Examination of Current Policy Concerning the Treatment of Confidential Information Submitted to the Commission

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 0

[GC Docket No. 96-55, FCC 96-109]

Examination of Current Policy Concerning the Treatment of

Confidential Information Submitted to the Commission

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: The Commission has adopted a Notice of Inquiry and a Notice of

Proposed Rulemaking to begin a proceeding to evaluate its practices and

policies concerning the treatment of competitively sensitive

information that has been provided to the Commission. The Commission's

objective is to develop a policy that will guide it in evaluating an

increasing number of requests that it afford confidential treatment to

information that has been provided to it by regulated entities and

others. The central issue that confronts the Commission is how to avoid

unnecessary competitive harm that could be caused by the disclosures of

such information and still fulfill its regulatory duties in a manner

that is efficient and fair to the parties and members of the public who

have an interest in its proceedings.

DATES: Comments are due on or before June 14, 1996 and Reply comments

are due on or before July 15, 1996.

FOR FURTHER INFORMATION CONTACT: Joel Kaufman, Office of General

Counsel, (202) 418-1720.

SUPPLEMENTARY INFORMATION: The complete text of this Notice of Inquiry

and Notice of Proposed Rulemaking is available for inspection and

copying during normal business hours in the FCC Reference Center (room

239), 1919 M Street, NW., Washington, DC, and also may be purchased

from the Commission's copy contractor, International Transcription

Service at (202) 857-3800, 2100 M Street, NW., Suite 140, Washington,

DC 20037.

Synopsis

I. Background

A. Authority To Disclose and Withhold Competitively Sensitive

Information

1. Freedom of Information Act

1. Under the Freedom of Information Act (FOIA), 5 U.S.C. 552, the

Commission is required to disclose reasonably described agency records

requested by any person, unless the records contain information that

fits within one or more of the nine exemptions from disclosure provided

in the Act. For the purposes of this proceeding, the most important of

the FOIA exemptions is commonly referred to Exemption 4. Exemption 4

provides that the government need not disclose ``trade secrets and

commercial or financial information obtained from a person and

privileged or confidential.'' 5 U.S.C. Sec. 552(b)(4).

2. For many years, the applicable standard for whether commercial

or financial information was ``confidential'' under Exemption 4 of FOIA

was set forth in National Parks and Conservation Association v. Morton,

498 F.2d 765 (D.C. Cir. 1974). In National Parks, the Court set forth a

two-part test, stating that ``[c]ommercial or financial matter is

`confidential' * * * if disclosure of the information is likely * * *

either * * * (1) to impair the Government's ability to obtain necessary

information in the future; or (2) to cause substantial harm to the

competitive position of the person from whom the information was

obtained.'' Id. at 770. In Critical Mass Energy Project v. Nuclear

Regulatory Commission, 975 F.2d 871 (D.C. Cir. 1992), cert. denied, 113

S.Ct. 1579 (1993), the court limited National Parks to situations where

a party must submit information to a federal agency. Under Critical

Mass, ``financial or commercial information provided to the Government

on a voluntary basis is `confidential' for the purpose of Exemption 4

if it is of a kind that would customarily not be released to the public

by the person from whom it was obtained.'' Id. at 879.

2. The Trade Secrets Act and Commission Authority To Disclose Exemption

4 Records

3. While FOIA Exemption 4 allows an agency to withhold business

competitive information from public disclosure, the Trade Secrets Act,

18 U.S.C. 1905, acts as an affirmative restraint on an agency's ability

to release such information. It states:

Whoever, being an officer or employee of the United States or of

any department or

[[Page 16425]]

agency thereof, * * * publishes, divulges, discloses, or makes known

in any manner or to any extent not authorized by law any information

coming to him in the course of his employment or official duties * *

* [that] concerns or relates to the trade secrets, processes,

operations, style of work, or apparatus * * * shall be fined not

more than $1000, or imprisoned not more than one year, or both; and

shall be removed from office or employment.

18 U.S.C. 1905 (emphasis added).

4. In Chrysler Corp. v. Brown, 441 U.S. 281 (1979), the Supreme

Court discussed the relationship between the Trade Secrets Act and

Exemption 4 as follows:

Although there is a theoretical possibility that material might

be outside Exemption 4 yet within the substantive provisions of [the

Trade Secrets Act] * * * that possibility is at most of limited

practical significance in view of the similarity of language between

Exemption 4 and the substantive provisions of [the Trade Secrets

Act].

Id. at 319 n. 49. Thus, if information may be withheld under Exemption

4, the agency is barred from disclosing it by the terms of the Trade

Secrets Act unless the disclosure is otherwise authorized by law.

5. Sections 0.457(d)(1) and 0.457(d)(2)(i) of the Commission's

rules, 47 CFR Secs. 0.457(d)(1), 0.457(d)(2)(i), constitute the

requisite legal authorization for disclosure of competitively sensitive

information under the Trade Secrets Act. These rules permit disclosure

of trade secrets and commercial or financial information upon a

``persuasive showing'' of the reasons in favor of the information's

release.

5. The Commission's legal authority to adopt a rule that permits

disclosure of materials covered by the Trade Secrets Act is grounded in

Section 4(j) of the Communications Act, 47 U.S.C. Sec. 4(j). In Federal

Communications Commission v. Schreiber, 381 U.S. 279, 291-92 (1965),

the Supreme Court expressly addressed the Commission's authority under

that Section, noting: ``Grants of agency authority comparable in scope

to Sec. 4(j) [of the Communications Act] have been held to authorize

public disclosure of information, or receipt of data in confidence, as

the agency may determine to be proper upon a balancing of the public

and private interests involved.''

B. Review of Commission's Policies Governing Disclosure

1. Commission Rules and Procedures

6. The Commission has adopted general rules to implement the

provisions of the FOIA. Section 0.457(d) of the Commission's Rules, 47

CFR Sec. 0.457(d), implements FOIA Exemption 4. Quoting Exemption 4, it

provides that records not routinely available for public inspection

include ``[t]rade secrets and commercial or financial information

obtained from any person and privileged or confidential.'' Section

0.457 of the Commission's rules also provides that certain categories

materials listed therein are deemed to be within Exemption 4 and

therefore are ``not routinely available for public inspection.'' Such

Exemption 4 materials may not be disclosed by Commission employees

unless an appropriate request for inspection is made and, after

weighing the considerations favoring disclosure and non-disclosure, the

Commission determines that a ``persuasive showing'' has been made to

warrant disclosure. 47 CFR Secs. 0.451(b)(5), 0.457(d)(1);

0.457(d)(2)(i); 0.461(f)(4).

