAV

(GPS)RWY 5, Amdt 1 Beckwourth, CA, Nervino, RNAV

(GPS)Z RWY 25, Orig-A Placerville, CA, Placerville, RNAV

(GPS)RWY 5, Orig Placerville, CA, Placerville, GPS RWY 5, Amdt 1A, CANCELLED Placerville, CA, Placerville, Takeoff Minimums and Obstacle DP, Amdt 2 Windsor Locks, CT, Bradley Intl, Takeoff Minimums and Obstacle DP, Amdt 2 Blakely, GA, Early County, LOC/NDB RWY 23, Amdt 1 Blakely, GA, Early County, Takeoff Minimums and Obstacle DP, Orig Douglas, GA, Douglas Muni, ILS OR LOC RWY 4, Amdt 1 Douglas, GA, Douglas Muni, RNAV

(GPS)RWY 4, Orig Douglas, GA, Douglas Muni, RNAV

(GPS)RWY 22, Orig Douglas, GA, Douglas Muni, GPS RWY 4, Orig-B, CANCELLED Douglas, GA, Douglas Muni, GPS RWY 22, Orig-B, CANCELLED Norton, KS, Norton Muni, Takeoff Minimums and Obstacle DP, Amdt 1 Danville, KY, Stuart Powell Field, Takeoff Minimums and Obstacle DP, Orig New Orleans, LA, Louis Armstrong New Orleans Intl, ILS OR LOC RWY 28, Amdt 7 New Orleans, LA, Louis Armstrong New Orleans Intl, RNAV

(GPS)RWY 28, Amdt 1 Hagerstown, MD, Hagerstown Regional/Richard A. Henson Field, ILS OR LOC RWY 27, Amdt 9 Albuquerque, NM, Double Eagle II, Takeoff Minimums and Obstacle DP, Amdt 1 Las Vegas, NV, North Las Vegas, Takeoff Minimums and Obstacle DP, Amdt 3 Tulsa, OK, Richard Lloyd Jones JR, VOR/DME-A, Amdt 7 Factoryville, PA, Seamans Field, RNAV

(GPS)RWY 4, Orig Factoryville, PA, Seamans Field, Takeoff Minimums and Obstacle, DP Amdt 2 Factoryville, PA, Seamans Field, VOR OR GPS-A, Amdt 1, CANCELLED Grove City, PA, Grove City, Takeoff Minimums and Obstacle DP, Amdt 3 Brady, TX, Curtis Field, RNAV

(GPS)RWY 17, Orig Brady, TX, Curtis Field, RNAV

(GPS)RWY 35, Orig Brady, TX, Curtis Field, NDB RWY 17, Amdt 4 Brady, TX, Curtis Field, GPS RWY 17, Orig, (CANCELLED) Brady, TX, Curtis Field, Takeoff Minimums and Obstacle ODP, Orig Cleburne, TX, Cleburne Muni, RNAV

(GPS)RWY 15, Orig Cleburne, TX, Cleburne Muni, RNAV

(GPS)RWY 33, Orig Cleburne, TX, Cleburne Muni, VOR/DME RNAV RWY 15, Orig-A, CANCELLED Cleburne, TX, Cleburne Muni, VOR/DME RNAV RWY 33, Orig, CANCELLED Cleburne, TX, Cleburne Muni, Takeoff Minimums and Obstacle ODP, Orig New Braunfels, TX, New Braunfels Muni, RNAV

(GPS)RWY 13, Orig New Braunfels, TX, New Braunfels Muni, RNAV

(GPS)RWY 17, Orig New Braunfels, TX, New Braunfels Muni, RNAV

(GPS)RWY 31, Orig New Braunfels, TX, New Braunfels Muni, RNAV

(GPS)RWY 35, Amdt 2 New Braunfels, TX, New Braunfels Muni, GPS RWY 13, Orig-B, CANCELLED New Braunfels, TX, New Braunfels Muni, GPS RWY 17, Amdt 1, CANCELLED New Braunfels, TX, New Braunfels Muni, GPS RWY 31, Amdt 1, CANCELLED New Braunfels, TX, New Braunfels Muni, VOR/DME RNAV RWY 31, Orig-A, CANCELLED San Antonio, TX, Stinson Muni, RNAV

(GPS)RWY 32, Orig San Antonio, TX, Stinson Muni, VOR RWY 32, Amdt 14 San Antonio, TX, Stinson Muni, Takeoff Minimums and Obstacle DP, Amdt 2 Effective 13 MAR 2008 Rockland, ME, Knox County Regional, ILS OR LOC RWY 13, Amdt 1C Harbor Springs, MI, Harbor Springs, RNAV

(GPS)RWY 10, Amdt 1 Harbor Springs, MI, Harbor Springs, RNAV

(GPS)RWY 28, Amdt 2 Harbor Springs, MI, Harbor Springs, Takeoff Minimums and Obstacle DP, Amdt 2 Greenville, MS, Mid Delta Regional, ILS OR LOC RWY 18L, Amdt 9C Wadsworth, OH, Wadsworth Muni, RNAV

(GPS)RWY 2, Amdt 1 Wadsworth, OH, Wadsworth Muni, RNAV

(GPS)RWY 20, Amdt 1 Wadsworth, OH, Wadsworth Muni, VOR/DME-A, Amdt 2 Clarion, PA, Clarion County, VOR-A, Amdt 3 Effective 10 APR 2008 Marshall, AK, Marshall Don Hunter Sr, RNAV (GPS)-A, Amdt 1 Marshall, AK, Marshall Don Hunter Sr, RNAV

(GPS)RWY 7, Amdt 1 Centre, AL, Centre-Piedmont Cherokee County Rgnl, RNAV

(GPS)RWY 7, Orig Centre, AL, Centre-Piedmont Cherokee County Rgnl, RNAV

(GPS)RWY 25, Orig Centre, AL, Centre-Piedmont Cherokee County Rgnl, Takeoff Minimums and Obstacle DP, Orig Leadville, CO, Lake County, Takeoff Minimums and Obstacle DP, Amdt 2 Olive Branch, MS, Olive Branch, ILS OR LOC RWY 18, Amdt 2 Effective 05 JUN 2008 Fargo, ND, Hector International, RADAR-1, Amdt 11, CANCELLED [FR Doc. E8-1015 Filed 1-23-08; 8:45 am] BILLING CODE 4910-13-P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 97 [Docket No. 30589; Amdt. No. 3253] Standard Instrument Approach Procedures; Miscellaneous Amendments AGENCY: Federal Aviation Administration (FAA), DOT. ACTION: Final rule. SUMMARY: This rule amends Standard Instrument Approach Procedures (SIAPs) for operations at certain airports. These regulatory actions are needed because of changes in the National Airspace System, such as the commissioning of new navigational facilities, adding of new obstacles, or changing air traffic requirements. These changes are designed to provide safe and efficient use of the navigable airspace and to promote safe flight operations under instrument flight rules at the affected airports. DATES: This rule is effective January 24, 2008. The compliance date for each SIAP is specified in the amendatory provisions. The incorporation by reference of certain publications listed in the regulations is approved by the Director of the Federal Register as of January 24, 2008. ADDRESSES: Availability of matter incorporated by reference in the amendment is as follows: *For Examination—* 1. FAA Rules Docket, FAA Headquarters Building, 800 Independence Avenue, SW., Washington, DC 20591; 2. The FAA Regional Office of the region in which the affected airport is located; 3. The National Flight Procedures Office, 6500 South MacArthur Blvd., Oklahoma City, OK 73169 or, 4. The National Archives and Records Administration (NARA). For information on the availability of this material at NARA, call 202-741-6030, or go to: *http://www.archives.gov/federal_register/code_of_federal_regulations/ibr_locations.html* . *Availability* —All SIAPs are available online free of charge. Visit nfdc.faa.gov to register. Additionally, individual SIAP and Takeoff Minimums and ODP copies may be obtained from: 1. FAA Public Inquiry Center (APA-200), FAA Headquarters Building, 800 Independence Avenue, SW., Washington, DC 20591; or 2. The FAA Regional Office of the region in which the affected airport is located. FOR FURTHER INFORMATION CONTACT: Harry J. Hodges, Flight Procedure Standards Branch (AFS-420), Flight Technologies and Programs Division, Flight Standards Service, Federal Aviation Administration, Mike Monroney Aeronautical Center, 6500 South MacArthur Blvd. Oklahoma City, OK 73169 (Mail Address: P.O. Box 25082 Oklahoma City, OK 73125) telephone:

(405)954-4164. SUPPLEMENTARY INFORMATION: This rule amends Title 14, Code of Federal Regulations, Part 97 (14 CFR part 97) by amending the referenced SIAPs. The complete regulatory description of each SIAP is listed on the appropriate FAA Form 8260, as modified by the National Flight Data Center (FDC)/Permanent Notice to Airmen (P-NOTAM), and is incorporated by reference in the amendment under 5 U.S.C. 552(a), 1 CFR part 51, and § 97.20 of Title 14 of the Code of Federal Regulations. The large number of SIAPs, their complex nature, and the need for a special format make their verbatim publication in the **Federal Register** expensive and impractical. Further, airmen do not use the regulatory text of the SIAPs, but refer to their graphic depiction on charts printed by publishers of aeronautical materials. Thus, the advantages of incorporation by reference are realized and publication of the complete description of each SIAP contained in FAA form documents is unnecessary. This amendment provides the affected CFR sections and specifies the types of SIAP and the corresponding effective dates. This amendment also identifies the airport and its location, the procedure and the amendment number. The Rule This amendment to 14 CFR part 97 is effective upon publication of each separate SIAP as amended in the transmittal. For safety and timeliness of change considerations, this amendment incorporates only specific changes contained for each SIAP as modified by FDC/P-NOTAMs. The SIAPs, as modified by FDC P-NOTAM, and contained in this amendment are based on the criteria contained in the U.S. Standard for Terminal Instrument Procedures (TERPS). In developing these changes to SIAPs, the TERPS criteria were applied only to specific conditions existing at the affected airports. All SIAP amendments in this rule have been previously issued by the FAA in a FDC NOTAM as an emergency action of immediate flight safety relating directly to published aeronautical charts. The circumstances which created the need for all these SIAP amendments requires making them effective in less than 30 days. Because of the close and immediate relationship between these SIAPs and safety in air commerce, I find that notice and public procedure before adopting these SIAPs are impracticable and contrary to the public interest and, where applicable, that good cause exists for making these SIAPs effective in less than 30 days. Conclusion The FAA has determined that this regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore—(1) is not a “significant regulatory action” under Executive Order 12866;

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

(3)does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. For the same reason, the FAA certifies that this amendment will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. List of Subjects in 14 CFR Part 97 Air Traffic Control, Airports, Incorporation by reference, and Navigation (Air). Issued in Washington, DC, on January 11, 2008. James J. Ballough, Director, Flight Standards Service. Adoption of the Amendment Accordingly, pursuant to the authority delegated to me, Title 14, Code of Federal regulations, Part 97, 14 CFR part 97, is amended by amending Standard Instrument Approach Procedures, effective at 0901 UTC on the dates specified, as follows: PART 97—STANDARD INSTRUMENT APPROACH PROCEDURES 1. The authority citation for part 97 continues to read as follows: Authority: 49 U.S.C. 106(g), 40103, 40106, 40113, 40114, 40120, 44502, 44514, 44701, 44719, 44721-44722. 2. Part 97 is amended to read as follows: §§ 97.23, 97.25, 97.27, 97.29, 97.33, and 97.35 [Amended] By Amending: § 97.23 VOR, VOR/DME, VOR or TACAN, and VOR/DME or TACAN; § 97.25 LOC, LOC/DME, LDA, LDA/DME, SDF, SDF/DME; § 97.27 NDB, NDB/DME; § 97.29 ILS, ILS/DME, ISMLS, MLS/DME, MLS/RNAV; § 97.31 RADAR SIAPs; § 97.33 RNAV SIAPs; and § 97.35 COPTER SIAPs, Identified as follows: Effective Upon Publication FDC date State City Airport FDC number Subject 01/07/08 AK JUNEAU JUNEAU INTL 8/0472 LDA X RWY 8, AMDT 11A. [FR Doc. E8-1012 Filed 1-23-08; 8:45 am] BILLING CODE 4910-13-P DEPARTMENT OF HEALTH AND HUMAN SERVICES Food and Drug Administration 21 CFR Parts 510 and 520 Oral Dosage Form New Animal Drugs; Clindamycin AGENCY: Food and Drug Administration, HHS. ACTION: Final rule. SUMMARY: The Food and Drug Administration

(FDA)is amending the animal drug regulations to reflect approval of an abbreviated new animal drug application (ANADA) filed by Novopharm Ltd. The ANADA provides for the veterinary prescription use of clindamycin hydrochloride oral capsules in dogs for the treatment of various infections due to susceptible bacterial pathogens. DATES: This rule is effective January 24, 2008. FOR FURTHER INFORMATION CONTACT: John K. Harshman, Center for Veterinary Medicine (HFV-104), Food and Drug Administration, 7500 Standish Pl., Rockville, MD 20855, 240-276-9808, e-mail: *john.harshman@fda.hhs.gov* . SUPPLEMENTARY INFORMATION: Novopharm Ltd., 30 Novopharm Ct., Toronto, Ontario, Canada M1B 2K9, filed ANADA 200-383 that provides for the veterinary prescription use of CLINDAROBE (clindamycin hydrochloride) Capsules in dogs for the treatment of various infections due to susceptible bacterial pathogens. Novopharm Ltd.'s CLINDAROBE Capsules is approved as a generic copy of Pharmacia & Upjohn Co.'s ANTIROBE Capsules, approved under NADA 120-161. The ANADA is approved as of December 19, 2007, and 21 CFR 520.446 is amended to reflect the approval. In addition, Novopharm Ltd. has not been previously listed in the animal drug regulations as a sponsor of an approved application. At this time, 21 CFR 510.600(c) is being amended to add entries for the firm. In accordance with the freedom of information provisions of 21 CFR part 20 and 21 CFR 514.11(e)(2)(ii), a summary of safety and effectiveness data and information submitted to support approval of this application may be seen in the Division of Dockets Management (HFA-305), Food and Drug Administration, 5630 Fishers Lane, rm. 1061, Rockville, MD 20852, between 9 a.m. and 4 p.m., Monday through Friday. FDA has determined under 21 CFR 25.33(a)(1) that this action is of a type that does not individually or cumulatively have a significant effect on the human environment. Therefore, neither an environmental assessment nor an environmental impact statement is required. This rule does not meet the definition of “rule” in 5 U.S.C. 804(3)(A) because it is a rule of “particular applicability.” Therefore, it is not subject to the congressional review requirements in 5 U.S.C. 801-808. List of Subjects 21 CFR Part 510 Administrative practice and procedure, Animal drugs, Labeling, Reporting and recordkeeping requirements. 21 CFR Part 520 Animal drugs. Therefore, under the Federal Food, Drug, and Cosmetic Act and under authority delegated to the Commissioner of Food and Drugs and redelegated to the Center for Veterinary Medicine, 21 CFR parts 510 and 520 are amended as follows: PART 510—NEW ANIMAL DRUGS 1. The authority citation for 21 CFR part 510 continues to read as follows: Authority: 21 U.S.C. 321, 331, 351, 352, 353, 360b, 371, 379e. 2. Section 510.600 is amended in the table in paragraph (c)(1) by alphabetically adding a new entry for “Novopharm Ltd.” and in the table in paragraph (c)(2) by numerically adding a new entry for “043806” to read as follows: § 510.600 Names, addresses, and drug labeler codes of sponsors of approved applications.

(c)* * *

(1)* * * Firm name and address Drug labeler code * * * * * Novopharm Ltd., 30 Novopharm Ct., Toronto, Ontario, Canada M1B 2K9 043806 * * * * *

(2)* * * Drug labeler code Firm name and address * * * * * 043806 Novopharm Ltd., 30 Novopharm Ct., Toronto, Ontario, Canada M1B 2K9 * * * * * PART 520—ORAL DOSAGE FORM NEW ANIMAL DRUGS 3. The authority citation for 21 CFR part 520 continues to read as follows: Authority: 21 U.S.C. 360b. 4. In § 520.446, add paragraphs (a)(3) and (b)(3) to read as follows: § 520.446 Clindamycin capsules and tablets.

(a)* * *

(3)Each capsule contains the equivalent of 25, 75, or 150 mg clindamycin as the hydrochloride salt.

(b)* * *

(3)No. 043806 for use of tablets described in paragraph (a)(3) of this section. Dated: January 14, 2008. Bernadette Dunham, Director, Center for Veterinary Medicine. [FR Doc. E8-1199 Filed 1-23-08; 8:45 am] BILLING CODE 4160-01-S DEPARTMENT OF STATE 22 CFR Part 51 RIN 1400-AC28 [Public Notice: 6071] Passports; Correction AGENCY: Department of State. ACTION: Final rule; correction. SUMMARY: This document contains a correction to the revised Passport rule published in the **Federal Register** on November 19, 2007, 72 FR 64930. DATES: Effective on February 1, 2008. FOR FURTHER INFORMATION CONTACT: Consuelo Pachon, Office of Legal Affairs and Law Enforcement Liaison, Bureau of Consular Affairs, 2100 Pennsylvania Avenue, NW., Suite 3000, Washington, DC., telephone number 202-663-2431. Background The rule reorganizes, restructures, and updates the passport regulations in order to make them easier for users to access the information, to better reflect current practice and changes in statutory authority, and to remove outdated provisions. Need for Correction The final passport rule published on November 19, 2007 erroneously labels two sentences in the rule contained in 22 CFR 51.21(b) and

(c)as a “Note.” This correction deletes the labels “Note” and corrects the numbering of the two provisions. Correction The final passport rule published on November 19, 2007 (72 FR 64930) is corrected as follows: 1. On page 64933, 22 CFR part 51.21 is corrected by making the following correcting amendments: PART 51—PASSPORTS Section 51.21(b) and

(c)is revised to read as follows: § 51.21 Execution of passport application.

(b)*Application by mail—persons in the United States.*

(1)A person in the United States who previously has been issued a passport valid for 10 years in his or her own name may apply for a new passport by filling out, signing and mailing an application on the form prescribed by the Department if:

(i)The most recently issued previous passport was issued when the applicant was 16 years of age or older;

(ii)The application is made not more than 15 years following the issue date of the previous passport, except as provided in paragraph

(e)of this section; and

(iii)The most recently issued previous passport of the same type is submitted with the new application.

(2)The applicant must also provide photographs as prescribed by the Department and pay the applicable fees prescribed in the Schedule of Fees for Consular Services (22 CFR 22.1).

(c)*Application by mail—persons abroad.*

(1)A person in a foreign country where the Department has authorized a post to receive passport applications by mail who previously has been issued a passport valid for 10 years in his or her own name may apply for a new passport in that country by filling out, signing and mailing an application on the form prescribed by the Department if:

(i)The most recently issued previous passport was issued when the applicant was 16 years of age or older;

(ii)The application is made not more than 15 years following the issue date of the previous passport, except as provided in paragraph

(e)of this section; and

(iii)The most recently issued previous passport of the same type is submitted with the new application.

(2)The applicant must also provide photographs as prescribed by the Department and pay the applicable fees prescribed in the Schedule of Fees for Consular Services (22 CFR 22.1). Dated: January 18, 2008. Ann Barrett, Deputy Assistant Secretary, Bureau of Consular Affairs, Department of State. [FR Doc. E8-1205 Filed 1-23-08; 8:45 am] BILLING CODE 4710-06-P DEPARTMENT OF HOMELAND SECURITY Coast Guard 33 CFR Part 165 [USCG-2007-0169] RIN 1625-AA00 Safety Zone: Trent River Between New Bern and James City, NC AGENCY: Coast Guard, DHS. ACTION: Temporary final rule. SUMMARY: The Coast Guard will establish a safety zone on the waters of the Trent River between New Bern and James City, North Carolina in the vicinity of the U.S. Route 70 Highway Swing Bridge. This safety zone is necessary to provide for the safety of life on navigable waters during the movement of bridge construction equipment from the southern end of the bridge construction project to the northern end of the project. DATES: This rule is effective from 10 a.m. on January 8, 2008 through 2 p.m. on January 24, 2008. ADDRESSES: Documents indicated in this preamble as being available in the docket are part of docket USCG-2007-0169 and are available for inspection or copying at Sector North Carolina 2301 East Fort Macon Road Atlantic Beach, NC 28512 between 8 a.m. and 4 p.m., Monday through Friday, except Federal holidays. FOR FURTHER INFORMATION CONTACT: Commander Jennifer Williams, Prevention Department Head, United States Coast Guard Sector North Carolina at

(252)247-4570 or

(252)247-457046. SUPPLEMENTARY INFORMATION: Regulatory Information We did not publish a notice of proposed rulemaking

(NPRM)for this regulation. Under 5 U.S.C. 553(b)(B), the Coast Guard finds that good cause exists for not publishing an NPRM. The publishing of an NPRM would be impracticable and contrary to public interest since immediate action is needed to protect the maritime public from the hazards associated with this maintenance project. The necessary information to determine whether the construction poses a threat to persons and vessels was not provided with sufficient time to publish an NPRM. For the safety concerns noted, it is in the public interest to have this regulation in effect during the construction. Under 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause exists for making this rule effective less than 30 days after publication in the **Federal Register** . Delaying the effective date would be contrary to the public interest, since immediate action is needed to ensure the public's safety. Background and Purpose From 10 a.m. to 2 p.m. on each Tuesday, Wednesday, and Thursday from January 8, 2008 through January 24, 2008 Balfour Beatty Infrastructure Inc. will relocate construction equipment in the vicinity of the U.S. Route 70 Highway Swing Bridge from James City, NC to New Bern, NC. To provide for the safety of the public, the Coast Guard will temporarily restrict access to this section of the Trent River during equipment relocation. Discussion of Rule The Coast Guard is establishing a temporary safety zone that will extend from the Norfolk Southern Railroad Bridge and Union Point, New Bern, NC to the U.S. Route 17 Highway Bridge at James City, NC, latitude 35°05.8′ N, longitude 77°02.2′ W. This zone will require mariners to avoid entry into the area. Entry into the zone will not be permitted except as specifically authorized by the Captain of the Port or his designated representative. Regulatory Evaluation This rule is not a “significant regulatory action” under section 3(f) of Executive Order 12866, Regulatory Planning and Review, and does not require an assessment of potential costs and benefits under section 6(a)(3) of that Order. The Office of Management and Budget has not reviewed it under that Order. The Coast Guard expects the economic impact of this rule to be so minimal that a full Regulatory Evaluation is unnecessary. Although this regulation will restrict access to the regulated area, the effect of this rule will not be significant because:

(i)The safety zone will be in effect for a limited duration of time and

(ii)the Coast Guard will make notifications via maritime advisories so mariners can adjust their plans accordingly. Small Entities Under the Regulatory Flexibility Act (5 U.S.C. 601-612), we have considered whether this temporary final rule would have a significant economic impact on a substantial number of small entities. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000. The Coast Guard certifies under 5 U.S.C. 605(b) that this temporary final rule will not have a significant economic impact on a substantial number of small entities. Although the regulated area will apply to waters of the Trent River, the zone will not have a significant impact on small entities because the zone will only be in place for a limited duration of time and maritime advisories will be issued in advance to allow the public to adjust their plans accordingly. Assistance for Small Entities Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR (1-888-734-3247). The Coast Guard will not retaliate against small entities that question or complain about this rule or any policy or action of the Coast Guard. Collection of Information This rule calls for no new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). Federalism A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on State or local governments and would either preempt State law or impose a substantial direct cost of compliance on them. We have analyzed this temporary final rule under that Order and have determined that it does not have implications for federalism. Unfunded Mandates Reform Act The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 or more in any one year. Though this rule would not result in such expenditure, we do discuss the effects of this rule elsewhere in this preamble. Taking of Private Property This temporary final rule will not effect a taking of private property or otherwise have taking implications under Executive Order 12630, Governmental Actions and Interference with Constitutionally Protected Property Rights. Civil Justice Reform This rule meets applicable standards in sections 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden. Protection of Children We have analyzed this rule under Executive Order 13045, Protection of Children from Environmental Health Risks and Safety Risks. This rule is not an economically significant rule and would not create an environmental risk to health or risk to safety that might disproportionately affect children. Indian Tribal Governments This rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it would not have a substantial direct effect on one or more Indian tribes, or 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. Energy Effects We have analyzed this rule under Executive Order 13211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use. We have determined that it is not a “significant energy action” under that order because it is not a “significant regulatory action” under Executive Order 12866 and is not likely to have a significant adverse effect on the supply, distribution, or use of energy. The Administrator of the Office of Information and Regulatory Affairs has not designated it as a significant energy action. Therefore, it does not require a Statement of Energy Effects under Executive Order 13211. Technical Standards The National Technology Transfer and Advancement Act (NTTAA) (15 U.S.C. 272 note) directs agencies to use voluntary consensus standards in their regulatory activities unless the agency provides Congress, through the Office of Management and Budget, with an explanation of why using these standards would be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standards (e.g., specifications of materials, performance, design, or operation; test methods; sampling procedures; and related management systems practices) that are developed or adopted by voluntary consensus standards bodies. This rule does not use technical standards. Therefore, we did not consider the use of voluntary consensus standards. Environment We have analyzed this rule under Commandant Instruction M16475.lD and Department of Homeland Security Management Directive 5100.1, which guides the Coast Guard in complying with the National Environmental Policy Act of 1969

(NEPA)(42 U.S.C. 4321-4370f), and have concluded that there are no factors in this case that would limit the use of a categorical exclusion under section 2.B.2 of the Instruction. Therefore, this rule is categorically excluded, under figure 2-1, paragraph (34)(g), of the Instruction, from further environmental documentation. Under figure 2-1, paragraph (34)(g), of the Instruction, an “Environmental Analysis Check List” and a “Categorical Exclusion Determination” will be available in the docket where indicated under ADDRESSES . List of Subjects in 33 CFR Part 165 Harbors, Marine safety, Navigation (water), Reporting and recordkeeping requirements, Security measures, Waterways. Regulation For the reasons set out in the preamble, the Coast Guard amends 33 CFR part 165 as follows: PART 165—REGULATED NAVIGATION AREAS AND LIMITED ACCESS AREAS 1. The authority citation for part 165 continues to read as follows: Authority: 33 U.S.C. 1226, 1231; 46 U.S.C. Chapter 701; 50 U.S.C. 191, 195; 33 CFR 1.05-1, 6.04-1, 6.04-6 and 160.5; Pub. L. 107-295, 116 Stat. 2064; Department of Homeland Security Delegation No. 0170.1. 2. A temporary § 165.T05-901 is added to read as follows: § 165.T05-901 Safety Zone: Trent River between New Bern and James City, North Carolina.

(a)*Regulated area:* The following area is a safety zone: waters of the Trent River, from the Norfolk Southern Railroad Bridge and Union Point New Bern, NC to the U.S. Route 17 Highway Bridge at James City, NC, latitude 35°05.8′ N, longitude 77°02.2′ W. All coordinates reference Datum NAD 1983.

(b)*Definitions: Captain of the Port Representative* any Coast Guard commissioned, warrant, or petty officer who has been authorized by the Captain of the Port to act on his behalf.

(c)*Regulations:*

(1)In accordance with the general regulations in section 165.23 of this part, entry into this zone is prohibited unless authorized by the Captain of the Port or a Captain of the Port Representative. All vessel movement within the safety zone is prohibited except as specifically authorized by the Captain of the Port or a Captain of the Port Representative. The general requirements of section 165.23 also apply to this regulation.

(2)Persons or vessels requiring entry into or passage through any portion of the safety zone must first request authorization from the Captain of the Port, or his Representative, unless the Captain of the Port previously announced via Marine Safety Radio Broadcast on VHF Marine Band Radio channel 22 (157.1 MHz) that this regulation will not be enforced in that portion of the safety zone. The Captain of the Port can be contacted at telephone number

(252)247-4570 or

(252)247-4546, or by radio on VHF Marine Band Radio, channels 13 and 16.

(d)The Captain of the Port will notify the public of changes in the status of this zone by Marine Safety Radio Broadcast on VHF Marine Band Radio, Channel 22 (157.1 MHz).

