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/ Tuesday, January 13, 1998
[Federal Register: January 13, 1998 (Volume 63, Number 8)]
[Proposed Rules]
[Page 1943-1947]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13ja98-32]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 76
[CS Docket No. 97-248; FCC 97-415]
Program Access Proceeding
AGENCY: Federal Communications Commission.
ACTION: Proposed rule.
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SUMMARY: In the Memorandum Opinion and Order and Notice of Proposed
Rulemaking (``NPRM''), the Commission grants the petition for
rulemaking filed by Ameritech New Media, Inc. requesting that the
Commission issue a notice of proposed rulemaking to amend its program
access rules. Also in the NPRM the Commission seeks comment on
proposals to amend several aspects of the program access rules. The
Commission believes that these proposals will provide expeditious and
effective resolution of program access complaints. These proposed rules
are necessary to further the Commission's goals of increased
competition and diversity in the multichannel video programming market,
as well as foster the development of competition to traditional cable
systems. The intended effect of this action is to seek comment on
proposed rules and procedures applicable to the Commission's program
access rules.
DATES: Comments are due on or before February 2, 1998. Reply comments
are due on or before February 23, 1998.
ADDRESSES: Federal Communications Commission, 1919 M Street, N.W., Room
222, Washington, D.C. 20554.
FOR FURTHER INFORMATION CONTACT: Deborah Klein or Steve Broeckaert,
Consumer Protection and Competition Division, Cable Services Bureau, at
(202) 418-7200.
SUPPLEMENTARY INFORMATION: This is a synopsis of the Memorandum Opinion
and Order and Notice of Proposed Rulemaking in CS Docket No. 97-248,
FCC 97-415 which was adopted and released on December 18, 1997. A copy
of the complete item is available for inspection and copying during
normal business hours in the FCC Reference Center, Room 239, 1919 M
Street, N.W., Washington, D.C. 20554. The complete text may be
purchased from the Commission's copy contractor, International
Transcription Service, Inc., 1231 20th Street, N.W., Washington, D.C.
20036, (202) 857-3800. The complete Memorandum Opinion and Order and
Notice of Proposed Rulemaking also is available on the Commission's
Internet home page (http://www.fcc.gov).
Summary of Action
I. Background
1. On December 18, 1997, the Federal Communications Commission
(``Commission'') adopted a Memorandum Opinion and Order and Notice of
Proposed Rulemaking which granted a petition for rulemaking filed by
Ameritech New Media, Inc. (``Ameritech'') and sought comment on a
variety of proposals relating to its program access rules. The Order
and NPRM are summarized below.
[[Page 1944]]
A. Introduction
2. Section 628 of the Communications Act of 1934, as amended
(``Communications Act''), prohibits unfair or discriminatory practices
in the sale of satellite cable and satellite broadcast programming.
Section 628 is intended to increase competition and diversity in the
multichannel video programming market, as well as to foster the
development of competition to traditional cable systems, by prescribing
regulations that govern the access by competing multichannel systems to
cable programming services. Section 628(c) instructs the Commission to
adopt regulations to identify particular conduct that is prohibited by
section 628(b). The Communications Act provides parties aggrieved by
conduct alleged to violate the program access provisions the right to
commence an adjudicatory proceeding before the Commission. Ameritech
filed a petition for rulemaking requesting that the Commission issue a
notice of proposed rulemaking to amend its program access rules.
Pursuant to Sec. 1.401 of the Commission's rules, on June 2, 1997, the
Commission issued a public notice seeking comment on Ameritech's
petition. Timely comments and oppositions were filed on July 2, 1997;
reply comments were filed on July 17, 1997. As discussed herein, the
Commission is initiating a proceeding to consider the amendment of
several aspects of the program access rules.
B. Time Limits
3. The Commission seeks comment on Ameritech's proposed time limits
for the processing of program access complaints: 90 days in the case of
a complaint that can be resolved without recourse to discovery, and
within 150 days if the complainant elects to conduct discovery. The
Commission seeks comment on appropriate time limits for the resolution
of program access complaints: should the Commission adopt the 90-day
and 150-day time periods proposed by Ameritech; should some other time
period apply; or should the Commission not adopt time limits. In
addition, the Commission seeks comment on whether the time limit, if
any, should run from the time the complaint was filed, or whether the
time limit should run from some other point, such as the close of
pleadings, or the close of discovery.
