[Federal Register Volume 73, Number 202 (Friday, October 17, 2008)]
[Rules and Regulations]
[Pages 61742-61746]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-24317]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 76

[CS Docket No. 98-120; FCC 08-193]


Carriage of Digital Television Broadcast Signals: Amendment to 
Part 76 of the Commission's Rules

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: The Commission addresses the obligations of small cable 
systems, and grants them an exemption from the material degradation 
requirement to carry high definition broadcast signals under the 
Commission's rules. The Commission holds that cable systems that either 
have 2,500 or fewer subscribers and are not affiliated with a large 
cable operator, or have an activated channel capacity of 552 MHz or 
less, are exempt from the requirement to carry high definition versions 
of broadcast signals. This exemption will sunset three years after the 
conclusion of the digital television (DTV) Transition. The Commission 
notes that the signals of all must-carry stations must continue to be 
made viewable to all subscribers pursuant to the Commission's rules.

DATES: Effective November 17, 2008.

FOR FURTHER INFORMATION CONTACT: For additional information on this 
proceeding, please contact Lyle Elder, <a href="/cdn-cgi/l/email-protection#571b2e3b3279123b3332251731343479303821"><span class="__cf_email__" data-cfemail="9ad6e3f6ffb4dff6feffe8dafcf9f9b4fdf5ec">[email protected]</span></a> of the Policy 
Division, Media Bureau, (202) 418-2120, or Eloise Gore, 
<a href="/cdn-cgi/l/email-protection#02476e6d6b71672c456d7067426461612c656d74"><span class="__cf_email__" data-cfemail="a8edc4c7c1dbcd86efc7dacde8cecbcb86cfc7de">[email protected]</span></a>, of the Media Bureau, (202) 418-7200.

SUPPLEMENTARY INFORMATION: This is a summary of the Federal 
Communications Commission's Fourth Report and Order in CS Docket No. 
98-120, FCC 08-193, adopted August 20, 2008, and released September 4, 
2008. The full text of this document is available for public inspection 
and copying during regular business hours in the FCC Reference Center, 
Federal Communications Commission, 445 12th Street, SW., CY-A257, 
Washington, DC 20554. These documents will also be available via ECFS 
(http://www.fcc.gov/cgb/ecfs/). (Documents will be available 
electronically in ASCII, Word 97, and/or Adobe Acrobat.) The complete 
text may be purchased from the Commission's copy contractor, 445 12th 
Street, SW., Room CY-B402, Washington, DC 20554. To request this 
document in accessible formats (computer diskettes, large print, audio 
recording, and Braille), send an e-mail to <a href="/cdn-cgi/l/email-protection#f89e9b9bcdc8ccb89e9b9bd69f978e"><span class="__cf_email__" data-cfemail="d7b1b4b4e2e7e397b1b4b4f9b0b8a1">[email protected]</span></a> or call the 
Commission's Consumer and Governmental Affairs Bureau at (202) 418-0530 
(voice), (202) 418-0432 (TTY).

Summary of the Final Rule

I. Introduction

    1. In the Third Report and Order, 73 FR 6043, February 1, 2008, and 
Third Further Notice of Proposed Rulemaking, 73 FR 6099, February 1, 
2008, we established rules governing the viewability of broadcast 
signals, retained and reaffirmed the standard governing material 
degradation of broadcast signals, and sought comment on the effect of 
these rules on small cable systems, and other issues. In this Fourth 
Report and Order, we address the obligations of small cable systems, 
and grant them an exemption from the material degradation requirement 
to carry high definition (HD) broadcast signals under the Commission's 
rules, as discussed below.
    2. We hold that cable systems that either have 2,500 or fewer 
subscribers and are not affiliated with a large cable operator, or have 
an activated channel capacity of 552 MHz or less, are exempt from the 
requirement to carry high definition versions of broadcast signals for 
three years following the digital television (DTV) Transition. We 
emphasize, however, that no exemption from the viewability requirements 
is necessary; nor, indeed, would it be appropriate. The mandatory 
carriage rules serve their purpose only when must-carry stations are 
viewable by all cable subscribers. We therefore remind cable operators 
that the signals of all must-carry stations must be made viewable to 
all subscribers pursuant to the Commission's rules, and acknowledge the 
continued pledges of cable industry commenters, including the operators 
of small systems, to ensure viewability.