(e)*Enforcement period:* This rule will be enforced from 10 a.m. to 2 p.m. each Tuesday, Wednesday, and Thursday from January 8, 2008 through January 24, 2008. Dated: December 14, 2007. G.D. Case, Commander, U.S. Coast Guard, Acting Captain of the Port North Carolina. [FR Doc. E8-1133 Filed 1-23-08; 8:45 am] BILLING CODE 4910-15-P LIBRARY OF CONGRESS Copyright Royalty Board 37 CFR Part 382 [Docket No. 2006-1 CRB DSTRA] Determination of Rates and Terms for Preexisting Subscription Services and Satellite Digital Audio Radio Services AGENCY: Copyright Royalty Board, Library of Congress. ACTION: Final rule and order. SUMMARY: The Copyright Royalty Judges are announcing their final determination of the rates and terms for the digital transmission of sound recordings and the reproduction of ephemeral recordings by preexisting satellite digital audio radio services for the period beginning on January 1, 2007, and ending on December 31, 2012. DATES: *Effective Date:* January 24, 2008. *Applicability Date:* The regulations apply to the license period January 1, 2007, through December 31, 2012. ADDRESSES: The final determination also is posted on the Copyright Royalty Board Web site at *http://www.loc.gov/crb/proceedings/2006-1/sdars-final-rates-terms.pdf* . FOR FURTHER INFORMATION CONTACT: Richard Strasser, Senior Attorney, or Gina Giuffreda, Attorney Advisor. Telephone:

(202)707-7658. Telefax:

(202)252-3423. SUPPLEMENTARY INFORMATION: I. Introduction This is a rate determination proceeding convened under 17 U.S.C. 803(b) and 37 CFR part 351. A Notice announcing commencement of proceeding with request for Petitions to Participate in such proceeding to determine the rates and terms of royalty payments under Sections 114 and 112 of the Copyright Act for the activities of preexisting subscription services (“PSS”) and preexisting satellite digital audio radio services (“SDARS”) was published in the **Federal Register** on January 9, 2006. 1 The rates and terms set in this proceeding apply to the period of January 1, 2008, through December 31, 2012 for PSS, and January 1, 2007, through December 31, 2012 for SDARS. 17 U.S.C. 804(b)(3)(B). The PSS royalty rates are provided in a separate order. For the SDARS, the instant order provides for a beginning rate of 6% of gross revenues, with increases during the term of the period. See *infra* at Section IV.C.3.d. 1 71 FR 1455, Docket No. 2006-1 CRB DSTRA. II. The Proceeding The following entities filed Petitions in response to the January 9, 2006 request for Petitions to Participate: SoundExchange, Music Choice, Muzak LLC, XM, Sirius, Royalty Logic, Inc. (“RLI”), and THP Capstar Acquisition d/b/a DMX Music (“DMX”). The Copyright Royalty Judges (“Judges”) dismissed Muzak as a party on January 10, 2007. 2 On August 21, 2006, the Judges referred a novel material question of substantive law regarding the universe of preexisting subscription services under 17 U.S.C. 114(j)(11) 3 to the Register of Copyrights. 4 On October 20, 2006, the Register transmitted a Memorandum Opinion to the Board that addressed the novel question of law. 5 The Register concluded that 2 Order Granting SoundExchange's Motion to Dismiss Muzak LLC, Docket No. 2006-1 CRB DSTRA. 3 Section 114(j)(11) of the Copyright Act defines the term “preexisting subscription service” to mean “a service that performs sound recordings by means of noninteractive audio-only subscription digital audio transmissions, which was in existence and was making such transmissions to the public for a fee on or before July 31, 1998, and may include a limited number of sample channels representative of the subscription service that are made available on a nonsubscription basis in order to promote the subscription service.” 17 U.S.C. 114(j)(11). 4 Order Granting in Part SoundExchange's Motion Requesting Referral of a Novel Question of Substantive Law and Denying Motion by THP Capstar Acquisition Corp. D/B/A DMX Music Requesting Proposed Briefing Schedule, Docket No. 2006-1 CRB DSTRA. In its motion SoundExchange contended that Sirius and DMX are not eligible for a statutory license for a “preexisting subscription service” because they are not the entities that were in existence and making digital audio transmissions on or before July 31, 1998, a requirement under Section 114 of the Copyright Act. *See* 71 FR at 64640. 5 The Register's Memorandum Opinion was published in the **Federal Register** on November 3, 2006. 71 FR 64639. for purposes of participating in a rate setting proceeding, the term “preexisting subscription service” is best interpreted as meaning the business entity which operates under the statutory license. A determination of whether DMX is the same service that was identified by the legislative history in 1998 and has operated continuously since that time requires a factual analysis that is beyond the scope of the Register's authority for questions presented under 17 U.S.C. 802(f)(1)(B). 71 FR 64640. Subsequently, Sirius presented its case solely as an SDARS and not as a PSS in the instant proceeding. DMX withdrew from participation in the proceeding on October 30, 2006. 6 Following an unsuccessful negotiation period, the then-remaining parties filed written direct statements on October 30, 2006 (SoundExchange, Music Choice, Sirius, and XM) and on November 21, 2006 (RLI), respectively. RLI withdrew from the proceeding on March 16, 2007. 7 Music Choice and SoundExchange settled on June 12, 2007. 8 The Judges published the settlement for public comment in the **Federal Register** on October 31, 2007 (72 FR 61585) and published a Final Rule relating to PSS on December 19, 2007 (72 FR 71795). 6 Notice by DMX, Inc. of its Withdrawal from Participation in the 2006 Copyright Royalty Board Proceeding Entitled “Adjustment of Rates and Terms for Preexisting Subscription and Satellite Digital Audio Radio Services,” Docket No. 2006-1 CRB DSTRA. 7 Notice by Royalty Logic, Inc. of Its Withdrawal from Participation in the 2006 Copyright Royalty Board Proceeding Entitled “Adjustment of Rates and Terms for Preexisting Subscription and Satellite Digital Audio Radio Services,” Docket No. 2006-1 CRB DSTRA. 8 Notice of Settlement, Docket No. 2006-1 CRB DSTRA (June 12, 2007). Discovery was followed by live testimony. Testimony was taken from June 4, 2007, to July 9, 2007. XM presented testimony of the following witnesses: Mr. Gary Parsons, Chairman of the Board, XM; Mr. Eric Logan, Executive Vice President of Programming, XM; Mr. Mark Vendetti, Senior Vice President of Corporate Finance, XM; Mr. Stephen Cook, Executive Vice President for Automotive, XM; and Mr. Anthony Masiello, Senior Vice President of Operations, XM. Sirius presented testimony from the following witnesses: Mr. Mel Karmazin, President and CEO, Sirius; Mr. Terrence Smith, Senior Vice President of Engineering, Sirius; Mr. Douglas Wilsterman, Senior Vice President and General Manager of the Automotive OEM Division, Sirius; Mr. Jeremy Coleman, Vice President and General Manager of Talk Entertainment and Information Programming, Sirius; Mr. Steven Cohen, Vice President of Sports Programming, Sirius; Mr. Steven Blatter, Senior Vice President of Music Programming, Sirius; Ms. Christine Heye, former Vice President, Research, Sirius; Mr. Michael Moore, Vice President, Customer Care and Sales Operations, Sirius; Mr. David J. Frear, Chief Financial Officer, Sirius; and Mr. Robert Law, Senior Vice President and General Manager of the Consumer Electronics Division, Sirius. XM and Sirius jointly presented testimony from the following witnesses: Dr. John R. Woodbury, Vice President, CRA International and Mr. J. Armand Musey, President and Partner, New Earth, LLC. SoundExchange presented testimony of the following witnesses: Dr. Yoram (Jerry) Wind, Professor of Marketing and a Lauder Professor, The Wharton School, University of Pennsylvania; Mr. Mark Eisenberg, Executive Vice President, Business and Legal Affairs, Global Digital Business Group, Sony BMG Music Entertainment; Ms. Barrie Kessler, Chief Operating Officer, SoundExchange, Inc.; Mr. Sean Butson, Chartered Financial Analyst and consultant; Mr. Edgar Bronfman, Jr., Chairman and CEO, Warner Music Group; Mr. Simon Renshaw, President, Strategic Artist Management; Dr. Janusz Ordover, Professor of Economics, New York University; Mr. Dan Navarro, singer, songwriter, recording artist; Mr. Edward Chemelewski, President, Blind Pig Records; Mr. Michael Kushner, Senior Vice President, Business and Legal Affairs, Atlantic Records; Mr. Lawrence Kenswil, President of Universal eLabs, a division of Vivendi Universal's Universal Music Group; Mr. Charles Ciongoli, Executive Vice President and Chief Financial Officer, Universal Music Group North America; Dr. Michael Pelcovits, Principal, Microeconomic Consulting & Research Associates, Inc. The remaining parties filed written rebuttal statements on July 24, 2007. The rebuttal phase of the trial occurred from August 15, 2007 to August 30, 2007. XM presented the rebuttal testimony of Mr. Vendetti. Sirius presented the rebuttal testimony of Mr. Karmazin and Mr. Frear. Sirius and XM presented the joint rebuttal testimony of Dr. Roger G. Noll, Professor Emeritus of Economics, Stanford University; Dr. Erich Joachimsthaler, CEO, Vivaldi Partners; Dr. George Benston, John H. Harlan Professor of Finance, Accounting and Economics at the Goizueta Business School and Professor of Economics, Emory University; Mr. Daryl Martin, Vice President, Consor Intellectual Assessment Management; Dr. John Hauser, Management Science Area Head and Kirin Professor of Marketing, Massachusetts Institute of Technology; Mr. Bruce Silverman, marketing consultant; and Dr. Woodbury. 9 9 The Services also sought to present the testimony of Professor William W. Fisher, III, but the Judges granted SoundExchange's motion to strike Professor Fisher's rebuttal testimony. 8/15/07 Tr. at 11. SoundExchange presented the rebuttal testimony of Mr. Ciongoli; Dr. Ordover; Mr. Bruce Elbert, President, Application Technology Strategy, Inc.; Mr. Butson; Dr. Pelcovits; Mr. Eisenberg; Ms. Kessler; Dr. Wind; Dr. Steven Herscovici, Managing Principal, Analyst Group, Inc.; and Mr. George Mantis, President, The Mantis Group, Inc. At the close of the evidence, the record was closed. In addition to the written direct statements and written rebuttal statements, the Judges heard 26 days of testimony, which filled over 7,700 pages of transcript, and over 230 exhibits were admitted. The docket contains over 400 pleadings, motions, and orders. On October 1, 2007, after the evidentiary phase of the proceeding, the participants filed Proposed Findings of Fact and Conclusions of Law. Participants filed replies on October 11, 2007. Closing arguments occurred on October 17, 2007. On December 3, 2007, the Copyright Royalty Judges issued the Initial Determination of Rates and Terms. Pursuant to 17 U.S.C. 803(c)(2) and 37 CFR part 353, SoundExchange filed a Motion for Rehearing. The Judges requested the SDARS to respond to the motion, which they did in a timely fashion. Having reviewed SoundExchange's motion and the SDARS' response, the Judges denied the motion for rehearing. Order Denying Motion for Rehearing, In the Matter of Determination of Rates and Terms for Preexisting Subscription Services and Satellite Digital Audio Radio Services, Docket No. 2006-1 CRB DSTRA (January 8, 2008). As reviewed in said Order, none of the grounds in the motion presented the type of exceptional case where the Initial Determination is not supported by the evidence. 17 U.S.C. 803(c)(2)(A); 37 CFR 353.1 and 353.2. The motion did not meet the required standards set by statute, by regulation and by case law. Nevertheless, the Judges were persuaded to clarify one aspect of the definition of Gross Revenues. Specifically, the Judges are adding the phrase “offered for a separate charge” to the regulatory language of subsection (3)(vi)(A) of the definition of Gross Revenues at § 382.11 to make clear that this portion of the definition dealing with data services does not contemplate an exclusion of revenues from such data services, where such data services are not offered for a separate charge from the basic subscription product's revenues. III. The Statutory Standards for Determining Royalty Rates Section 801(b)(1) of the Copyright Act, 17 U.S.C., provides that the Copyright Royalty Judges shall “make determinations and adjustments of reasonable terms and rates of royalty payments” for the statutory licenses set forth in Sections 112(e) and 114. 10 The section then prescribes that the royalty rates applicable under Section 114(f)(1)(B), which is the performance license for sound recordings at issue in this proceeding, shall be calculated to achieve the following objectives: 11 10 The “reasonable” rates and terms requirement also applies to the statutory licenses set forth in 17 U.S.C. 115, 116, 118, 119, and 1004. Though the Section 119 license is referenced, there is currently no rate adjustment provided in the Copyright Act for that license. 11 We note that the Section 801(b)(1) objectives, or factors, do not apply to the Section 112(e) license. For a discussion of this license's applicability to this proceeding, *see infra* at Section IV.D.

(A)To maximize the availability of creative works to the public.

(B)To afford the copyright owner a fair return for his or her creative work and the copyright user a fair income under existing economic conditions.

(C)To reflect the relative roles of the copyright owner and the copyright user in the product made available to the public with respect to relative creative contribution, technological contribution, capital investment, cost, risk, and contribution to the opening of new markets for creative expression and media for their communication.

(D)To minimize any disruptive impact on the structure of the industries involved and on generally prevailing industry practices. 17 U.S.C. 801(b)(1). Because of the importance of this language to our determination, the Copyright Royalty Judges undertake the following comprehensive review of the provisions and their interpretation. A. Legislative Background The Section 801(b)(1) factors owe their origin to the legislative process that produced the Copyright Act of 1976. The 1976 Act created three new statutory licenses 12 —cable, jukebox and noncommercial broadcasting—and established the Copyright Royalty Tribunal to adjust rates and terms and make royalty distributions to copyright owners where appropriate. An examination of the legislative history of the 1976 Act reveals that the motivation for adopting the Section 801(b)(1) factors arose from an exchange between Professor Ernest Gellhorn, on behalf of certain copyright users, and Professor Louis H. Pollack, on behalf of certain copyright owners, concerning the constitutionality of the Copyright Royalty Tribunal. Professor Gellhorn recommended that in order to bolster the constitutionality of the Tribunal, the Congress should, *inter alia* , adopt statutory standards beyond the vague criterion of “reasonableness.” *Hearings on H.R. 2223 before the Subcomm. on Courts, Civil Liberties, and the Administration of Justice of the House Comm. on the Judiciary, 94th* Cong., 1922 (1975). The Register of Copyrights, in her second supplementary report on the general revision of the copyright laws later that year, disputed the constitutional concerns of Professor Gellhorn but concluded that it would be “wise to establish, in the statute, certain criteria beyond ‘reasonableness’ that each Panel is to apply to its decision-making.” *Second Supplementary Report of the Register of Copyrights on the General Revision of the U.S. Copyright Law* , Chapter XV, p. 31 (1975). The House Judiciary Committee, in its subsequent report on the Senate revision bill, took heed of the Register's advice and stated in the report (but not the bill), that “it is anticipated that the Commission 13 will consider the following objectives in determining a reasonable rate * * * ”: 12 The lone statutory license under the 1909 Copyright Act, the section 115 “mechanical” license for the making and distribution of phonorecords, was carried forward into the 1976 Act. 13 The House revision bill created a Copyright Royalty Commission, whereas the Senate revision bill created a Copyright Royalty Tribunal. The Senate nomenclature was used in the final bill.

(1)The rate should maximize the availability of diverse creative works to the public.

(2)The rate should afford the copyright owner a fair income, or if the owner is not a person, a fair profit, under existing economic conditions, in order to encourage creative activity.

(3)The rate should not jeopardize the ability of the copyright user

(a)To earn a fair income, or if the user is not a person, a fair profit, under existing economic conditions, and

(b)To charge the consumer a reasonable price for the product.

(4)The rate should reflect the relative roles of the copyright owner and the copyright user in the product made available to the public with respect to relative contribution, technological contribution, capital investment, cost, risk, and contribution to the opening of new markets for creative expression and media for their communication.

(5)The rate should minimize any disruptive impact on the structure of the industries involved and on generally prevailing industry practices. H.R. Rep. No. 94-1476, at 173-174

(1976)(footnote added). The House and Senate Conference yielded the revision bill as enacted and set forth the Section 801(b)(1) factors in their current form. Unfortunately, the Conference Report does not offer any discussion of the final language. B. Prior Proceedings There have been three statutory license proceedings involving the reasonable rate standard and the Section 801(b)(1) factors: A Section 116 jukebox rate adjustment by the Copyright Royalty Tribunal; a Section 115 mechanical rate adjustment, also by the Tribunal; and a proceeding under the Copyright Arbitration Royalty Panel (“CARP”) system administered by the Librarian of Congress for preexisting subscription services under the same Section 114(f)(1)(B) statutory license involved in this proceeding. All three of these decisions were the subject of judicial review. 1. The 1980 Jukebox License Proceeding The Copyright Royalty Tribunal's first consideration of the reasonable rate standard and the Section 801(b)(1) factors involved the 1980 Adjustment of the Royalty Rate for Coin-Operated Phonorecord Players, better known as jukeboxes. 46 FR 884 (January 5, 1981). The Tribunal raised the $8 a year per jukebox fee that was set by statute in the 1976 Copyright Act to $50 per year phased in over a 2-year period. The rate remained in effect for a 10-year period from 1980 to 1990. While the Tribunal's decision was somewhat lengthy, its consideration and application of the standard and the Section 801(b)(1) factors was not. Coming in the last section of its decision and amounting to less than a page, the Tribunal applied the factors to the $50 rate it derived from its consideration of “marketplace analogies” and determined that the selected rate was consistent with each. 46 FR 889. In reviewing the Tribunal's decision, the U.S. Court of Appeals for the Seventh Circuit gave no attention to the Section 801(b)(1) factors or the Tribunal's application of them, focusing instead on the appropriateness of the Tribunal's choice of “marketplace analogies.” *Amusement & Music Operators Ass'n.* v. *Copyright Royalty Tribunal,* 676 F.2d 1144 (7th Cir. 1982). The Tribunal decision was upheld. 2. The 1981 Mechanical License Proceeding Less than one month after releasing the jukebox rate determination, the Tribunal issued its decision in the Adjustment of the Royalty Payable Under Compulsory License for Making and Distributing Phonorecords, better known as the mechanical license proceeding. 46 FR 10466 (February 3, 1981). The mechanical license requires payment to copyright owners of musical works (songwriters and music publishers) for the creation and distribution of phonorecords of their works. In a lengthy decision, the Tribunal nearly doubled the existing rates and established a complex system for future interim adjustments during the 7-year license period to reflect increases in the average list price of record albums. Unlike the jukebox proceeding, the Tribunal offered its views as to the ‘reasonable’ royalty standard and the Section 801(b)(1) factors. As to the ‘reasonable’ royalty standard, the Tribunal stated that “[i]t is our opinion that the term reasonable in the statute is of dominating importance in reaching a final determination in this proceeding.” 46 FR 10479. As to the meaning of the term “reasonable,” the Tribunal recalled Professor Gellhorn's and the Register of Copyrights' admonitions to the Congress to adopt standards in the 1976 Copyright Act and observed that “Congress drafted the (Section 801(b)(1)) criteria in the broadest terms that it could, consistent with its intent to prevent a challenge to the constitutionality of the Tribunal.” *Id.* (parenthetical added). The Tribunal went on and “conclude[d], consistent with its Congressional mandate, that this Tribunal's adjustment must set a “reasonable” mechanical royalty rate designed to achieve four objectives, set forth in Section 801 of the Act* * *” *Id.* The Tribunal then undertook an application of the record evidence to each of the Section 801(b)(1) factors and concluded that the 4 cent rate it had derived from the evidence and economic testimony of the parties satisfied all of the factors. *Id.* at 10479-81. The U.S. Court of Appeals for the District of Columbia Circuit upheld the Tribunal's determination of the rates, but set aside the Tribunal's mechanism for adjusting the rates within the licensing period as being beyond the Tribunal's statutory authority. *Recording Industry Ass'n. of America* v. *Copyright Royalty Tribunal,* 662 F.2d 1 (D.C. Cir. 1981). In reviewing the rates, the Court discussed the Section 801(b)(1) factors not in the context of the Tribunal's interpretation or application of them, but rather in terms of the judicial standard of review to be applied. The Court concluded at least three aspects of the factors increased the deference owed to the Tribunal's conclusions. First, subsections

(A)and (D)—the maximization of the availability of creative works to the public and minimization of disruption to the industries—“require determinations ‘of a judgmental or predictive nature,’ and the court must be aware that ‘a forecast of the direction in which the future public interest lies necessarily involves deductions based on the expert knowledge of the agency.’ ” *Id.* at 8 (citations omitted). Second, the Court noted that subsections

(B)and (C)—the fair return and income to owners and users and relative roles of owners and users in the product—call for policy choices that should be owed considerable deference. *Id.* at 8-9. Finally, the Court observed: [T]he statutory factors pull in opposing directions, and reconciliation of these objectives is committed to the Tribunal as part of its mandate to determine “reasonable” royalty rates. Both the House and Senate had originally passed bills whose only instruction to the Tribunal was to assure that the royalty rate was reasonable, although the House report had stated objectives that it “anticipated that the Commission will consider.” As part of the compromise that produced the final structure of the Tribunal, most of those objectives were written into the statute,* * *, but the Tribunal was not told which factors should receive higher priorities. To the extent that the statutory objectives determine a range of reasonable royalty rates that would serve all these objectives adequately but to differing degrees, the Tribunal is free to choose among those rates, and courts are without authority to set aside the particular rate chosen by the Tribunal if it lies within a “zone of reasonableness.” *Id.* at 9 (footnotes omitted). 3. The Digital Performance Right in Sound Recordings Proceeding The Tribunal never had occasion again to conduct a Section 801(b)(1) rate adjustment, and it was abolished in 1993 and replaced by the CARP scheme administered by the Librarian of Congress. Copyright Royalty Tribunal Reform Act of 1993, Pub. L. No. 103-198, 107 Stat. 2304. Subsequent to the Tribunal's abolition, Congress passed the Digital Performance Right in Sound Recordings Act of 1995, Pub. L. No. 104-39, 109 Stat. 336, which created the Section 114 digital performance right license that is the subject of this proceeding. Unlike prior statutory licenses where the Congress fixed the initial rates within the statute, the rates for the new digital performance right license were left to resolution by a CARP. The Librarian convened a CARP in 1997 for PSS and SDARS. The SDARS settled with copyright owners and withdrew from the proceeding, 14 and the CARP rendered a determination only with respect to the PSS. The Librarian reviewed the CARP's determination and rejected it with respect to the rate as well as to certain terms, and the U.S. Court of Appeals for the District of Columbia Circuit reviewed the Librarian's decision. The Court upheld the Librarian's rate determination but remanded certain terms adopted by the Librarian for lack of supporting evidence. *Recording Industry Ass'n of America, Inc.* v. *Librarian of Congress,* 176 F.3d 528, 532 (DC Cir. 1999). 14 The terms and conditions of the agreement were never publicly disclosed. While the CARP offered nothing by way of interpretation of the Section 801(b)(1) factors, it took a decidedly different approach from the Tribunal in applying them. Whereas the Tribunal first analyzed the economic benchmarks submitted by the parties, selected a royalty fee and then applied the factors sequentially to the record evidence to determine if the selected fee satisfied them, the CARP instead began its analysis with the factors. The CARP did not analyze the factors in order, instead beginning with subsection (C), followed by subsections (D),

(A)and then (B). Curiously, the CARP's consideration of the parties' benchmarks occurred under its consideration of subsection (B), the factor requiring a balancing of fair return to the copyright owner and fair income to the copyright user. Then, at the end of the determination, the CARP provided a less than one-page conclusion resolving all of the factors in favor of the PSS. *In re: Determination of Statutory License Terms and Rates for Certain Digital Subscription Transmissions of Sound Recordings, Report of the Copyright Arbitration Royalty Panel,* Docket No. 96-5 CARP DSTRA, p. 62 (November 28, 1997). The CARP's approach did not particularly vex the Librarian, but its terse conclusion that subsection (A)—maximization of creative works to the public—favored the PSS certainly did. There is no record evidence to support a conclusion that the existence of the digital transmission services stimulates the creative process. Instead, the Panel made observations concerning the development of another method for disseminating creative works to the public—a valid and vital consideration addressed in the statutory objective concerning the relative contributions from each party—but fails to discuss how the creation of a new mode of distribution will itself stimulate the creation of additional works. *Determination of Reasonable Rates and Terms for the Digital Performance of Sound Recordings (Final Rule and Order),* 63 FR 25394, 25406 (May 8, 1998) (codified at 37 CFR part 260) (“ *1998 PSS Rate Determination* ”). The Librarian also faulted the CARP for failing to reconcile its conclusion with the Tribunal's determination in the 1980 jukebox rate adjustment proceeding that jukeboxes did not contribute to the maximization of creative works to the public. *Id.* at 25406-7. As to the other Section 801(b)(1) factors, the Librarian affirmed the CARP's determination, but he concluded that an upward adjustment of the rate was necessary because he found that the CARP's reliance upon a single private license agreement offered as a benchmark and its subsequent manipulation of the license fee amounted to arbitrary action. *Id.* at 25409. The Librarian increased the 5% of annual revenues fee proposed by the CARP to 6.5%, stating that the 6.5% rate met all of the Section 801(b)(1) factors. *Id.* at 25410. Only the Recording Industry Association of America, Inc. (“RIAA”) challenged the Librarian's decision. In its petition for review, RIAA argued that the Librarian misinterpreted Section 801(b)(1) by equating “reasonable” royalty rates with those that are calculated to achieve the objectives of the Section 801(b)(1) factors. Rather, in RIAA's view, the statutory language imposes two separate requirements: the royalty fee must be

(1)a “reasonable copyright royalty rate,” and

(2)it must be then “calculated to achieve” the Section 801(b)(1) objectives. RIAA argued that a “reasonable copyright royalty rate” was one that affords fair market compensation, thus making market rates the starting point for application of the Section 801(b)(1) factors. *Recording Industry Ass'n of America, Inc.* v. *Librarian of Congress,* 176 F.3d 528, 532 (DC Cir. 1999). The U.S. Court of Appeals for the District of Columbia Circuit rejected RIAA's position, ruling that the Librarian's interpretation of the statute was permissible under *Chevron U.S.A., Inc.* v. *Natural Resources Defense Council, Inc.,* 467 U.S. 837 (1984). 176 F.3d at 533. The Court went further and observed: “Here, the Librarian determined that ‘reasonable rates’ are those that are calculated with reference to the four statutory criteria. This interpretation is not only permissible but, given that [Section] 114 rates are to be ‘calculated to achieve’ the four objectives of [Section] 801(b)(1), it is the most natural reading of the statute.” *Id.; see also,* 176 F.3d at 534 (“Because it was reasonable for the Librarian to find that the term ‘reasonable copyright royalty rates’ is defined by the four statutory objectives, there is no need to look to Tribunal precedent interpreting the term ‘reasonable rates’ in other contexts.”). The Court did not discuss the Librarian's application of the Section 801(b)(1) factors to the record evidence, but “den[ied] RIAA's petition for review with respect to the establishment of a 6.5 percent rate. *Id.* at 535. 15 15 The RIAA was successful in convincing the Court to vacate and remand the Librarian's determination with respect to terms on the grounds of lack of record evidence to support them. *Id.* at 536. C. Approach of the Copyright Royalty Judges Based upon the above discussion, the path for the Copyright Royalty Judges is well laid out. We shall adopt reasonable royalty rates that satisfy all of the objectives set forth in Section 801(b)(1)(A)-(D). In so doing, we begin with a consideration and analysis of the benchmarks and testimony submitted by the parties, and then measure the rate or rates yielded by that process against the statutory objectives to reach our decision. Section 114(f)(1)(B) also affords us the discretion to consider the relevance and probative value of any agreements for comparable types of digital audio transmission services that submit voluntary agreements under 17 U.S.C. 114(f)(1)(A). *See,* 17 U.S.C. 114(f)(1)(B) (“[I]n addition to the objectives set forth in Section 801(b)(1), the Copyright Royalty Judges *may* consider the rates and terms for comparable types of subscription digital audio transmission services and comparable circumstances under voluntary license agreements described in subparagraph (A).”) (emphasis added). IV. Determination of Royalty Rates A. Application of Section 114 and Section 112 Based on the applicable law and relevant evidence received in this proceeding, the Copyright Royalty Judges must determine rates for the Section 114 performance licenses and the associated Section 112 ephemeral reproduction licenses utilized by SDARS. As previously discussed, the Copyright Act requires that the Copyright Royalty Judges establish rates for the Section 114 license that are reasonable and calculated to achieve the following four specific policy objectives:

(A)To maximize the availability of creative works to the public;

(B)to afford the copyright owner a fair return for his creative work and the copyright user a fair income under existing economic conditions;

(C)to reflect the relative roles of the copyright owner and the copyright user in the product made available to the public with respect to relative creative contribution, technological contribution, capital investment, cost, risk, and contribution to the opening of new markets for creative expression and media for their communication; and

(D)to minimize any disruptive impact on the structure of the industries involved and on generally prevailing industry practices. 17 U.S.C. 114(f)(1)(B) and 17 U.S.C. 801(b)(1). With respect to the Section 112 license, the Copyright Act requires that the Copyright Royalty Judges establish rates for this license that most clearly represent those “that would have been negotiated in the marketplace between a willing buyer and a willing seller” and to take into account evidence presented on such factors as

(1)whether the use of the services may substitute for or promote the sale of phonorecords and

(2)whether the copyright owner or the service provider makes relatively larger contributions to the service ultimately provided to the consuming public with respect to creativity, technology, capital investment, cost and risk. 17 U.S.C. 112(e)(4). Having carefully considered the relevant law and the evidence received in this proceeding, the Copyright Royalty Judges determine that the appropriate Section 114 performance license rate is 6.0% of gross revenues for 2007 and 2008, 6.5% for 2009, 7.0% for 2010, 7.5% for 2011 and 8.0% for 2012 and, further, that the appropriate Section 112 reproduction license rate is deemed to be embodied in the Section 114 license rate. The applicable rate structure for the Section 114 license is the starting point for the Copyright Royalty Judges' determination. B. The Rate Proposals of the Parties and the Appropriate Royalty Structure for Section 114 Performance License Applicable To Sdars 1. Rate Proposals The contending parties present several alternative rate structures. In its second amended rate proposal, SoundExchange argues in favor of a monthly fee equal to the *greater of:* A percentage of gross revenues varying from 8% to 23% *or* a per subscriber rate varying from $0.85 per subscriber to $3.00 per subscriber. These applicable fees vary based on the actual number of subscriptions reported by the service. For example, the lowest fee (i.e., the greater of 8% of gross revenues or $0.85 per subscriber) would be applicable for a number of subscriptions equal to less than 9 million. At the opposite extreme, the highest fee (i.e., the greater of 23% of gross revenues or $3.00 per subscriber) would be applicable for a number of subscriptions equal to or more than 19 million. While proposing that the percent of revenues alternatives increase only in response to subscriber growth over the license period, SoundExchange proposes that the per subscriber alternatives associated with particular subscriber numbers would be additionally adjusted at the beginning of each year starting with January, 2008 by the change in the consumer price index (CPI-U) over the preceding 12 months ending on November 1. SoundExchange Second Amended Rate Proposal (July 24, 2007) at 1-4. Subsequently, SoundExchange defensively offered, in the alternative, a second “option” in which applicable rates would continue to vary with subscriber numbers but also would vary at each subscriber interval based on a per broadcast/per subscriber metric. For example, at the low end of this alternative proposal, if the number of subscriptions were equal to less than 9 million for an SDARS, $0.0000028 per subscriber would be applicable to each broadcast of a sound recording for the first 150,000 sound recordings broadcast each month and $0.0000008 per subscriber would be applicable to each broadcast of a sound recording thereafter. At the high end of this alternative, if the number of subscriptions were equal to more than 19 million for an SDARS, $0.00001 per subscriber would be applicable to each broadcast of a sound recording for the first 150,000 sound recordings broadcast each month and $0.000003 per subscriber would be applicable to each broadcast of a sound recording thereafter. With respect to this “option,” SoundExchange also proposes that the royalty rates associated with particular subscriber numbers would be additionally adjusted at the beginning of each year starting with January, 2008 by the change in the CPI-U over the preceding 12 months ending on November 1. SoundExchange Third Amended Rate Proposal (August 6, 2007) at 1-8. By contrast, XM and Sirius initially proposed only a percentage of revenues fee structure equal to 0.88% of a licensee's quarterly gross revenues resulting from residential services in the United States to be applicable for the duration of the 2007-2012 license period. XM Rate Proposal (January 17, 2007) at § 26_.3; Sirius Rate Proposal (January 17, 2007) at § 26_.3. This proposal was subsequently revised in an amended proposal 16 that called for the establishment in 2007 of a quarterly license fee of $1.20 per play 17 of a copyrighted sound recording during the quarter, with subsequent years of the license period beginning with 2008 adjusted each year by the percentage change in combined SDARS subscribers during the preceding year. XM Amended Rate Proposal (July 24, 2007) at § 3_.3; Sirius Amended Rate Proposal (July 24, 2007) at § 3_.3. A further revision of this proposal was submitted as the Services' Second Amended Proposal of Rates and Terms and provided for the establishment in 2007 of a quarterly license fee of $1.60 per play of a copyrighted sound recording during the quarter, again with subsequent years of the license period beginning with 2008 adjusted each year by the percentage change in combined SDARS subscribers during the preceding year. Second Amended Proposal of Rates and Terms of Sirius Satellite Radio Inc. and XM Satellite Radio Inc. (October 1, 2007) at § 3_.3. 16 While the XM and Sirius amended rate proposal omits any specific mention of a revenue basis, their chief economic expert, Dr. Woodbury, nevertheless supplies a revised estimate of his recommended revenue-based rate in the course of his rebuttal testimony and uses that revised revenue-based rate as the basis for the SDARS' amended and second amended “per play” proposals. At bottom then, the SDARS' amended rate proposal does not scrap its revenue basis, but rather simply translates the revenue-based recommendation of 1.20% into a per play rate by dividing the revenues that would be garnered from the application of the revised revenue-based rate by the total number of estimated compensable plays broadcast by the SDARS in 2006. This results in a per play rate of $1.20 in their amended proposal based on 2006 revenues and a per play rate of $1.60 in their second amended proposal based instead on 2007 revenue projections. Woodbury WRT at 22; SDARS PFF at ¶¶ 845-846. 17 “Play” is defined as the transmission of a sound recording by the SDARS, regardless of the number of listeners who tune in or listen to the transmission. XM Amended Rate Proposal (July 24, 2007) at § 3_.2(d); Sirius Amended Rate Proposal (July 24, 2007) at § 3_.2(d). In other words, while the parties on both sides initially proposed rates based on a percentage of gross revenues (albeit with somewhat different definitions of gross revenues), they both subsequently submitted royalty payment proposals that could generally be described as “per play” or “per broadcast” rates. However, their purposes in proposing “per play” or “per broadcast” rates differ. While admitting the likelihood of increased administrative costs, the SDARS maintain that their “per play” mechanism is superior to a revenue-based rate structure because:

(1)It allows the SDARS to respond to any substantial increases in fees by economizing on the use of music so as to reduce their payments and