4. Further, the Commission seeks comment regarding whether one
universally applicable time limit should apply to all program access
complaints, or whether one time limit should be established for cases
involving denial of programming, with another longer time limit
established for price discrimination cases, which generally involve
issues of greater complexity. The Commission also seeks comment on any
other reasonable distinction between program access cases which would
impact the appropriate time limit, if any, for resolution of that type
of program access proceeding. In addition, the Commission seeks comment
on Ameritech's proposal to shorten the answer (30 days to 20 days) and
reply (20 days to 15 days) pleading periods applicable to program
access complaints.
C. Discovery
5. The Commission seeks comment on several means of expediting the
discovery process. In this regard, the Commission seeks comment on
whether it would speed the discovery process to have complainants
submit proposed discovery requests with their program access complaints
and require Defendants to submit their proposed discovery requests and
objections to complainants' discovery requests with their answer.
Complainants would submit their objections to defendants' discovery
requests with their reply.
6. The Commission seeks comment on any other change in the
procedures applicable to program access complaints that would result in
the necessary information disclosure in the most efficient, expeditious
fashion possible. In this regard, the Commission seeks comment on
whether different standards for discovery should be applied to
different types of program access complaints, such as price
discrimination, exclusivity, and denial of programming. The Commission
also seeks comment on whether the issuance of a standardized protective
order applicable to program access complaints would expedite the
necessary information disclosure. Further, the Commission seeks comment
on Ameritech's proposal that complainants be entitled to discovery as
of right, particularly in light of our conclusion not to permit
discovery as of right in common carrier formal complaint proceedings.
D. Damages
7. The Commission has authority to impose forfeitures for violation
of the program access rules. The Commission seeks comment on whether
forfeitures alone are an adequate deterrent to prevent violations of
these rules. The Commission also seeks comment on whether an additional
check on anticompetitive conduct such as the imposition of damages for
violations of section 628 of the Communications Act may now be
appropriate and in the public interest. In this regard, the Commission
also seeks comment on the appropriate interaction, if any, between
damages and the Commission's existing forfeiture authority under Title
V to impose forfeitures for violations of the program access rules. The
Commission also seeks comment regarding the correct procedures through
which to implement damages or forfeitures in the context of specific
program access proceedings. For example, the Commission seeks comment
on the date from which damages should be levied for violations of
section 628. The Commission seeks comment on whether the operative date
should be the date of the notice of intent to file a program access
complaint, as Ameritech suggests, or the date of filing of the program
access complaint, or the date on which the violation first occurred.
Because the complainant has the ability to file a complaint at any time
after the 10 day notice requirement set forth in 47 CFR 76.1003(a), the
Commission seeks comment on whether damages should be calculated from
the date upon which the complainant filed its program access complaint
with the Commission. The Commission also seeks comment on the adequacy
and clarity of the forfeiture procedures and guidelines set forth in
section 503 of the Communications Act, the Commission's rules, and case
law. In addition the Commission seeks comment on whether, in some
cases, the most efficient manner of processing program access cases
would be to bifurcate the program access violation determination from
the damages or forfeiture determination. The Commission seeks comment
on whether Commission Staff should be given the discretion to bifurcate
the violation and sanction portions of program access proceedings and
whether doing so would more efficiently process such cases.
8. The Commission also seeks comment on the calculation of damages,
if assessed. Commenters should consider whether the Commission should
determine damages on a case-by-case basis, or whether there should be a
standard calculation for damages in program access matters. Those
arguing that damages should be based on a standard calculation should
comment on how the Commission should determine such standard
calculation. The Commission also seeks comment on the basis on which
damages, if assessed, should be calculated. For example, should damages
be based on lost profit, the difference between the rate that the
[[Page 1945]]
complainant was charged and the rate the complainant should have been
charged, or some other legitimate basis.
9. The Commission seeks comment on whether a complainant seeking
damages must file in its complaint or supplemental complaint either a
detailed computation of damages or a detailed explanation of why such a
computation is not possible at the time of filing. Commenters
advocating the adoption of such a requirement should address whether
the explanation standards adopted for complaints against common
carriers should be adopted, or whether some other explanation standard
should apply.