II. Discussion

    3. The Communications Act of 1934, as amended (the ``Act''), at 
section 614(b)(4)(A), requires that cable operators carry broadcast 
signals ``without material degradation,'' and, in particular, instructs 
the Commission to ``adopt carriage standards to ensure that, to the 
extent technically feasible, the quality of signal processing and 
carriage provided by a cable system for the carriage of local 
commercial television stations will be no less than that provided by 
the system for carriage of any other type of signal.'' In 2001, the 
First Report and Order, 66 FR 16533, March 26, 2001, in this docket

[[Page 61743]]

established the following requirement to avoid material degradation of 
digital signals: ``A cable operator may not provide a digital broadcast 
signal in a lesser format or lower resolution than that afforded to any 
digital programmer (e.g., non-broadcast cable programming, other 
broadcast digital program, etc.) carried on the cable system, provided, 
however, that a broadcast signal delivered in HDTV [i.e., high 
definition] must be carried in HDTV.'' The Third Report and Order 
retained and reaffirmed this standard. The Commission also adopted 
rules requiring that broadcast signals carried pursuant to the must-
carry rules be made viewable to all subscribers. In the Third FNPRM, we 
expressed concern about the impact these rules might have on small 
cable operators, and sought comment on ways to minimize any harms. In 
particular, we sought comment on a number of proposals offered by cable 
commenters, including a waiver or revision of the Commission's 2001 
decision to require carriage of HD signals in HD. We also asked for 
comment on ``system characteristics'' for the purposes of any changes 
to the rules that came in response to the Third FNPRM.
    4. Both the National Cable and Telecommunications Association 
(NCTA) and the American Cable Association (ACA), as well as individual 
cable operators, filed comments and replies on these questions, along 
with a number of ex parte filings and presentations. Taken together, 
the cable commenters do not lodge strong objections to the requirement 
to ``provide all subscribers with a viewable signal,'' but rather ask 
the Commission to exempt ``small systems from any requirement to also 
provide a digital signal under the FCC's interpretation of the `no 
material degradation' provisions of section 614.''
    5. First, we clarify that our rules do not require cable operators, 
irrespective of system size, to carry an SD digital version of a 
broadcast station's signal, in addition to the analog version, to 
satisfy the material degradation requirement retained in the Third 
Report and Order. This is because both an SD digital version and an 
analog version of the digital broadcast signal received at the headend 
should have the same resolution--480i--and thus there should be no 
perceivable difference between the two versions of the signal. We also 
reiterate that, for purposes of the Viewability requirements, any cable 
operator, irrespective of system size, may be required to carry an SD 
version of a must carry station's signal if there are digital 
subscribers to the system who would otherwise be unable to view the 
analog version of that station's signal. Therefore, cable systems 
subject to the exemption in this order, which exempts certain cable 
systems as described herein from carrying broadcast signals in HD or 
any other digital format, would not be required to carry an HD or an SD 
version as long as all subscribers can receive and view the 
downconverted analog signal.
    6. Commenters state that, without an exemption from the material 
degradation rules, ``small systems will be forced to absorb or impose 
significant and unsustainable price increases, or in some instances to 
shut down altogether.'' The National Association of Broadcasters and 
Maximum Service Television (NAB), in a joint comment and joint reply, 
expressed opposition to this small system exemption. Section 
614(b)(4)(A) of the Act directs the Commission to adopt material 
degradation standards ensuring that ``to the extent technically 
feasible, the quality of signal processing and carriage provided by a 
cable system for the carriage of local commercial television stations 
will be no less than that provided by the system for carriage for any 
other type of signal.''
    7. We are persuaded by the comments filed by cable operators that 
requiring small systems with certain characteristics to carry HD 
versions of all broadcast television stations' HD signals would not be 
appropriate. Regarding the question of what system characteristics are 
appropriate under this exemption, we will first use the technical 
standard originally adopted for waivers of these rules, and apply the 
exemption to systems of 552 MHz or less. We will also exempt systems 
with 2,500 or fewer subscribers that are not affiliated with a cable 
operator serving more than 10% of all multichannel video programming 
distributor (MVPD) customers. The Rural Independent Competitive 
Alliance (RICA) argues that ``pressing uneconomic digital carriage upon 
small * * * rural systems may well * * * limit access to broadcast 
signals for rural consumers generally by creating a regime in which the 
required carriage is too expensive to operate.'' The Organization for 
the Promotion and Advancement of Small Telecommunications Companies 
(OPASTCO) expresses a similar concern, stating that this could lead to 
the loss of lower-priced video offerings in many markets, thus reducing 
consumer choice. Charter Communications, Inc. (Charter), operator of a 
number of small systems, provides specific examples of systems with 
very few subscribers, where per-subscriber upgrade costs would be so 
high as to make it not worthwhile to continue operating the system. As 
even NAB and MSTV acknowledge, in some markets there is no local-into-
local Direct Broadcast Satellite (DBS) service, so the loss of a small 
cable system could mean the effective loss of all MVPD service for some 
customers. Indeed, in some areas, due to poor over-the-air reception, 
loss of a small cable system could mean loss of any access to some or 
all broadcast signals as well. The Commission will review these 
exemptions between February 18, 2011 and February 17, 2012, and they 
will expire at the conclusion of that period if not renewed. We note 
that as with all Commission rules, systems that do not fall within 
either of these exemption categories may still file for individual 
waivers. We will expedite the review process for cable operators that 
are requesting a waiver for systems with 5,000 or fewer subscribers, 
which could require shortening the comment and reply period to 10 days 
for comment and 5 days for reply, so that the Bureau will resolve the 
request no later than 30 days after it is received by the commission.
    8. Cable commenters, including NCTA, argue that because all must-
carry stations will remain viewable and available to all cable 
subscribers even after the grant of a material degradation exemption, 
any harm to broadcasters will be less than the harm that would be 
suffered by small cable system operators if these exemptions were not 
granted. This argument is not directly contradicted by NAB and MSTV.
    9. ACA proposed also looking to the number of subscribers served by 
a system to determine the scope of the exemption. Based on the record 
in this proceeding, we find that for some systems with a small number 
of subscribers, the cost of mandatory HD carriage warrants an exemption 
from compliance. Therefore, we will also exempt systems with 2,500 or 
fewer subscribers that are not affiliated with a cable operator serving 
more than 10% of all multichannel video programming distributor (MVPD) 
customers. In systems with 2,500 or fewer subscribers, the cost-per-
subscriber could be significant, even if costs were borne in part by 
analog subscribers (who would receive no direct benefit from the HD 
carriage). We recognize, however, that small cable systems may be part 
of larger, multiple-cable-system, networks. This potentially allows 
even very high costs to be spread over large numbers of subscribers, 
easing the upgrade cost burden even in systems with small numbers of 
subscribers. Therefore, we