(2)it preserves the incentives of the SDARS to acquire more attractive nonmusic programming or to improve the quality of their radio devices. Woodbury WRT at 21. SoundExchange, on the other hand, while recognizing that there are benefits to a per performance rate structure such as adopted by the Judges in the recently concluded webcasting proceeding 18 (i.e., where a performance refers to one play of one sound recording to a single listener at a time), also recognizes that its “per broadcast” alternative is not the functional equivalent of a per performance rate structure. As a result, SoundExchange admits that its “per broadcast” mechanism does not engender the benefits of the usage metric adopted in *Webcaster II* and, further, that it is inferior to a percentage of revenue structure. Pelcovits WRT at 19, 25-26. At bottom, SoundExchange's alternative proposal is submitted defensively to protect against the possibility that, notwithstanding these weaknesses, this Court might nevertheless settle upon a per play or per broadcast approach without reducing what SoundExchange identifies as “the most significant distortion in a static proposal of this nature”—the lack of proportionality between total listening and the number of broadcasts. Pelcovits WRT at 23. For this reason, SoundExchange offers a two-tier structure associated with seven specific subscriber intervals as part of its per broadcast/per subscriber proposal to help mitigate the potential adverse revenue impact of a decline in music broadcasts that is not fully matched by an equivalent decline in music listenership. Pelcovits WRT at 23-25. 18 *Digital Performance Right in Sound Recordings and Ephemeral Recordings (Final Rule and Order)* , 72 FR 24084 (May 1, 2007) (codified at 37 CFR part 380) (“Webcaster II”). 2. Rate Structure Because we have no true per performance fee proposal before us nor sufficient information from evidence of record to accurately transform any of the parties' proposals into a true per performance fee proposal, the Copyright Royalty Judges conclude that a revenue-based fee structure for the SDARS is the most appropriate fee structure applicable to these licensees. First, the absence of a true per performance fee proposal that seeks to tie payment directly to actual usage of the sound recording by the licensees makes all the various alternative fee proposals of the parties into proxies for a usage metric at best. Although revenue merely serves as a proxy for measuring the value of the rights used, so also do the per play and per broadcast alternatives offered by the parties. Neither of the parties' alternatives to a revenue-based metric really measures actual usage. The SDARS “per play” proposal makes no attempt to measure the number of listeners to any particular sound recording, but rather transforms the revenue-based metric into a “per play” metric by applying that revenue rate to the transmission of a sound recording without regard to the number of listeners who tune in or listen to the transmission. Woodbury WRT at 22 and XM Amended Rate Proposal (July 24, 2007) at § 3_.2(d); Sirius Amended Rate Proposal (July 24, 2007) at § 3_.2(d); Second Amended Proposal of Rates and Terms of Sirius Satellite Radio Inc. and XM Satellite Radio Inc. (October 1, 2007) at § 3_.2(d). Indeed, since the number of “plays” (i.e. transmission of a sound recording) for which the SDARS propose payment is not further related to the number of listeners to such transmissions, Dr. Woodbury admits that the per play rate is not even as good a proxy for usage as revenue without further annual adjustments for growth in subscribers. Woodbury WRT at 22. Similarly, the SoundExchange “per broadcast” rate proposal fails to relate royalty payments directly to usage. Even though the SoundExchange “per broadcast” proposal is tied to the number of SDARS subscribers, it remains, at best, a proxy for actual usage because, as Dr. Pelcovits admits, “subscribers” are not the functional equivalent of “listeners” and because the available data does not permit the precise determination of whether the music listened to by SDARS subscribers refers solely to the compensable sound recordings at question in this proceeding. Pelcovits WRT at Appendix at 1-3. In short, as Dr. Pelcovits states, “the per broadcast/per subscriber metric simply does not provide an accurate and dynamic measure of listening/consumption.” Pelcovits WRT at 25. Second, the advocates of the “per play” and “per broadcast” rate structures effectively admit that, as proxies for usage, such measures are no better than revenue-based measures, as shown by their attempts to use changes in general subscriber levels as a rough proxy for measuring the impact of changes in the number of listeners. For example, Dr. Woodbury, after noting that the “per-play payment does not account for any changes in aggregate music listening time during the license period,” suggests “accounting for such changes in an *approximate* way by increasing the per-play rate by the actual annual percentage change in the number of SDARS subscribers.” Woodbury WRT at 22 (emphasis added). Similarly, SoundExchange's “per broadcast/per subscriber” rate proposal, ultimately ties increases in royalty rates to the achievement of specific subscriber levels that are only roughly related to the actual number of listeners to any given sound recording. SoundExchange Third Amended Rate Proposal (August 6, 2007) at 5-7. In short, both parties ultimately focus on a major driver of revenue growth (i.e., subscriber growth) as a proxy for usage because, without this additional adjustment, “per play” and “per broadcast” metrics are clearly poorer substitutes for a usage-based metric compared to a percentage of revenue approach. Consequently, notwithstanding the various adjustments made by advocates of the “per play” or “per broadcast” proposals they remain inextricably focused on revenues. Moreover, because the adjustments suggested to improve the “per play” and “per broadcast” proposals result in additional ambiguities rather than more precision, these alternatives may be even less satisfactory proxies for a usage-based metric than the percentage of revenue approach. Third, upon careful review, we find that the SDARS' two proffered advantages of a “per play” metric as compared to a percentage of revenue measure are less advantageous than claimed. The SDARS argue that a “per play” rate provides the SDARS with more business flexibility because it allows them to respond to any substantial increases in fees by economizing on the plays of sound recordings so as to reduce their royalty costs. Woodbury WRT at 20; Karmazin WRT at 13. While the general proposition of enhancing business flexibility is usually advantageous (at least to the party obtaining such flexibility), the probability of obtaining the specific advantage described by Dr. Woodbury and Mr. Karmazin is reduced by the myriad of economic circumstances which must coalesce as necessary preconditions. 19 Further, the same flexibility may be achieved by other means. 20 At the same time, this business flexibility “advantage” raises serious questions of fairness precisely because the SDARS “per play” metric is a less than fully satisfactory proxy for listenership. Thus, fewer stations (ergo fewer plays) could be offered by the SDARS without a proportionate reduction in the number of transmissions actually heard. Under such circumstances, the copyright owner's per performance revenue would decline because of the shortcomings of the “per play” metric in question as a proxy for measuring actual usage. SX PFF at ¶¶ 1442-9. It is not fair to so clearly fail to properly value the performance rights at issue in this proceeding. Such a result is additionally at odds with the stated policy objective of the statute to afford the copyright owner a fair return for his creative work. 17 U.S.C. 801(b)(1). Similarly, the SDARS' contention that the adoption of a “per play” rate structure would preserve their incentives to improve the quality of their service (by leaving them with more revenue to acquire more attractive nonmusic programming or to improve the quality of their radio devices), is not an advantage equitably experienced by both parties. Rather, the advantage runs to the SDARS who stand to gain revenue while the copyright owner experiences a decline in the value of the performance rights at issue in this proceeding. Again, this is because number of plays can be reduced with a less than proportionate reduction in listenership. Furthermore, there is no guarantee that the SDARS will spend any additional revenue so acquired to improve the quality of their services; thus “preserving an incentive” is not the equivalent of insuring action of the type suggested by Dr. Woodbury based on that incentive. 19 From an economic point of view, for example, it would only make sense for the SDARS to reduce their use of music as an input in response to a royalty fee increase if the revenue they earned from the last dollar spent on music programming came to be outstripped by the revenue they earned from spending the same dollar on nonmusic programming. This assumes that a variety of relative revenue generation and relative input pricing circumstances have been simultaneously satisfied. 20 For example, in light of the definition of “gross revenues” herein below in this determination, the SDARS could offer wholly nonmusic programming as an additional, separately priced premium channel/service without having the revenues from such a premium channel/service become subject to the royalty rate and, thereby, achieve the desired flexibility of offering more lucrative nonmusic programming without sharing the revenues from that programming with the suppliers of sound recording inputs. In short, given that the two “advantages” of the “per play” approach stated by Dr. Woodbury are neither clear-cut nor of estimable likelihood, we are persuaded that the “countervailing consideration” of greater administrative costs raised by Dr. Woodbury clearly outweighs the tenuous benefits of the SDARS “per play” fee structure. SoundExchange in its proposed “per broadcast/per subscriber” approach attempts to mitigate some of the untoward effects of the SDARS “per play” approach through the addition of a two-tier fee structure that partially and indirectly addresses the absence of a true per performance measure reflective of actual listenership. However, we agree with Dr. Pelcovits that even as so modified, this approach still yields less than satisfactory results. Pelcovits WRT at 25 (“the per broadcast/per-subscriber [sic] metric simply does not provide an accurate and dynamic measure of listening/consumption”). Moreover, the tradeoff for this modest conceptual improvement in the “per play” fee structure is reliance on less than precise estimates of listenership and additional complexity in administration. On balance, then, we conclude that neither the SDARS' “per play” metric nor SoundExchange's “per broadcast/per subscriber” measure is superior to a revenue-based fee structure as a proxy for a true per performance fee structure for the services in this proceeding. Furthermore, a revenue-based fee structure at least offers clear administrative advantages to these parties and, therefore, reduced transactions costs compared to the “per play” and “per broadcast/per subscriber” alternatives proposed by the parties. Fourth, while in *Webcaster II* we concluded that the evidence in the record of that proceeding weighed in favor of a per performance usage fee structure for both commercial and noncommercial webcasters, we further suggested that, in the absence of some of the more egregious problems noted therein, the use of a revenue-based metric as a proxy for a usage-based metric might be reasonable. *Webcaster II* , 72 FR 24090. In particular, one of the more intractable problems associated with the revenue-based metrics proposed by the parties in *Webcaster II* , 72 FR 24090, was the parties' strong disagreement concerning the definition of revenue for *nonsubscription* services. This was further complicated by questions related to applying the same revenue-based metric to noncommercial as well as commercial services. *See Webcaster II* , 72 FR 24094 n.15. The same degree of difficulty is not presented by the applicable facts in this proceeding. The parties to this proceeding, at least initially, all proposed a revenue-based metric and, while there were some differences in the definition of revenues in their initial proposals, no party has submitted any evidence regarding the impossibility of applying or complying with a revenue-based metric. That is not surprising, inasmuch as the parties have until now lived under a revenue-based regime. Therefore the parties are most familiar, and perhaps most comfortable, with the operation of a revenue-based metric. The value of such familiarity lies in its contribution towards minimizing disputes and, concomitantly, keeping transactions costs in check. Because XM and Sirius are both commercial subscription services and music is an integral part of each subscription service, focusing on gross revenues attributable to those subscriptions or derived in connection with the use of music in SDARS programming (e.g., advertising or sponsorship revenues attributable to such programming) provides a straightforward method of relating music fees to the value of the rights being provided. For all of the above reasons, the Copyright Royalty Judges conclude that evidence in the record weighs in favor of a revenue-based fee structure for the SDARS. We find a sufficient clarity of evidence based on the record in this proceeding to produce a revenue-based metric that can serve as adequate proxy for a usage-based metric. Furthermore, there was no substantial evidence offered by any party to readily guide the calculation of a usage-based (i.e. per performance) metric as a substitute for the revenue-based approach long employed by the parties. Indeed, in stark contrast to the record in *Webcaster II* , neither the SDARS nor SoundExchange provided substantial evidence to indicate that a true per performance rate was susceptible of being calculated by the parties to this proceeding. Therefore, we find that a revenue-based measure is currently the most effective proxy for capturing the value of the performance rights at issue here, particularly in the absence of any substantial evidence of how some readily calculable true per performance metric could be applied to the SDARS. 3. Revenue Defined In order to properly implement a revenue-based metric, a definition of revenue that properly relates the fee to the value of the rights being provided is required. 21 Although the SDARS and SoundExchange offered somewhat different formulations of how revenue should be defined in their initial rate proposals, the parties offered little evidence to support their respective proposed definitions of revenue. SoundExchange proposed an expansive reading of revenue to include “all revenue paid or payable to an SDARS that arise from the operation of an SDARS service * * *” SoundExchange Third Amended Rate Proposal (August 6, 2007) at § 38_.2(g). However, SoundExchange offers scant evidentiary support for this particularly broad yet vague definition. The SDARS, by contrast, offer a definition of gross revenues that apparently seeks to largely adapt the existing PSS definition of gross revenues, 37 CFR 260.2(e), to the nature of current SDARS services. XM Rate Proposal (January 17, 2007) at § 26_.2(d); Sirius Rate Proposal (January 17, 2007) at § 26_.2(d). With one exception, we find that the SDARS “gross revenue” definition in their initial fee proposal more unambiguously relates the fee to the value of the sound recording performance rights at issue in this proceeding. For example, the SDARS definition of “gross revenues” excludes monies attributable to premium channels of nonmusic programming that are offered for a charge separate from the general subscription charge for the service. The separate fee generated for such nonmusic premium channels is not closely related to the value of the sound recording performance rights at issue in this proceeding. Therefore, this proposed exclusion serves to more clearly delineate the revenues related to the value of the sound recording performance rights at issue in this proceeding. 21 Dr. Ordover simply describes the main consideration as follows: “In sum, rates should reflect purchasers' willingness to pay for *music* content.” Ordover WDT at 21 (emphasis added). The one exception to the SDARS definition of revenues that fails to meet the test of unambiguously relating the fee to the value of the sound recording performance rights is the use of the SDARS definition of a Music Channel in two places in their gross revenue definition—once in connection with a limitation on advertising revenues and again in an exclusion of subscription revenues solely derived from nonmusic channels. The SDARS define Music Channels to mean channels where sound recordings constitute 50% or more of the programming at SDARS proposed regulation § 26_.2(f), but their gross revenue definition at SDARS proposed regulation § 26_.2(d)(vi)(B) also implies that nonmusic channels are channels that are characterized as those with only “incidental” performances of sound recordings. 22 Because the latter interpretation is more consistent with the test of unambiguously relating the fee to the value of the sound recording performance rights at issue in this proceeding and because the SDARS offer no substantial evidence to support their 50% breakpoint, we decline to adopt the more cramped position stated in the SDARS' proposed definition of a Music Channel. Rather, we adopt the SDARS “incidental” performance of sound recordings formulation. Using the latter formulation, gross revenues would exclude both subscription and advertising revenues associated with channels that use only “incidental” performances of sound recordings as part of their programming. 23, 24 22 The latter definition is more consistent with current SDARS programming. See Woodbury Amended WDT at 6-7 and Ex. 3 and Ex. 4. It is also more consistent with the notion of a music channel espoused by SDARS' expert economist, Dr. Woodbury, who identifies all channels using commercially released sound recordings as “music channels” in his analyses. Woodbury Amended WDT at 7 and n.22. 23 *See infra* at § 382.11 (definition of “Gross Revenues”). 24 The Judges do not address here the compensability of “incidental” performances of sound recordings; rather, the Judges find that reference to such “incidental” performances facilitates an unambiguous definition of nonmusic channels identifying substantial revenue generation unrelated to the sound recording rights at issue in this proceeding and which arises under circumstances clearly distinguishable from the joint music/nonmusic product typically offered by the SDARS. A further consequence of the Copyright Royalty Judges adopting the revenue-based metric as a proxy for a usage-based metric with the definition of gross revenue described hereinabove is to eliminate the need for a rate structure formulated as a “greater of” comparison between gross revenue-based metrics and alternative revenue-based metrics that focus on the dollar value of subscriptions alone. Although SoundExchange proposes an alternative per subscription dollar amount, the Judges do not find the basis for this alternative structure to be supported by persuasive evidence. For example, SoundExchange's expert economist, Dr. Pelcovits, simply asserts that its rate proposal “sensibly follows a `greater of' rate structure common to certain marketplace agreements” without more. Pelcovits WDT at 4. Indeed, Dr. Pelcovits' recommended SDARS rate itself is not stated as a “greater of” alternative, but rather as *equivalent* dollar per subscriber or percent of revenue rates. Pelcovits WDT at 32, Pelcovits WRT at 39. SoundExchange's other economic expert, Dr. Ordover, similarly reads SoundExchange's per subscriber and percent of revenue rates as equivalent alternatives. Ordover WDT at 4. Neither Dr. Pelcovits nor any other SoundExchange witness offers a solid explanation of why a “greater of” rate structure makes sense in other marketplaces *together with* an explanation of how that rationale is also applicable to this marketplace, notwithstanding any differences observed between the marketplaces in question. Nor does SoundExchange present any persuasive evidence that the availability of this per subscription alternative is necessary because it is easier to administer and thus will reduce transactions costs. Finally, given the parameters of gross revenues as defined hereinabove, there is no evidence in the record to suggest that gross revenues could be reduced below the amount of revenues otherwise due from applicable subscriptions. For all these reasons, the Judges decline to establish such a duplicative structure. C. The Section 114 Royalty Rates for the SDARS 1. The Applicable Standard As previously noted hereinabove, *supra* at Section IV.A., the Copyright Act requires that the Copyright Royalty Judges establish rates for the Section 114 license that are reasonable and calculated to achieve the following four specific policy objectives identified in Section 801(b):

(A)To maximize the availability of creative works to the public;

(B)to afford the copyright owner a fair return for his creative work and the copyright user a fair income under existing economic conditions;

(D)to minimize any disruptive impact on the structure of the industries involved and on generally prevailing industry practices. 17 U.S.C. 114(f)(1)(B) and 17 U.S.C. 801(b)(1). Both the copyright owners and the SDARS agree that a good starting point for the determination of what constitutes a reasonable rate encompassing the four policy factors is to focus on comparable marketplace royalty rates as “benchmarks,” indicative of the prices that prevail for services purchasing similar music inputs for use in digital programming ultimately made available to consumers. SDARS PFF at ¶ 810 and SX PFF at ¶ 279. We agree that “comparability” is a key issue in gauging the relevance of any proffered benchmarks. Although the applicable Section 114 statutory standard provides a broader scope for analyzing relevant “benchmark” rates than the “willing buyer, willing seller standard” applicable to the *Webcaster II* proceeding, nevertheless potential benchmarks are confined to a zone of reasonableness that excludes clearly noncomparable marketplace situations. 2. Comparability of Marketplace Rates Notwithstanding their apparent general agreement that beginning with a relatively comparable marketplace benchmark is the best way to undertake the requisite analysis here, the parties disagree about what constitutes an appropriate benchmark. The SDARS argue that the most appropriate benchmarks, as analyzed by their expert economist, Dr. Woodbury, are

(1)PSS rates applicable to cable subscription offerings by Music Choice; and

(2)agreements between performing rights organizations (ASCAP and BMI) and the SDARS covering the digital public performance of musical works. On the other hand, SoundExchange maintains that the most appropriate benchmark agreements, as analyzed by its expert economists, Dr. Michael Pelcovits and Dr. Janusz Ordover, are:

(1)The SDARS nonmusic programming content expenditures;

(2)market agreements between record companies and a variety of services that digitally distribute their sound recordings; and

(3)agreements between content providers and satellite television operators. We find, based on the available evidence before us, that no single market benchmark offered in evidence wholly satisfies the requisite analysis here, but rather that some evidence offered by both the SDARS and SoundExchange can serve to identify the parameters of a reasonable range of rates within which a particular rate most reflective of the four 801(b) factors can be located. a. The Woodbury Benchmarks The SDARS' expert economic witness, Dr. Woodbury, offers two alternative benchmarks for consideration as the starting point for rate determination in the instant matter:

(1)The 2004-7 rate paid by Music Choice for sound recordings used in its cable subscription offering, or 7.25% of gross revenues, subject to certain adjustments which would reduce the effective rate for the SDARS to 1.20% of gross revenues; and

(2)the aggregate current musical works rates paid to ASCAP and BMI, or 2.35% of gross revenues. In addition, the SDARS argue that certain other evidence in the record “corroborates Dr. Woodbury's PSS-Derived Rate” (e.g., the “custom radio” agreement between Yahoo! and Sony BMG, again subject to certain adjustments which would reduce the effective rate if applied to the SDARS to 2.57% of revenue). i. An Adjusted Music Choice PSS Rate With respect to the first of these proferred benchmarks, we find that Dr. Woodbury's assertion that the Music Choice cable television music offering is comparable to the services offered by the SDARS is unpersuasive. The Music Choice audio service is included as a part of a bundle of primarily audiovisually oriented services (i.e., television channels) offered over cable television systems to cable television subscribers at fixed locations, while the SDARS music channels are a substantial part of purely audio services provided to subscribers over devices designed in large part to compete with terrestrial radio in terms of equivalent mobility. Further, no evidence has been presented to indicate that cable TV subscribers utilize the Music Choice audio service except as incidental to their primary activity of television channel usage, while substantial evidence has been provided by both the SDARS and SoundExchange to indicate that music listening is an integral part of consumer activity with respect to SDARS transmissions. SX PFF at ¶¶ 333-5; Woodbury Amended WDT at 34. In short, the consumer products from which demand is derived for music inputs are clearly not comparable in these two markets. Furthermore, in contrast to the core SDARS product, there is evidence that consumer demand for the Music Choice offering on cable TV is relatively weak. SX PFF at ¶¶ 1298-1300. Since demand for the music input is a demand derived from its use in the consumer service offered and, in this case, the ultimate uses of the Music Choice music programming and SDARS music programming exhibit substantial differences so as to make them poor comparators, we find that the Music Choice “benchmark” provides little if any guidance as to a reasonable price for the music input used in the SDARS service. We are also not persuaded that the so-called “functionality ” adjustment applied by Dr. Woodbury in a purported effort to make his proposed Music Choice benchmark market more comparable to the SDARS target market achieves the desired result. The Woodbury “functionality” adjustment does not address adequately the salient consumer product differences noted above. In that sense, to refer to this adjustment as a “functionality” adjustment is a misnomer. Dr. Woodbury's “functionality adjustment” merely lists key characteristics of the music made available to SDARS consumers (e.g. mobility, quality of reception, broader playlists than typically available on terrestrial radio, etc.) for which music consumers are willing to pay enhanced revenues and then attributes *all* of the revenue associated with these characteristics to other inputs such as satellite technology under the unsubstantiated theory that such other inputs could produce the same level of revenue 25 absent any music to broadcast. Therefore, the Woodbury “functionality” adjustment is seriously flawed and makes little contribution to resolving the lack of comparability between the Music Choice cable TV music programming proposed benchmark market and the SDARS target market. 25 Although Dr. Woodbury uses the “costs” associated with these other inputs in his adjustment, he makes clear that those costs merely serve as a proxy for revenues attributable to the use of inputs. Woodbury Amended WDT at 23 (“The SRPR [sound recording performance right] fee paid by XM and Sirius would be higher only because of the added revenue (reflecting higher costs) attributable to providing an end-to-end mobile service, not necessarily because of the inherently higher value of music.”) Dr. Woodbury describes the costs of these other inputs as “subscriber distribution and acquisition costs.” Woodbury Amended WDT at 22. We conclude from the record before us that there is no basis to support the notion that music inputs in both these markets are equally productive in generating revenues for the users. That notion is artificially and inappropriately created by Dr. Woodbury's reduction of the capabilities associated with the music inputs used by the SDARS by restricting their use to the more limited capabilities of the music inputs used by Music Choice in its cable TV offering (e.g., no mobility, etc.). If anything, rather than adding to the downward adjustment to the Music Choice rate already made by Dr. Woodbury to account for music/nonmusic differences, it would seem more appropriate to adjust the proffered SDARS rate upwards to account for these particular mobility differences. 26 26 This is not to say that the music input that is sold to consumers as “mobile music” is *wholly* responsible for the consumer revenues generated by the product over and above the revenues that are generated by an otherwise identical but “nonmobile music product,” any more than the technical distribution vehicle is *wholly* responsible for those added revenues. In sum, the consumer products from which demand is derived for music inputs are clearly not comparable in these two markets and the proferred adjustments do not remedy this shortcoming. Because of the large degree of its incomparability, particularly as adjusted by Dr. Woodbury, the proposed Music Choice benchmark clearly lies outside the “zone of reasonableness” for consideration in this proceeding. Therefore, we find this particular benchmark cannot serve as a starting point for the 801(b) analysis that must be undertaken in this proceeding. ii. The Musical Works Rates The musical works rates benchmark proposed by the SDARS also fails to provide a reasonable benchmark in terms of comparability. This benchmark analysis tracks some similar arguments that failed to prevail in *Webcaster II.* The Copyright Royalty Judges find that the musical works benchmark analysis offered by Dr. Woodbury is similarly flawed here for several reasons. First, the musical works benchmark analysis is based on a marketplace in which, while the buyers may be the same as in the SDARS marketplace, the sellers are different and they are selling different rights. *Webcaster II,* 72 FR 24094. The fact that an SDAR requires both sets of rights does not make them equivalent. Many products and services require several essential inputs, but that fact alone does not lead to price parity across those inputs. Ordover WRT at 19. Second, contrary to Dr. Woodbury's assertions that the prices paid for the rights in each respective market should be the same, substantial empirical evidence shows that sound recording rights are paid multiple times the amounts paid for musical works rights in most digital markets (e.g., ringtones, digital downloads, music videos). 27 *Webcaster II,* 72 FR 24094; SX PFF at ¶¶ 1381-87, 1389-93. Thus, we conclude that the marketplace evidence from other digital markets submitted by SoundExchange casts substantial doubt on the reasonableness of using the proferred musical works rates as a benchmark for the sound recording rates to be determined in this proceeding, except as an indicator that a reasonable rate for sound recordings could *not* be as low as the musical works rate. 27 The SDARS attempt to discount these particular disparities by implying that since the sound recording rates are negotiated in an unconstrained marketplace while the ASCAP musical works rates in these markets are subject to court supervision, the latter must necessarily be relatively lower because they are constrained by the threat of court intervention. (See, for example, SDARS RFF at ¶ 90.) But this argument is not persuasive, because it fails to show that the negotiated sound recording rates are greater than “the price that a willing buyer and a willing seller would agree to in an arm's length transaction” (i.e., the rate court standard for reasonableness as articulated in *U.S.* vs. *ASCAP (Salem Media),* 981 F. Supp 199, 210 (S.D.N.Y., 1997)). The SDARS also appear to argue that the Librarian's statement in the 1998 PSS Rate Determination, at 63 FR 25405, that copyright owners of musical compositions and record companies “do not share equal power to set rates in an unfettered marketplace,” recognized that sound recordings enjoy relatively higher rates compared to musical works in other digital markets because of the exercise of relatively greater market power by the record companies as compared to the more constrained musical works seller. Yet, the SDARS reliance on the Librarian's decision in the *1998 PSS Rate Determination* is misplaced insofar as the Librarian was not focusing on comparative musical works and sound recording rate data from these other *digital* markets where record companies do not sell directly to consumers in the 1998 decision, but rather was evaluating the merits of an RIAA contention that record companies should receive more value from the performance right in sound recordings because the record companies garner more revenue from the use of the mechanical license than do the songwriters and composers. In other words, the focus was on the relevance of the wholesale market for CDs and cassette tapes. Indeed, the Librarian specifically criticized the RIAA offering for failing to “explain why the relative value of the mechanical license to the various owners and users has any application to the determination of the value of digital performance in sound recordings.” *1998 PSS Rate Determination* at 63 FR 25405. Third, the Copyright Royalty Judges find that Dr. Woodbury's equivalence argument also is flawed because of his effective reliance on the assumption of “sunk costs” as a justification. This assumption fails on both theoretical and empirical grounds for the same reasons that we rejected it in *Webcaster II.* Dr. Woodbury claims that, while the sellers in his benchmark market are not the same as in the target market, they stand in a similar position because for both musical works and sound recordings, the costs of producing the underlying intellectual property are effectively sunk, meaning that there is no incremental cost imposed on the sellers of either the musical work or sound recording by virtue of making the underlying intellectual property available for digital performance. Woodbury Amended WDT at 37. As a matter of theory, then, Dr. Woodbury's proposed benchmark analysis ignores the long-established pattern of investment in the recording industry. As we noted in *Webcaster II* at 72 FR 24094, not only are there some initial sunk investments, but there is a requirement of *repeated* substantial outlays year after year or, in other words, the repeated “sinking” of funds; and, if sellers are faced with the prospect of not recovering such sunk costs, then the incentive to produce sound recordings is diminished. In this case there is also substantial evidence of a substantially greater investment of this type in sound recordings as compared to musical works. SoundExchange PFF at ¶¶ 1399-1401, 1407. Furthermore, recording companies will necessarily make future investment decisions based on their best estimates of the revenue sources available to them in the future from all sources including revenue streams derived from the SDARS' use of sound recordings. Ordover WRT at 14 (“Record companies' incentives to produce new music are based on revenues from all available sources”). As we recognized in *Webcaster II* at 72 FR 24094 n.28, this is a dynamic economic process concerned with obtaining greater resources for future creative efforts. To suggest that the sound recording copyright owners should ignore such costs in their approach to pricing in the SDARS market makes little sense. At bottom, then, we find Dr. Woodbury's equivalence rationale for his proposed benchmark to be severely flawed. Moreover, as we pointed out above, there is ample empirical evidence in the record from other digital marketplaces to controvert Dr. Woodbury's premise that the market for sound recordings and the market for musical works are necessarily equivalent. SX PFF at ¶¶ 1381-87, 1389-93. For all these reasons, the Judges find that Dr. Woodbury's proffered musical works benchmark is not useful as a starting point for our determination of a reasonable sound recording rate in this market and, further, that marketplace evidence from other digital markets submitted by SoundExchange shows that a reasonable rate for sound recordings could not be as low as the musical works rate. iii. SDARS' Corroborative Evidence for PSS-Derived Rate The SDARS argue that certain other evidence in the record corroborates Dr. Woodbury's PSS-derived rate of 1.2% of revenues:

(1)The prior SDARS-RIAA agreement (in the range of 2.0% to 2.5% of revenues);

(2)the SDARS Musical Works Agreements (suggested benchmark rate of 2.35%);

(3)a “custom radio” agreement between Yahoo! and Sony BMG, subject to certain adjustments which would reduce the effective rate if applied to the SDARS to 2.57% of revenue; and

(4)Dr. Pelcovits' nonmusic programming benchmark, also subject to certain adjustments which would reduce the effective rate if applied to the SDARS to 3.51% of revenue. We find that rates which are virtually 2 or 3 times as great (e.g. 2.35% or 3.51%) as the rate they are being used to corroborate (i.e. 1.2%) only serve to undermine any reasonableness that might be ascribed to the Woodbury PSS-derived rate of 1.2%. That is, even if the Woodbury PSS-derived rate was derived from an arguably comparable benchmark, this “corroborative” data all points in the direction that it is too low as adjusted. Furthermore, we find that the musical works benchmark and the adjusted Pelcovits nonmusic programming benchmark themselves suffer from serious flaws. See *supra* at Section IV.C.2.a.ii. and *infra* at Section IV.C.2.b.ii. In addition, the SDARS-RIAA current agreement cannot be corroborative of a *reduced* rate going forward since it is not accompanied by any evidentiary showing that economic circumstances in this market have deteriorated. Finally, the rate terms from a “custom radio” agreement between Yahoo! and Sony BMG (which were not introduced to corroborate the PSS-adjusted rate but rather were introduced by Dr. Woodbury to ostensibly test the sensitivity of Dr. Ordover's analyses of other markets):

(1)Were not shown to be representative of this category's agreements; and

(2)suffer from the same flawed “functionality” adjustment as Dr. Woodbury's PSS-derived rate. In short, we find no persuasive evidence proffered by the SDARS that would cause us to alter our earlier finding that the PSS-derived rate as adjusted by Dr. Woodbury (i.e., 1.2% of revenues) clearly lies outside the “zone of reasonableness” for consideration in this proceeding. b. The Pelcovits Benchmarks and Analyses SoundExchange's expert economic witness, Dr. Pelcovits, offers two benchmarks for consideration as the starting point for determination of a royalty rate applicable to the SDARS:

(1)Royalties of 23% for sound recordings based on Sirius' payments to Howard Stern for nonmusic content (Pelcovits Amended WDT at 8); and