10. Finally, the Commission observes that no persuasive evidence
has been presented which suggests that punitive damages should be
imposed in program access cases. Accordingly, the Commission
tentatively concludes that punitive damages should not be imposed in
program access cases. The Commission seeks comment on this tentative
conclusion.
E. Terrestrial-Delivery of Programming
11. Section 628 of the Communications Act is applicable to cable
operators, satellite cable programming vendors in which a cable
operator has an attributable interest, and satellite broadcast
programming vendors and generally applies to the delivery of satellite
cable programming and satellite broadcast programming. On its face,
section 628 does not preclude a programmer from altering its
distribution method from satellite-distribution to terrestrial-
distribution. Such an action could arguably constitute an unfair method
of competition or unfair or deceptive act or practice, the purpose or
effect of which is to hinder significantly or to prevent any
multichannel video programming distributor from providing satellite
cable programming or satellite broadcast programming to subscribers or
consumers. The Commission seeks comment on appropriate ways to address
such situations. As a threshold matter, the Commission specifically
asks commenters to address the statutory basis for any suggested
remedial action, and whether legislation is needed. To the extent that
commenters contend that Commission action is appropriate, the
Commission seeks comment on what types of evidence a complainant may
marshal to prevail on a claim against a programmer that has moved
satellite-delivered programming to terrestrial delivery to evade the
program access requirements. The Commission also seeks comment on
whether programming that has been moved from satellite to terrestrial
delivery can or should be subject to program access requirements based
on the effect, rather than the purpose, of the programmer's action.
F. Buying Groups: Joint and Several Liability
12. The Commission seeks comment on a proposal that the Commission
clarify its program access rules to provide that any cooperative buying
group that maintains adequate financial reserves should not be required
to provide joint and several liability. Specifically, the Commission
seeks comment on what financial assurances cooperative buying groups
can provide to programming distributors such that joint and several
liability is not necessary, while adequately protecting programming
distributors from the financial risks associated with such
arrangements. For example, the Commission seeks comment on whether
buying groups that maintain a cash reserve equal to one month's
programming fees would satisfy such a requirement. In addition, the
Commission seeks comment on any other proposals that would result in
the elimination of joint and several liability while maintaining
adequate protection for programmers.
II. Procedural Matters
A. Regulatory Flexibility Analysis
13. As required by the Regulatory Flexibility Act (RFA), 5 U.S.C.
Sec. 603, the Commission has prepared an Initial Regulatory Flexibility
Analysis (IRFA) of the expected impact on small entities of the rules
proposed in the NPRM. Written public comments are requested on the
IRFA. Comments on the IRFA must have a separate and distinct heading
designating them as responses to the IRFA and must be filed by the
deadlines for comments on the NPRM. The Commission will send a copy of
the NPRM, including this IRFA, to the Chief Counsel for Advocacy of the
Small Business Administration.
Initial Regulatory Flexibility Analysis
A. Need for, and Objectives of, the Proposed Rules
14. In 1993, the Commission adopted its current rules intended to
protect, pursuant to section 628 of the Communications Act, the right
of multichannel video programming providers to obtain access to
specified types of video programming. Ameritech filed a petition for
rulemaking proposing that certain aspects of the Commission's program
access rules be amended to better ensure the Communication Act's
program access requirements. In this NPRM, the Commission seeks comment
as to whether certain aspects of the Commission's program access rules
should be amended to better enforce the Communication Act's program
access requirements.
B. Legal Basis
15. The authority for the action proposed for this rulemaking is
contained in sections 4(i), 303(r), and 628 of the Communications Act
of 1934, as amended, 47 U.S.C. sections 4(i), 303(r), and 548.
C. Description and Estimate of the Number of Small Entities
16. The Commission is required to provide a description of and,
where feasible, an estimate of the number of small entities that will
be affected by the proposed rules, if adopted. The RFA defines the term
``small entity'' as having the same meaning as the terms ``small
business'' and ``small organization.'' In addition, the term ``small
business'' has the same meaning as the term ``small business concern''
under section 3 of the Small Business Act. Under the Small Business
Act, a ``small business concern'' is one which: (1) is independently
owned and operated; (2) is not dominant in its field of operation; and
(3) meets any additional criteria established by the Small Business
Administration (``SBA'').