[[Page 61744]]

exclude from this exemption any system affiliated with a cable operator 
serving more than 10% of all multichannel video programming distributor 
(MVPD) subscribers.
    10. In their comments to the Second FNPRM, 72 FR 31244, June 6, 
2007, ACA proposed that must-carry broadcasters should be required to 
pay the cost of downconverting their signals for carriage in analog. 
The Commission declined to adopt this proposal for all cable operators, 
noting that ``post-transition downconversion will be undertaken by 
operators, at their discretion, in order to comply with the Act.'' We 
raised this issue for comment in the Third FNPRM, asking whether must-
carry stations should be required to pay the costs associated with 
downconversion by small cable operators in particular. No commenters 
supported this proposal, and we decline to adopt it.
    11. The exemptions adopted in this Fourth Report and Order shall be 
in force for three years from the date of the digital transition, 
subject to review by the Commission during the last year of this period 
(i.e., between February 2011 and February 2012). In light of the 
numerous issues associated with the transition, it is important to 
retain flexibility as we deal with emerging concerns. A three-year 
sunset provides the Commission with the opportunity after the 
transition to review these rules in light of the potential cost and 
service disruption to consumers, and the state of technology and the 
marketplace. Additionally, providing a window of time to phase in new 
technology gives systems a clear opportunity to come into compliance 
with the rules by spreading their effort and costs over an extended 
period.
    12. In conclusion, we are granting relief to operators of cable 
systems with 2,500 or fewer subscribers that are not affiliated with a 
cable operator serving more than 10% of all MVPD subscribers, and to 
those with an activated channel capacity of 552 MHz or less, from the 
requirement to carry HD versions of broadcast signals. The Commission 
will review these material degradation exemptions simultaneously with 
the viewability rules adopted in the Viewability Order, and they will 
expire on February 17, 2012 if not renewed. All operators must continue 
to ensure that every subscriber to a cable system is able to view every 
must-carry signal, by downconverting it if necessary and carrying it in 
a format or formats that can be viewed by all subscribers. We find that 
the record in this case supports the cable commenters' suggestion that 
this exemption will best ensure the continued viability and 
competitiveness of small cable systems in markets throughout the 
country, thereby ensuring the broadest possible cable carriage after 
the transition.