7. Any person submitting information or materials to the Commission

not falling within the specific categories set forth in Section 0.457

may also request on an ad hoc basis that such information not be made

routinely available for public inspection under Exemption 4. Each such

request must contain a statement of the reasons for withholding the

materials from inspection and of the facts upon which those reasons are

based. A request that information not be made routinely available for

public inspection will be granted if it presents by a preponderance of

the evidence a case for non-disclosure consistent with the provisions

of FOIA. 47 CFR Sec. 0.459(b). If a request that materials not be

routinely available for public inspection is granted, the material will

be treated the same as those categories of information presumed not

routinely available for public disclosure. 47 CFR Sec. 0.459(h). The

Commission's rules also contain procedures to protect the

confidentiality of information until administrative and judicial

appeals procedures have been completed. 47 CFR Sec. 0.459(g).

2. General Policies Regarding Disclosure of Exemption 4 Records

8. As indicated above, the Commission's rules provide for the

disclosure of Exemption 4 material if a ``persuasive showing is made.''

The Commission generally has exercised its discretion to release FOIA

Exemption 4 information only in very limited circumstances such as

where a party placed its financial condition at issue in a Commission

proceeding or where the Commission has identified a compelling public

interest in disclosure. See e.g., The Western Union Telegraph Company,

2 FCC Rcd 4485, 4487 (1987) (citing Kannapolis Television Co., 80 FCC

2d 307 (1980)); MCI Telecommunications Corporation, 58 RR 2d 187

(1985). In determining whether a public interest in the privacy of

proprietary business data exists, the Commission has adhered to a

policy whereby it ``will not authorize the disclosure of confidential

financial information on the mere chance that it might be helpful, but

insists upon a showing that the information is a necessary link in a

chain of evidence that will resolve a public interest issue.'' E.g.,

Classical Radio for Connecticut, Inc., 69 FCC 2d 1517, 1520 n.4 (1978).

3. The Protective Order Approach

9. In recent years, the Commission also has increasingly relied on

special remedies such as redaction,1 aggregated data or

summaries,2 and protective orders 3 to balance the interests

in disclosure and the interests in preserving the confidentiality of

competitively sensitive materials. In particular, the Commission has

refined the manner in which it releases confidential information by

relying more frequently on protective orders or agreements. Protective

orders or agreements essentially require parties to whom confidential

information is made available to limit the persons who will have access

to the information and the purposes for which the information will be

used. Disclosure under a protective order or agreement may serve the

dual purpose of protecting competitively

[[Page 16426]]

valuable information while still permitting limited disclosure for a

specific public purpose. Cincinnati, 10 FCC Rcd at 10575; Hawaii, 10

FCC Rcd at 2366. While protective orders permit the Commission to make

confidential information available on a limited basis while minimizing

the competitive harm that might ensue from widespread disclosure, the

Commission is mindful of the fact that extensive reliance on protective

orders may also impose burdens on the public and the Commission. See

e.g., Motorola Satellite Communications Inc., 7 FCC Rcd 5062, 5064

(1992) (quoting Letter of Thomas P Stanley, Chief Engineer (June 3,

1992)).

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\1\ Allnet Communications Services, Inc., 8 FCC Rcd 5629, 5630

(1993) (withholding from public release some redacted material

provided to the parties under a protective order, but releasing

other redacted material that did not contain confidential

information).

\2\ Id. (finding certain averaged data not to be competitively

sensitive); Bellsouth Corp., 8 FCC Rcd 8129, 8130 (1993) (releasing

summary of audit findings despite claim of confidentiality since

summary nature of information significantly diminished the

likelihood of competitive harm).

\3\ See, e.g., Cincinnati Bell Telephone Co. (``Cincinnati''),

10 FCC Rcd 10574 (Com. Car. Bur. 1995); Petition of Public Utilities

Commission, State of Hawaii, for Authority to Extend its Rate

Regulation of Commercial Mobile Radio Services in the State of

Hawaii (``Hawaii''), 10 FCC Rcd 2359 and 10 FCC Rcd 2881 (Wireless

Bur. 1995); In re Applications of Craig O. McCaw, Transferor, and

American Telephone and Telegraph Company, Transferee, for Consent to

the Transfer of Control of McCaw Cellular Communications, Inc. and

its Subsidiaries, 9 FCC Rcd 2610 (Com. Car. Bur. 1994); Commission

Requirements for Cost Support Material to be Filed with Open Network

Architecture Access Tariffs (``Open Network Architecture''), 7 FCC

Rcd 1526 (Com. Car. Bur. 1992), aff'd, 9 FCC Rcd 180 (1993);

Motorola Satellite Communications, Inc. Request for Pioneer's

Preference to Establish a Low-Earth Orbit Satellite System in the

1610-1626.5 MHz Band (``Motorola''), 7 FCC Rcd 5062 (1992).

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II. Issues for Comment

A. General Issues

10. The Commission's policies implementing its rules governing

confidentiality affect both the competitive nature of the

telecommunications industry and performance of the Commission's public

responsibilities. The Commission has long been sensitive to the concern

that fulfillment of its regulatory responsibilities does not result in

unnecessary disclosure of confidential information that places

Commission regulatees at an unfair competitive disadvantage. In that

respect, we recognize that the ``private'' interests of regulatees in

ensuring their own competitive vitality generally coincide with the

public interest in promoting a robust and competitive

telecommunications market. Further, allowing confidential submission

increases the willingness of holders of confidential information to

provide that information to the Commission and, even where submission

is mandatory, often avoids the burden and delay of invoking such

mandatory means. For these reasons, the Commission's policy has been to

avoid disclosures of confidential information except where necessary to

the effective performance of its regulatory duties and to employ

protective orders where appropriate.