17. Small MVPDs. The SBA has developed a definition of small
entities for cable and other pay television services, which includes
all such companies generating $11 million or less in annual receipts.
This definition includes cable system operators, closed circuit
television services, direct broadcast satellite services, multipoint
distribution systems, satellite master antenna systems and subscription
television services. According to the Bureau of the Census, there were
1,758 total cable and other pay television services and 1,423 had less
than $11 million in revenue. The Commission addresses below each
service individually to provide a more precise estimate of small
entities.
18. Cable Systems. The Commission has developed, with SBA's
approval, our own definition of a small cable system operator for the
purposes of rate regulation. Under 47 CFR 76.901(e), a ``small cable
company'' is one serving fewer than 400,000 subscribers nationwide.
Based on our most recent information, the Commission estimates that
there were 1439 cable operators that qualified as small cable companies
at
[[Page 1946]]
the end of 1995. Since then, some of those companies may have grown to
serve over 400,000 subscribers, and others may have been involved in
transactions that caused them to be combined with other cable
operators. Consequently, the Commission estimates that there are fewer
than 1439 small entity cable system operators that may be affected by
the decisions and rules the Commission is adopting. The Commission
believes that only a small percentage of these entities currently
provide qualifying ``telecommunications services'' as required by the
Communications Act and, therefore, estimate that the number of such
entities are significantly fewer than noted.
19. The Communications Act also contains a definition of a small
cable system operator, which is ``a cable operator that, directly or
through an affiliate, serves in the aggregate fewer than 1% of all
subscribers in the United States and is not affiliated with any entity
or entities whose gross annual revenues in the aggregate exceed
$250,000,000.'' The Commission has determined that there are 61,700,000
subscribers in the United States. Therefore, the Commission found that
an operator serving fewer than 617,000 subscribers shall be deemed a
small operator, if its annual revenues, when combined with the total
annual revenues of all of its affiliates, do not exceed $250 million in
the aggregate. Based on available data, the Commission finds that the
number of cable operators serving 617,000 subscribers or less totals
1450. Although it seems certain that some of these cable system
operators are affiliated with entities whose gross annual revenues
exceed $250,000,000, the Commission is unable at this time to estimate
with greater precision the number of cable system operators that would
qualify as small cable operators under the definition in the
Communications Act.
20. Multipoint Multichannel Distribution Systems (``MMDS''). The
Commission refined the definition of ``small entity'' for the auction
of MMDS as an entity that together with its affiliates has average
gross annual revenues that are not more than $40 million for the
preceding three calendar years. This definition of a small entity in
the context of MMDS auctions has been approved by the SBA.
21. The Commission completed its MMDS auction in March 1996 for
authorizations in 493 basic trading areas (``BTAs''). Of 67 winning
bidders, 61 qualified as small entities. Five bidders indicated that
they were minority-owned and four winners indicated that they were
women-owned businesses. MMDS is an especially competitive service, with
approximately 1573 previously authorized and proposed MMDS facilities.
Information available to us indicates that no MMDS facility generates
revenue in excess of $11 million annually. The Commission concludes
that, for purposes of this FRFA, there are approximately 1634 small
MMDS providers as defined by the SBA and the Commission's auction
rules.
22. Direct Broadcast Satellite (``DBS''). Because DBS provides
subscription services, DBS falls within the SBA definition of cable and
other pay television services (SIC 4841). As of December 1996, there
were eight DBS licensees. Estimates of 1996 revenues for various DBS
operators are significantly greater than $11,000,000 and range from a
low of $31,132,000 for Alphastar to a high of $1,100,000,000 for
Primestar. Accordingly, the Commission concludes that no DBS operator
qualifies as a small entity.
23. Home Satellite Dish (``HSD''). The market for HSD service is
difficult to quantify. Indeed, the service itself bears little
resemblance to other MVPDs. HSD owners have access to more than 265
channels of programming placed on C-band satellites by programmers for
receipt and distribution by MVPDs, of which 115 channels are scrambled
and approximately 150 are unscrambled. HSD owners can watch unscrambled
channels without paying a subscription fee. To receive scrambled
channels, however, an HSD owner must purchase an integrated receiver-
decoder from an equipment dealer and pay a subscription fee to an HSD
programming packager. Thus, HSD users include: (1) viewers who
subscribe to a packaged programming service, which affords them access
to most of the same programming provided to subscribers of other MVPDs;
(2) viewers who receive only nonsubscription programming; and (3)
viewers who receive satellite programming services illegally without
subscribing.