(2)royalties of 18.6% for sound recordings based on payments made in the aggregate by the SDARS for nonmusic programming, including payments made to Howard Stern (Pelcovits Amended WDT at 10). In addition, Dr. Pelcovits offers an alternative analysis that yields royalties of 18% for sound recordings based on a “division of surplus” analysis between nonmusic content and music content (Pelcovits WRT at 39 n.64). i. The Stern Benchmark Dr. Pelcovits offers his Stern analysis on the assumption that nonmusic content and music content are substitutes. He then focuses on one particular type of non-music content, Howard Stern's programming on Sirius. He next estimates that Sirius paid about 50% of revenue to Stern for each incremental subscriber that his programming attracted to Sirius. Using the results of a survey undertaken by Dr. Wind that purports to show that 56% of all Sirius' subscriber revenues would be lost if it offered no music channels, Dr. Pelcovits then concludes that just as Howard Stern is paid 50% of the revenues for the customers attributed to him, the music input should likewise be paid 50% of the revenues for the 56% of SDARS customers attributed to it. Subtracting the music publishers' royalty and the SDARS' internal production costs for music channels, Dr. Pelcovits is left with a bottom line royalty of 23% for sound recordings. We find this analysis suffers from several serious shortcomings. First, Dr. Pelcovits' assertion that “different kinds of content are substitutable inputs” (see Pelcovits WDT at 10) is questionable in light of the fact that both inputs are required to produce the SDARS primary offering—a joint music-nonmusic consumer service. As currently constituted in this joint offering, these two types of different content, by definition, may well be classified as complementary (e.g., similar to the joint requirement for a fishing rod and a fishing reel in order to engage in the activity of fishing). No substantial evidence regarding the relevant cross-price elasticities of demand was presented by Dr. Pelcovits to support his assertion that music programming and nonmusic programming are substitutes *as currently utilized by the SDARS.* 28 Indeed, Dr. Pelcovits recognizes this *complementary* aspect of the various programming inputs when he declares, with respect to the current Sirius service, that “a large catalog of music is *essential* to a music-based service and attracts customers to Sirius *just as* Stern attracts customers.” Pelcovits WDT at 13 (emphasis added). 28 A positive cross-price elasticity of demand for music programming associated with an increase in the price of nonmusic programming would indicate that the two inputs were substitutes, while a negative cross-price elasticity of demand under the same circumstances would indicate that the two inputs were complements. Second, Dr. Pelcovits makes several unjustifiable leaps in his analysis. He asserts that since Sirius paid 50% of revenues for each incremental subscriber that Stern's programming attracted to Sirius, the same 50% figure “ought to apply equally to music content as to Stern” without performing any comparable *incremental* revenue analysis for music programming. Pelcovits WDT at 13. Given the weaknesses of the 50% calculation for Stern, his assertion without any attempted analysis of the same 50% figure for music content requires a leap of faith that appears unjustified. 29 Dr. Pelcovits then multiplies the 50% Stern figure by 56% of all customers purportedly attracted to music so as to determine the “share of the customer base that can be attributed to sound recordings in the same sense” that Stern's *incremental* customers are attributed to Stern. Pelcovits WDT at 13. But this latter calculation has little to do with determining *incremental* subscriber revenue. For example, Dr. Wind's survey findings do not satisfactorily meet the needs of the theory espoused by Dr. Pelcovits because, as noted by Dr. Noll, “The survey methods for determining the importance of music to SDARS penetration are not designed to answer the pertinent question, which is the *incremental* value of music, holding constant the features of the service, including the quantity of music that is now available.” Noll WRT at 69. ( *See also* Noll WRT at 10-11). Thus, even assuming Dr. Wind's survey were without faults, that survey says little about *incremental* subscribers, but rather tries to assess the consumer preferences of all Sirius subscribers or the average Sirius subscriber. By comparing the incremental revenues attributable to Stern and the overall revenues arguably attributable to music programming in order to solve for the unknown price of the music input, Dr. Pelcovits effectively ignores the marginal or incremental nature of the concept he seeks to employ. 30 Even Dr. Pelcovits' estimate of the total revenues attributable to the music input is based on a single imperfect snapshot of consumer preferences provided by Dr. Wind 31 at one point in time, without any justification for the implied assumption that such preferences have remained or will remain stable across Sirius' subscribership over time or even over any limited relevant time period. 29 This 50% estimate was originally based on analyst projections of 1.75 million incremental subscribers. A subsequent 50% estimate was based on the 2 million incremental subscribers that Dr. Pelcovits said Sirius contemplated Stern would generate by the end of 2007. Pelcovits Amended WDT at 6-8. In his amended estimates, using the original 1.75 million incremental subscribers reduces the Stern cost as a percent of incremental revenue to 49%. Dr. Pelcovits further offered estimates for 1, 2, 3 or 4 million subscribers (79%, 50%, 39% and 34% respectively) as well as an average percentage of 49% taking into account each of the four amounts of incremental subscribers. Pelcovits Amended WDT at 7-8. Incredulously, even though he offers no apparent reason for looking at one of these estimates (the 3 million incremental subscriber case) or for suggesting that it might reflect actual experience in some way, Dr. Pelcovits includes it in his “average” and describes the resulting average as “reasonable.” Pelcovits Amended WDT at 8 n.20. To the contrary, Dr. Pelcovits' various alternative estimates simply underscore the lack of a solid foundation, in fact or in theory, for his estimates and, therefore, undermine their reasonableness. 30 Indeed, it is questionable as to whether the marginal analysis Dr. Pelcovits seeks to apply to the Stern content makes good sense given that the acquisition of Stern was a “lumpy” purchase that inhibits small incremental adjustments. Woodbury WRT at 41. 31 Because nonmusic content is broken down into a number of non-additive sub-categories, while music content is not, Dr. Wind asks consumers to compare music not relative to nonmusic content, but rather to compare music to each of news, sports and talk and entertainment programming separately. These survey results therefore cannot be properly interpreted as if music as a generic category were being compared to nonmusic as a generic category. Third, and most importantly, inasmuch as Dr. Pelcovits offers the Stern analysis as a “benchmark,” he assumes a degree of marketplace comparability that the evidence in this proceeding does not support. The sellers of the respective inputs are different. 32 There is a single purchaser of the “exclusive” Stern content from among the SDARS (i.e. Sirius), while both SDARS are buyers of the same music content. The way the inputs are used in the ultimate consumer offering results in different revenue generating capabilities for the respective inputs. For example, the Stern content can generate revenue through increased subscriptions as well as through increased advertising, while the chief characteristic of the music input on the SDARS is that it is commercial-free. Then too, there are other benefits associated with specific nonmusic content like the Stern content, such as the right to associate the service with the content provider's brand, that makes those inputs differentiable from the music input in terms of the breadth of intellectual property rights provided or the nature of the input provided. SDARS RFF at ¶ 286. In other words, all “content” is not comparable, any more than all inputs in addition to that content are comparable just because they share the ultimate purpose of generating revenue for the SDARS. 32 In addition, because Stern is a single seller in the market for his content, he arguably functions as a monopolist in the market for his service whereas the sellers of the music inputs are more numerous. Fourth, to the extent that Dr. Pelcovits treats advertising revenues as part of incremental revenues attributable to Howard Stern (Pelcovits Amended WDT at 6), his use of the result as a benchmark for pricing commercial-free content inappropriately assumes an undemonstrated incremental revenue impact for the music input from advertising. SoundExchange's argument that “to the extent that music grows the subscriber base, and those subscribers listen to non-music channels as well as music channels, the larger base of potential listeners helps attract advertisers” ( *see* SX RFF at ¶ 464) mistakenly attempts to equate an actual, measurable direct or primary effect associated with the Stern content to a possible, though a largely unsupported and uncalculated indirect or secondary effect which SoundExchange attributes to music. There is no dispute that the Stern content, as is the case with other nonmusic content used by the SDARS, is specifically utilized in conjunction with advertising, while the music content used by the SDARS is specifically touted to emphasize the commercial-free nature of the offering. Finally, Dr. Pelcovits' estimates of subscribers drawn to Sirius by the Stern deal do not inspire great confidence. Other conflicting evidence concerning estimates of the additional subscribers likely to flow from the Stern deal have been identified in the record. SDARS RFF at ¶¶ 392-393. For all these reasons, we find the proposed Stern content benchmark to be a poor starting point for the 801(b) analysis that must be undertaken in this proceeding. ii. The Nonmusic Content Benchmark Many of the shortcomings that apply to the Stern benchmark, similarly apply to Dr. Pelcovits' consideration of other nonmusic content deals as benchmarks. Here again, Dr. Pelcovits does not satisfy his theoretical claims that music programming and these other types of content are substitutes in the primary product offering of the SDARS. Most importantly, the key characteristic of a good benchmark—comparability—is not present. The sellers are different, the buyers are only the same in the aggregate and the nature of the inputs offered vary substantially. Then too, Dr. Pelcovits abandons the economic rationale that he claimed served to undergird his Stern analysis: “Absent data for other content deals, I was unable to reliably perform similar analyses of other individual deals relating the amount paid to the content provider to the expected number of incremental subscribers.” Pelcovits Amended WDT at 9. Undeterred, Dr. Pelcovits claims that it is sufficient to simply calculate the total expenditure of the SDARS on nonmusic content as a proportion of total SDARS revenues in order to determine the appropriate revenue-based rate to use as a benchmark for the music input. We find Dr. Pelcovits' analysis and the resulting recommended “benchmark” of 18.6% particularly unpersuasive. Certainly, confidence in the reliability of the benchmark is hardly enhanced by the fact that it reflects two widely disparate estimates for each of the two SDARS. 33 33 Looking at each of the SDARS individually, Dr. Pelcovits calculates that XM's nonmusic content providers were paid 16.9% of revenues in 2006 while Sirius' nonmusic content providers were paid 33.2% of revenues in 2006. Pelcovits Amended WDT at 10. In short, we find Dr. Pelcovits' proposed rates based on nonmusic content to poorly meet the needs of a reliable benchmark. Even before subjecting it to any 801(b) analysis, SoundExchange admits this benchmark is significantly lower if the same analysis is applied to data projections for the years 2006 through 2012 instead of just actual data from 2006. SX RFF at ¶ 461. Even if the benchmark did not suffer from all the shortcomings identified hereinabove, such a large degree of sensitivity does not inspire confidence in using this proposed benchmark as a starting point for our analysis. iii. Division of Surplus Analysis In addition to his two proferred nonmusic content benchmarks, Dr. Pelcovits undertakes an additional analysis that purports to divide the SDARS “surplus” or residual revenues (revenues net of noncontent costs including capital costs) between the SDARS, music content providers and nonmusic content providers. We find that this analysis relies on unsupported assumptions about market behavior. For example, Dr. Pelcovits argues that all content costs must be part of his surplus pot because that is how negotiations take place “in the real world.” Pelcovits WDT at 16. No evidence from this market was provided to support this assumption. Despite this assumption, Dr. Pelcovits omits musical works royalty costs from his surplus pot. Pelcovits WDT at 16 n.15. Thus his inclusion of nonmusic content costs into his surplus pot appears to be little more than a transparent attempt to enlarge the surplus that is potentially available for distribution to owners of sound recordings. Although Dr. Pelcovits later claims to amend his results by “excluding these royalties and then pay this same amount off the top out of the surplus assigned to music,” this adjustment still treats the music publishers' costs as predetermined, rather than adding the publishers as the players to the game who also share in the surplus. Dr. Pelcovits offers no sound basis for distinguishing between his treatment of nonmusic content costs and musical works content costs or, for that matter, for treating other variable inputs as predetermined costs as well. As Dr. Noll points out, this disparate treatment of SDARS inputs may well bias the Shapley values in favor of the record labels. Noll WRT at 89. Other assumptions underlying Dr. Pelcovits' analysis are also not solidly supported. For example, Dr. Pelcovits relies on Mr. Butson's revenue and cost estimates for XM and Sirius in 2012, despite the well-known fact that financial projections of the kind undertaken by Mr. Butson increase in uncertainty over the course of the period projected, with the last year in a six-year period of projections (in this case, 2012) being the least reliable. SDARS PFF at ¶ 960. Mr. Butson's projections in turn rest on a number of growth assumptions that either merely track past experience at best or are arbitrary at worst, leading us to question the degree to which such data is reliable for the purpose employed by Dr. Pelcovits. Different assumptions would provide different bottom-line numbers in Dr. Pelcovits' analysis. After estimating the available “surplus” in 2012, Dr. Pelcovits proceeds to use a Shapley model of a cooperative game to divide the “surplus” among the various inputs. But a cooperative game solution to a bargaining problem assumes that an agreement between the parties is both possible and enforceable. Here there is no enforcement mechanism. 7/9/07 Tr. 303 (Pelcovits); Noll WRT at 83. Therefore, the outcomes of the model cannot be supported. At the same time, no reason is provided by Dr. Pelcovits as to why each participant in the game should not make its decisions independently to maximize their own profits. In other words, a non-cooperative game approach may have been more appropriate under the circumstances. In short, questionable assumptions coupled with concerns over the reliability of the data used in the Pelcovits analysis cause us to regard the findings of the Pelcovits analysis as carrying little weight. For those reasons, the Judges find that the Pelcovits surplus analysis neither serves to provide a solid market rate estimate to serve as a starting point for the application of the 801(b) considerations nor to provide additional solid corroboration of SoundExchange's various benchmark analyses. c. The Ordover Benchmarks Although Dr. Ordover recognizes that no benchmark is perfect, he offers two categories of benchmarks for the Judges' consideration:

(1)satellite TV deals with nonmusic content providers that yield two benchmarks, 40% of gross revenues based on overall content or 49.3% of gross revenues based on premium network programming, subject to certain adjustments which would reduce the effective rate for the SDARS to 18.5% or 23.5% of gross revenues (Ordover WDT at 40-41); and

(2)a variety of agreements covering other distribution channels for digital music (e.g., interactive subscription services, cellular ringtones, etc.) that suggest a benchmark of 35% to 50% of revenues, subject to only an adjustment for the lower proportion of music content on the SDARS that would result in a benchmark royalty rate of 19% to 28% or, if adjusted to account for other differences between the benchmark market and the target SDARS market, would yield a royalty rate of $2.51 to $3.09 per subscriber per month (Ordover WDT at 50-52). We find the first of these two categories of proferred benchmarks to be of little value. Even assuming that the SDARS have similar cost structures to satellite TV (also known as Direct Broadcast Satellite or DBS) operators, they offer very different consumer products, the inputs focused on in the analysis (nonmusic audiovisual content) differ substantially from the sound recording inputs at issue in this proceeding, and the buyers and sellers are different in the benchmark market as compared to the target market. The fact that these different enterprises may exhibit some similarities with respect to their capital structure and that both are subscription services offering entertainment in a broad sense is not sufficient to overcome all the aforementioned fundamental differences between the proposed benchmark market and the target market. However, we find Dr. Ordover's second category of proferred benchmarks—certain channels for the distribution of digital music—more useful. In particular, the interactive subscription market is a benchmark with characteristics reasonably comparable to the non-interactive SDARS, particularly after Dr. Ordover's reasonable adjustment for the difference in interactivity. Both markets have similar sellers and a similar set of rights to be licensed. While the buyers may be different entities, there is no persuasive evidence that the buyers in the target market have less relative market power than the buyers in the benchmark market. Both markets are input markets and demand for these inputs is driven by or derived from the ultimate consumer markets in which these inputs are put to use. In these ultimate consumer markets, music is delivered to consumers in a similar fashion and consumers pay a monthly subscription fee for access irrespective of the hours of programming accessed. However, in the interactive case, the choice of music actually delivered is usually influenced by the ultimate consumer, while in the non-interactive case of the SDARS the consumer usually plays a more passive role limited to selecting a particular channel of music programming. Ordover WDT at 47-48. But this difference is reasonably accounted for in Dr. Ordover's interactivity adjusted per subscriber rates. In order to make the benchmark interactive market more comparable to a non-interactive service like the SDARS, Dr. Ordover adjusts the benchmark by the differential value associated with the interactivity characteristic. Ordover WDT at 47-52. This adjustment by itself suggests a rate of $1.40 per subscriber per month (i.e. $7.50 per subscriber per month multiplied by an interactivity adjustment factor of .0015/.008). Using Dr. Ordover's assumption that the average monthly per subscriber price for satellite radio is $11.25, the interactivity adjusted benchmark of $1.40 per subscriber per month is the equivalent of 13% on a percentage of subscriber revenue basis. 34 While we agree with Dr. Ordover, that but for the lack of extensive data, these calculations might well be improved through a hedonic regression analysis, nevertheless we find that, based on the available data in the record, this interactivity adjusted benchmark is a reasonable estimate of a marketplace derived benchmark. 35 34 Because of the commercial-free character of music programming on the SDARS, subscription revenues attributable to music programming are the appropriate focus of this analysis. 35 SoundExchange's argument that this interactivity adjustment needs to be adjusted further by differences in the intensity of use is not adequately supported by the record. Dr. Ordover admitted that the information he would have to rely on to make such an adjustment was “imparted to me by counsel” and that he “did not have a direct conversation with the people who delivered the information” and that he “did not file a calculation that would reflect that adjustment” (i.e. he made no adjustment to his proposed rates based on this information regarding intensity of use). *8/27/07* Tr. 102:11-12; 108:7-109:18 (Ordover). Moreover, Mr. Eisenberg's testimony cited by SoundExchange to support higher intensity of usage ambiguously refers to “historical” data from an unknown period which may or may not coincide with the period analyzed by Dr. Ordover in making his initial interactivity adjustment. Eisenberg WDT at 19. At the same time, the SDARS' argument that Dr. Ordover's interactivity adjustment is fatally compromised by the absence of this additional intensity adjustment is equally without merit. The absence of the unsupported additional “intensity” adjustment does not negate the reasonableness of Dr. Ordover's interactivity adjustment based on the record of evidence before us. The SDARS' separate argument that Dr. Ordover's video-service interactivity adjustment needs to be adjusted to reflect a substantially higher value for interactivity, as shown by a few recent audio agreements covering interactive as well as noninteractive services, is not supported by a close reading of the relevant provisions of those agreements. SX PFF at ¶ 481-486. At the same time, we find that any rate derived from the higher digital distribution channel benchmarks offered in evidence lie outside the zone of reasonableness because they either:

(1)Fail to account for key differences that consumers value or

(2)propose other adjustments not well supported by the evidence. For example, Dr. Ordover himself proposes an additional upward “immediacy” adjustment to the interactivity adjusted digital subscription rate calculated above that would raise it from $1.40 per subscriber per month to $2.51 per subscriber per month. Ordover WDT at 49-50. However, we find that the “immediacy” adjustment is not well founded in that it:

(1)Unrealistically treats all computers as stationary devices always necessitating a two-step accessibility process involving downloading music to a computer and uploading therefrom to a separate portable device in order to move the music listening experience to another physical location (i.e., widely available technology allows portable computers not only to be moved to other physical locations but also to access the internet wirelessly); and

(2)appears to overstate the significance of the delay involved in listening to music because of the process of downloading to a computer and uploading therefrom to a separate portable device (i.e., the consumer may have previously downloaded the music that he may want to listen to at any point in time so that the download process does not have to be repeated every time the consumer wants to listen to music). Moreover, Dr. Ordover admits that, in light of the trend of more recent agreements, it is possible that the basis for his “immediacy” adjustment has all but disappeared as indicated by a ratio approaching unity. 6/21/07 Tr. 186:20-187:8 (Ordover). In sum, while some aspects of the Ordover analysis may not be persuasive, the Judges find that these critiques are not sufficient to undermine the basic thrust and conclusions of the Ordover analysis that the interactive subscription market is a benchmark with characteristics reasonably similar to the non-interactive SDARS, particularly after Dr. Ordover's reasonable adjustment for the difference in interactivity. As noted hereinabove, we equate the resulting benchmark offered by Dr. Ordover to be the equivalent of 13% stated as a percentage of revenue. We find that some of the additional relevant evidence from the marketplace for other types of digital music services corroborates Dr. Ordover's analysis by showing that, for many types of music services, a substantial portion of revenue is paid to sound recording copyright owners above the current SDARS rate, just as it would be pursuant to the 13% rate that would result from Dr. Ordover's interactivity adjusted interactive subscription market analysis. In other words, we find these additional voluntary agreements covering such digital services as clip licenses, permanent audio downloads, etc. of some general corroborative value. These data show that, in many cases, the price paid by buyers for the rights to utilize a sound recording in various ways is as much as or higher than the 13% rate suggested hereinabove. This shows that the prevailing rates in these other markets do not appear to undermine his analysis—some indication of general reasonableness. However, because no effort is made to reconcile the many differences in product characteristics that may exist between these markets and the target SDARS market and adjust for such differences, these alternatives must be regarded as having only directional value and to lie outside the zone of reasonableness (i.e. a zone that excludes clearly noncomparable market situations). In other words, based on the record of this proceeding, the 13% rate identified hereinabove marks the upper boundary for a zone of reasonableness for potential marketplace benchmarks from which to identify a rate that satisfies any 801(b) policy considerations not adequately addressed in the market. 3. The Zone of Reasonableness and the 801(b) Policy Considerations The marketplace evidence offered by the SDARS and SoundExchange supports the determination of the parameters of a zone of reasonableness. Based on the record of evidence in this proceeding we have determined that the 13% rate identified hereinabove marks the upper boundary for a zone of reasonableness for potential marketplace benchmarks. We have also determined that potential marketplace benchmarks cannot be less than or equal to the SDARS' musical works rates (i.e., 2.35% of gross revenues). However, the latter lower boundary for the zone of reasonableness is not the equivalent of the upper boundary in offering a specific benchmark defined by comparability. Therefore, based strictly on marketplace evidence, a rate close to the upper boundary is more strongly supported than one close to the lower boundary. We now turn to the 801(b) policy considerations to determine the extent to which those policy considerations weigh in the same direction or a different direction as the benchmark market evidence hereinbefore reviewed. The relevant 801(b) factors meriting further consideration consist of the following four specific policy objectives:

(A)To maximize the availability of creative works to the public;

(B)to afford the copyright owner a fair return for his creative work and the copyright user a fair income under existing economic conditions;

(D)to minimize any disruptive impact on the structure of the industries involved and on generally prevailing industry practices. 17 U.S.C. 114(f)(1)(B) and 17 U.S.C. 801(b)(1). Not surprisingly, both the SDARS and SoundExchange have a different view of how specific facts weigh in their favor on each of these policy objectives. We reject the notion, however, that Section 801(b)(1) is a beauty pageant where each factor is a stage of competition to be evaluated individually to determine the stage winner and the results aggregated to determine an overall winner. Neither the Copyright Royalty Tribunal nor the Librarian of Congress adopted such an approach. *See* 46 FR 884 (January 5, 1981) (jukebox proceeding); 46 FR 10466 (February 3, 1981) (mechanical license proceeding); 63 FR 25394 (May 8, 1998) (PSS proceeding). Rather, the issue at hand is whether these policy objectives weigh in favor of divergence from the results indicated by the benchmark marketplace evidence. Therefore, we next evaluate the other evidence in the record offered with respect to the four policy considerations to determine if that evidence shows that the weight of marketplace evidence we have previously reviewed requires any adjustment. a. Maximizing the Availability of Creative Works to the Public While the SDARS and SoundExchange offer various arguments to suggest that they are each respectively the largest contributor toward the achievement of this policy objective, those arguments miss the mark. The ultimate question is whether it is necessary to adjust the result indicated by marketplace evidence in order to achieve this policy objective. We agree with Dr. Ordover that “voluntary transactions between buyers and sellers as mediated by the market are the most effective way to implement efficient allocations of societal resources.” Ordover WDT at 11. An effective market assures absence of both below-market prices and supra-competitive prices, so that suppliers will not reduce output and innovation in response to the former and consumers will not experience a reduction in consumer welfare in response to the latter. In other words, an effective market determines the maximum amount of product availability consistent with the efficient use of resources. The parties to this proceeding choose to emphasize only one or two aspects of these supply and demand dynamics because doing so appears to facially support a “win” for them on the availability factor. The SDARS, for example, choose to emphasize that they foster the availability of music:

(1)by assuring that different types of music are more widely disseminated than they are in the terrestrial radio alternative and

(2)by the promotional effect of their airplay. Therefore, their view is that the availability of works to the public is maximized if the rates are as low as possible. *See* SDARS PFF at ¶¶ 126-147; Woodbury Amended WDT at 43-44; Noll WRT at 41. On the other hand, SoundExchange focuses on the input suppliers' incentive to increase creative output, arguing that the recording industry requires higher revenues from alternative distribution mechanisms to compensate for a drop in the physical sales of CDs generally and higher revenues from the SDARS specifically to compensate for the substitution of SDARS listening for physical CD sales. Therefore, its view is that the availability of works to the public can only be maximized through higher rates. *See* SX PFF at ¶¶ 781-93, ¶¶ 811-12, ¶¶ 669-710. We find that the record does not support any adjustment from the result indicated by the previously reviewed marketplace evidence in order to achieve the policy objective of maximizing the availability of creative works. For example, the evidence presented by the SDARS and SoundExchange is insufficient to suggest a net substitution/promotion difference between the interactive subscription service benchmark and the SDARS marketplace. Because only the relative difference between the benchmark market and the hypothetical target market would necessitate an adjustment, the absence of solid empirical evidence of such a difference obviates the need for such further adjustment. Furthermore, even if the absolute levels of promotion/substitution in the SDARS market alone were somehow relevant, as the parties appear to suggest, we find that they presented no acceptable empirical basis for quantifying promotion/substitution for purposes of adjusting rates. For example, the SDARS assert that their service is promotional and imply that they should receive credit for this effect. But they present no persuasive evidence that would be useful for quantifying the magnitude of this asserted effect or for deriving a method for translating such magnitudes into a rate adjustment. The mere assertion that airplay is promotional without more is insufficient. Indeed, the quality of evidence presented by the services on this issue consisted largely of such assertions (e.g., Woodbury Amended WDT at 44-46), a handful of consumer testimonial e-mails or anecdotes recounting subjective opinions. *See* SX PFF at ¶¶ 714, 717. SoundExchange, in an effort to support and quantify its claimed substitution effect, offers the results of several consumer surveys. Dr. Pelcovits concludes that these surveys show that SDARS subscribers will reduce their purchases of CDs by 2.6 CDs per subscriber per year. *See* Pelcovits WRT at 31-33. But the Wind survey on which Dr. Pelcovits partially relies in reaching his conclusion was excluded by the Judges in their gatekeeping roles (applying Federal Rule of Evidence 702), because of data shortcomings and questions about the reliability of the methods employed by Dr. Wind in that survey. 8/29/07 Tr. 114:2-115:2. Dr. Pelcovits' partial reliance on the marketing survey research offered by Mr. Mantis is similarly misplaced because the weight of the survey's results are questionable in light of:

(1)The lack of a control group where the purpose of the survey is to establish causality;

(2)the potential bias introduced by the leading character of important questions in the survey;

(3)an inability to specifically attribute all of the claimed substitution effect to the SDARS music programming as opposed to the SDARS nonmusic programming; and

(4)the lack of time period specificity in asking about consumer behaviors. SDARS PFF at ¶¶ 247-257, 258-261, 263. Dr. Pelcovits' reliance on the National Association of Recording Merchants (“NARM”) survey does not aid his calculation of the magnitude of the substitution effect because, even construing the evidence in a light most favorable to SoundExchange, it indicates the percentage of satellite radio subscribers who purchased no music in the last year. That is, the NARM study may suggest a substitution effect but does not attempt to quantify it. 36 36 SoundExchange also argues that the SDARS' own listening research suggests a substitution effect. Again, even construing the evidence in a light most favorable to SoundExchange, the SDARS' internal research merely provides general evidence of a substitution effect rather than a specific quantifiable magnitude. Thus, on the evidence before us we find the net impact of the claimed substitution and promotion effect of the SDARS on CD sales is indeterminate. More importantly, we find that little if any of this evidence sheds light on the question of whether the net substitution/promotion effect of the SDARS is different from the net substitution/promotion effect of the interactive subscription service benchmark. Finding no conclusive quantifiable evidence of such a substitution/promotion difference between the benchmark market and the target market and, further, finding no quantifiable difference suggested by the parties with respect to the remaining evidence submitted on the first policy factor discussed hereinabove, we conclude that, in the instant case, the policy goal of maximizing the availability of creative works to the public is reflected in the market solution embodied in the benchmark market rates. An effective market would have taken into account substitution concerns and promotion effects in determining the maximum amount of product availability consistent with the efficient use of resources. b. Fair Return to Copyright Owner and Fair Income to Copyright User Here, too, the SDARS and SoundExchange offer various arguments to suggest that they should each be the largest beneficiary of this policy objective and, again, those arguments miss the mark. The ultimate question is whether it is necessary to adjust the result indicated by marketplace evidence in order to achieve this policy objective and, if so, is there sufficient evidence available to do so. We find that the evidence in the record supports no such adjustment. The SDARS have not shown that their income under existing economic conditions is unfairly constrained by adoption of a rate informed by the marketplace evidence we have previously reviewed. Nor has SoundExchange shown that the copyright owners will fail to receive a fair return for their creative work because of the adoption of a rate informed by the marketplace evidence we have previously reviewed. The SDARS argue that a fair income to the copyright user is one which is sufficient to generate a competitive risk-adjusted return on past and future investments. *See* SDARS PFF at ¶ 179. But the SDARS conveniently ignore the highly leveraged structure of their enterprises and imply that such a return should occur within the license term and, further, that such a return should be at least one that consists of net income in the form of profits. *See* SDARS PFF at ¶¶ 178, 186. Affording copyright users a fair income is not the same thing as guaranteeing them a profit in excess of the fair expectations 37 of a highly leveraged enterprise. Nor is a fair income one which allows the SDARS to utilize its other resources inefficiently. In both these senses, a fair income is more consistent with reasonable market outcomes. Therefore, in the absence of any substantial evidence in the record to the contrary, we find that it is not necessary to adjust the benchmark rate hereinbefore indicated by marketplace evidence in order to achieve the policy objective of affording copyright users a fair income. For example, there is no substantial evidence of the exercise of unfair market power in the setting of prices in the benchmark marketplace. 37 The SDARS readily admit that any projections, particularly in this relatively new industry, are subject to substantial uncertainty especially towards the latter part of the license period. Frear WRT at ¶¶ 13-14. Therefore, the fair earnings expectations of a highly leveraged enterprise must reasonably carry a somewhat wider ambit than various projections offered into evidence by the contending parties. This is not to say that SDARS' concerns with respect to meeting their cash flow and income goals sooner rather than later should not be considered in this proceeding, but rather we find that they are more properly raised when the SDARS more directly address the timing issue and its impact in the context of the fourth policy objective articulated in the statute (i.e., minimizing any disruptive impact on the structure of the industries involved). With respect to the second policy objective, SoundExchange primarily points to the voluntary agreements negotiated with other digital services in the market for sound recordings as representing a fair return for copyright owners. However, SoundExchange suggests that if the application of the four policy objectives produces a below-market rate, then a fair return would not be achieved because that below-market rate would result in the record industry not earning sufficient royalties to compensate for the substitution effect the SDARS have on revenues from the sales of other forms of music. *See* SX PFF at ¶ 834. Because we have previously addressed SoundExchange's market-based evidence, *supra* at Section IV.C.2.b.-c., we need not address the specifics of that evidence again here. Similarly, we have previously addressed SoundExchange's evidence with respect to substitution of the SDARS for CD sales, *supra* at Section IV.C.3.a., where we found the net impact of the claimed substitution and promotion effect of the SDARS on CD sales was indeterminate. We further note that additional SoundExchange claims regarding a broader view of substitution (i.e. an SDARS substitutional effect on the sales of music in forms other than CDs) are neither adequately supported nor quantified in the record. In short, based on the evidence before us, we find that it is not necessary to adjust the benchmark previously indicated by marketplace evidence in order to achieve the policy objective of affording copyright owners a fair return. c. Relative Roles of the Copyright Owner and the Copyright User in the Product Made Available to the Public With Respect to Relative Creative Contribution, Technological Contribution, Capital Investment, Cost, Risk, and Contribution to the Opening of New Markets for Creative Expression and Media for Their Communication The SDARS, in effect, argue that the third 801(b) policy objective requires a discounted market rate in consideration of their:

(1)Creative contributions to developing and airing nonmusic programming,

(2)creative contributions to music channels,

(3)contributions in the form of the design and development of new technology,

(4)substantial capital investments and operating costs,

(5)contribution towards meeting various risks associated with making their product available to the public, and

(6)contribution to opening new markets for creative expression and media for their communication. Not surprisingly, SoundExchange argues that record companies and artists make equally important contributions to the achievement of this third policy objective when these various sub-factors are considered as a whole and, further, that these various sub-factors are adequately considered and valued in market transactions. We find that, considering the record of relevant evidence as a whole, the various sub-factors identified in this policy objective may weigh in favor of a discount from the market rate because of the SDARS' demonstrated need to continue to make substantial new investments to support the satellite technology necessary to continue to provide this specific service during the relevant license period. However, inasmuch as we find this issue is intimately intertwined with evidence impacting our consideration of the fourth 801(b) policy objective (i.e., minimizing any disruptive impact on the structure of the industries involved), we will treat the effect of this particular matter as part of our consideration of the fourth policy objective. *See infra* at Section IV.C.3.d. We come to this conclusion in a straightforward manner from the evidence offered regarding the third policy consideration. The SDARS' attempt to obtain credit for creative contributions largely centers on:

(1)Enhancements to the channels described as music channels and

(2)their acquisition of nonmusic programming as part of their product offering. The SDARS' reliance on the Librarian's decision in the *1998 PSS Rate Determination* at 63 FR 25405 which stated that the “product made available” is the “entire digital music service” of which sound recordings are an element is misplaced where the SDARS seek to gain credit towards a discounted royalty rate for music by pointing to their creative addition of nonmusic programming to the digital music offering. The Librarian was clearly considering a music-only service in the *1998 PSS Rate Determination* and nowhere in that decision suggests that such nonmusic content considerations are relevant. SX PCL at ¶¶ 84-85. While the SDARS' creative contributions to music channels may be relevant, it is certainly subsidiary to and dependent on the creative contributions of the record companies and artists to the making of the sound recordings that are the primary focus of those music channels. 38 Herscovici WRT at 23-24. However, our inquiry does not end here. We find that, notwithstanding this imbalance in relative creative contributions, there is nothing that distinguishes this result from the benchmark marketplace that requires an adjustment in order to achieve the third policy objective. 38 Dr. Woodbury suggests that the creative contributions of the record companies and artists are not relevant because they were not made specifically for this product offering—that is, they involved no “incremental effort to create new music.” Woodbury Amended WDT at 48. There is no factual basis to support the Woodbury assertion. Moreover, the owners of sound recordings clearly receive recognition for their creative contribution in the form of compensation from all of the other digital music services discussed in this proceeding even though those sound recordings were not shown to be created exclusively for those services. In other words, the Woodbury analysis is flawed because it would preclude intellectual property owners from ever being compensated for their creative efforts in this market or other similar digital markets and thereby eliminates their incentive to create and supply the very music upon which the future of this service depends as currently structured. With respect to technological contributions, capital investment, cost, risk and the opening of new markets, the SDARS' claims are overstated regarding their relative contributions to the relevant product made available to the public. For example, the SDARS' claimed technological contributions take credit for not only their own efforts but also for the substantial technological contributions of others. Elbert WRT at 20-40. At the same time, capital investment expense, other costs, and risk incurred by copyright owners are dismissed by the SDARS because they are not “incremental” with respect to satellite radio (Woodbury Amended WDT at 50); but this ignores the fact that record companies undertake “significant and irreversible investments to develop talent and produce new works and in order to maximize their incentives to do so, it is important to receive from each distribution channel revenues that reflect the value of their contributions.” Ordover WRT at 14. Thus, contrary to the overstated claims of the SDARS, with respect to most such investments, costs and risks, there is little to distinguish their relative contribution in this market from those of other digital music distributors in their markets. 39 40 Moreover, over time, the relative position of the SDARS may have improved compared to the relative position of the record companies. Herscovici WRT at 24-25, 29. 39 Moreover, there is no substantial evidence to indicate that the relative capital investment, cost and risk contributions made by the SDARS as shown by the record of evidence in this proceeding were made (or are continuing to be made) to secure revenue streams limited to the license period at issue in this proceeding. The same, of course, is true for similar contributions made by the record companies. 40 There is also little to distinguish the SDARS' relative contribution to opening new markets from those of other digital music distributors in their markets at present. SX RFF at ¶¶ 104-105. However, the primary type of expenditure incurred by the SDARS that does distinguish them from other digital distributors of music is their expenditure for satellite technology. This type of investment spending has a useful life that typically extends beyond the limited period of a single licensing period as currently defined by statute; therefore, all of the costs of spending on this technology cannot properly be ascribed to a single licensing period. Then, too, such technology may have a recoverable asset value even if the SDARS that made the investment ceases to operate. Herscovici WRT at 28. Nevertheless, nothing in the record of evidence before us indicates that the SDARS can continue to make their current product available to the public in the license period at issue in this proceeding without making new expenditures related to their satellite technology. Clearly, new satellite investment, unlike other costs, cannot be postponed without a serious threat of disruption to the service the SDARS provide. Although this may weigh in favor of a discount from the market rate, we find this issue is intimately intertwined with evidence impacting our consideration of the fourth 801(b) policy objective (i.e., minimizing any disruptive impact on the structure of the industries involved). Consequently, we will treat the potential disruptive effect of postponing investment in new satellite technology as part of our consideration of the fourth policy objective below. *See infra* at Section IV.C.3.d. d. Minimizing Any Disruptive Impact on the Structure of the Industries Involved and on Generally Prevailing Industry Practices Despite predictions of impending doom for satellite radio if excessively high rates are set in this proceeding or similar dire predictions for the record companies if exceedingly low rates are set in this proceeding, the rate set here is just one component that will impact the future of both industries. It can be disruptive, however, if it directly produces an adverse impact that is substantial, immediate and irreversible in the short-run because there is insufficient time for either the SDARS or the copyright owners to adequately adapt to the changed circumstances produced by the rate change and, as a consequence, such adverse impacts threaten the viability of the music delivery service currently offered to consumers under this license. Economic experts for both sides agree that a royalty rate that would cause the SDARS to cease operating or dramatically change the nature of its product would clearly be disruptive. Ordover WDT at 33-34; Herscovici WRT at 31,40; 8/16/07 Tr. 70:10-72:13, 73:21-76:7 (Noll). In order to minimize the adverse impact of the rate applicable to the license here, we find it appropriate to adopt a rate from the zone of reasonableness for potential marketplace benchmarks that is lower than the upper boundary most strongly indicated by marketplace data. We do so in order to satisfy 801(b) policy considerations related to the minimization of disruption that are not adequately addressed by the benchmark market data alone. The Judges further find that over the period of time marked by the license period, the potential for disruption will diminish, allowing for some reasonable escalation of the initial rate we set herein. Although much evidence of the respective financial conditions of the SDARS and the record companies was presented in this proceeding, we conclude that many of the claimed examples of “disruption” are overstated. As Dr. Herscovici points out “simply causing an increase in costs to the Services or a decline in royalties to the record companies” is not substantial enough to qualify as a disruptive impact. Herscovici WRT at 31. However, we are persuaded by the evidence before us that there are two circumstances faced by the SDARS that merit the adoption of a rate below the upper boundary of the zone of reasonable market rates we have identified hereinbefore (i.e., 13%). First, given that the current rates paid by the SDARS for these inputs are in the range of 2.0% to 2.5% of revenues, an immediate increase to the upper boundary of the zone of reasonableness (i.e., 13%) would be disruptive inasmuch as the SDARS have not yet attained a sufficient subscriber base nor generated sufficient revenues to reach consistent Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) profitability or positive free cash flow. For example, EBITDA profitability for Sirius is estimated by Mr. Karmazin to be consistent with revenues generated from between 10 million and 11 million subscribers. *6/7/07* Tr. 35 (Karmazin). Increasing the current royalty rates to 13% will increase costs and raise the necessary critical mass of subscribers sufficient to generate revenues that can yield EBITDA profitability or even positive free cash flow. In order not to significantly delay the attainment and amounts of EBITDA profitability and positive free cash flow, some rate within the zone of reasonableness that is less than 13% is warranted. Even SoundExchange's own proposal recognizes that immediate movement to a substantially higher market rate is potentially disruptive and seeks to minimize the possibility by requesting an initial rate of 8% that increases as subscribership increases for each of the SDARS. Moreover, while SoundExchange maintains that the proper market-based rate is 23% and it is merely proposing a phase-in of that rate, it also recognizes that various year-end 2011 consensus subscriber projections in the neighborhood of 15-16 million for each of the SDARS (See SX PFF at ¶¶ 1094, 1096) would only take the SDARS to a rate of 17% by the beginning of the last year of the license term (2012). *See* SoundExchange Third Amended Rate Proposal (August 6, 2007) at 1-8 and closing argument of SoundExchange's counsel, 10/17/07 Tr. 142 (Handzo). In short, even SoundExchange has made a market-based proposal that, barring exceptional events, 41 is adjusted to minimize disruption for the SDARS by not only delaying the application of that market-based rate but effectively discounting it throughout the relevant period of the license. 41 SoundExchange argues that the proposed merger between Sirius and XM should be factored into the rate determination. But this would require us to estimate the likelihood that the merger would successfully occur, forecast the precise date when the merged entity would become a single operation, and project the likelihood, magnitude and timing of any synergistic benefits of the merger in terms of cost savings. We find on the record before us that we have been presented with insufficient evidence on these issues. Second, as noted, *supra* at Section IV.C.3.c., we are persuaded that still another factor that requires attention is any undue constraint on the SDARS' ability to successfully undertake satellite investments planned for the license period. A failure to complete these investments as scheduled clearly raises the potential for disruption of the current consumer service. For all these reasons, the Judges find it appropriate to adopt a rate from the zone of reasonableness for potential marketplace benchmarks that is lower than the upper boundary most strongly indicated by marketplace data. Based on the record before us, including, among other things, Mr. Butson's sensitivity analysis and testimony from the respective CFOs of the SDARS, Mr. Frear and Mr. Vendetti, a reasonable starting point for this license is a royalty rate of 6% of gross revenues as we have previously defined such revenue. *See* Butson WRT at Appendix A, B and E (suggesting that inasmuch as a 4% average rate over the period will not cause the SDARS' EBITDA profitability and positive free cash flow to be substantially impacted relative to current consensus analyst expectations and, by comparison, that a near 8% average rate over the period significantly delays the attainment and amounts of EBITDA profitability and positive free cash flow for the SDARS, then an average rate somewhat less than 8% and structured to begin as high as 6% will have an impact not likely to threaten disruption); 6/6/07 Tr. 37:16-38:16 (Vendetti) (indicating that a 4% immediate rate necessitates no change in plans as contrasted to an 8% immediate rate that “particularly impacts the amount of cash the company has to run its operation” and therefore an 8% immediate rate adversely impacts the company “very much” in the short-term whereas a 6% rate has lesser impact than an 8% rate); 6/12/07 Tr. 172:1-10 (Frear) and 8/15/07 Tr. 103:15-104:12 (Frear) (sound recording royalties already budgeted in 2007 at a figure north of 4% or at 4.2%); *see also* closing argument of XM's counsel, Mr. Bruce Rich, at 10/17/07 Tr. 234:19-237:14 (indicating that an immediate rate higher than 6% is likely to give rise to planning concerns and that SDARS do not have “absolute vision that 4 1/2 percent wouldn't work or 5% wouldn't work”). We further find that over the passage of time the potential for disruption from the imposition of the 6% rate gradually diminishes as indicated by various forecasts showing consistent subscriber and revenue growth (See SX PFF at ¶¶ 1094, 1096), thereby allowing a reasonable escalation of the initial rate by the addition of 0.5% annually beginning with the start of the 2009 calendar year to the previous years' royalty rate. In short, the Judges find that the percentage of gross revenues rate applicable to each year of the license for the SDARS is as follows: 6.0% for 2007, 6.0% for 2008, 6.5% for 2009, 7.0% for 2010, 7.5% for 2011, and 8.0% for 2012. We find no basis for making further adjustments to this revenue rate to reflect inflation. 42 42 We do *not* find that the benchmark supports an additional Consumer Price Index adjustment to the percent of revenue rate. No showing has been made to indicate that gross revenues, as hereinbefore defined, will not maintain their real value over time—indeed, the services have increased their prices during the prior licensing periods. Moreover, no evidence has been submitted by SoundExchange, the proponent of such an adjustment, to support this additional adjustment by what is, at this point in time, an indeterminate amount. D. The Section 112 Royalty Rates and Minimum Fees 1. Background Section 112(e) of the Copyright Act directs the Judges to establish rates and terms for the making of ephemeral copies of digital recordings. We are tasked with setting rates and terms that “most clearly represent the fees that would have been negotiated in the marketplace between a willing buyer and a willing seller,” as well as establish “ a minimum fee for each type of service offered by transmitting organizations.” 17 U.S.C. 112(e)(4). 2. Proposals of the Parties SoundExchange proposes combining the Section 112 and 114 rates over the license period by allocating 8.8% of the combined fee owed by the SDARS towards the Section 112 charge. SoundExchange Third Amended Rate Proposal (August 6, 2007) at 4. The SDARS also appear to believe that the fee for the Section 112 license should be combined with that for Section 114, but their fee proposal recognizes no separate value for the Section 112 license. They argue that ephemeral copies have no economic value separate from the value of the performances they effectuate, citing the Copyright Office's 2001 *DMCA Section 104 Report* in support. SDARS PFF at ¶¶ 898-899, 902; SDARS RFF at ¶ 504. 3. The Record Evidence While the record in *Webcaster II* regarding the Section 112 license was exceedingly slim, it is virtually nonexistent in this proceeding. No party presented any evidence as to the independent value arising from the Section 112 license. SDARS PFF at ¶ 903. 4. Conclusion Of the thousands of pages of testimony and exhibits submitted by the parties in this proceeding, virtually none of them are devoted to any discussion of the Section 112 license and ephemeral copies. It is therefore evident that the parties consider the Section 112 license to be of little value at this point in time. Nevertheless, SoundExchange asks the Copyright Royalty Judges to bless the fiction that whatever the royalty fee for the Section 114 license may be, 8.8% of that fee constitutes the value of the Section 112 license. We decline to accept SoundExchange's invitation for the same two reasons we declined to do so in *Webcaster II.* First, the Section 112 license requires us to determine the rate or rates that would have been negotiated between a willing buyer and a willing seller, not the value that copyright owners and performers or the SDARS would have attached to ephemeral copies. SoundExchange's valuation of 8.8% is not a rate. The SDARS will not be paying 8.8% more in total royalty fees because of this valuation, nor will they be subtracting 8.8% from their charge if they choose not to avail themselves of the Section 112 license. Rather, SoundExchange's 8.8% valuation is nothing more than an effort to preserve a belief that the Section 112 license has *some* value by perpetuating the number adopted in the first webcasting proceeding. *Determination of Reasonable Rates and Terms for the Digital Performance of Sound Recordings and Ephemeral Recordings (Final Rule),* 67 FR 45240 (July 8, 2002) (codified at 37 CFR part 261) (“ *Webcaster I* ”). Second, the paucity of the record prevents us from determining that 8.8% of the Section 114 royalties is either the value or the rate for the Section 112 license. SoundExchange's mere assertion that its 8.8% proposal reflects an agreement between record companies and artists on the rate applicable to Section 112 does not overcome the absence of evidence in the record with respect to this license. SoundExchange did not present any testimony or evidence from copyright owners or performers on this point. We are left with a record that demonstrates that the license is merely an add-on to the securing of the performance rights granted by the Section 114 license. SoundExchange's proposal to include the Section 112 license within the rates set for the Section 114 license reflects this reality and we accept it as we did in *Webcaster II.* However, just as we did in *Webcaster II,* we decline, for the reasons stated above, to ascribe any particular percentage of the Section 114 royalty as representative of the value of the Section 112 license. *See Webcaster II,* 72 FR 24101-2. V. Terms Having determined the rates to be paid by the SDARS for their activities under Sections 114 and 112 of the Copyright Act, the Judges now turn to the terms necessary to effectuate payment and distribution. As we stated in *Webcaster II,* we are obligated to “adopt royalty payment and distribution terms that are practical and efficient.” 72 FR 24102. SoundExchange and the SDARS each submitted proposals of the terms they believe fulfill this obligation. SoundExchange based its proposal largely on terms the Judges adopted in *Webcaster II.* SX PFF at ¶ 1466. The terms proposed by the SDARS differ in certain respects from the *Webcaster II* terms. In considering the parties' proposals and adopting royalty terms, we seek to maintain consistency across the licenses set forth in Sections 112 and 114. Consistency promotes efficiency thereby reducing the overall costs associated with the administration of the licenses. This is not to say that the Judges will never vary terms across the licenses, but the burden is upon the parties to demonstrate the need for and the benefits of variance. As discussed below, the parties, for the most part, have not met this burden. A. Collective SoundExchange requests to be named the sole collective for the collection and distribution of royalties paid by the SDARS under the Section 112 and 114 licenses for the license period 2007-2012. SX PFF at ¶ 1505; Kessler WDT at 15-17. The SDARS do not oppose SoundExchange's request. SDARS RFF at ¶ 506 n.51. We have determined previously that designation of a single Collective “represents the most economically and administratively efficient system for collecting royalties under the blanket license framework created by the statutory licenses.” *Webcaster II,* 72 FR 24104. No party submitted evidence that would compel us to alter that determination here. Indeed, no party requested the designation of multiple collectives, and SoundExchange was the only party requesting to be selected as a collective. 43 43 Although Royalty Logic Inc. filed a petition to participate, it withdrew from the proceeding before the oral presentation of witnesses. *See, supra,* at 3. SoundExchange has a track record of serving as a Collective for the collection and processing of royalty payments made under Sections 112 and 114, having done so since the inception of the statutory licenses. That coupled with the absence of any opposition or record evidence to suggest that SoundExchange should not serve in that capacity here leads us to determine that SoundExchange will serve as the Collective for the 2007-2012 license period. We now turn to those terms which are in dispute. B. Disputed Terms 1. Late Fees a. Late Royalty Payments SoundExchange requests that the Judges establish a fee for late royalty payments equal to 1.5% of the total royalty owed by the SDARS for that period. SX PFF at ¶¶ 1482, 1488, 1489; Kessler WRT at 2-4; 8/29/07 Tr. 19:15-20:5 (Kessler). The proposed fee of 1.5% is the fee that is currently paid by PSS for the license period 2002-2007 and was the fee imposed by the Judges in the recently concluded webcasting proceeding. *See* SX PFF at ¶¶ 1480-82; 8/29/07 Tr. 19:15-20:5 (Kessler). SoundExchange argues that imposition of a “significant” late fee is necessary in order to compel licensees to make timely royalty payments. SX PFF at ¶ 1486; 6/19/07 Tr. 44:3-10 (Kessler). SoundExchange represents that many licensees are late with their payments, with such delinquency ranging from a few days to a few months. SX PFF at ¶ 1483. Ms. Kessler asserts that late fees are the only remedy available to SoundExchange to thwart late payments, absent filing an infringement suit. Kessler WRT at 3; 6/19/07 Tr. 44:3-10 (Kessler). Moreover, SoundExchange submits that a 1.5% late fee is not burdensome to the SDARS provided they submit their royalty payments in a timely manner. SX PFF at ¶ 1483; SX RFF at ¶ 522. In support of its proposed fee, SoundExchange cites three marketplace agreements between record companies and digital music services that impose a late fee of 1.5%. SDARS Ex. 86 at SE-REB0025070 (sec. 7.2); SDARS Ex. 88 at SE-REB 0025912 (sec. 6.04(d)); SX Ex. 105 DR at Ex. A, sec. 5(b). While the SDARS do not oppose the imposition of a fee for untimely royalty payments, they counter that a fee of 0.5% of the total royalty owed for the period is more reasonable and is supported by the record in this proceeding. SDARS PFF at ¶ 1311. The SDARS argue that SoundExchange's primary support for its 1.5% fee is that the Judges adopted that fee in *Webcaster II* and relies on the agreements offered in that proceeding here. *See* SDARS PFF at ¶ 1315; SDARS RFF at ¶¶ 507-09. The SDARS contend that SoundExchange has presented no other agreements in this proceeding to support its proposal. SDARS PFF at ¶ 1314. The SDARS further contend that, unlike the record in *Webcaster II,* which established that SoundExchange was faced “with virtually hundreds of different webcasters, including some with an established poor or unknown payment history,” the SDARS are defined entities with a history of making payments in a timely manner the majority of the time—a point conceded by SoundExchange. SDARS PFF at ¶ 1315; 6/19/07 Tr. 94:14-95:5 (Kessler) (“XM and Sirius are typically timely with their payments.”). The SDARS assert, therefore, that they need no motivation to pay timely. SDARS PFF at ¶ 1315. The SDARS also cite the testimony of Mr. Frear who testified that most of Sirius' “commercial agreements have no late payment charges at all. If there are late payment charges, they tend to be in the half of one percent to one percent per month range.” 6/12/07 Tr. 24:4-8 (Frear). They state that Mr. Frear's testimony is supported by numerous SDARS agreements as well as record company agreements and amendments with digital music services in the record which contain either no late fee provision or impose a late fee of 1%. SDARS PFF at ¶ 1312, citing SIR Exs. 43, 52-53; SDARS Ex. 85 at SE-REB 0027789; SDARS Ex. 87 at SE-REB 0028157; SX Ex. 104 DR at 23; SX Ex. 256 RR.at SE 0000626; SX Ex. 257 RR at SE 000148; SE Ex. 258 RR at SE 0005331-32; SX Ex. 253 RR; SX Ex. 254 RR. The SDARS claim that SoundExchange's proposal of a 1.5% late fee is “the rare and extreme upper bound of marketplace fees, [whereas] the norm is no late fee at all,” thus making the SDARS' proposal of 0.5% “far more consistent with the record evidence * * * particularly in light of [their] established record of timeliness.” SDARS RFF at ¶ 510. In determining an appropriate late fee, a balance must be struck between providing an effective incentive to the licensee to make payments timely on the one hand and not making the fee so high that it is punitive on the other hand. As we did in *Webcaster II,* the Judges conclude that a fee of 1.5% for untimely payments strikes the proper balance. Even though the SDARS typically submit their payments in a timely manner (SDARS PFF at ¶ 1309; 6/19/07 Tr. 94:14-95:5 (Kessler)), the SDARS' payment history is not dispositive. We are not persuaded that a late fee of 0.5% per month provides a sufficient incentive. While the content agreements and record company agreements cited by the SDARS do not contain a late fee provision, these agreements do contain provisions allowing for the termination of the agreement in the event of a breach of the agreement such as failure to make payments timely. SIR Ex. 43, sec. 12.4(a); SDARS Ex. 85 at SE-REB 0027790 (sec. 8(b)); SDARS Ex. 86 at SE-REB 0025071 (sec. 12); SDARS Ex. 87 at SE-REB 0028160 (sec. 10(b)); SDARS Ex. 88 at SE-REB 0025917 (sec. 10.01); SX Ex. 104 DR at 34 (sec. 12). Copyright owners and performers have no such recourse under a statutory license. They cannot terminate, short of a finding of infringement by a federal court, access to their works under the license. *See Webcaster II* , 72 FR 24107. We find that a late fee of 1.5%, as found in several of the agreements in the record, provides a proper incentive to the SDARS to maintain such timeliness and is not unduly harsh. SDARS Ex. 86 at SE-REB 0025070 (sec. 7.2); SDARS Ex. 88 at SE-REB 0025912 (sec. 6.04(d)); SX Ex. 105 DR at A-7 (sec. 5(b)); SX Ex. 107 DR at 9 (sec. 6(c)). The 1.5% late fee we adopt today is consistent with the late fees applicable to webcasters and PSS. b. Statements of Account and Reports of Use SoundExchange proposes that a late fee of 1.5% also be assessed for untimely statements of account and reports of use. SX PFF at ¶¶ 1488-89; Kessler WRT at 3; 6/19/07 Tr. 44:15-17 (Kessler). SoundExchange justifies its request by asserting that untimely submission of these documents hamper its ability to promptly distribute royalties. SX PFF at ¶ 1488; Kessler WRT at 4. SoundExchange goes on that such late fees would provide licensees with a financial incentive to submit their statements and reports in a timely fashion. SX PFF at ¶ 1488; 6/19/07 Tr. 44:15-45:6 (Kessler). The SDARS oppose SoundExchange's proposal. They assert that SoundExchange has provided no record evidence to support assessment of late fees to these submissions. SDARS PFF at ¶ 1319. Rather, the SDARS continue, the record establishes the opposite. Specifically, the SDARS point to several agreements between record labels and digital music distribution services which assess no late fee for anything other than a late payment. SDARS Ex. 85 at SE-REB 0027789; SDARS Ex. 86 at SE-REB 0025070; SDARS Ex. 87 at SE-REB 0028157; SDARS Ex. 88 at SE-REB 0025912; SX Ex. 104 DR at 23; SX Ex. 105 DR at A-6 of 7/1/04 agreement; SX Ex. 107 DR at 9; SX Ex. 256 RR at SE 0000626; SX Ex. 257 RR at SE 000148. In light of these agreements, they conclude that SoundExchange's proposal is unreasonable. SDARS RFF at ¶ 511. In *Webcaster II,* the Judges determined “that timely submission of a statement of account is critical to the quick and efficient distribution of royalties.” 72 FR 24107. Given its importance to the distribution process, we imposed a late fee of 1.5% of the total royalty owed for that month for its untimely submission. 72 FR 24108. That reasoning applies with equal force here. Consequently, we adopt the same 1.5% per month late fee for untimely statements of account that was adopted in *Webcaster II* and proposed by SoundExchange here. We defer any decision, however, to apply a late fee to the reports of use in light of our determination that issues relating to reports of use are best addressed in the context of a rulemaking proceeding. *See infra* at Section VI. As we found in *Webcaster II* , “inconsequential good-faith omissions or errors” in the statement of account “should not warrant imposition of the late fee.” 72 FR 24108. In applying a late fee to both royalty payments and statements of account, we reject SoundExchange's request to have the late fee accrue separately for these items regardless of whether they are submitted simultaneously, as proposed by SoundExchange, or separately. Since we are requiring the simultaneous submission of payments and statements of account, we agree with the SDARS that SoundExchange has not demonstrated the need for such an onerous provision in that instance. Therefore, when a royalty payment and statement of account are submitted together in accordance with the regulations but are late, the offending SDAR will pay a late fee of 1.5% that covers both the payment and the statement. Conversely, if the payment and the statement are submitted separately and both are late, then the SDAR will pay a 1.5% late fee for the late payment and an additional 1.5% late fee for the untimely statement. Finally, we reject the SDARS' proposal to require receipt of written notice of a late submission before the accrual of the late fee begins. *See* Second Amended Proposal of Rates and Terms of Sirius Satellite Inc. and XM Satellite Radio Inc. (October 1, 2007) at § 3._.3(c). The responsibility of timely submitting royalty payments and statements of account rests with the statutory licensee. We do not find such responsibility to be unduly burdensome. Therefore, we see no justification for providing the SDARS with any grace period before the commencement of the accrual period. 2. Confidentiality The parties are at loggerheads over whether copyright owners and performers should have access to the information contained in the statements of account. SoundExchange seeks adoption of the same confidentiality provisions adopted in *Webcaster II* . SX PFF at ¶ 1491; *see also* 37 CFR 380.5. There, copyright owners and performers and their agents (as well as attorneys, consultants, and authorized agents in future proceedings) are allowed to review confidential information in or pertaining to statements of account, subject to appropriate confidentiality agreements. SX PFF at ¶ 1491. SoundExchange submits that such access assists copyright owners and performers in making informed decisions regarding licensees' compliance with their statutory obligations and in making audit and enforcement decisions. *Id.* SoundExchange contends that in its experience more restrictive confidentiality provisions, such as those adopted in *Webcaster I* , lead to “significant operational and other problems” which make “it difficult for SoundExchange to complete its work” and result in unfairness to copyright owners and performers, the ultimate beneficiaries of the royalties. SX PFF at ¶¶ 1492-8. In opposing SoundExchange's proposal, the SDARS characterize SoundExchange's proposal as flawed because it “assumes that the services at issue are not complying with their obligations or making accurate payments.” SDARS PFF at ¶ 1327. The SDARS point out that unlike the webcasters in *Webcaster II* , they “largely have been compliant with all of their obligations.” *Id.* They conclude that “[w]here there is no basis for the premise underlying SoundExchange's confidentiality proposal, there can be no justification for adopting” it. *Id* . We find that the SDARS' argument misses the mark and adopt the confidentiality provisions proposed by SoundExchange. We previously have made clear that we will not impose confidentiality restrictions without a showing by the licensee—the SDARS here—of how disclosure of the information in the statements of account would be, or likely would be, harmful; in other words, a showing that such information is confidential. *See* 72 FR 24108. The SDARS made no such showing here; indeed, they put forth no evidence in support of their proposal to deny copyright owners and performers access to the statements of account. The SDARS' history of being “largely compliant” in its statutory obligations, while commendable, provides no justification for adversely impacting copyright owners' and performers' substantive rights under the Section 112 and 114 licenses. *See, id* . There is no support in the statute for excluding copyright owners and performers from having access to the information necessary to pursue an infringement suit, especially when copyright owners have full and complete access to the statements of account filed under the cable, satellite and DART licenses. 72 FR 24108 & n.77. As in *Webcaster II* , the general public will not have access to the statements of account. Therefore, access is limited to copyright owners and performers, and their agents and representatives identified in the regulations, whose works were used by the SDARS under the Section 112 and 114 licenses. *See* , 72 FR 24109. 3. Audits and Verification of Payments The SDARS strenuously object to SoundExchange's proposal that the SDARS be required to “use commercially reasonable efforts to obtain or to provide access to any relevant books and records maintained by third parties for the purpose of the [royalty verification] audit.” SDARS PFF at ¶ 1335. The SDARS argue that such a term is “unheard of in marketplace contracts between record labels and digital distribution services.” SDARS PFF at ¶ 1336, citing SDARS Exs. 85-89; SIR Exs. 43, 52-53; SX Exs. 104-05, 107 DR; SX Exs. 253-54, 256-258 RR. The SDARS add that such a term would interfere with their private contractual relationships with third parties. SDARS PFF at ¶ 1336. SoundExchange counters that its proposal only requires the SDARS to use “commercially reasonable efforts” to obtain these records, and the SDARS have offered no reason why they cannot make such an effort “to enable those audits to be as thorough and accurate as possible.” SX RFF at ¶ 535. Audits serve a critical function in the context of a statutory license where a copyright owner cannot easily terminate access to its works. Therefore, it is important that there be a high level of confidence in the results of such audits. It is equally important that the audit be as thorough and accurate as possible. Achievement of this goal requires a balancing of the benefits to SoundExchange of having at its disposal all pertinent records (or access thereto) against the burdens placed upon the SDARS in providing such records or access. We find that the balance weighs in favor of SoundExchange. Therefore, we are requiring the SDARS to use commercially reasonable efforts to obtain or provide access to records maintained by third parties that are relevant to the verification process. Imposition of this requirement is consistent with the terms we adopted in *Webcaster II* . *See* , 37 CFR 380.6(d). VI. Notice and Recordkeeping Section 803(c)(3) of the Copyright Act grants the Copyright Royalty Judges the authority to adopt terms regarding notice and recordkeeping which would supercede those set forth in 37 CFR part 370. Our exercise of this authority, however, is discretionary. 17 U.S.C. 803(c)(3) (“[T]he Copyright Royalty Judges *may* specify notice and recordkeeping requirements of users of the copyrights at issue that apply in lieu of those that would otherwise apply under regulations.”) (emphasis added). As with our consideration of terms, the Judges will adopt new or amended notice and/or recordkeeping requirements only where the parties sufficiently demonstrate the need for and the benefits of variances with existing regulations. The parties have once again failed to satisfy their burden. The parties each have submitted recordkeeping proposals which go beyond the current interim notice and recordkeeping regulations set forth in 37 CFR part 370. *See* SoundExchange Third Amended Rate Proposal (August 6, 2007) at 9; Second Amended Proposal of Rates and Terms of Sirius Satellite Radio Inc. and XM Satellite Radio Inc. (October 1, 2007) at § 3_.6. The proposals include provisions covering the frequency of service of the reports of use, the additional information to be reported regarding each sound recording, the time period for retention of the reports of use by the SDARS, signature requirements, format and delivery requirements, confidentiality of the reports, and census reporting. While the parties agree on certain of the proposed provisions, they disagree on others. The parties' proposals, with one exception discussed below, all suffer the same deficiency: they are nothing more than bare proposals unsupported by record evidence. The need for the changes and the benefits to be obtained from them are backed by nothing more than argument of counsel in their closing briefs. Without more, the Judges decline to exercise their discretion to amend the notice and recordkeeping regulations. The one proposal that is offered with some record testimony is SoundExchange's request that the recordkeeping regulations be amended to require census reporting. Kessler WDT at 17-18; 8/29/07 Tr. 23:19-25:11 (Kessler); SX PFF at ¶ 1469. SoundExchange relies on the testimony it presented in *Webcaster II* for support of all of its proposed terms, including those relating to reports of use. Kessler WDT at 2; 6/19/07 Tr. 39:16-40:2, 47:8-19 (Kessler). The SDARS do not object to census reporting in general but disagree with SoundExchange that they should be required to report all sound recordings, noting that SoundExchange's proposal does not include the “pragmatic exceptions” found in the current recordkeeping regulations. SDARS PFF at ¶¶ 1329-30. Such “exceptions” require no reporting of sound recordings that are not under federal copyright protection or whose term has expired, that have been directly licensed by the Service or that amount to an incidental performance as defined in the regulations. 37 CFR 370.3(b)(8)(i)-(iii); SDARS PFF at ¶ 1329. When the interim notice and recordkeeping rules were promulgated, we made clear our intention to “monitor the operation of these regulations * * * and [to] request public comment in the future as to the need for amendment or improvement prior to adopting final regulations.” *Notice and Recordkeeping for Use of Sound Recordings Under Statutory License (Interim Final Rule)* , 71 FR 59010, 59011 (October 6, 2006) (codified at 37 CFR Part 370). In *Webcaster II* , we declined to address notice and recordkeeping as part of that rate setting proceeding, explaining that “because our recordkeeping regulations are interim and not final, there is ample opportunity to again address” issues such as the Services' recordkeeping costs and SoundExchange's request for census reporting in the more appropriate context of a future rulemaking proceeding. 72 FR 24110. Moreover, we found “there was no persuasive testimony compelling an adjustment of the current recordkeeping regulations.” *Id* . SoundExchange has failed to present any persuasive evidence in this proceeding to challenge our conclusion in *Webcaster II* , and we therefore do not see any reason to now adopt its proposed census reporting requirement, particularly where the parties cannot agree as to what information constitutes census reporting. VII. Determination and Order Having fully considered the record, the Copyright Royalty Judges make the above Findings of Fact based on the record. Relying upon these Findings of Fact, the Copyright Royalty Judges unanimously adopt every portion of this Determination of the Rates and Terms of the Statutory Licenses for the digital transmission of sound recordings, pursuant to 17 U.S.C. 114, and for the making of ephemeral phonorecords, pursuant to 17 U.S.C. 112(e). *So ordered.* James Scott Sledge, Chief Copyright Royalty Judge. William J. Roberts, Jr., Copyright Royalty Judge. Stanley C. Wisniewski, Copyright Royalty Judge. Dated: January 10, 2008. List of Subjects in 37 CFR Part 382 Copyright, Digital audio transmissions, Performance right, Sound recordings. Final Regulations For the reasons set forth in the preamble, the Copyright Royalty Judges are amending part 382 of Chapter III to title 37 of the Code of Federal Regulations by adding a new Subpart B to read as follows: PART 382—RATES AND TERMS FOR DIGITAL TRANSMISSIONS OF SOUND RECORDINGS AND THE REPRODUCTION OF EPHEMERAL RECORDINGS BY PREEXISTING SUBSCRIPTION SERVICES AND PREEXISTING SATELLITE DIGITAL AUDIO RADIO SERVICES Subpart B—Preexisting Satellite Digital Audio Radio Services Sec. 382.10 General. 382.11 Definitions. 382.12 Royalty fees for public performance of sound recordings and the making of ephemeral recordings. 382.13 Terms for making payment of royalty fees and statements of account. 382.14 Confidential information. 382.15 Verification of royalty payments. 382.16 Verification of royalty distributions. 382.17 Unclaimed funds. Authority: 17 U.S.C. 112(e), 114(f), 804(b)(3). § 382.10 General.