11. At the same time, allowing confidential submission necessarily

decreases the amount of information publicly available to facilitate

public participation in the regulatory process. Public participation in

Commission proceedings cannot be effective unless meaningful

information is made available to the interested persons. As noted, in

recent years, the Commission also has relied more frequently on

protective orders and agreements. Protective orders and agreements have

the advantage of permitting the release--albeit on a limited basis--of

more information than would be possible without them, given our

obligations to protect trade secrets and commercial or financial

information. On the other hand, protective orders are inconvenient and

sometimes cumbersome and increase the administrative burdens on the

Commission and those subject to them. In addition, protective orders

may make it less likely that the Commission will receive a diversity of

public comment on the protected materials. Given the Commission's

obligation to balance these concerns, we therefore seek comment whether

the Commission should adopt additional policies or rules governing the

treatment of information submitted to the Commission in confidence.

12. Specifically, we seek comment on the standard in the

Commission's current rules that permits disclosure of trade secrets and

confidential commercial or financial information upon a ``persuasive

showing'' of the reasons in favor of the information's release. See 47

CFR Sec. 0.457(d)(1), (d)(2)(i). We ask commenters to address whether

this continues to be the appropriate standard or whether the Commission

should adopt some other standard. Assuming we retain this standard, we

seek comment on what should constitute a ``persuasive showing'' of the

reasons in favor of the information's release. As discussed in more

detail below, we also ask comment on standards that should apply in

particular types of Commission proceedings.

13. We also seek comment on whether the Commission's current

approach to the use of protective orders is the appropriate approach or

whether the Commission should adopt some other approach. Advantages and

disadvantages of the current approach should be discussed. We

specifically request comment on any problems or burdens that commenters

perceive with the current protective order approach and ways in which

these problems or burdens might be minimized. Commenters should also

address whether the Commission's willingness to release confidential

information subject to a protective order reduces submitters

willingness to voluntarily submit information to the Commission. And,

we seek comment on whether the use of protective orders unduly

interferes with the Commission's ability to obtain public comment or

with the public's right to know what actions the Commission is taking

and why it is taking them.

14. As a related matter, we note that a recent D.C. Circuit opinion

suggests that the Commission may have the option of releasing all or

part of an order under seal. SBC Communications, Inc. v. FCC, 56 F.3d

1484, 1492 (D.C. Cir. 1995). We seek comment whether it is appropriate

for the Commission to draft a decision that relies on confidential data

(or data disclosed pursuant to protective order) without publicly

revealing the information. If the Commission determines that the data

is necessary to support the order, should the Commission place the

relevant order under seal or should the information lose protected

status at this point?

15. Commenters also are invited to address and comment on any other

issues relating to the Commission's policies and rules governing

confidential treatment of information submitted to the Commission.

B. Model Protective Order

16. As discussed, release of confidential information under a

protective order or agreement can often serve to resolve the conflict

between safeguarding competitively sensitive information and allowing

interested parties the opportunity to fully respond to assertions put

forth by the submitter of confidential information. We seek comment as

to whether it would be helpful for the Commission to develop a standard

form protective order that could then be modified as appropriate to fit

the circumstances of particular cases. We have supplied, as an

Attachment to this Notice of Proposed Rulemaking, a draft model

protective order. We look forward to receiving comments on this draft

order, and in particular what modifications need to be made to make it

suitable to the varied types of Commission proceedings in which issues

of confidentiality arise.

17. We also seek comment on what procedures the Commission should

use to resolve disputes about the issuance and content of protective

orders and how to ensure compliance with them. We are especially

interested in whether commenters believe that our rules should be

amended to address such issues directly.

C. Issues That Arise With Respect to Specific Types of FCC Proceedings

18. As indicated above, we also seek comment on whether different

standards should apply for various categories of proceedings with

respect to (i) what constitutes a ``persuasive showing'' of the reasons

in favor of confidential information's release and (ii) what, if any,

protective conditions we should place upon released material and

whether this should vary depending on the nature of a proceeding.

[[Page 16427]]

Specifically, we seek comment on whether the Commission should apply

different disclosure policies to rulemakings, licensing proceedings,

tariff proceedings and perhaps other categories of proceedings. For

example, we seek comment on whether the Commission should require

public disclosure of information without protective orders in some

types of Commission proceedings even though that information is within

FOIA Exemption 4. Specific issues that arise in connection with various

types of proceedings are discussed below. In addition, we request

comments on whether special disclosure policies should apply to other

categories of proceedings, not specifically mentioned below, and, if

so, what those procedures should be.

1. Title III Licensing Proceedings

19. Section 309 of the Communications Act provides that the

Commission must allow at least 30 days following issuance of a public

notice of certain radio license applications for interested parties to

file petitions to deny an application. 47 U.S.C. 309(b), (d)(1).

Section 309 thus contemplates that interested members of the public

will have a full opportunity to challenge the grant of license

applications. In addition, relevant case law indicates generally that

petitioners to deny must be afforded access to all information

submitted by licensees that bear upon their applications. See, e.g.,

Bilingual Bicultural Coalition on Mass Media, Inc. v. FCC, 595 F.2d

621, 634 (D.C. Cir. 1978) (en banc).

20. We seek comment on whether the fact that the statutory scheme

expressly contemplates public participation in Title III license

application proceedings makes it inappropriate to withhold information

filed in such proceedings from routine public disclosure. In this

regard, we note that Commission rules currently specify that broadcast

and other Title III license applications are routinely available for

public inspection. See 47 CFR Secs. 0.453, 0.455. Nevertheless,

applicants do sometimes request confidential treatment pursuant to

Section 0.459 of our rules for information submitted with their

applications in both contested and uncontested application proceedings.

In light of the special issues regarding public participation that

arise in Section 309 proceedings, we therefore seek comment on whether

our general policy should be to discourage submission of confidential

information in the application context but still to leave the

Commission some discretion to use protective orders where it seems

warranted. Or, is it appropriate to adopt a general policy with regard

to licensing proceedings, permitting disclosure of trade secrets and

commercial or financial information only pursuant to protective orders?