24. According to the most recently available information, there are
approximately 30 program packagers nationwide offering packages of
scrambled programming to retail consumers. These program packagers
provide subscriptions to approximately 2,314,900 subscribers
nationwide. This is an average of about 77,163 subscribers per program
packager. This is substantially smaller than the 400,000 subscribers
used in the Commission's definition of a small multiple system operator
(``MSO''). Furthermore, because this is an average, it is likely that
some program packagers may be substantially smaller.
25. Open Video System (``OVS''). The Commission has certified nine
OVS operators. Of these nine, only two are providing service. On
October 17, 1996, Bell Atlantic received approval for its certification
to convert its Dover, New Jersey Video Dialtone (``VDT'') system to
OVS. Bell Atlantic subsequently purchased the division of Futurevision
which had been the only operating program package provider on the Dover
system, and has begun offering programming on this system using these
resources. Metropolitan Fiber Systems was granted certifications on
December 9, 1996, for the operation of OVS systems in Boston and New
York, both of which are being used to provide programming. Bell
Atlantic and Metropolitan Fiber Systems have sufficient revenues to
assure us that they do not qualify as small business entities. Little
financial information is available for the other entities authorized to
provide OVS that are not yet operational. The Commission believes that
one OVS licensee may qualify as a small business concern. Given that
other entities have been authorized to provide OVS service but have not
yet begun to generate revenues, the Commission concludes that at least
some of the OVS operators qualify as small entities.
26. Satellite Master Antenna Television (``SMATVs''). Industry
sources estimate that approximately 5200 SMATV operators were providing
service as of December 1995. Other estimates indicate that SMATV
operators serve approximately 1.05 million residential subscribers as
of September 1996. The ten largest SMATV operators together pass
815,740 units. If the Commission assumes that these SMATV operators
serve 50% of the units passed, the ten largest SMATV operators serve
approximately 40% of the total number of SMATV subscribers. Because
these operators are not rate regulated, they are not required to file
financial data with the Commission. Furthermore, the Commission is not
aware of any privately published financial information regarding these
operators. Based on the estimated number of operators and the estimated
number of units served by the largest ten SMATVs, the Commission
concludes that a substantial number of SMATV operators qualify as small
entities.
27. Local Multipoint Distribution System (``LMDS''). Unlike the
above pay television services, LMDS technology and spectrum allocation
will allow licensees to provide wireless telephony,
[[Page 1947]]
data, and/or video services. A LMDS provider is not limited in the
number of potential applications that will be available for this
service. Therefore, the definition of a small LMDS entity may be
applicable to both cable and other pay television (SIC 4841) and/or
radiotelephone communications companies (SIC 4812). The SBA definition
for cable and other pay services is defined above. A small
radiotelephone entity is one with 1500 employees or less. However, for
the purposes of this NPRM, the Commission includes only an estimate of
LMDS video service providers.
28. LMDS is a service that is expected to be auctioned by the FCC
in 1998. The vast majority of LMDS entities providing video
distribution could be small businesses under the SBA's definition of
cable and pay television (SIC 4841). However, the Commission proposed
to define a small LMDS provider as an entity that, together with
affiliates and attributable investors, has average gross revenues for
the three preceding calendar years of less than $40 million. The
Commission has not yet received approval by the SBA for this
definition.
29. There is only one company, CellularVision, that is currently
providing LMDS video services. Although the Commission does not collect
data on annual receipts, the Commission assumes that CellularVision is
a small business under both the SBA definition and our proposed auction
rules. Accordingly, the Commission affirms its tentative conclusion
that a majority of the potential LMDS licensees will be small entities,
as that term is defined by the SBA.