(a)*Scope.* This subpart establishes rates and terms of royalty payments for the public performance of sound recordings in certain digital transmissions by Licensees in accordance with the provisions of 17 U.S.C. 114, and the making of Ephemeral Recordings by Licensees in accordance with the provisions of 17 U.S.C. 112(e), during the period from January 1, 2007, through December 31, 2012.

(b)*Legal compliance.* Licensees relying upon the statutory licenses set forth in 17 U.S.C. 112 and 114 shall comply with the requirements of those sections, the rates and terms of this subpart, and any other applicable regulations.

(c)*Relationship to voluntary agreements.* Notwithstanding the royalty rates and terms established in this subpart, the rates and terms of any license agreements entered into by Copyright Owners and Licensees shall apply in lieu of the rates and terms of this subpart to transmission within the scope of such agreements. § 382.11 Definitions. For purposes of this subpart, the following definitions shall apply: *Collective* is the collection and distribution organization that is designated by the Copyright Royalty Judges. For the 2007-2012 license period, the Collective is SoundExchange, Inc. *Copyright Owners* are sound recording copyright owners who are entitled to royalty payments made under this subpart pursuant to the statutory licenses under 17 U.S.C. 112(e) and 114(f). *Ephemeral Recording* is a phonorecord created for the purpose of facilitating a transmission of a public performance of a sound recording under a statutory license in accordance with 17 U.S.C. 114(f) and subject to the limitations specified in 17 U.S.C. 112(e). *GAAP* shall mean generally accepted accounting principles in effect from time to time in the United States. *Gross Revenues.*

(1)Gross Revenues shall mean revenue recognized by the Licensee in accordance with GAAP from the operation of an SDARS, and shall be comprised of the following:

(i)Subscription revenue recognized by Licensee directly from residential U.S. subscribers for Licensee's SDARS; and

(ii)Licensee's advertising revenues, or other monies received from sponsors, if any, attributable to advertising on channels other than those that use only incidental performances of sound recordings, less advertising agency and sales commissions.

(2)Gross Revenues shall include such payments as set forth in paragraphs (1)(i) and

(ii)of the definition of “Gross Revenues” to which Licensee is entitled but which are paid to a parent, wholly-owned subsidiary or division of Licensee.

(3)Gross Revenues shall exclude:

(i)Monies or other consideration attributable to the sale and/or license of equipment and/or other technology, including but not limited to bandwidth, sales of devices that receive the Licensee's SDARS and any taxes, shipping and handling fees therefor;

(ii)Royalties paid to Licensee for intellectual property rights;

(iii)Monies or other consideration received by Licensee from the sale of phonorecords and digital phonorecord deliveries;

(iv)Sales and use taxes, shipping and handling, credit card, invoice, and fulfillment service fees;

(v)Bad debt expense, and

(vi)Revenues recognized by Licensee for the provision of

(A)Current and future data services offered for a separate charge (e.g., weather, traffic, destination information, messaging, sports scores, stock ticker information, extended program associated data, video and photographic images, and such other telematics and/or data services as may exist from time to time);

(B)Channels, programming, products and/or other services offered for a separate charge where such channels use only incidental performances of sound recordings;

(C)Channels, programming, products and/or other services provided outside of the United States; and

(D)Channels, programming, products and/or other services for which the performance of sound recordings and/or the making of ephemeral recordings is exempt from any license requirement or is separately licensed, including by a statutory license and, for the avoidance of doubt, webcasting, audio services bundled with television programming, interactive services, and transmissions to business establishments. *Licensee* is a person that has obtained a statutory license under 17 U.S.C. 114, and the implementing regulations, to make transmissions over a preexisting satellite digital audio radio service, and has obtained a statutory license under 17 U.S.C. 112(e), and the implementing regulations, to make Ephemeral Recordings for use in facilitating such transmissions. *Performers* means the independent administrators identified in 17 U.S.C. 114(g)(2)(B) and (C), and the parties identified in 17 U.S.C. 114(g)(2)(D). *Qualified Auditor* is a Certified Public Accountant. *Residential* means, with respect to a service, a service that may be licensed under the provisions of 17 U.S.C. 114(d)(2)(B); and, with respect to subscribers, subscribers to such a service. *SDARS* means the preexisting satellite digital audio radio services as defined in 17 U.S.C. 114(j)(10). *Term* means the period commencing January 1, 2007, and continuing through December 31, 2012. § 382.12 Royalty fees for the public performance of sound recordings and the making of ephemeral recordings. The monthly royalty fee to be paid by a Licensee for the public performance of sound recordings pursuant to 17 U.S.C. 114(d)(2) and the making of any number of ephemeral phonorecords to facilitate such performances pursuant to 17 U.S.C. 112(e) shall be the percentage of monthly Gross Revenues resulting from Residential services in the United States as follows: for 2007 and 2008, 6.0%; for 2009, 6.5%; for 2010, 7.0%; for 2011, 7.5%; and for 2012, 8.0%. § 382.13 Terms for making payment of royalty fees and statements of account.

(a)*Payment to the Collective.* A Licensee shall make the royalty payments due under § 382.12 to the Collective.

(b)*Designation of the Collective.*

(1)Until such time as a new designation is made, SoundExchange, Inc., is designated as the Collective to receive statements of account and royalty payments from Licensees due under § 382.12 and to distribute such royalty payments to each Copyright Owner and Performer, or their designated agents, entitled to receive royalties under 17 U.S.C. 112(e) or 114.

(2)If SoundExchange, Inc. should dissolve or cease to be governed by a board consisting of equal numbers of representatives of Copyright Owners and Performers, then it shall be replaced by a successor Collective upon the fulfillment of the requirements set forth in paragraph (b)(2)(i) of this section.

(i)By a majority vote of the nine Copyright Owner representatives and the nine Performer representatives on the SoundExchange board as of the last day preceding the condition precedent in paragraph (b)(2) of this section, such representatives shall file a petition with the Copyright Royalty Judges designating a successor to collect and distribute royalty payments to Copyright Owners and Performers entitled to receive royalties under 17 U.S.C. 112(e) or 114 that have themselves authorized the Collective.

(ii)The Copyright Royalty Judges shall publish in the **Federal Register** within 30 days of receipt of a petition filed under paragraph (b)(2)(i) of this section an order designating the Collective named in such petition.

(c)*Monthly payments.* A Licensee shall make any payments due under § 382.12 on a monthly basis on or before the 45th day after the end of each month for that month, except that payments due under § 382.12 for the period beginning January 1, 2007, through the last day of the month in which the Copyright Royalty Judges issue their final determination adopting these rates and terms shall be due 45 days after the end of such period. All payments shall be rounded to the nearest cent.

(d)*Late payments and statements of account.* A Licensee shall pay a late fee of 1.5% per month, or the highest lawful rate, whichever is lower, for any payment and/or statement of account received by the Collective after the due date. Late fees shall accrue from the due date until payment is received by the Collective.

(e)*Statements of account.* Any payment due under § 382.12 shall be accompanied by a corresponding statement of account. A statement of account shall contain the following information:

(1)Such information as is necessary to calculate the accompanying royalty payments;

(2)The name, address, business title, telephone number, facsimile number (if any), electronic mail address and other contact information of the person to be contacted for information or questions concerning the content of the statement of account;

(3)The handwritten signature of a duly authorized officer or representative of the Licensee;

(4)The printed or typewritten name of the person signing the statement of account;

(5)The date of signature;

(6)The title or official position held in relation to the Licensee by the person signing the statement of account;

(7)A certification of the capacity of the person signing; and

(8)A statement to the following effect: I, the undersigned officer or representative of the Licensee, have examined this statement of account and hereby state that it is true, accurate, and complete to my knowledge after reasonable due diligence.

(f)*Distribution of royalties.*

(1)The Collective shall promptly distribute royalties received from Licensees to Copyright Owners and Performers, or their designated agents, that are entitled to such royalties. The Collective shall only be responsible for making distributions to those Copyright Owners, Performers, or their designated agents who provide the Collective with such information as is necessary to identify the correct recipient. The Collective shall distribute royalties on a basis that values all performances by a Licensee equally based upon the information provided under the reports of use requirements for Licensees contained in § 370.3 of this chapter.

(2)If the Collective is unable to locate a Copyright Owner or Performer entitled to a distribution of royalties under paragraph (f)(1) of this section within 3 years from the date of payment by a Licensee, such royalties shall be handled in accordance with § 382.17.

(g)*Retention of records.* Books and records of a Licensee and of the Collective relating to payments of and distributions of royalties shall be kept for a period of not less than the prior 3 calendar years. § 382.14 Confidential information.

(a)*Definition.* For purposes of this subpart, “Confidential Information” shall include the statements of account and any information contained therein, including the amount of royalty payments, and any information pertaining to the statements of account reasonably designated as confidential by the Licensee submitting the statement.

(b)*Exclusion.* Confidential Information shall not include documents or information that at the time of delivery to the Collective are public knowledge. The party claiming the benefit of this provision shall have the burden of proving that the disclosed information was public knowledge.

(c)*Use of Confidential Information.* In no event shall the Collective use any Confidential Information for any purpose other than royalty collection and distribution and activities related directly thereto.

(d)*Disclosure of Confidential Information.* Access to Confidential Information shall be limited to:

(1)Those employees, agents, attorneys, consultants and independent contractors of the Collective, subject to an appropriate confidentiality agreement, who are engaged in the collection and distribution of royalty payments hereunder and activities related thereto, for the purpose of performing such duties during the ordinary course of their work and who require access to the Confidential Information;

(2)An independent and Qualified Auditor, subject to an appropriate confidentiality agreement, who is authorized to act on behalf of the Collective with respect to verification of a Licensee's statement of account pursuant to § 382.15 or on behalf of a Copyright Owner or Performer with respect to the verification of royalty distributions pursuant to § 382.16;

(3)Copyright Owners and Performers, including their designated agents, whose works have been used under the statutory licenses set forth in 17 U.S.C. 112(e) and 114(f) by the Licensee whose Confidential Information is being supplied, subject to an appropriate confidentiality agreement, and including those employees, agents, attorneys, consultants and independent contractors of such Copyright Owners and Performers and their designated agents, subject to an appropriate confidentiality agreement, for the purpose of performing their duties during the ordinary course of their work and who require access to the Confidential Information; and

(4)In connection with future proceedings under 17 U.S.C. 112(e) and 114(f) before the Copyright Royalty Judges, and under an appropriate protective order, attorneys, consultants and other authorized agents of the parties to the proceedings or the courts.

(e)*Safeguarding of Confidential Information.* The Collective and any person identified in paragraph

(d)of this section shall implement procedures to safeguard against unauthorized access to or dissemination of any Confidential Information using a reasonable standard of care, but no less than the same degree of security used to protect Confidential Information or similarly sensitive information belonging to the Collective or person. § 382.15 Verification of royalty payments.

(a)*General.* This section prescribes procedures by which the Collective may verify the royalty payments made by a Licensee.

(b)*Frequency of verification.* The Collective may conduct a single audit of a Licensee, upon reasonable notice and during reasonable business hours, during any given calendar year, for any or all of the prior 3 calendar years, but no calendar year shall be subject to audit more than once.

(c)*Notice of intent to audit.* The Collective must file with the Copyright Royalty Judges a notice of intent to audit a particular Licensee, which shall, within 30 days of the filing of the notice, publish in the **Federal Register** a notice announcing such filing. The notification of intent to audit shall be served at the same time on the Licensee to be audited. Any such audit shall be conducted by an independent and Qualified Auditor identified in the notice, and shall be binding on all parties.

(d)*Acquisition and retention of report.* The Licensee shall use commercially reasonable efforts to obtain or to provide access to any relevant books and records maintained by third parties for the purpose of the audit. The Collective shall retain the report of the verification for a period of not less than 3 years.

(e)*Acceptable verification procedure.* An audit, including underlying paperwork, which was performed in the ordinary course of business according to generally accepted auditing standards by an independent and Qualified Auditor, shall serve as an acceptable verification procedure for all parties with respect to the information that is within the scope of the audit.

(f)*Consultation.* Before rendering a written report to the Collective, except where the auditor has a reasonable basis to suspect fraud and disclosure would, in the reasonable opinion of the auditor, prejudice the investigation of such suspected fraud, the auditor shall review the tentative written findings of the audit with the appropriate agent or employee of the Licensee being audited in order to remedy any factual errors and clarify any issues relating to the audit; Provided that an appropriate agent or employee of the Licensee reasonably cooperates with the auditor to remedy promptly any factual errors or clarify any issues raised by the audit.

(g)*Costs of the verification procedure.* The Collective shall pay the cost of the verification procedure, unless it is finally determined that there was an underpayment of 10% or more, in which case the Licensee shall, in addition to paying the amount of any underpayment, bear the reasonable costs of the verification procedure. § 382.16 Verification of royalty distributions.

(a)*General.* This section prescribes procedures by which any Copyright Owner or Performer may verify the royalty distributions made by the Collective; Provided, however, that nothing contained in this section shall apply to situations where a Copyright Owner or Performer and the Collective have agreed as to proper verification methods.

(b)*Frequency of verification.* A Copyright Owner or Performer may conduct a single audit of the Collective upon reasonable notice and during reasonable business hours, during any given calendar year, for any or all of the prior 3 calendar years, but no calendar year shall be subject to audit more than once.

(c)*Notice of intent to audit.* A Copyright Owner and Performer must file with the Copyright Royalty Judges a notice of intent to audit the Collective, which shall, within 30 days of the filing of the notice, publish in the **Federal Register** a notice announcing such filing. The notification of intent to audit shall be served at the same time on the Collective. Any audit shall be conducted by an independent and Qualified Auditor identified in the notice, and shall be binding on all Copyright Owners and Performers.

(d)*Acquisition and retention of report.* The Collective shall use commercially reasonable efforts to obtain or to provide access to any relevant books and records maintained by third parties for the purpose of the audit. The Copyright Owner or Performer requesting the verification procedure shall retain the report of the verification for a period of not less than 3 years.

(f)*Consultation.* Before rendering a written report to a Copyright Owner or Performer, except where the auditor has a reasonable basis to suspect fraud and disclosure would, in the reasonable opinion of the auditor, prejudice the investigation of such suspected fraud, the auditor shall review the tentative written findings of the audit with the appropriate agent or employee of the Collective in order to remedy any factual errors and clarify any issues relating to the audit; Provided that the appropriate agent or employee of the Collective reasonably cooperates with the auditor to remedy promptly any factual errors or clarify any issues raised by the audit.

(g)*Costs of the verification procedure.* The Copyright Owner or Performer requesting the verification procedure shall pay the cost of the procedure, unless it is finally determined that there was an underpayment of 10% or more, in which case the Collective shall, in addition to paying the amount of any underpayment, bear the reasonable costs of the verification procedure. § 382.17 Unclaimed funds. If the Collective is unable to identify or locate a Copyright Owner or Performer who is entitled to receive a royalty distribution under this subpart, the Collective shall retain the required payment in a segregated trust account for a period of 3 years from the date of distribution. No claim to such distribution shall be valid after the expiration of the 3-year period. After expiration of this period, the Collective may apply the unclaimed funds to offset any costs deductible under 17 U.S.C. 114(g)(3). The foregoing shall apply notwithstanding the common law or statutes of any State. Dated: January 10, 2008. James Scott Sledge, Chief Copyright Royalty Judge. [FR Doc. E8-669 Filed 1-23-08; 8:45 am] BILLING CODE 1410-72-P ENVIRONMENTAL PROTECTION AGENCY 40 CFR Part 52 [EPA-R01-OAR-2007-0399; FRL-8517-4] Approval and Promulgation of Air Quality Implementation Plans; Connecticut; State Implementation Plan Revision to Implement the Clean Air Interstate Rule AGENCY: Environmental Protection Agency (EPA). ACTION: Final rule. SUMMARY: EPA is approving a State Implementation Plan

(SIP)revision submitted by the State of Connecticut on April 26, 2007, with amendments submitted on September 12, 2007. This SIP 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 Connecticut. Therefore, as a consequence of the SIP approval, the Administrator of EPA will also, in a separate document, issue a final rule to withdraw the Federal Implementation Plan

(FIP)concerning NO X ozone-season emissions for Connecticut. In the SIP revision that EPA is approving, Connecticut will meet CAIR requirements by participating in the EPA-administered cap-and-trade program addressing NO X ozone-season emissions. Connecticut's SIP revision is based on EPA's model CAIR NO X ozone season rule and is, in most respects, substantively identical to that model rule. The Connecticut CAIR program has two major substantive differences from that model rule (expanded applicability, and a different methodology for allocating NO X allowances), both of which are consistent with the flexibility allowed under CAIR for state participation in the EPA-administered cap-and-trade program. The SIP revision complies with the statutory and regulatory requirements for approval of a CAIR NO X ozone-season program. This action is being taken in accordance with the Clean Air Act. DATES: *Effective Date:* This rule is effective on January 24, 2008. ADDRESSES: EPA has established a docket for this action under Docket Identification No. EPA-R01-OAR-2007-0399. All documents in the docket are listed on the *www.regulations.gov* Web site. 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 through *www.regulations.gov* or in hard copy at the Office of Ecosystem Protection, U.S. Environmental Protection Agency, EPA New England Regional Office, One Congress Street, Suite 1100, Boston, MA. EPA requests that, if at all possible, you contact the contact 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 legal holidays. Copies of the documents relevant to this action are also available for public inspection during normal business hours, by appointment at the Bureau of Air Management, Department of Environmental Protection, State Office Building, 79 Elm Street, Hartford, CT 06106-1630. FOR FURTHER INFORMATION CONTACT: If you have questions concerning today's action, please contact Alison C. Simcox, Air Quality Planning Unit, U.S. Environmental Protection Agency, EPA New England Regional Office, One Congress Street, Suite 1100 (CAQ), Boston, MA 02114-2023, telephone number

(617)918-1684, fax number

(617)918-0684, e-mail *simcox.alison@epa.gov* . SUPPLEMENTARY INFORMATION: Table of Contents I. What Action Is EPA Taking? II. What are the Regulatory History and General Requirements of CAIR and the CAIR FIPs? III. EPA Analysis of Connecticut's CAIR SIP Submittal A. State Budgets for Allowance Allocations B. CAIR Cap-and-Trade Programs C. Applicability Provisions for non-EGUs NO X SIP Call Sources D. NO X Allowance Allocations E. Individual Opt-in Units IV. Final Action V. When Is This Action Effective? VI. Statutory and Executive Order Reviews I. What Action Is EPA Taking? EPA is approving a revision to Connecticut's SIP that includes a new regulation, Regulations of Connecticut State Agencies

(RCSA)section 22a-174-22c, “The Clean Air Interstate Rule

(CAIR)Nitrogen Oxides (NO X ) Ozone Season Trading Program” (herein called “Connecticut's CAIR program”), repeal of RCSA section 22a-174-22a (“The Connecticut NO X Budget Program”), as of September 4, 2007, and repeal of RCSA section 22a-174-22b, “The Connecticut Post-2002 NO X Budget Program” (herein called the “Connecticut NO X SIP Call trading program”), as of May 1, 2010. This SIP revision was first submitted on April 26, 2007, but includes amendments submitted on September 12, 2007. The CT DEP had requested that EPA “parallel process” Connecticut's proposed CAIR SIP revision. Under this procedure, EPA prepared its proposed approval of Connecticut's SIP revision before the state's final adoption and repeal of the regulations referenced above. EPA has reviewed Connecticut's final adopted regulations and determined that changes were made to clarify meaning, improve consistency, or to address redundancy, and that they do not differ significantly from the “post-hearing final draft” version that was the subject of the notice of proposed rulemaking

(NPR)for this SIP Revision (72 FR 50305). For example, definitions of “commence commercial operation” and “commence operation” were clarified; the word “through” was substituted for a hyphen between dates listed to clearly identify the control periods included in the regulation; and language was added to clarify that the term “permitting authority” has the same meaning as in 40 CFR part 96, subpart AAAA, which refers to the CAIR NO X Ozone Season Trading Program. None of the changes made are deemed significant for SIP approval purposes, and it is, therefore, appropriate to prepare this final rule. In its SIP revision, Connecticut will meet CAIR requirements by requiring certain electric generating units

(EGUs)to participate in the EPA-administered State CAIR cap-and-trade program addressing NO X ozone-season emissions. EPA has determined that the Connecticut SIP, as revised, meets the applicable requirements of CAIR. As a consequence of the SIP approval, the Administrator of EPA will also, in a separate document, issue a final rule to withdraw the FIP concerning NO X ozone-season emissions for Connecticut. That action will delete and reserve 40 CFR 52.386. The withdrawal of the CAIR FIP for Connecticut is a conforming amendment that must be made once the SIP is approved because EPA's authority to issue the FIP was premised on a deficiency in the SIP for Connecticut. Once the SIP is fully approved, EPA no longer has authority for the FIP. Thus, EPA will not have the option of maintaining the FIP 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 FIP. II. What Is the Regulatory History and General Requirements of CAIR and the CAIR FIPs? The Clean Air Interstate Rule

(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 particles (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 other control measures. 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. More information on the regulatory history and requirements of CAIR and the CAIR FIPs is available in the NPR and will not be restated here. III. EPA Analysis of Connecticut's CAIR SIP Submittal A brief summary of EPA's review of Connecticut's CAIR program is given below. Additional details regarding requirements of Connecticut's 22a-174-22c regulation and EPA's evaluation of this regulation are available in the NPR for this SIP revision. In addition, Connecticut's CAIR SIP submittal is available in the docket supporting this action. 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 of the CAIR program (2009-2014) and by 0.125 lb/mmBtu, for phase 2 of the CAIR program (2015 and thereafter) 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. Connecticut, however, is only required to participate in the CAIR NO X ozone-season program, not the CAIR NO X annual or SO 2 trading programs. Therefore, only CAIR NO X ozone-season budgets apply to the Connecticut CAIR program. In today's action, EPA is approving Connecticut's SIP revision, which includes a new regulation, 22a-174-22c, which comprises Connecticut's CAIR program. This SIP revision adopts the budget established for the State in CAIR, i.e., 2,559 tons of NO X ozone-season emissions for CAIR phases 1 and 2, plus an additional 132 tons of NO X ozone-season emissions for both phases 1 and 2 to account for NO X emissions from “non-EGUs” from the Connecticut NO X SIP Call trading program. The total NO X ozone-season budget is therefore 2,691 tons of NO X ozone-season emissions for CAIR phases 1 and 2. Connecticut's SIP revision sets this budget as the total number of allowances (with each allowance authorizing one ton of NO X ozone-season emissions) available for allocation for each year under the EPA-administered CAIR cap-and-trade program. 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 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 requirements by participating in the CAIR NO X ozone season trading program and including all their NO X SIP Call trading sources in that program. In the SIP revision, Connecticut will implement its CAIR budgets by requiring EGUs (as well as “non-EGUs” from its NO X SIP Call trading program, as discussed below) to participate in EPA-administered cap-and-trade programs for NO X ozone-season emissions. Connecticut has adopted a full SIP revision that adopts, with certain allowed changes discussed below, the CAIR model cap-and-trade rules for 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 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 (herein called “non-EGUs”). 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. Connecticut has chosen to expand the applicability provisions of the CAIR NO X ozone season trading program to include all units in the State's NO X SIP Call trading program. Units in the Connecticut NO X SIP Call trading program include EGUs of 15 MW or more and non-EGUs (such as industrial boilers and combustion turbines) with a maximum design heat input of 250 MMBtu/hr or more. These units will be included in the Connecticut CAIR program beginning with the control period in 2009. EPA has determined that Connecticut's regulation 22a-174-22c includes the allowable CAIR applicability provisions relating to adding all NO X SIP Call trading-program units to the Connecticut CAIR NO X ozone season program. D. NO X Allowance Allocations *Deadlines:* CAIR provides in 40 CFR 51.123(aa)(2)(iii)(C) that for a full SIP revision, “[t]he State's methodology must require that, for EGUs commencing operation before January 1, 2001, the State will determine, and notify the Administrator of, each unit's allocation of CAIR NO X allowances by October 31, 2006 for the ozone seasons 2009, 2010, and 2011.” Connecticut's SIP revision requires that it submit and it in fact did submit these allocations by April 30, 2007 (the deadline for submittal applicable to abbreviated SIP revisions under 40 CFR 51.123(ee)(2)(ii)(C)). The purpose of the October 31, 2006 deadline was to allow EPA's Clean Air Markets Division sufficient time to process the allocations. At this point, as Connecticut has in fact submitted its allocations well before the date of this document, and as the Clean Air Markets Division is fully able to process the allocations, it makes no difference whether EPA received the 2009-2011 allocations in April of 2007 or October of 2006. EPA will still be able to record the allocations and provide the allowances to owners and operators sufficiently in advance of the 2009-2011 control periods. EPA considers the late submittal harmless error and consequently approves this SIP revision. *NO* X * allowance-allocation methodology:* 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 (i.e., “existing units”), 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 State 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. Connecticut has chosen to replace the provisions of the CAIR NO X ozone-season model trading rule concerning allowance allocations with its own methodology. Connecticut's CAIR program is codified at RCSA section 22a-174-22c. Whereas the model trading rule uses an allocation methodology that is fuel-adjusted and based on heat input, Connecticut's allocation methodology is not fuel-adjusted and is largely based on heat output. Connecticut also provides a percentage of allowances for a new unit set-aside and for an energy efficiency/renewable energy set-aside (EERESA) and Qualifying Other Project (QOPs). For the 2009 through 2011 control periods, Connecticut will first allocate NO X allowances to CAIR NO X Ozone Season units which are cogeneration, industrial or waste-tire-fired units on an input basis, then will allocate allowances to older EGUs using an output basis. Remaining allocations will be allocated to newer EGUs on a pro-rated output basis. For the 2012 control period and beyond, Connecticut will allocate allowances to both older and newer EGUs on a pro-rated output basis. Connecticut has set a new unit set-aside at 7 percent of the State's CAIR budget during CAIR phase 1 (2009-2014), and at 5 percent of the State's CAIR budget during CAIR phase 2 (2015 and thereafter). Therefore, the new unit set-aside includes 200 CAIR NO X ozone-season allowances during CAIR phase 1, and 134 allowances during CAIR phase 2. Connecticut has set the EERESA at 10 percent of the State's CAIR budget for both phases of the CAIR program. Therefore, the EERESA includes 268 CAIR NO X allowances for the 2009 and subsequent ozone-season control periods. More details on Connecticut's methodology for allocating CAIR allowances, as well as information on Connecticut CAIR permits and requirements for facilities to report emissions data, can be found in the NPR and in Connecticut's CAIR SIP submittal available in the docket supporting this action. In the NPR, EPA identified two potential ambiguities in the allocation provisions of Connecticut's proposed CAIR program, and proposed its interpretations of those provisions. See 72 FR 50309. EPA received no comments regarding these proposed interpretations. Consequently, EPA interprets the provisions involved as follows. First, the proposed regulation uses the term “NO[X] allowance,” which is not defined, in three places. See RCSA sections 22a-174-22c(c)(2), 22a-174-22c(c)(3)(B), 22a-174-22c(g)(4). EPA interprets the term “NO[X] allowance” when used in RCSA section 22a-174-22c as being identical to the term “CAIR NO[X] Ozone Season allowance” as defined at 40 CFR 96.302. Second, under RCSA sections 22a-174-22c(e)(7)(A) and