21. If the Commission were to adopt a policy favoring the use of

protective orders in licensing proceedings, we assume that petitioners

would be given an opportunity to supplement their petitions to deny

after reviewing the protected material. We also seek comment on whether

members of the public should be afforded access to such protected

material (pursuant to protective orders) in order to enable them to

determine whether they wish to file petitions to deny. Would such

policies tend to unduly delay Commission action on license

applications? We also seek comment on whether it is ever appropriate to

withhold from release entirely some Exemption 4 information, as has

sometimes been done in the context of licensing proceedings and if so

what standard should be used. See e.g., Application of Mobile

Communications Holdings, Inc. for Authority to Construct the ELLIPSO

Elliptical Orbit Mobile Satellite System, 10 FCC Rcd 1547, 1548 (Int'l

Bur. 1994) (declining to release, even under protective order, detailed

cost and pricing information of applicant for a license). Finally, we

seek comment on whether different policies apply to different

categories of material. For example, commenters should address whether

our policy would be to use protective orders in licensing proceedings

only in instances in which the material in question satisfies the trade

secrets or ``substantial competitive harm'' prongs of Exemption 4 and

to require public disclosure in all other cases in which the Exemption

is invoked.

2. Tariff Proceedings

22. Section 203 of the Communications Act, 47 U.S.C. 203, requires

that common carriers file and maintain tariffs with the Commission.

Section 204, 47 U.S.C. 204, gives the Commission the authority to

review tariffs for lawfulness, which involves, among other things, a

determination of whether the tariff is just and reasonable pursuant to

Section 201(b), 47 U.S.C. 201(b), and is not unjustly discriminatory

pursuant to Section 202, 47 U.S.C. 202. The Commission has adopted

rules specifying what support materials carriers must file to enable it

to carry out its tariff review authority. See 47 CFR Secs. 61.38,

61.49. Pursuant to Section 0.455(b)(11) of the Commission's rules, 47

CFR Sec. 0.455(b)(11), cost support data are routinely available for

public inspection.

23. The Commission has generally made tariff support material

publicly available. See, e.g., Cincinnati, 10 FCC Rcd at 10575. It has

departed from this policy only in a few limited circumstances, for

example, to protect third-party vendor data where the data were made

available subject to a protective agreement. See Letter from Kathleen

M.H. Wallman to Jonathan E. Canis, et al., 9 FCC Rcd 6495 (Com. Car.

Bur. 1994) (denying unrestricted access to cost support data filed in

connection with virtual collocation tariff, but allowing access

pursuant to protective order), application for review pending.

Recently, a number of carriers have filed requests for confidential

treatment of their cost support data with their tariff transmittals.

This presents a number of problems during the tariff review process.

The maximum period for tariff review is defined by statute. The

Commission has a maximum of one hundred and twenty days to determine

the lawfulness of the tariff transmittal. See 47 U.S.C. 203(b)(2); 47

CFR Sec. 61.58(a)(2). The tariff goes into effect on its effective date

unless the Commission issues an order rejecting or suspending and

investigating the tariff. 47 U.S.C. 204. Section 402(b) of the

Telecommunications Act of 1996 provides that, effective one year after

enactment, a local exchange carrier may file charges, classifications,

regulations or practices on a streamlined basis, which shall be

effective 7 days (in the case of a reduction in rates) or 15 days (in

the case of an increase in rates) after the date on which they are

filed unless the Commission takes action before the end of the period.

24. A request for confidential treatment may not be resolved within

the 120 day statutory time frame established for the tariff review

process under current law, especially if a ruling is appealed. A

request for confidentiality is unlikely to be resolved under the 7 or

15 day time frame that is to become effective for streamlined local

exchange carrier filings under the Telecommunications Act of 1996. We

therefore seek comment on how to resolve a request for confidentiality

made in the context of the tariff review process. One possibility that

takes account of the statutory time frame for the tariff review process

is to require that carriers file any confidential information first,

independent of the filing of the tariff transmittal. Under this

alternative, the tariff filing could not be made until the request for

confidentiality was resolved.

[[Page 16428]]

Commenters should also address whether we should continue to make

exceptions to the Commission's rule requiring such data to be made

publicly available. In this regard, we seek comment on how petitioners

will be able to formulate meaningful objections to the proposed tariff

rates, terms and conditions, often a critical part of the tariff review

process, if they are unable to review all support material prior to the

date that petitions are due. One possible solution is to develop a

generic protective agreement that parties can use to protect the

information during the tariff review process.

25. Commenters also should address whether different disclosure

policies should apply to different phases of the tariff review process.

Specifically, should different disclosure policies be applied to the

tariff review and tariff investigation stages? Actions denying

petitions to suspend or reject tariffs, thereby allowing a tariff to go

into effect, are considered non-final, non-judicially reviewable

actions because a party can seek further redress by filing a formal

complaint pursuant to Section 208 of the Act. In contrast, a tariff set

for investigation is assigned a docket number and a pleading cycle is

established providing for direct cases, comments and replies. At the

conclusion of the investigation, the Commission issues an order which

is subject to judicial review. Therefore since decisions to allow

tariffs to go into effect are non-reviewable, non-final orders, should

the Commission's policies focus on the need for disclosure to

petitioners (whether or not pursuant to protective orders) primarily in

instances in which a particular tariff has been set for investigation?

3. Rulemaking Proceedings

26. Section 553(b) of the Administrative Procedure Act (APA), 5

U.S.C. 551 et seq., generally requires notice and an opportunity to

comment before promulgation of a final agency rule. An agency's

decision to withhold information in the context of a rulemaking can

have a significant impact on whether meaningful notice and opportunity

to comment on the bases of an agency's decision have been given. In

addition, issues arise to the extent that an agency relies on

information that has not been made available to commenters. For these

reasons, the Commission generally has not afforded confidential

treatment to material submitted in rulemakings, although it has on rare

occasions utilized protective orders or agreements in the context of

rulemakings. Rulemakings also may create special problems for use of

protective orders, however, because a large number of commenters may be

involved. On the other hand, a blanket refusal to apply protective

orders in the context of rulemakings might cause the Commission to have

access to less information than if it used protective orders. We seek

comment on these issues as well as the general issue of whether it is

ever appropriate to withhold competitively sensitive information filed

in rulemaking proceedings from routine public disclosure. We note that

the Commission has the option of refusing to consider information in a

rulemaking that is submitted along with a request for confidentiality.