30. Program Producers and Distributors. The Commission has not
developed a definition of small entities applicable to producers or
distributors of television programs. Therefore, the Commission will
utilize the SBA classifications of Motion Picture and Video Tape
Production (SIC 7812), Motion Picture and Video Tape Distribution (SIC
7822), and Theatrical Producers (Except Motion Pictures) and
Miscellaneous Theatrical Services (SIC 7922). These SBA definitions
provide that a small entity in the television programming industry is
an entity with $21.5 million or less in annual receipts for SIC 7812
and 7822, and $5 million or less in annual receipts for SIC 7922. The
1992 Bureau of the Census data indicate the following: (1) there were
7265 U.S. firms classified as Motion Picture and Video Production (SIC
7812), and that 6987 of these firms had $16,999 million or less in
annual receipts and 7002 of these firms had $24,999 million or less in
annual receipts; (2) there were 1139 U.S. firms classified as Motion
Picture and Tape Distribution (SIC 7822), and that 1007 of these firms
had $16,999 million or less in annual receipts and 1013 of these firms
had $24,999 million or less in annual receipts; and (3) there were 5671
U.S. firms classified as Theatrical Producers and Services (SIC 7922),
and that 5627 of these firms had less than $5 million in annual
receipts.
31. Each of these SIC categories is very broad and includes firms
that may be engaged in various industries including television.
Specific figures are not available as to how many of these firms
exclusively produce and/or distribute programming for television or how
many are independently owned and operated. Consequently, the Commission
concludes that there are approximately 6987 small entities that produce
and distribute taped television programs, 1013 small entities primarily
engaged in the distribution of taped television programs, and 5627
small producers of live television programs that may be affected by the
rules adopted in this proceeding.
D. Description of Reporting, Recordkeeping, and Other Compliance
Requirements
32. The rules proposed in this NPRM will not require a change in
record keeping requirements.
E. Steps Taken To Minimize Significant Economic Impact on Small
Entities, and Significant Alternatives Considered
33. The NPRM proposes various alternatives which may expand access
to video programming by small entities.
F. Federal Rules Which Overlap, Duplicate, or Conflict With These Rules
34. None.
B. Ex Parte Presentations
35. The NPRM is a permit but disclose notice and comment rule
making proceeding. Ex parte presentations are permitted, except during
the Sunshine Agenda period, provided they are disclosed as provided in
Commission rules. See generally 47 CFR 1.1202, 1.1203, and 1.1206(a).
C. Comments
36. Pursuant to applicable procedures set forth in Secs. 1.415 and
1.419 of the Commission's rules, interested parties may file comments
on or before February 2, 1998 and reply comments on or before February
23, 1998. To file formally in this proceeding, you must file an
original and six copies of all comments, reply comments, and supporting
comments. Parties are also asked to submit, if possible, draft rules
that reflect their positions. If you want each Commissioner to receive
a personal copy of your comments, you must file an original and eleven
copies. Comments and reply comments should be sent to Office of the
Secretary, Federal Communications Commission, 1919 M Street, N.W., Room
222, Washington, D.C. 20554, with a copy to Deborah Klein of the Cable
Services Bureau, 2033 M Street, N.W., 7th Floor, Washington, D.C.
20554. Parties should also file one copy of any documents filed in this
docket with the Commission's copy contractor, International
Transcription Services, Inc., 1231 20th Street, N.W., Washington, D.C.
20037. Comments and reply comments will be available for public
inspection during regular business hours in the FCC Reference Center,
1919 M Street, N.W., Room 239, Washington, D.C. 20554.
37. Parties are also asked to submit comments and reply comments on
diskette, where possible. Such diskette submissions would be in
addition to and not a substitute for the formal filing requirements
addressed above. Parties submitting diskettes should submit them to
Deborah Klein of the Cable Services Bureau, 2033 M Street, N.W., 7th
Floor, Washington, D.C. 20554. Such a submission must be on a 3.5 inch
diskette formatted in an IBM compatible form using MS DOS 5.0 and
WordPerfect 5.1 software. The diskette should be submitted in ``read
only'' mode. The diskette should be clearly labelled with the party's
name, proceeding, type of pleading (comment or reply comments) and date
of submission. The diskette should be accompanied by a cover letter.
List of Subjects in 47 CFR Part 76
Administrative practice and procedure.
Federal Communications Commission.
Magalie Roman Salas,
Secretary.
[FR Doc. 98-707 Filed 1-12-98; 8:45 am]
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