(B)and 22a-174-22c(e)(8)(A), there is no limit to the number of allowances that can be allocated to CAIR NO X Ozone Season units which are cogeneration units, industrial units, waste-tire-fired units, or Phase I units in any control period. For purposes of construing Connecticut's proposed SIP revision, EPA interprets RCSA sections 22a-174-22c(e)(2) and 22a-174-22c(e)(3) to prohibit the Connecticut DEP from allocating allowances in excess of the total state budget, and to control in any conflict with RCSA sections 22a-174-22c(e)(7)(A) and

(B)and 22a-174-22c(e)(8)(A). Thus, if the operation of RCSA sections 22a-174-22c(e)(7)(A)-(B) and/or 22a-174-22c(e)(8)(A) were to yield allowances for CAIR NO X Ozone Season units which are cogeneration units, industrial units, waste-tire-fired units, or Phase I units in excess of the state budget, either by themselves or in combination with allocations to other categories, then RCSA sections 22a-174-22c(e)(2) and 22a-174-22c(e)(3) would require the Connecticut DEP to recalculate or reallocate allowances so as not to exceed the state budget. EPA has relied on these interpretations of Connecticut's proposed SIP revision for the purposes of approving it as meeting the requirements of the Act and the CAIR program, and these interpretations represent EPA's formal interpretations of the SIP provisions at issue for purposes of federal law. E. Individual Opt-in Units The Connecticut CAIR SIP does not include opt-in provisions because the State has chosen to allocate CAIR allowances using an energy-output methodology that cannot be used for opt-in sources under the model CAIR NO X ozone-season trading rule. In addition, Connecticut does not expect there to be a demand for opt-in provisions as no source opted into Connecticut's NO X SIP Call trading program. IV. Final Action EPA is approving a revision to Connecticut's SIP that includes a new regulation, RCSA section 22a-174-22c (Connecticut's CAIR program), and repeal of RCSA section 22a-174-22a (“The Connecticut NO X Budget Program”), as of September 4, 2007, and of RCSA section 22a-174-22b (“The Connecticut Post-2002 NO X Budget Program”), as of May 1, 2010. Under this SIP revision, Connecticut will participate in the EPA-administered cap-and-trade program for NO X ozone-season emissions. The SIP revision meets the applicable requirements in 40 CFR 51.123(o) and (aa), with regard to NO X ozone season emissions. EPA has determined that the SIP as revised meets 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 FIP concerning NO X ozone-season emissions for Connecticut. That action will delete and reserve 40 CFR 52.386 in part 52. Other specific requirements of the CAIR SIP revision and the rationale for EPA's approval are explained in the NPR and will not be restated here. No public comments were received on the NPR. V. When Is This Action Effective? EPA finds that there is good cause for this approval to become effective on the date of publication of this action in the **Federal Register** , because a delayed effective date is unnecessary due to the nature of the approval, which allows the State to make allocations under its CAIR rules. The expedited effective date for this action is authorized under both 5 U.S.C. 553(d)(1), which provides that rule actions may become effective less than 30 days after publication if the rule “grants or recognizes an exemption or relieves a restriction” and 5 U.S.C. 553(d)(3), which allows an effective date less than 30 days after publication “as otherwise provided by the agency for good cause found and published with the rule.” CAIR SIP approvals exempt states and CAIR sources within states from being subject to allowance allocation provisions in the CAIR FIPs that otherwise would apply, allowing States to make their own allowance allocations based on their SIP-approved State rule. The exemption from these obligations is sufficient reason to allow an expedited effective date of this rule under 5 U.S.C. 553(d)(1). In addition, Connecticut's exemption from these obligations provides good cause to make this rule effective on the date of publication of this action in the **Federal Register** , pursuant to 5 U.S.C. 553(d)(3). The purpose of the 30-day waiting period prescribed in 5 U.S.C. 553(d) is to give affected parties a reasonable time to adjust their behavior and prepare before the final rule takes effect. Where, as here, the final rule grants an exemption rather than imposing obligations, and where the effect of the final rule is simply to approve for federal purposes obligations that are already effective under state law, affected parties, such as the State of Connecticut and CAIR sources within the State, do not need time to adjust and prepare before the rule takes effect. VI. 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), because it 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 Clean Air Act. 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 approves a state rule implementing a Federal standard. In reviewing SIP submissions, EPA's role is to approve state choices, provided that they meet the criteria of the Clean Air Act. 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 Clean Air Act. 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 Clean Air Act, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by March 24, 2008. 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 in 40 CFR Part 52 Environmental protection, Air pollution control, Incorporation by reference, Intergovernmental relations, Nitrogen oxides, Ozone, Particulate matter, Reporting and recordkeeping requirements, Sulfur dioxide. Dated: January 15, 2008. Robert W. Varney, Regional Administrator, EPA New England. Part 52 of chapter I, title 40 of the Code of Federal Regulations 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 H—Connecticut 2. Section 52.370 is amended by revising paragraph (c)(80)(i)(B) and adding paragraphs (c)(86)(iii) and (c)(97) to read as follows: § 52.370 Identification of plan.

(c)* * *

(80)* * * .

(i)* * *

(B)Regulation section 22a-174-22a, “The Nitrogen Oxides (NO X ) Budget Program” adopted on December 15, 1998, and effective on March 3, 1999. As of January 24, 2008, Section 22a-174-22a is superseded and shall have no prospective effect. Violations of Section 22a-174-22a that occur prior to January 24, 2008 shall continue to be subject to enforcement, including on or after January 24, 2008, in accordance with applicable law.

(86)* * *

(iii)Section 22a-174-22b, State of Connecticut Regulation of Department of Environmental Protection Concerning The Post-2002 Nitrogen Oxides (NO X ) Budget Program, is fully enforceable up to and including April 30, 2010. As of May 1, 2010, Section 22a-174-22b is superseded and shall have no prospective effect. Violations of Section 22a-174-22b that occur prior to May 1, 2010 shall be subject to enforcement, including on or after May 1, 2010, in accordance with applicable law.

(97)Revisions to the State Implementation Plan submitted by the Connecticut Department of Environmental Protection on April 26, 2007 and September 12, 2007.

(i)Incorporation by reference.

(A)Regulations of Connecticut State Agencies

(RCSA)section 22a-174-22c entitled “The Clean Air Interstate Rule

(CAIR)Nitrogen Oxides (NO X ) Ozone Season Trading Program,” effective in the State of Connecticut on September 4, 2007. 3. In § 52.385, Table 52.385 is amended by adding new entries to existing state citations for 22a-174-22a and 22a-174-22b; and by adding a new state citation for 22a-174-22c to read as follows: § 52.385 EPA-approved Connecticut regulations. Table 52.385.—EPA-Approved Regulations Connecticut state citation Title/subject Dates Date adopted by State Date approved by EPA Federal Register citation Section 52.370 Comments/description * * * * * * * 22a-174-22a The Connecticut NO X Budget Program 9/04/07 1/24/08 [Insert Federal Register page number where the document begins] (c)(97) Repealed as of January 24, 2008. Superseded by CAIR. * * * * * * * 22a-174-22b The Connecticut Post-2002 NO X Budget Program, as of May 1, 2010 9/04/07 1/24/08 [Insert Federal Register page number where the document begins] (c)(97) Repealed as of May 1, 2010. Superseded by CAIR. 22a-174-22c The Clean Air Interstate Rule

(CAIR)Nitrogen Oxides (NO X ) Ozone Season Trading Program 9/04/07 1/24/08 [Insert Federal Register page number where the document begins] (c)(97) * * * * * * * [FR Doc. E8-1183 Filed 1-23-08; 8:45 am] BILLING CODE 6560-50-P ENVIRONMENTAL PROTECTION AGENCY 40 CFR Part 52 [EPA-R02-OAR-2007-0913; FRL-8514-9] Approval and Promulgation of Implementation Plans; New York: Clean Air Interstate Rule AGENCY: Environmental Protection Agency (EPA). ACTION: Final rule. SUMMARY: EPA is taking final action to approve a revision to the New York State Implementation Plan

(SIP)that 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 New York. As a result of this rulemaking, EPA will also withdraw, through a separate rulemaking, the CAIR Federal Implementation Plans (CAIR FIPs) concerning sulfur dioxide (SO 2 ), nitrogen oxides (NO X ) annual, and NO X ozone season emissions for New York. The CAIR FIPs for all states in the CAIR region were promulgated on April 28, 2006 and subsequently revised on December 13, 2006. In addition, EPA is determining that the New York SIP revision satisfies New York's obligation under section 110(a)(2)(D)(i) of the Clean Air Act

(CAA)to prohibit air emissions that would interfere with provisions to prevent significant deterioration of air quality. DATES: This rule is effective on January 24, 2008. ADDRESSES: EPA has established a docket for this action under Docket ID No. EPA-R02-OAR-2007-0913. All documents in the docket are available online at *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. 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 Air Programs Branch, Environmental Protection Agency, Region 2 Office, 290 Broadway, 25th Floor, New York, New York 10007-1866. FOR FURTHER INFORMATION CONTACT: Mr. Kenneth Fradkin, Environmental Protection Agency, Region 2 Office, 290 Broadway, 25th Floor, New York, New York 10007-1866, phone number

(212)637-3702 or by e-mail at: *fradkin.kenneth@epa.gov.* SUPPLEMENTARY INFORMATION: Table of Contents I. EPA's Action A. What action is EPA approving? B. When did EPA propose to approve New York's SIP revision? C. What are the public comments on EPA's proposal? D. Where is additional information available on EPA's action? II. Conclusion III. When Is This Action Effective? IV. Statutory and Executive Order Reviews I. EPA's Action A. What action is EPA approving? EPA is taking final action to approve a revision to New York's SIP which was approved for adoption by New York's State Environmental Board on August 28, 2007 and submitted as a SIP revision on September 17, 2007. New York's revision addresses the Clean Air Interstate Rule

(CAIR)and obligations under 110(a)(2)(D)(i) for the 8-hour ozone and fine particle (PM 2.5 ) National Ambient Air Quality Standards (NAAQS). New York's adoption was published in the New York Register on October 10, 2007 (Volume XXIX, Issue 41). EPA has determined that the SIP, as revised, will meet the applicable requirements of CAIR. Parts 243, 244 and 245 of title 6 of the New York Code of Rules and Regulations (6NYCRR) constitute New York State's CAIR program. Part 243 establishes the CAIR NO X Ozone Season Trading Program; Part 244 establishes the CAIR NO X Annual Trading Program; and Part 245 establishes the CAIR SO 2 Trading Program. As a result of this action, the Administrator of EPA will also issue a final rule to withdraw the FIPs concerning SO 2 , NO X annual, and NO X ozone season emissions for New York. The Administrator's action will delete and reserve 40 CFR 52.1684 and 40 CFR 52.1685, relating to the CAIR FIP obligations for New York. The withdrawal of the CAIR FIPs for New York 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 New York. 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. In addition, as EPA determined in the final CAIR, EPA's conclusion that the revised SIP meets the applicable requirements of CAIR is also sufficient to demonstrate that the New York SIP satisfies the requirements in section 110(a)(2)(D)(i) of the Clean Air Act

(CAA)with regard to “significant contribution” and “interference with maintenance”. Section 110(a)(2)(D)(i) requires, among other things, that each state submit a SIP that prohibits any source or any other type of emission activity within a state from emitting pollutants in amounts that will:

(1)contribute significantly to downwind nonattainment of the NAAQS and

(2)interfere with maintenance of the NAAQS. Because EPA previously determined in the CAIR that states will meet these two obligations by complying with the applicable CAIR requirements, EPA is not taking any final action in this notice with regard to the “significant contribution” and “interference with maintenance” obligations in section 110(a)(2)(D)(i). Section 110(a)(2)(D)(i) also contains requirements related to emissions that interfere with the prevention of significant deterioration of air quality

(PSD)and visibility protection, and CAIR did not address states' obligations with respect to these two requirements. In today's action, EPA is taking final action to determine that the New York SIP satisfies the CAA 110(a)(2)(D)(i) requirement that each state is to submit a SIP that prohibits any source or any other type of emission activity within a state from emitting pollutants in amounts that will interfere with provisions to prevent significant deterioration of air quality. EPA is taking no action to determine whether the New York SIP satisfies the visibility protection requirements in 110(a)(2)(D)(i) of the CAA because it is not possible at this time for New York to accurately determine whether there is interference with measures in another state's SIP to protect visibility. New York will need to address the visibility protection requirements once the regional haze SIP is completed and submitted to EPA. B. When did EPA propose to approve New York's SIP revision? EPA proposed to approve New York's request to amend the SIP on October 1, 2007 (72 FR 55723). The comment period closed on October 31, 2007. One comment was received and is addressed in Section I.C. below. C. What are the public comments on EPA's proposal? The following is a summary of the comments received on the proposed rule published on October 1, 2007 (72 FR 55723), and EPA's response. *Comment:* On October 30, 2007, the Connecticut Department of Environmental Protection (CTDEP) submitted adverse comments on EPA's proposed rule to approve New York's CAIR SIP. CTDEP indicates that the State is encouraged by the efforts of New York and other states to adopt programs to meet the emission reduction requirements of CAIR, and urges EPA approval. However, it argues that before approving state plans with respect to CAA 110(a)(2)(D), EPA should evaluate individually and in the aggregate each state's clean air programs. They argue such evaluation is necessary to ensure that each state's emissions do not significantly contribute to ozone nonattainment in Connecticut or any other state. CTDEP expresses concern that EPA is determining through this and other similar rulemakings that CAIR programs are sufficient to meet states' section 110(a)(2)(D)(i) obligations. CTDEP asserts, based on EPA and State modeling for CAIR, that the levels of transported pollution remaining after CAIR implementation are large enough that, even with local controls, it may be difficult for Connecticut to attain the 8-hour ozone NAAQS by 2010. Finally, CTDEP questions EPA's determination that highly cost effective controls are adequate to address states' section 110(a)(2)(D)(i) obligations as compared to “reasonable cost” controls that could be achieved to effect more stringent NO X reductions. *Response:* EPA does not agree that it is appropriate or necessary for EPA to conduct additional analysis before approving the New York CAIR SIP revision. Under this SIP revision, New York has chosen to participate in the EPA administered cap-and-trade program for SO 2 , NO X annual, and NO X ozone season emissions. EPA has evaluated this SIP revision and has determined that it complies with 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. CTDEP does not challenge this determination. Thus, CTDEP's comments do not specifically pertain to any aspect of EPA's proposed action to approve New York's CAIR SIP revision. Rather, the comments appear to be directed broadly at EPA's decisions with regard to states' section 110(a)(2)(D)(i) obligations. These decisions were made by EPA in the context of the CAIR rulemaking, which was promulgated on May 12, 2005 (70 FR 25162), not in the proposed action to approve New York's CAIR SIP revision. Therefore, CTDEP's comments are not relevant to the proposed action. CTDEP had ample opportunity to submit comments both during the comment period for the proposed CAIR rulemaking of January 30, 2004 (69 FR 4566) and during the comment period for the proposed CAIR FIP of August 24, 2005 (70 FR 49708). EPA's proposal to approve New York's CAIR SIP did not reopen either the CAIR or CAIR FIP rulemakings. Consequently, CTDEP's comments are not relevant to this rulemaking, or timely with respect to the CAIR and CAIR FIP rulemakings. Thus, EPA does not believe it is necessary to conduct additional analysis on whether New York or any other state satisfies the requirements of 110(a)(2)(D) before approving the New York CAIR SIP submission. D. Where is additional information available on EPA's action? A detailed analysis of New York's SIP submittal pertaining to New York's CAIR program and the requirements of section 110(a)(2)(D)(i) of the CAA is available in the October 1, 2007 Proposed Rulemaking (72 FR 55723). A copy of the rulemaking is available in the EPA docket. II. Conclusion EPA is taking final action to approve New York's full CAIR SIP revision submitted on September 17, 2007. Under this SIP revision, New York is choosing to participate in the EPA administered cap-and-trade program for SO 2 , NO X annual, and NO X ozone season emissions. The SIP revision 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. The revision includes three emission cap-and-trade rules, 6 NYCRR Parts 243, 244, and 245, effective on October 19, 2007, which implement the State's CAIR Cap-and-Trade Programs in New York. EPA has determined that the SIP, as revised, will meet the requirements of CAIR. The Administrator of EPA has also issued a direct final rule to automatically withdraw the CAIR FIPs concerning SO 2 , NO X annual, and NO X ozone season emissions for New York State upon the effective date of EPA's approval of a full state SIP revision that meets the requirements of CAIR. This action will delete and reserve 40 CFR 52.1684 and 40 CFR 52.1685. In addition, EPA is also taking final action to determine that the New York SIP satisfies the requirement in section 110(a)(2)(D)(i) of the Clean Air Act

(CAA)that requires each state to submit a SIP that prohibits any source or any other type of emission activity within a state from emitting pollutants in amounts that will interfere with provisions to prevent significant deterioration of air quality. EPA is not taking action to determine whether the New York SIP satisfies the 110(a)(2)(D)(i) requirement regarding visibility protection. This requirement will be re-evaluated after regional haze SIPs are completed and approved by EPA. III. When Is This Action Effective? EPA finds that there is good cause for this approval to become effective on January 24, 2008, because a delayed effective date is unnecessary due to the nature of the approval, which allows the State to implement the State's CAIR Cap-and-Trade Programs in New York. The expedited effective date for this action is authorized under both 5 U.S.C. 553(d)(1), which provides that rule actions may become effective less than 30 days after publication if the rule ”grants or recognizes an exemption or relieves a restriction” and section 5 U.S.C. 553(d)(3), which allows an effective date less than 30 days after publication “as otherwise provided by the agency for good cause found and published with the rule.” CAIR SIP approvals relieve states and CAIR sources within states from being subject to allowance allocation provisions in the CAIR FIPs that otherwise would apply to them, allowing States to make their own allowance allocations based on their SIP-approved State rule. The relief from these obligations is sufficient reason to allow an expedited effective date of this rule under 5 U.S.C. 553(d)(1). In addition, New York's relief from these obligations provides good cause to make this rule effective on January 24, 2008, pursuant to 5 U.S.C. 553(d)(3). The purpose of the 30-day waiting period prescribed in 5 U.S.C. 553(d) is to give affected parties a reasonable time to adjust their behavior and prepare before the final rule takes effect. Where, as here, the final rule relieves obligations rather than imposes obligations, affected parties, such as the State of New York and CAIR sources within the State, do not need time to adjust and prepare before the rule takes effect. IV. 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 would impose no additional requirements beyond those imposed by state law. Accordingly, the Administrator certifies that this rule would 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 action approves pre-existing requirements under state law and would 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 would not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes, as specified by Executive Order 13175 (65 FR 67249, November 9, 2000). This action also does not have Federalism implications because it would 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 will result, as a consequence of that approval, in the Administrator's withdrawal of the CAIR FIP. It does not alter the relationship or the distribution of power and responsibilities established in the Clean Air Act. 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 would approve a state rule implementing a Federal Standard. In reviewing SIP submissions, EPA's role is to approve state choices, provided that they meet the criteria of the Clean Air Act. 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 Clean Air Act. 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 would 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 March 24, 2008. 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 in 40 CFR Part 52 Environmental protection, Air pollution control, Electric utilities, Incorporation by reference, Intergovernmental relations, Nitrogen oxides, Ozone, Particulate matter, Reporting and recordkeeping requirements, Sulfur dioxide. Dated: December 31, 2007. Alan J. Steinberg, Regional Administrator, Region 2. 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 HH—New York 2. Section 52.1670 is amended by adding new paragraph (c)(113) to read as follows: § 52.1670 Identification of plans.

(c)* * *

(113)A revision to the State Implementation Plan that was submitted on September 17, 2007 by the New York State Department of Environmental Conservation (NYSDEC). This revision consists of regulations to meet the requirements of the Clean Air Interstate Rule (CAIR). This revision also addresses New York's 110(a)(2)(D)(i) obligations to submit a SIP revision that contains adequate provisions to prohibit air emissions from adversely affecting another state's air quality through interstate transport.

(i)Incorporation by reference:

(A)Part 243, CAIR NO X Ozone Season Trading Program, Part 244, CAIR NO X Annual Trading Program, and Part 245, CAIR SO 2 Trading Program, effective on October 19, 2007, of Title 6 of the New York Code of Rules and Regulations (NYCRR).

(B)Notice of Adoption, New York State Clean Air Interstate Rule, addition of Parts 243, 244 and 245 to Title 6 NYCRR, New York State Register, dated October 10, 2007, pages 16-22.

(ii)Additional information:

(A)Letter dated September 14, 2007 from Assistant Commissioner J. Jared Snyder, NYSDEC, to Alan J. Steinberg, RA, EPA Region II, submitting the SIP revision. 3. In § 52.1679, the table is amended by adding under Title 6 entries for Parts 243, 244, and 245 in numerical order to read as follows: § 52.1679 EPA—approved New York State regulations. State regulation State effective date EPA approved date Comments Title 6 * * * * * * * Part 243, CAIR NO X Ozone Season Trading Program 10/19/07 1/24/08, [Insert FR page citation] Part 244, CAIR NO X Annual Trading Program 10/19/07 1/24/08, [insert FR page citation] Part 245, CAIR SO 2 Trading Program 10/19/07 1/24/08, [insert FR page citation] * * * * * * * [FR Doc. E8-802 Filed 1-23-08; 8:45 am] BILLING CODE 6560-50-P FEDERAL COMMUNICATIONS COMMISSION 47 CFR Part 73 [MM Docket No. 98-203; FCC 01-306] Ancillary or Supplementary Use of Digital Television Capacity by Noncommercial Licensees AGENCY: Federal Communications Commission. ACTION: Final rule; announcement of effective date. SUMMARY: The Federal Communications Commission adopted rules concerning the provision of ancillary and supplementary services by noncommercial educational television licensees. The changes to the rules require Office of Management and Budget

(OMB)approval to become effective. This document announces that the Commission has received OMB approval for these rules. DATES: The changes to the rules published on November 26, 2001, 66 FR 58982, amending 47 CFR 73.624(g)(2)(i) are effective January 24, 2008. FOR FURTHER INFORMATION CONTACT: For information on this proceeding, contact Kim Matthews, *kim.matthews@fcc.gov,*

(202)418-2154, of the Federal Communications Commission, Media Bureau. Questions concerning the OMB control number should be directed to Cathy Williams, Federal Communications Commission,

(202)418-2918, *cathy.williams@fcc.gov.* SUPPLEMENTARY INFORMATION: The Federal Communications Commission has received OMB approval for the rule changes published at 66 FR 58982, November 26, 2001. Through this document, the Commission announces that it received this approval on July 7, 2003. In a Report and Order, released on October 17, 2001, and published in the **Federal Register** on November 26, 2001, 66 FR 58982, the Federal Communications Commission adopted rules that contained information collection requirements subject to the Paperwork Reduction Act. On July 7, 2003, the Office of Management and Budget approved the information collection requirements contained in 47 CFR 73.624(g)(2)(i). This information collection is assigned OMB Control Number 3060-0906. This publication satisfies the requirement that the Commission publish a document announcing the effective date of the rule changes requiring OMB approval. Federal Communications Commission. Marlene H. Dortch, Secretary. [FR Doc. E8-1163 Filed 1-23-08; 8:45 am] BILLING CODE 6712-01-P DEPARTMENT OF DEFENSE Defense Acquisition Regulations System 48 CFR Parts 204 and 225 Defense Federal Acquisition Regulation Supplement; Technical Amendments AGENCY: Defense Acquisition Regulations System, Department of Defense (DoD). ACTION: Final rule. SUMMARY: DoD is making technical amendments to the Defense Federal Acquisition Regulation Supplement (DFARS) to update an office symbol and a cross-reference. DATES: *Effective Date:* January 24, 2008. FOR FURTHER INFORMATION CONTACT: Ms. Michele Peterson, Defense Acquisition Regulations System, OUSD(AT&L)DPAP(DARS), IMD 3D139, 3062 Defense Pentagon, Washington, DC 20301-3062. Telephone 703-602-0311; facsimile 703-602-7887. SUPPLEMENTARY INFORMATION: This final rule amends DFARS text as follows: ○ *Section 204.7005.* Updates the office symbol for the Defense Logistics Agency order code monitor. ○ *Section 225.103.* Updates a cross-reference. List of Subjects in 48 CFR Parts 204 and 225 Government procurement. Michele P. Peterson, Editor, Defense Acquisition Regulations System. Therefore, 48 CFR Parts 204 and 225 are amended as follows: 1. The authority citation for 48 CFR parts 204 and 225 continues to read as follows: Authority: 41 U.S.C. 421 and 48 CFR Chapter 1. PART 204—ADMINISTRATIVE MATTERS 204.7005 [Amended] 2. Section 204.7005 is amended in paragraph (c), in the entry “Defense Logistics Agency”, by removing “(J-3311)” and adding in its place “(J71)”. PART 225—FOREIGN ACQUISITION 225.103 [Amended] 3. Section 225.103 is amended in paragraph (a)(ii)(B) introductory text, by removing “225.872-4(b)” and adding in its place “PGI 225.872-4”. [FR Doc. E8-1102 Filed 1-23-08; 8:45 am] BILLING CODE 5001-08-P DEPARTMENT OF DEFENSE Defense Acquisition Regulations System 48 CFR Parts 204 and 244 RIN 0750-AF61 Defense Federal Acquisition Regulation Supplement; Closeout of Contract Files (DFARS Case 2006-D045) AGENCY: Defense Acquisition Regulations System, Department of Defense (DoD). ACTION: Final rule. SUMMARY: DoD has issued a final rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to remove text addressing DoD procedures for closeout of contract files. Text on this subject has been relocated to the DFARS companion resource, Procedures, Guidance, and Information. DATES: *Effective Date:* January 24, 2008. FOR FURTHER INFORMATION CONTACT: Ms. Deborah Tronic, Defense Acquisition Regulations System, OUSD(AT&L)DPAP(DARS), IMD 3D139, 3062 Defense Pentagon, Washington, DC 20301-3062. Telephone 703-602-0289; facsimile 703-602-7887. Please cite DFARS Case 2006-D045. SUPPLEMENTARY INFORMATION: A. Background This final rule revises DFARS 204.804 to remove text addressing DoD procedures for closeout of contract files. Text on this subject has been relocated to the DFARS companion resource, Procedures, Guidance, and Information (PGI), at *http://www.acq.osd.mil/dpap/dars/dfarspgi/current/index.html.* In addition, the rule amends DFARS 244.304 to clarify an existing reference to corresponding PGI text. DoD published a proposed rule at 72 FR 14256 on March 27, 2007. DoD received no comments on the proposed rule. Therefore, DoD has adopted the proposed rule as a final rule without change. This rule was not subject to Office of Management and Budget review under Executive Order 12866, dated September 30, 1993. B. Regulatory Flexibility Act DoD certifies that this final rule will not have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, *et seq.* , because the rule pertains to administrative procedures for contract closeout functions performed by the Government. C. Paperwork Reduction Act The Paperwork Reduction Act does not apply, because the rule does not impose any information collection requirements that require the approval of the Office of Management and Budget under 44 U.S.C. 3501, *et seq.* List of Subjects in 48 CFR Parts 204 and 244 Government procurement. Michele P. Peterson, Editor, Defense Acquisition Regulations System. Therefore, 48 CFR parts 204 and 244 are amended as follows: 1. The authority citation for 48 CFR parts 204 and 244 continues to read as follows: Authority: 41 U.S.C. 421 and 48 CFR Chapter 1. PART 204—ADMINISTRATIVE MATTERS 2. Section 204.804 is revised to read as follows: 204.804 Closeout of contract files. Contracting officers shall close out contracts in accordance with the procedures at PGI 204.804. The closeout date for file purposes shall be determined and documented by the procuring contracting officer. 204.804-1 and 204.804-2 [Removed] 3. Sections 204.804-1 and 204.804-2 are removed. PART 244—SUBCONTRACTING POLICIES AND PROCEDURES 4. Section 244.304 is amended in paragraph

(b)by revising the second sentence to read as follows: 244.304 Surveillance.

(b)* * * See PGI 244.304(b) for guidance on how weaknesses may arise and may be discovered. [FR Doc. E8-1093 Filed 1-23-08; 8:45 am] BILLING CODE 5001-08-P DEPARTMENT OF DEFENSE Defense Acquisition Regulations System 48 CFR Parts 207 and 212 RIN 0750-AF78 Defense Federal Acquisition Regulation Supplement; Commercial Item Determinations (DFARS Case 2007-D005) AGENCY: Defense Acquisition Regulations System, Department of Defense (DoD). ACTION: Final rule. SUMMARY: DoD has issued a final rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to address requirements for DoD contracting officers to ensure that an item meets the definition of “commercial item” specified in the Federal Acquisition Regulation (FAR), when using commercial item procedures for acquisitions exceeding $1 million in value. DATES: *Effective Date:* January 24, 2008. FOR FURTHER INFORMATION CONTACT: Mr. Michael Benavides, Defense Acquisition Regulations System, OUSD(AT&L)DPAP(DARS), IMD 3D139, 3062 Defense Pentagon, Washington, DC 20301-3062. Telephone 703-602-1302; facsimile 703-602-7887. Please cite DFARS Case 2007-D005. SUPPLEMENTARY INFORMATION: A. Background FAR Part 12, Acquisition of Commercial Items, applies to the acquisition of supplies or services that meet the definition of “commercial item” in FAR 2.101. To emphasize the applicability of FAR Part 12, this DFARS rule specifies that, when using FAR Part 12 procedures for acquisitions exceeding $1 million in value, the contracting officer must determine in writing that the acquisition meets the commercial item definition in FAR 2.101, and the contracting officer must include the written determination in the contract file. This rule was not subject to Office of Management and Budget review under Executive Order 12866, dated September 30, 1993. B. Regulatory Flexibility Act This rule will not have a significant cost or administrative impact on contractors or offerors, or a significant effect beyond the internal operating procedures of DoD. Therefore, publication for public comment under 41 U.S.C. 418b is not required. However, DoD will consider comments from small entities concerning the affected DFARS subparts in accordance with 5 U.S.C. 610. Such comments should cite DFARS Case 2007-D005. C. Paperwork Reduction Act The Paperwork Reduction Act does not apply, because the rule does not impose any information collection requirements that require the approval of the Office of Management and Budget under 44 U.S.C. 3501, *et seq.* List of Subjects in 48 CFR Parts 207 and 212 Government procurement. Michele P. Peterson, Editor, Defense Acquisition Regulations System. Therefore, 48 CFR parts 207 and 212 are amended as follows: 1. The authority citation for 48 CFR parts 207 and 212 continues to read as follows: Authority: 41 U.S.C. 421 and 48 CFR Chapter 1. PART 207—ACQUISITION PLANNING 2. Section 207.102 is added to read as follows: 207.102 Policy. (a)(1) See 212.102 regarding requirements for a written determination that the commercial item definition has been met when using FAR Part 12 procedures. PART 212—ACQUISITION OF COMMERCIAL ITEMS 3. Subpart 212.1 is added to read as follows: Subpart 212.1—Acquisition of Commercial Items—General 212.102 Applicability. (a)(i) When using FAR Part 12 procedures for acquisitions exceeding $1 million in value, the contracting officer shall—

(A)Determine in writing that the acquisition meets the commercial item definition in FAR 2.101; and

(B)Include the written determination in the contract file.