4. Requests for Special Relief and Waivers

27. Parties affected by our rules have the right to seek special

relief from the rules' scope or waiver of these rules. In certain

cases, parties may base their request for relief upon--or otherwise put

into issue--information that is confidential. This information may

include financial information explaining cash flow, profitability, or

bankruptcy problems, or corporate or partnership structure designed to

demonstrate insulation from control or interest. For example, in

various cable television special relief proceedings, a party may seek

relief based on severe financial difficulties, or upon corporate or

partnership structure and insulation from control. See 47 CFR

Sec. 76.7(a) (cable petitions for special relief). We seek comment on

whether and under what circumstances it is appropriate to withhold

information filed in such proceedings from routine public disclosure,

particularly when the information is potentially decisional to a point

placed in issue by the party seeking to withhold such information and

may have precedential value for future cases.

5. Formal Complaints

28. Section 208 of the Communications Act, 47 U.S.C. Sec. 208,

permits any party to bring before the Commission a complaint against a

common carrier for acts or omissions in violation of either the Act or

a Commission rule or order. Our rules, in turn, establish both informal

and formal procedures for handling such complaints. 47 CFR Sec. 1.711

et seq. Confidentiality issues frequently arise in formal complaint

proceedings, especially in connection with discovery. See 47 CFR

Sec. 1.731; see also Amendment of Rules Governing Procedures to Be

Followed When Formal Complaints Are Filed Against Common Carriers, 58

FR 25569 (1993), 8 FCC Rcd 2614, 2621-22 (1993).

29. We ask commenters to consider the most effective means of

balancing our sometimes conflicting obligations to ensure protection of

proprietary business data, to prevent undue delay in resolving formal

complaints, and to produce decisions that adequately explain, by

reference to a specific record, the basis for our disposition of a

complaint. For instance, in some cases, a factually and legally sound

decision cannot be drafted without referring to information subject to

a claim of confidentiality. The particular information deemed by the

staff as necessary for resolution may be only a small portion of

voluminous materials that are subject to a protective order and

provided to the Commission in confidence. Thus, considerable time might

be necessary for the staff to examine all materials subject to claims

of confidentiality and rule on those claims. If the staff were to rule

on the confidentiality of only the particular information determined to

be decisionally significant, however, this ruling might prematurely

indicate to the parties the staff's recommendation for Commission or

Bureau disposition of the complaint. In either instance, the complaint

process could be delayed by administrative and judicial appeals of a

confidentiality ruling. We ask commenters to consider whether any such

delays and burden on Commission resources could or should be mitigated

by issuing parts of adjudicatory decisions that rely on confidential

information under seal. We seek comment on whether such a procedure

would serve the public interest, given that complaint cases--although

adjudications of disputes between particular parties--may result in

rulings that indirectly, through the establishment of precedent,

determine the legality of the practices of non-parties. We welcome

suggestions as to how we can preserve the broad utility of the formal

complaint process to elucidate the Commission's judgments regarding

carrier conduct without either compromising sensitive business data or

miring complaint proceedings in protracted peripheral disputes

involving confidentiality.

6. Audits

30. The Commission has a statutory right of access to all accounts,

records and memoranda, including all documents, papers, and

correspondence kept or required to be kept by common carriers. 47

U.S.C. 220(c). The detailed financial and commercial information

[[Page 16429]]

inspected during an audit is generally sensitive in nature and is not

customarily released to the public. This fact is highlighted by section

Sec. 220(f) of the Communications Act, 47 U.S.C. Sec. 220(f), which

expressly prohibits the release of information gathered during an audit

absent a Commission or court order. The Commission has held that the

public disclosure of data gathered in an audit is likely to impair its

future ability to obtain such data because while the Commission could

rely on compulsory measures to obtain the desired materials, such

measures would involve significant expense and delay. J. David Stoner,

5 FCC Rcd 6458, 6459 (1990); Martha H. Platt, 5 FCC Rcd 5742, 5743

(1990); Scott J Rafferty, 5 FCC Rcd 4138, 4138 (1990); Western Union

Telegraph Co., 2 FCC Rcd 4485, 4486 (1987).

31. The Commission has departed from its general policy and

publicly released audit reports only in extraordinary circumstances

when (i) the summary nature of the data contained in a particular

report is not likely to cause the providing carrier substantial

competitive injury, (ii) the release of the summary data and

information is not likely to impair our ability to obtain information

in future audits and (iii) overriding public interest concerns favor

release of the report. See Bell Telephone Operating Companies, FCC 94-

418 (released Oct. 17, 1995); see also, e.g., Bell Communications

Research, Inc, 7 FCC Rcd 891 (1992); BellSouth Corp., 8 FCC Rcd 8129,

8130 (1990). In the past, we have normally allowed submitters to

request confidentiality for such data and have dealt with such requests

on a case-by-case basis, consistent with the applicable standards in

FOIA. See id. We seek comment on whether we should continue to follow

this policy and on whether and in what circumstances information

gathered during an audit should be released even under a protective

order.

7. Surveys and Studies.

32. The Commission has authority to conduct studies and surveys

needed to fulfill its regulatory functions. See, e.g., 47 U.S.C. 403.

Unlike information submitted in support of a specific regulatory action

involving the submitting entity, surveys may request information from a

broad category of regulated entities who are only submitting data

because they were selected as part of a survey sample. Because these

studies may involve the submission of information deemed competitively

sensitive by responding entities, we seek comment on standards that

should be applied to protect the confidentiality of information

submitted in this context. We also seek comment regarding the treatment

of such information when the information is used ultimately in the

development of Commission rules or policies.

D. Scope of Materials Not Routinely Available for Public Inspection

33. The need for and burdens associated with protective orders are

necessarily affected by the amount of information eligible for

protected status. Accordingly, we seek comment on several issues raised

by our current rules on materials not routinely available for public

release.

34. Categories of Materials that are not Routinely Available for

Public Inspection. Section 0.457(d) of our rules, 47 CFR Sec. 0.457(d),

contains a list of categories of materials that are not routinely

available for public inspection and as such do not require a request

for such treatment under Section 0.459, 47 CFR Sec. 0.459. To the

extent it is possible to define broad categories of information that

should not be routinely available for public inspection, we can reduce

administrative burdens on the Commission and submitters. On the other

hand, over-inclusive categories would not be consistent with the

presumption FOIA creates in favor of disclosure. We seek comment

whether the current list of materials that are not routinely available

for public inspection is appropriate or whether the list ought to be

expanded or contracted.

35. Substantiating Confidentiality Claims. Section 0.461(a) of the

Commission's confidentiality regulations, 47 CFR Sec. 0.461(a),

provides that a person submitting information or materials to the

Commission may request that the information not be made routinely

available to the public. Section 0.461(b), 47 CFR Sec. 0.461(b),

requires that each such request contain a statement of the reasons for

withholding the materials from inspection and of the facts upon which

those reasons are based. Because the Commission sometimes receives

frivolous or unsubstantiated requests for confidentiality, we seek

comment on whether the Commission should establish a policy or rule

specifying more explicitly types of information that should be provided

to comply with Section 0.461(b).

36. Information that the submitter could be required to provide to

substantiate requests for confidentiality might include:

(1) What portion of the information the submitter believes is

entitled to confidential treatment;

(2) The length of time for which confidential treatment is desired;

(3) Measures taken by the business to prevent undesired disclosure

to others;

(4) The extent to which the information has already been disclosed

to others;

(5) Specific information showing the degree to which the

information concerns a service that is subject to competition; and

(6) Specific information concerning why disclosure would result in

substantial harmful effects to the business' competitive position.

37. Establishing a policy specifying what types of information

should be provided to comply with Section 0.461(b) might be beneficial

for several reasons. First, it would enable the Commission to deal in a

more efficient fashion with requests that materials not be made

routinely available to the public and with requests to release

materials not made routinely available to the public. For example, even

though our rules provide for seeking confidential treatment for only

portions of documents when other portions of documents are

nonconfidential, 47 CFR Sec. 0.459(a), submitters frequently assert an

entire submission as confidential, even though many documents are not

composed entirely of confidential business information. When the

Commission is dealing with masses of data from multiple submitters,

uncertainty as to what specific confidentiality claims are being

asserted can be a significant barrier to efficient action. In addition,

a policy specifying what types of information should be provided to

comply with Section 0.461(b) might help reduce those confidentiality

claims made as a matter of course and induce submitters to be more

selective in their confidentiality claims. We seek comment on these

benefits and on whether more precise substantiation requirements might

burden a submitter's assertion of a claim for information which is

truly entitled to confidential treatment. We also seek comment on what

measures might be appropriate to deter frivolous requests for

confidential treatment.

38. Aggregated or Sanitized Information. The Commission sometimes

finds it beneficial to disclose to the public non-confidential

information derived from data supplied by businesses and claimed as

confidential. Such releases might take the form of industry-wide data

aggregated into a non-confidential figure, or sanitized documents where

all information that could identify the submitters has been removed. We

seek comment on procedures the

[[Page 16430]]

Commission could use to ensure that the portions of the sanitized or

aggregated documents which are disclosed do not contain information

claimed as confidential and whether the rules should be amended to

incorporate such procedures.

E. Proposed Clarifications to Commission Rules

39. Any person submitting information or materials to the

Commission that do not fall within the specific categories of

information not subject to routine disclosure may also request, on an

ad hoc basis, that such information not be made routinely available for

public inspection under Exemption 4. 47 CFR Sec. 0.459(a). The

Commission is considering amending Section 0.459 of its rules to make

express in the rules an existing practice whereby the Commission

sometimes defers acting on a request for confidentiality if no request

for inspection has been made. This practice conserves Commission

resources because Exemption 4 determinations are often complex and

require substantial Commission analysis. In such instances, the party

submitting the information for which confidentiality is claimed is not

harmed because the information is not available for public inspection

pending Commission action on the confidentiality request. Likewise, the

public is not harmed, because, under the FOIA, the Commission would be

required to rule on any request that the information be disclosed. We

seek comment on codifying this practice of deferring action on requests

for confidentiality in the absence of a FOIA or other request for the

information.

40. The Commission also proposes a clarifying amendment to the

title of Section 0.457(d) of its rules, 47 CFR Sec. 0.457(d), to better

describe the Section's contents. The amended title would read:

``Certain trade secrets and commercial or financial information

obtained from any person and privileged or confidential--categories of

materials not routinely available for public inspection.''

Administrative Matters

Initial Regulatory Flexibility Act Analysis

41. Pursuant to Section 603 of the Regulatory Flexibility Act, the

Commission has prepared the following initial regulatory flexibility

analysis (IRFA) of the expected impact of these proposed policies and

rules on small entities. Written public comments are requested on the

IRFA. These comments must be filed in accordance with the same filing

deadlines as comments on the rest of the Notice of Proposed Rulemaking,

but they must have a separate and distinct heading designating them as

responses to the regulatory flexibility analysis. The Secretary shall

cause a copy of the Notice of Proposed Rulemaking, including the

initial regulatory flexibility analysis, to be sent to the Chief

Counsel for Advocacy of the Small Business Administration in accordance

with Section 603(a) of the Regulatory Flexibility Act, Pub. L. No. 96-

354, 94 Stat. 1164, 5 U.S.C. Section 601 et seq. (1981).

Reason for Action

42. The Communications Act of 1934 and the Commission's rules

require the Commission to balance various factors in determining

whether and under what conditions to withhold or to disclose

competitively sensitive information that has been submitted to the

Commission and that is not required to be publicly disclosed under the

Freedom of Information Act. This Notice of Proposed Rulemaking proposes

to examine the Commission's regulations and policies to determine

whether the Commission should modify its existing disclosure policies

and rules.

Objectives

43. To implement the Communications Act of 1934 and the Freedom of

Information Act and to develop a policy that will guide the Commission

in evaluating the increasing number of requests that it afford

confidential treatment to information that has been provided to it by

regulated entities and others.

Legal Basis. Action as proposed for this rulemaking is contained in

Sections 4(i), 4(j), 303(r) and 403 of the Communications Act of 1934,

as amended.