(ii)Follow the procedures at PGI 212.102(a) regarding file documentation. [FR Doc. E8-1121 Filed 1-23-08; 8:45 am] BILLING CODE 5001-08-P DEPARTMENT OF DEFENSE Defense Acquisition Regulations System 48 CFR Parts 212, 222, and 252 RIN 0750-AF11 Defense Federal Acquisition Regulation Supplement; Combating Trafficking in Persons (DFARS Case 2004-D017) AGENCY: Defense Acquisition Regulations System, Department of Defense (DoD). ACTION: Final rule. SUMMARY: DoD has issued a final rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to remove text addressing prohibitions on contractor activities involving trafficking in persons. The DFARS text is no longer necessary, since policy on this subject has been added to the Federal Acquisition Regulation (FAR). DATES: *Effective Date:* January 24, 2008. FOR FURTHER INFORMATION CONTACT: Ms. Felisha Hitt, Defense Acquisition Regulations System, OUSD(AT&L)DPAP(DARS), IMD 3D139, 3062 Defense Pentagon, Washington, DC 20301-3062. Telephone 703-602-0310; facsimile 703-602-7887. Please cite DFARS Case 2004-D017. SUPPLEMENTARY INFORMATION: A. Background DoD published an interim rule at 71 FR 62560 on October 26, 2006, adding DFARS Subpart 222.17 and a corresponding contract clause at DFARS 252.222-7006, to implement DoD policy prohibiting DoD contractors from engaging in activities that support or promote trafficking in persons. The DFARS text is no longer necessary, as a result of the FAR rule published at 72 FR 46335 on August 17, 2007. The FAR rule addresses Governmentwide zero tolerance policy with regard to trafficking in persons, and includes a contract clause for use in all solicitations and contracts. Therefore, this final rule removes the DFARS text published on October 26, 2006, except for references to internal DoD procedures regarding the combating of trafficking in persons. This rule was not subject to Office of Management and Budget review under Executive Order 12866, dated September 30, 1993. B. Regulatory Flexibility Act DoD certifies that this final rule will not have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, *et seq.* , because the rule removes DFARS text that has become obsolete as a result of changes that have been made to the FAR. C. Paperwork Reduction Act This final rule eliminates the information collection requirements previously approved by the Office of Management and Budget under Control Number 0704-0440. List of Subjects in 48 CFR Parts 212, 222, and 252 Government procurement. Michele P. Peterson, Editor, Defense Acquisition Regulations System. Therefore, 48 CFR parts 212, 222, and 252 are amended as follows: 1. The authority citation for 48 CFR parts 212, 222, and 252 continues to read as follows: Authority: 41 U.S.C. 421 and 48 CFR Chapter 1. PART 212—ACQUISITION OF COMMERCIAL ITEMS 212.301 [Amended] 2. Section 212.301 is amended as follows: a. By removing paragraph (f)(x); and b. By redesignating paragraphs (f)(xi) through (f)(xiii) as paragraphs (f)(x) through (f)(xii) respectively. PART 222—APPLICATION OF LABOR LAWS TO GOVERNMENT ACQUISITIONS 222.1700 through 222.1702 [Removed] 3. Sections 222.1700 through 222.1702 are removed. 4. Sections 222.1703 and 222.1704 are revised to read as follows: 222.1703 Policy. See PGI 222.1703 for additional information regarding DoD policy for combating trafficking in persons outside the United States. 222.1704 Violations and remedies. Follow the procedures at PGI 222.1704 for notifying the Combatant Commander if a violation occurs. 222.1704-70 and 222.1705 [Removed] 5. Sections 222.1704-70 and 222.1705 are removed. PART 252—SOLICITATION PROVISIONS AND CONTRACT CLAUSES 252.222-7006 [Removed] 6. Section 252.222-7006 is removed. [FR Doc. E8-1120 Filed 1-23-08; 8:45 am] BILLING CODE 5001-08-P DEPARTMENT OF DEFENSE Defense Acquisition Regulations System 48 CFR Part 225 RIN 0750-AF89 Defense Federal Acquisition Regulation Supplement; Trade Agreements—New Thresholds (DFARS Case 2007-D023) AGENCY: Defense Acquisition Regulations System, Department of Defense (DoD). ACTION: Interim rule with request for comments. SUMMARY: DoD has issued an interim rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to incorporate increased dollar thresholds for application of the World Trade Organization Government Procurement Agreement and the Free Trade Agreements, as determined by the United States Trade Representative. DATES: *Effective date:* January 24, 2008. *Comment date:* Comments on the interim rule should be submitted in writing to the address shown below on or before March 24, 2008, to be considered in the formation of the final rule. ADDRESSES: You may submit comments, identified by DFARS Case 2007-D023, using any of the following methods: ○ *Federal eRulemaking Portal:* *http://www.regulations.gov.* Follow the instructions for submitting comments. ○ *E-mail: dfars@osd.mil.* Include DFARS Case 2007-D023 in the subject line of the message. ○ *Fax:* 703-602-7887. ○ *Mail:* Defense Acquisition Regulations System, Attn: Ms. Amy Williams, OUSD(AT&L)DPAP(DARS), IMD 3D139, 3062 Defense Pentagon, Washington, DC 20301-3062. ○ *Hand Delivery/Courier:* Defense Acquisition Regulations System, Crystal Square 4, Suite 200A, 241 18th Street, Arlington, VA 22202-3402. Comments received generally will be posted without change to *http://www.regulations.gov,* including any personal information provided. FOR FURTHER INFORMATION CONTACT: Ms. Amy Williams, 703-602-0328. SUPPLEMENTARY INFORMATION: A. Background This interim rule amends the clause prescriptions at DFARS 225.1101 and 225.7503 to reflect increased dollar thresholds for application of the trade agreements. Every two years, the trade agreements thresholds are escalated according to a pre-determined formula set forth in the agreements. The United States Trade Representative has specified the following new thresholds, as published at 72 FR 71166 on December 14, 2007, and corrected at 72 FR 73904 on December 28, 2007: Trade agreement Supply contract (equal to or exceeding) Construction contract (equal to or exceeding) World Trade Organization Government Procurement Agreement $194,000 $7,443,000 Free Trade Agreements: Australia Free Trade Agreement 67,826 7,443,000 Bahrain Free Trade Agreement 194,000 8,817,449 Dominican Republic-Central America-United States Free Trade Agreement (El Salvador, Dominican Republic, Guatemala, Honduras, and Nicaragua) 67,826 7,443,000 Chile Free Trade Agreement 67,826 7,443,000 Morocco Free Trade Agreement 194,000 7,443,000 North American Free Trade Agreement: Canada $25,000 8,817,449 Mexico 67,826 8,817,449 Singapore Free Trade Agreement 67,826 7,443,000 This rule was not subject to Office of Management and Budget review under Executive Order 12866, dated September 30, 1993. B. Regulatory Flexibility Act DoD does not expect this rule to have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, *et seq.* , because the trade agreement threshold changes are designed to keep pace with inflation and thus maintain the status quo. Therefore, DoD has not performed an initial regulatory flexibility analysis. DoD invites comments from small businesses and other interested parties. DoD also will consider comments from small entities concerning the affected DFARS subparts in accordance with 5 U.S.C. 610. Such comments should be submitted separately and should cite DFARS Case 2007-D023. C. Paperwork Reduction Act This rule affects the certification and information collection requirements in the provisions at DFARS 252.225-7020 and 252.225-7035, currently approved under Office of Management and Budget Control Number 0704-0229. The impact, however, is negligible. The dollar threshold changes are in line with inflation and maintain the status quo. D. Determination To Issue an Interim Rule A determination has been made under the authority of the Secretary of Defense, that urgent and compelling reasons exist to publish an interim rule prior to affording the public an opportunity to comment. This interim rule incorporates increased dollar thresholds for application of the World Trade Organization Government Procurement Agreement and the Free Trade Agreements, as determined by the United States Trade Representative. The increased thresholds became effective on January 1, 2008. Comments received in response to this interim rule will be considered in the formation of the final rule. List of Subjects in 48 CFR Part 225 Government procurement. Michele P. Peterson, Editor, Defense Acquisition Regulations System. Therefore, 48 CFR part 225 is amended as follows: PART 225—FOREIGN ACQUISITION 1. The authority citation for 48 CFR part 225 continues to read as follows: Authority: 41 U.S.C. 421 and 48 CFR Chapter 1. 225.1101 [Amended] 2. Section 225.1101 is amended as follows: a. In paragraph (10)(i) introductory text by removing “$193,000” and adding in its place “$194,000”; and b. In paragraphs (10)(i)(A) and

(B)by removing “$64,786” and adding in its place “$67,826”. 3. Section 225.7503 is amended as follows: a. In paragraph

(a)by removing “$7,407,000” and adding in its place “$7,443,000”; and b. By revising paragraph

(b)to read as follows: 225.7503 Contract clauses.

(b)Use the clause at 252.225-7045, Balance of Payments Program—Construction Material Under Trade Agreements, in solicitations and contracts for construction to be performed outside the United States with a value of $7,443,000 or more. For acquisitions with a value of $7,443,000 or more, but less than $8,817,449, use the clause with its Alternate I. [FR Doc. E8-1103 Filed 1-23-08; 8:45 am] BILLING CODE 5001-08-P DEPARTMENT OF DEFENSE Defense Acquisition Regulations System 48 CFR Parts 232 and 252 RIN 0750-AF76 Defense Federal Acquisition Regulation Supplement; Payment Withholding—Deletion of Duplicative Text (DFARS Case 2007-D010) AGENCY: Defense Acquisition Regulations System, Department of Defense (DoD). ACTION: Final rule. SUMMARY: DoD has issued a final rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to remove text addressing withholding of payments under time-and-materials and labor-hour contracts. The DFARS text is no longer necessary, since similar policy has been added to the Federal Acquisition Regulation (FAR). DATES: *Effective Date:* January 24, 2008. FOR FURTHER INFORMATION CONTACT: Ms. Robin Schulze, Defense Acquisition Regulations System, OUSD(AT&L)DPAP(DARS), IMD 3D139, 3062 Defense Pentagon, Washington, DC 20301-3062. Telephone 703-602-0326; facsimile 703-602-7887. Please cite DFARS Case 2007-D010. SUPPLEMENTARY INFORMATION: A. Background DFARS 232.111 and 252.232-7006 provide that, under time-and-materials and labor-contracts, there normally should be no need to withhold payment for a contractor with a record of timely submittal of a release discharging the Government from all liabilities, obligations, and claims under the contract. Similar policy was added to FAR 32.111 and 52.232-7 in the final rule published at 70 FR 43580 on July 27, 2005. Therefore, the DFARS text is no longer necessary, and sections 232.111 and 252.232-7006 are removed. This rule was not subject to Office of Management and Budget review under Executive Order 12866, dated September 30, 1993. B. Regulatory Flexibility Act This rule will not have a significant cost or administrative impact on contractors or offerors, or a significant effect beyond the internal operating procedures of DoD. Therefore, publication for public comment under 41 U.S.C. 418b is not required. However, DoD will consider comments from small entities concerning the affected DFARS subparts in accordance with 5 U.S.C. 610. Such comments should cite DFARS Case 2007-D010. C. Paperwork Reduction Act The Paperwork Reduction Act does not apply, because the rule does not impose any information collection requirements that require the approval of the Office of Management and Budget under 44 U.S.C. 3501, *et seq.* List of Subjects in 48 CFR Parts 232 and 252 Government procurement. Michele P. Peterson, Editor, Defense Acquisition Regulations System. Therefore, 48 CFR parts 232 and 252 are amended as follows: 1. The authority citation for 48 CFR parts 232 and 252 continues to read as follows: Authority: 41 U.S.C. 421 and 48 CFR Chapter 1. PART 232—CONTRACT FINANCING 232.111 [Removed] 2. Section 232.111 is removed. PART 252—SOLICITATION PROVISIONS AND CONTRACT CLAUSES 252.232-7006 [Removed and Reserved] 3. Section 252.232-7006 is removed and reserved. [FR Doc. E8-1091 Filed 1-23-08; 8:45 am] BILLING CODE 5001-08-P DEPARTMENT OF DEFENSE Defense Acquisition Regulations System 48 CFR Parts 234 and 235 RIN 0750-AF79 Defense Federal Acquisition Regulation Supplement; Research and Development Contract Type Determination (DFARS Case 2006-D053) AGENCY: Defense Acquisition Regulations System, Department of Defense (DoD). ACTION: Interim rule with request for comments. SUMMARY: DoD has issued an interim rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to implement Section 818 of the National Defense Authorization Act for Fiscal Year 2007. Section 818 requires DoD to modify regulations regarding the determination of contract type for major development programs to address assessment of program risk. DATES: *Effective date:* January 24, 2008. *Comment date:* Comments on the interim rule should be submitted in writing to the address shown below on or before March 24, 2008, to be considered in the formation of the final rule. ADDRESSES: You may submit comments, identified by DFARS Case 2006-D053, using any of the following methods: ○ *Federal eRulemaking Portal: http://www.regulations.gov.* Follow the instructions for submitting comments. ○ *E-mail: dfars@osd.mil.* Include DFARS Case 2006-D053 in the subject line of the message. ○ *Fax:* 703-602-7887. ○ *Mail:* Defense Acquisition Regulations System, Attn: Mr. Mark Gomersall, OUSD(AT&L)DPAP(DARS), IMD 3D139, 3062 Defense Pentagon, Washington, DC 20301-3062. ○ *Hand Delivery/Courier:* Defense Acquisition Regulations System, Crystal Square 4, Suite 200A, 241 18th Street, Arlington, VA 22202-3402. Comments received generally will be posted without change to *http://www.regulations.gov,* including any personal information provided. FOR FURTHER INFORMATION CONTACT: Mr. Mark Gomersall, 703-602-0302. SUPPLEMENTARY INFORMATION: A. Background This interim rule implements Section 818 of the National Defense Authorization Act for Fiscal Year 2007 (Pub. L. 109-364). Section 818 requires DoD to modify regulations regarding the determination of contract type for development programs. Such regulations must require the Milestone Decision Authority for a major defense acquisition program to select the contract type for a development program that is consistent with the level of program risk. The Milestone Decision Authority may select a fixed-price type contract, including a fixed-price incentive contract; or a cost-type contract, provided certain written determination requirements are satisfied. The rule adds policy at DFARS 234.004 to implement the requirements of Section 818 of Public Law 109-364, applicable to major defense acquisition programs, and updates the policy at 235.006 to address requirements for other than major defense acquisition programs. This rule was not subject to Office of Management and Budget review under Executive Order 12866, dated September 30, 1993. B. Regulatory Flexibility Act DoD does not expect this rule to have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, *et seq.* , because the rule relates to internal DoD considerations and documentation requirements relating to the selection of contract type for development programs. Therefore, DoD has not performed an initial regulatory flexibility analysis. DoD invites comments from small businesses and other interested parties. DoD also will consider comments from small entities concerning the affected DFARS subparts in accordance with 5 U.S.C. 610. Such comments should be submitted separately and should cite DFARS Case 2006-D053. C. Paperwork Reduction Act The Paperwork Reduction Act does not apply, because the rule does not impose any information collection requirements that require the approval of the Office of Management and Budget under 44 U.S.C. 3501, *et seq.* D. Determination To Issue an Interim Rule A determination has been made under the authority of the Secretary of Defense that urgent and compelling reasons exist to publish an interim rule prior to affording the public an opportunity to comment. This interim rule implements Section 818 of the National Defense Authorization Act for Fiscal Year 2007 (Pub. L. 109-364). Section 818 requires DoD to modify regulations regarding the determination of contract type for major development programs to address requirements for selection of the contract type that is consistent with the level of program risk. Comments received in response to this interim rule will be considered in the formation of the final rule. List of Subjects in 48 CFR Parts 234 and 235 Government procurement. Michele P. Peterson, Editor, Defense Acquisition Regulations System. Therefore, 48 CFR parts 234 and 235 are amended as follows: 1. The authority citation for 48 CFR parts 234 and 235 continues to read as follows: Authority: 41 U.S.C. 421 and 48 CFR Chapter 1. PART 234—MAJOR SYSTEM ACQUISITION 2. Section 234.004 is revised to read as follows: 234.004 Acquisition strategy.

(1)See 209.570 for policy applicable to acquisition strategies that consider the use of lead system integrators.

(2)In accordance with Section 818 of the National Defense Authorization Act for Fiscal Year 2007 (Pub. L. 109-364), for major defense acquisition programs as defined in 10 U.S.C. 2430—

(i)The Milestone Decision Authority shall select, with the advice of the contracting officer, the contract type for a development program at the time of Milestone B approval or, in the case of a space program, Key Decision Point B approval;

(ii)The basis for the contract type selection shall be documented in the acquisition strategy. The documentation—

(A)Shall include an explanation of the level of program risk; and

(B)If program risk is determined to be high, shall outline the steps taken to reduce program risk and the reasons for proceeding with Milestone B approval despite the high level of program risk; and

(iii)If a cost-type contract is selected, the contract file shall include the Milestone Decision Authority's written determination that—

(A)The program is so complex and technically challenging that it would not be practicable to reduce program risk to a level that would permit the use of a fixed-price type contract; and

(B)The complexity and technical challenge of the program is not the result of a failure to meet the requirements of 10 U.S.C. 2366a. PART 235—RESEARCH AND DEVELOPMENT CONTRACTING 3. Section 235.006 is revised to read as follows: 235.006 Contracting methods and contract type. (b)(i) For major defense acquisition programs as defined in 10 U.S.C. 2430—

(A)Follow the procedures at 234.004; and

(B)Notify the Under Secretary of Defense (Acquisition, Technology, and Logistics) (USD(AT&L)) of an intent not to exercise a fixed-price production option on a development contract for a major weapon system reasonably in advance of the expiration of the option exercise period.

(ii)For other than major defense acquisition programs—

(A)Do not award a fixed-price type contract for a development program effort unless— *(1)* The level of program risk permits realistic pricing; *(2)* The use of a fixed-price type contract permits an equitable and sensible allocation of program risk between the Government and the contractor; and *(3)* A written determination that the criteria of paragraphs (b)(ii)(A) *(1)* and *(2)* of this section have been met is executed— *(i)* By the USD(AT&L) if the contract is over $25 million and is for: research and development for a non-major system; the development of a major system (as defined in FAR 2.101); or the development of a subsystem of a major system; or *(ii)* By the contracting officer for any development not covered by paragraph (b)(ii)(A) *(3)(i)* of this section.

(B)Obtain USD(AT&L) approval of the Government's prenegotiation position before negotiations begin, and obtain USD(AT&L) approval of the negotiated agreement with the contractor before the agreement is executed, for any action that is— *(1)* An increase of more than $250 million in the price or ceiling price of a fixed-price type development contract, or a fixed-price type contract for the lead ship of a class; *(2)* A reduction in the amount of work under a fixed-price type development contract or a fixed-price type contract for the lead ship of a class, when the value of the work deleted is $100 million or more; or *(3)* A repricing of fixed-price type production options to a development contract, or a contract for the lead ship of a class, that increases the price or ceiling price by more than $250 million for equivalent quantities. [FR Doc. E8-1092 Filed 1-23-08; 8:45 am] BILLING CODE 5001-08-P DEPARTMENT OF COMMERCE National Oceanic and Atmospheric Administration 50 CFR Part 229 [Docket No. 080117051-8053-01] RIN 0648-XF17 Taking of Marine Mammals Incidental to Commercial Fishing Operations; Atlantic Large Whale Take Reduction Plan AGENCY: National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce. ACTION: Temporary rule. SUMMARY: The Assistant Administrator for Fisheries (AA), NOAA, announces temporary restrictions consistent with the requirements of the Atlantic Large Whale Take Reduction Plan's (ALWTRP) implementing regulations. These regulations apply to lobster trap/pot and anchored gillnet fishermen in an area totaling approximately 2,251 nm 2 (7,720 km 2 ), southeast of Portsmouth, New Hampshire, for 15 days. The purpose of this action is to provide protection to an aggregation of northern right whales (right whales). DATES: Effective beginning at 0001 hours January 26, 2008, through 2400 hours February 9, 2008. ADDRESSES: Copies of the proposed and final Dynamic Area Management

(DAM)rules, Environmental Assessments (EAs), Atlantic Large Whale Take Reduction Team (ALWTRT) meeting summaries, and progress reports on implementation of the ALWTRP may also be obtained by writing Diane Borggaard, NMFS/Northeast Region, One Blackburn Drive, Gloucester, MA 01930. FOR FURTHER INFORMATION CONTACT: Diane Borggaard, NMFS/Northeast Region, 978-281-9300 x6503; or Kristy Long, NMFS, Office of Protected Resources, 301-713-2322. SUPPLEMENTARY INFORMATION: Electronic Access Several of the background documents for the ALWTRP and the take reduction planning process can be downloaded from the ALWTRP web site at *http://www.nero.noaa.gov/whaletrp/* . Background The ALWTRP was developed pursuant to section 118 of the Marine Mammal Protection Act

(MMPA)to reduce the incidental mortality and serious injury of three endangered species of whales (right, fin, and humpback) due to incidental interaction with commercial fishing activities. In addition, the measures identified in the ALWTRP would provide conservation benefits to a fourth species (minke), which are neither listed as endangered nor threatened under the Endangered Species Act (ESA). The ALWTRP, implemented through regulations codified at 50 CFR 229.32, relies on a combination of fishing gear modifications and time/area closures to reduce the risk of whales becoming entangled in commercial fishing gear (and potentially suffering serious injury or mortality as a result). On January 9, 2002, NMFS published the final rule to implement the ALWTRP's DAM program (67 FR 1133). On August 26, 2003, NMFS amended the regulations by publishing a final rule, which specifically identified gear modifications that may be allowed in a DAM zone (68 FR 51195). The DAM program provides specific authority for NMFS to restrict temporarily on an expedited basis the use of lobster trap/pot and anchored gillnet fishing gear in areas north of 40° N. lat. to protect right whales. Under the DAM program, NMFS may:

(1)require the removal of all lobster trap/pot and anchored gillnet fishing gear for a 15-day period;

(2)allow lobster trap/pot and anchored gillnet fishing within a DAM zone with gear modifications determined by NMFS to sufficiently reduce the risk of entanglement; and/or

(3)issue an alert to fishermen requesting the voluntary removal of all lobster trap/pot and anchored gillnet gear for a 15-day period and asking fishermen not to set any additional gear in the DAM zone during the 15-day period. A DAM zone is triggered when NMFS receives a reliable report from a qualified individual of three or more right whales sighted within an area (75 nm 2 (139 km 2 )) such that right whale density is equal to or greater than 0.04 right whales per nm 2 (1.85 km 2 ). A qualified individual is an individual ascertained by NMFS to be reasonably able, through training or experience, to identify a right whale. Such individuals include, but are not limited to, NMFS staff, U.S. Coast Guard and Navy personnel trained in whale identification, scientific research survey personnel, whale watch operators and naturalists, and mariners trained in whale species identification through disentanglement training or some other training program deemed adequate by NMFS. A reliable report would be a credible right whale sighting. On January 13, 2008, an aerial survey reported two aggregations of right whales, totaling seven individuals: four whales in the proximity of 42° 37′ N. latitude and 70° 01′ W. longitude, and three whales in the proximity of 42° 51′ N. latitude and 70° 04′ W. longitude. These positions lie northeast of Boston, Massachusetts, and southeast of Portsmouth, New Hampshire, respectively. After conducting an investigation, NMFS ascertained that the report came from a qualified individual and determined that the report was reliable. Thus, NMFS has received a reliable report from a qualified individual of the requisite right whale density to trigger the DAM provisions of the ALWTRP. Once a DAM zone is triggered, NMFS determines whether to impose restrictions on fishing and/or fishing gear in the zone. This determination is based on the following factors, including but not limited to: the location of the DAM zone with respect to other fishery closure areas, weather conditions as they relate to the safety of human life at sea, the type and amount of gear already present in the area, and a review of recent right whale entanglement and mortality data. NMFS has reviewed the factors and management options noted above relative to the DAM under consideration. As a result of this review, NMFS prohibits lobster trap/pot and anchored gillnet gear in this area during the 15-day restricted period unless it is modified in the manner described in this temporary rule. The DAM Zone is bound by the following coordinates: 43° 09′ N., 70° 29′ W. (NW Corner) 43° 09′ N., 69° 39′ W. 42° 56′ N., 69° 39′ W. 42° 56′ N., 69° 33′ W. 42° 16′ N., 69° 33′ W. 42° 16′ N., 70° 33′ W. 42° 56′ N., 70° 33′ W. 42° 56′ N., 70° 29′ W. 43° 09′ N., 70° 29′ W. (NW Corner) In addition to those gear modifications currently implemented under the ALWTRP at 50 CFR 229.32, the following gear modifications are required in the DAM zone. If the requirements and exceptions for gear modification in the DAM zone, as described below, differ from other ALWTRP requirements for any overlapping areas and times, then the more restrictive requirements will apply in the DAM zone. Lobster Trap/pot Gear Fishermen utilizing lobster trap/pot gear within the portions of Northern Nearshore Lobster Waters, Northern Inshore State Lobster Waters, and the Stellwagen Bank/Jeffrey's Ledge Restricted Area that overlap with the DAM zone are required to utilize all of the following gear modifications while the DAM zone is in effect: 1. Groundlines must be made of either sinking or neutrally buoyant line. Floating groundlines are prohibited; 2. All buoy lines must be made of either sinking or neutrally buoyant line, except the bottom portion of the line, which may be a section of floating line not to exceed one-third the overall length of the buoy line; 3. Fishermen are allowed to use two buoy lines per trawl; and 4. A weak link with a maximum breaking strength of 600 lb (272.4 kg) must be placed at all buoys. Fishermen utilizing lobster trap/pot gear within the portion of the Offshore Lobster Waters Area that overlap with the DAM zone are required to utilize all of the following gear modifications while the DAM zone is in effect: 1. Groundlines must be made of either sinking or neutrally buoyant line. Floating groundlines are prohibited; 2. All buoy lines must be made of either sinking or neutrally buoyant line, except the bottom portion of the line, which may be a section of floating line not to exceed one-third the overall length of the buoy line; 3. Fishermen are allowed to use two buoy lines per trawl; and 4. A weak link with a maximum breaking strength of 1,500 lb (680.4 kg) must be placed at all buoys. Anchored Gillnet Gear Fishermen utilizing anchored gillnet gear within the portions of Other Northeast Gillnet Waters and the Stellwagen Bank/Jeffrey's Ledge Restricted Area that overlap with the DAM zone are required to utilize all the following gear modifications while the DAM zone is in effect: 1. Groundlines must be made of either sinking or neutrally buoyant line. Floating groundlines are prohibited; 2. All buoy lines must be made of either sinking or neutrally buoyant line, except the bottom portion of the line, which may be a section of floating line not to exceed one-third the overall length of the buoy line; 3. Fishermen are allowed to use two buoy lines per string; 4. The breaking strength of each net panel weak link must not exceed 1,100 lb (498.8 kg). The weak link requirements apply to all variations in net panel size. One weak link must be placed in the center of the floatline and one weak link must be placed in the center of each of the up and down lines at both ends of the net panel. Additionally, one weak link must be placed as close as possible to each end of the net panels on the floatline; or, one weak link must be placed between floatline tie-loops between net panels and one weak link must be placed where the floatline tie-loops attach to the bridle, buoy line, or groundline at each end of a net string; 5. A weak link with a maximum breaking strength of 1,100 lb (498.8 kg) must be placed at all buoys; and 6. All anchored gillnets, regardless of the number of net panels, must be securely anchored with the holding power of at least a 22 lb (10.0 kg) Danforth-style anchor at each end of the net string. The restrictions will be in effect beginning at 0001 hours January 26, 2008, through 2400 hours February 9, 2008, unless terminated sooner or extended by NMFS through another notification in the **Federal Register** . The restrictions will be announced to state officials, fishermen, ALWTRT members, and other interested parties through e-mail, phone contact, NOAA website, and other appropriate media immediately upon issuance of the rule by the AA. Classification In accordance with section 118(f)(9) of the MMPA, the Assistant Administrator

(AA)for Fisheries has determined that this action is necessary to implement a take reduction plan to protect North Atlantic right whales. Environmental Assessments for the DAM program were prepared on December 28, 2001, and August 6, 2003. This action falls within the scope of the analyses of these EAs, which are available from the agency upon request. NMFS provided prior notice and an opportunity for public comment on the regulations establishing the criteria and procedures for implementing a DAM zone. Providing prior notice and opportunity for comment on this action, pursuant to those regulations, would be impracticable because it would prevent NMFS from executing its functions to protect and reduce serious injury and mortality of endangered right whales. The regulations establishing the DAM program are designed to enable the agency to help protect unexpected concentrations of right whales. In order to meet the goals of the DAM program, the agency needs to be able to create a DAM zone and implement restrictions on fishing gear as soon as possible once the criteria are triggered and NMFS determines that a DAM restricted zone is appropriate. If NMFS were to provide prior notice and an opportunity for public comment upon the creation of a DAM restricted zone, the aggregated right whales would be vulnerable to entanglement which could result in serious injury and mortality. Additionally, the right whales would most likely move on to another location before NMFS could implement the restrictions designed to protect them, thereby rendering the action obsolete. Therefore, pursuant to 5 U.S.C. 553(b)(B), the AA finds that good cause exists to waive prior notice and an opportunity to comment on this action to implement a DAM restricted zone to reduce the risk of entanglement of endangered right whales in commercial lobster trap/pot and anchored gillnet gear as such procedures would be impracticable. For the same reasons, the AA finds that, under 5 U.S.C. 553(d)(3), good cause exists to waive the 30-day delay in effective date. If NMFS were to delay for 30 days the effective date of this action, the aggregated right whales would be vulnerable to entanglement, which could cause serious injury and mortality. Additionally, right whales would likely move to another location between the time NMFS approved the action creating the DAM restricted zone and the time it went into effect, thereby rendering the action obsolete and ineffective. Nevertheless, NMFS recognizes the need for fishermen to have time to either modify or remove (if not in compliance with the required restrictions) their gear from a DAM zone once one is approved. Thus, NMFS makes this action effective 2 days after the date of publication of this document in the **Federal Register** . NMFS will also endeavor to provide notice of this action to fishermen through other means upon issuance of the rule by the AA, thereby providing approximately 3 additional days of notice while the Office of the **Federal Register** processes the document for publication. NMFS determined that the regulations establishing the DAM program and actions such as this one taken pursuant to those regulations are consistent to the maximum extent practicable with the enforceable policies of the approved coastal management program of the U.S. Atlantic coastal states. This determination was submitted for review by the responsible state agencies under section 307 of the Coastal Zone Management Act. Following state review of the regulations creating the DAM program, no state disagreed with NMFS' conclusion that the DAM program is consistent to the maximum extent practicable with the enforceable policies of the approved coastal management program for that state. The DAM program under which NMFS is taking this action contains policies with federalism implications warranting preparation of a federalism assessment under Executive Order 13132. Accordingly, in October 2001 and March 2003, the Assistant Secretary for Intergovernmental and Legislative Affairs, Department of Commerce, provided notice of the DAM program and its amendments to the appropriate elected officials in states to be affected by actions taken pursuant to the DAM program. Federalism issues raised by state officials were addressed in the final rules implementing the DAM program. A copy of the federalism Summary Impact Statement for the final rules is available upon request ( ADDRESSES ). The rule implementing the DAM program has been determined to be not significant under Executive Order 12866. Authority: 16 U.S.C. 1361 *et seq.* and 50 CFR 229.32(g)(3) Dated: January 17, 2008. John Oliver, Deputy Assistant Administrator for Operations, National Marine Fisheries Service. [FR Doc. 08-262 Filed 1-18-08; 2:32 pm]

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