Description, Potential Impact and Number of Small Entities Affected

44. The Commission's policies and rules regarding the disclosure of

confidential commercial and financial information affects small

entities that are regulated by the Commission and small entities that

participate in Commission proceedings. We are presently unable to

estimate the

Reporting, Record Keeping and Other Compliance Requirements

45. None.

Federal Rules Which Overlap, Duplicate or Conflict With This Rule

46. None.

Any Significant Alternatives Minimizing Impact on Small Entities and

Consistent with Stated Objectives

47. None.

Paperwork Reduction Act

48. The requirements proposed herein have been analyzed with

respect to the Paperwork Reduction Act of 1995 and found to impose no

new or modified information collection requirement on the public.

Procedural Provisions

49. This Notice of Inquiry and Notice of Proposed Rulemaking is

issued pursuant to authority contained in Sections 4(i), 4(j), 303(r)

and 403 of the Communications Act of 1934, as amended, 47 U.S.C.

154(i), 154(j), 303(r) and 403. Pursuant to applicable procedures set

forth in Sections 1.415, 1.419 and 1.430 of the Commission's Rules, 47

CFR Secs. 1.415, 1.419 and 1.430, interested parties may file comments

on or before June 14, 1996, and reply comments on or before July 15,

1996. To file formally in this proceeding, participants must file an

original and four copies of all comments, reply comments and supporting

comments. If participants want each Commissioner to receive a personal

copy of their comments, an original plus ten copies must be filed.

Comments and reply comments should be sent to the Office of the

Secretary, Federal Communications Commission, Washington, DC 20554.

Comments and reply comments will be available for public inspection

during regular business hours in the FCC Reference Center (Room 239) of

the Federal Communications Commission, 1919 M Street, NW., Washington,

DC 20554.

50. Ex parte Rules--Non-Restricted Proceeding. This is a non-

restricted notice and comment rulemaking proceeding. Ex parte

presentations are permitted, except during the Sunshine Agenda period,

provided that they are disclosed as provided in Commission rules. See

generally 47 CFR Sections 1.1202, 1.1203, and 1.1206(a).

Ordering Clauses

51. It is ordered that, pursuant to Sections 4(i), 4(j), 303(r) and

403 of the Communications Act of 1934, 47 U.S.C. Secs. 154 (i), 154

(j), 303(r) and 403, notice is hereby given of proposed amendments to

Part 0, in accordance with the proposals and discussions, in this

Notice of Proposed Rulemaking, and that comment is sought regarding

such proposals, discussion, and statement of issues.

52. It is further ordered that, the Secretary shall send a copy of

this

[[Page 16431]]

Notice of Proposed Rulemaking, including the Initial Regulatory

Flexibility Analysis, to the Chief Counsel for Advocacy of the Small

Business Administration in accordance with paragraph 603(a) of the

Regulatory Flexibility Act. Pub. L. No. 96-354, 94 Stat. 1164, 5 U.S.C.

601 et seq. (1981).

List of Subjects in 47 CFR Part 0

Freedom of information, Public information and inspection of

records.

Federal Communications Commission.

William F. Caton,

Acting Secretary.

Not to be published in the Code of Federal Regulations.

Attachment--Model Protective Order and Declaration

Before the Federal Communications Commission, Washington, DC 20554

In the Matter of [Name of Proceeding], Docket No. ______.

Protective Order

This Protective Order is a device to facilitate and expedite the

review of documents containing trade secrets and commercial or

financial information obtained from a person and privileged or

confidential. It reflects the manner in which ``Confidential

Information,'' as that term is defined herein, is to be treated. The

Order is not intended to constitute a resolution of the merits

concerning whether any Confidential Information would be released

publicly by the Commission upon a proper request under the Freedom

of Information Act or otherwise.

1. For purposes of this Order, ``Confidential Information''

shall in the first instance mean either (i) information submitted to

the Commission by the Submitting Party that has been so designated

by the Submitting Party and which the Submitting Party has

determined in good faith constitutes trade secrets and commercial or

financial information which is privileged or confidential within the

meaning of Exemption 4 of the Freedom of Information Act, 5 U.S.C.

Sec. 552(b)(4) or (ii) information submitted to the Commission by

the Submitting Party that has been so designated by the Submitting

Party and which the Submitting Party has determined in good faith

falls within the terms of [cite Commission order designating items

for treatment as Confidential Information]. Confidential Information

shall be deemed to include additional copies of and information

derived from Confidential Information.

2. The Commission may sua sponte or upon petition determine that

all or part of the information claimed as ``Confidential

Information'' is not entitled to such treatment.

3. Confidential Information submitted to the Commission shall

bear on the front page in bold print, ``CONTAINS PRIVILEGED AND

CONFIDENTIAL INFORMATION--DO NOT RELEASE.'' Confidential Information

shall be segregated by the Submitting Party from all non-

confidential information submitted to the Commission. To the extent

a document contains both Confidential Information and non-

confidential information, the submitting party shall designate the

specific portions of the document claimed to contain Confidential

Information and shall, where feasible, also submit a redacted

version not containing Confidential Information.

4. The Secretary of the Commission or other Commission staff to

whom Confidential Information is submitted shall place the

Confidential Information in a non-public file. In the event that any

person requests that Confidential Information be released publicly,

the Commission will treat the request pursuant to 47 CFR Sec. 0.461.

5. Confidential Information shall only be made available to

Commission staff, Commission consultants and to counsel to the

Reviewing Parties or if a Reviewing Party has no counsel to a person

designated by the Reviewing Party. Reviewing Party shall mean a

party to a Commission proceeding or any person or entity filing a

pleading in a Commission proceeding. Before counsel to a Reviewing

Party or such other designated person may obtain access to

Confidential Information, counsel or such other designated person

must execute the attached Declaration.

6. Counsel to a Reviewing Party or such other person designated

pursuant to Paragraph 5 may disclose Confidential Information to

other Authorized Representatives to whom disclosure is permitted

under the terms of paragraph 7 of this Protective Order only after

advising such Authorized Representatives of the terms and

obligations of the Order. In addition, before Authorized

Representatives may obtain access to Confidential Information,

Authorized Representatives must execute the attached Declaration.

7. Authorized Representatives shall be limited to:

a. Counsel for the Reviewing Parties to this proceeding

including in-house counsel actively engaged in the conduct of this

proceeding and their associated attorneys, paralegals, clerical

staff and other employees, to the extent reasonably necessary to

render professional services in this proceeding, provided that such

persons are not representing or advising or otherwise assisting * *

*;

b. Specified persons, including employees of the Reviewing

Parties, requested by counsel to furnish technical or other expert

advice or service, or otherwise engaged to prepare material for the

express purpose of formulating filings in this proceeding except

that disclosure to persons in a position to use this information for

competitive commercial or business purposes shall require the

approval of the Commission; or

c. Any person designated by the Commission in the public

interest, upon such terms as the Commission may deem proper.

8. Confidential Information shall be maintained by a Submitting

Party for inspection in at least two locations, one of which shall

be in Washington, D.C. Inspection shall be carried out by Authorized

Representatives by appointment during normal business hours. The

Submitting Party shall provide copies of the Confidential Material

to Authorized Representatives upon request and may charge a

reasonable copying fee not to exceed twenty five cents per page.

9. Authorized Representatives may make additional copies of

Confidential Information but only to the extent required and solely

for the preparation and use in this proceeding, and provided further

that the original copy and all other copies of the Confidential

Information shall remain in the care and control of Authorized

Representatives at all times and shall not pass to any other persons

except as provided herein.

10. Counsel for Reviewing Parties shall provide to the

Submitting Party and the Commission with a copy of the attached

Declaration for each Authorized Representative within five (5)

business days after the attached Declaration is executed, or by any

other deadline prescribed by the Commission.

11. Confidential Information shall not be used by any person

granted access under this Protective Order for any purpose other

than for use in this proceeding (including any subsequent

administrative or judicial review), shall not be used for

competitive business purposes, and shall not be disclosed except in

accordance with this Order. This shall not preclude the use of any

material or information that is in the public domain or has been

developed independently by any other person who has not had access

to the Confidential Information nor otherwise learned of its

contents.

12. Reviewing Parties may, in any pleadings that they file in

this proceeding, reference the Confidential Information, but only if

they comply with the following procedures:

a. Any portions of the pleadings that contain or disclose

Confidential Information must be physically segregated from the

remainder of the pleadings;

b. The portions containing or disclosing Confidential

Information must be covered by a separate letter referencing this

Protective Order;

c. Each page of any Party's filing that contains or discloses

Confidential Information subject to this Order must be clearly

marked: ``Confidential Information included pursuant to Protective

Order, [cite proceeding];'' and

d. The confidential portion(s) of the pleading shall be served

upon the Secretary of the Commission, the Submitting Party, and

those Reviewing Parties that have signed the attached Declaration.

Such confidential portions shall be served under seal, and shall not

be placed in the Commission's Public File unless the Commission

directs otherwise (with notice to the Submitting Party and an

opportunity to comment on such proposed disclosure). A Reviewing

Party filing a pleading containing Confidential Information shall

also file a redacted copy of the pleading containing no Confidential

Information, which copy shall be placed in the Commission's public

files. Reviewing Parties may provide courtesy copies of pleadings

containing Confidential Information to Commission staff.

13. Should a Reviewing Party that has properly obtained access

to Confidential

[[Page 16432]]

Information under this Protective Order violate any of its terms, it

shall immediately convey that fact to the Commission and to the

Submitting Party. Further, should such violation consist of improper

disclosure of Confidential Information, the violating party shall

take all necessary steps to remedy the improper disclosure. The

Commission retains its full authority to fashion appropriate

sanctions for violations of this Protective Order, including but not

limited to denial of further access to Confidential Information in

this proceeding.

14. Within two weeks after final resolution of this proceeding

(which includes any administrative or judicial appeals), Authorized

Representatives of Reviewing Parties shall destroy all Confidential

Information as well as all copies and derivative materials made, and

shall certify that no material whatsoever derived from such

Confidential Information has been retained by any person having

access thereto, except that counsel to a Reviewing Party may retain

two copies of pleadings submitted on behalf of the Reviewing Party.

15. Disclosure of Confidential Information as provided herein

shall not be deemed a waiver by the Submitting Party of any

privilege or entitlement to confidential treatment of such

Confidential Information. Reviewing Parties, by viewing these

materials: (a) agree not to assert any such waiver; (b) agree not to

use information derived from any confidential materials to seek

disclosure in any other proceeding; and (c) agree that accidental

disclosure of privileged information shall not be deemed a waiver of

the privilege.

16. The entry of this Protective Order is without prejudice to

the rights of the Submitting Party to apply for additional or

different protection where it is deemed necessary or to the rights

of Reviewing Parties to request further or renewed disclosure of

Confidential Information. Moreover, it in no way precludes the

Commission from disclosing any Confidential Information where it

determines the public interest so requires.

17. This Protective Order is issued pursuant to Section 4(i) of

the Communications Act as amended, 47 U.S.C. Sec. 154(i) and 47 CFR

Sec. 0.457(d).

18. As used in this Order, the term ``Commission'' shall also

include any arm of the Commission acting pursuant to delegated

authority.

Declaration

[Cite Proceeding]

I, __________, hereby declare under penalty of perjury that I

have read the foregoing Protective Order that has been entered by

the Commission in this proceeding, and that I agree that I will be

bound by its terms pertaining to the treatment of Confidential

Information submitted by parties to this proceeding. I understand

that the Confidential Information shall not be disclosed to anyone

except in accordance with the terms of the Protective Order and

shall be used only for purposes of the proceedings in this matter. I

acknowledge that a violation of the Protective Order is a violation

of an order of the Federal Communications Commission.

(signed)---------------------------------------------------------------

(printed name)---------------------------------------------------------

(title)----------------------------------------------------------------

(affiliation)----------------------------------------------------------

(address)--------------------------------------------------------------

----------------------------------------------------------------------

(phone)----------------------------------------------------------------

(date)-----------------------------------------------------------------

[FR Doc. 96-9240 Filed 4-12-96; 8:45 am]

BILLING CODE 6712-01-P