III. Procedural Matters

A. Final Regulatory Flexibility Act Analysis
    13. As required by the Regulatory Flexibility Act of 1980, as 
amended (RFA), an Initial Regulatory Flexibility Analysis (IRFA) was 
incorporated in the Third Further Notice of Proposed Rulemaking (Third 
FNPRM). The Commission sought written public comment on the proposals 
in the Third FNPRM, including comment on the IRFA. This present Final 
Regulatory Flexibility Analysis (FRFA) conforms to the RFA.
1. Need for, and Objectives of, the Fourth Report and Order
    This Fourth Report and Order exempts certain cable systems from the 
material degradation requirement to carry HD versions of HD broadcast 
signals that was reaffirmed in the Third Report and Order. We are 
granting relief to operators of cable systems with 2,500 or fewer 
subscribers that are not affiliated with a cable operator serving more 
than 10% of all MVPD subscribers, and to those with an activated 
capacity of 552 MHz or less. The Commission will review these material 
degradation exemptions simultaneously with the viewability rules 
adopted in the Viewability Order (i.e., between February 18, 2011 and 
February 17, 2012), and they will expire on February 17, 2012 if not 
renewed. All operators must continue to ensure that every subscriber to 
a cable system is able to view every must-carry signal, by 
downconverting it if necessary and carrying it in a format or formats 
that can be viewed by all subscribers.
2. Summary of Significant Issues Raised by Public Comments in Response 
to the IRFA
    14. No comments were filed in response to the IRFA.
3. Description and Estimate of the Number of Small Entities to Which 
the Report and Order Will Apply
    15. The RFA directs the Commission to provide a description of and, 
where feasible, an estimate of the number of small entities that will 
be affected by the rules adopted herein. The RFA defines the term 
``small entity'' as having the same meaning as the terms ``small 
business,'' ``small organization,'' and ``small governmental 
jurisdiction.'' In addition, the term ``small business'' has the same 
meaning as the term ``small business concern'' under the Small Business 
Act. A small business concern is one which: (1) Is independently owned 
and operated; (2) is not dominant in its field of operation; and (3) 
satisfies any additional criteria established by the Small Business 
Administration (``SBA''). The decision of the Commission in this Fourth 
Report and Order primarily affects cable operators and television 
stations. A description of these small entities, as well as an estimate 
of the number of such small entities, is provided below.
    16. Cable Television Distribution Services. Since 2007, these 
services have been defined within the broad economic census category of 
Wired Telecommunications Carriers; that category is defined as follows: 
``This industry comprises establishments primarily engaged in operating 
and/or providing access to transmission facilities and infrastructure 
that they own and/or lease for the transmission of voice, data, text, 
sound, and video using wired telecommunications networks. Transmission 
facilities may be based on a single technology or a combination of 
technologies.'' The SBA has developed a small business size standard 
for this category, which is: All such firms having 1,500 or fewer 
employees. To gauge small business prevalence for these cable services 
we must, however, use current census data that are based on the 
previous category of Cable and Other Program Distribution and its 
associated size standard; that size standard was: All such firms having 
$13.5 million or less in annual receipts. According to Census Bureau 
data for 2002, there were a total of 1,191 firms in this previous 
category that operated for the entire year. Of this total, 1,087 firms 
had annual receipts of under $10 million, and 43 firms had receipts of 
$10 million or more but less than $25 million. Thus, the majority of 
these firms can be considered small.
    17. Cable Companies and Systems. The Commission has also developed 
its own small business size standards, for the purpose of cable rate 
regulation. Under the Commission's rate regulation rules, a ``small 
cable company'' is one serving 400,000 or fewer subscribers, 
nationwide. Industry data indicate that, of 1,076 cable operators 
nationwide, all but eleven are small under this size standard. In 
addition, under the Commission's rate regulation rules, a ``small 
system'' is a cable system serving 15,000 or fewer subscribers. 
Industry data indicate that, of 7,208 systems nationwide, 6,139 systems 
have under 10,000 subscribers, and an additional 379 systems have 
10,000-19,999

[[Page 61745]]

subscribers. Thus, under this rate regulation size standard, most cable 
systems are small.
    18. Cable System Operators. The Communications Act of 1934, as 
amended, also contains a separate size standard for small cable system 
operators with respect to rate regulation requirements, which is ``a 
cable operator that, directly or through an affiliate, serves in the 
aggregate fewer than 1 percent of all subscribers in the United States 
and is not affiliated with any entity or entities whose gross annual 
revenues in the aggregate exceed $250,000,000.'' The Commission has 
determined that an operator serving fewer than 677,000 subscribers 
shall be deemed a small operator, if its annual revenues, when combined 
with the total annual revenues of all its affiliates, do not exceed 
$250 million in the aggregate. Industry data indicate that, of 1,076 
cable operators nationwide, all but ten are small under this rate 
regulation size standard. We note that the Commission neither requests 
nor collects information on whether cable system operators are 
affiliated with entities whose gross annual revenues exceed $250 
million, and therefore we are unable to estimate more accurately the 
number of cable system operators that would qualify as small under this 
size standard.
    19. Television Broadcasting. This Economic Census category 
``comprises establishments primarily engaged in broadcasting images 
together with sound. These establishments operate television 
broadcasting studios and facilities for the programming and 
transmission of programs to the public.'' The SBA has created the 
following small business size standard for Television Broadcasting 
firms: Those having $14 million or less in annual receipts. The 
Commission has estimated the number of licensed commercial television 
stations to be 1,379. In addition, according to Commission staff review 
of the BIA Publications, Inc., Master Access Television Analyzer 
Database (BIA) on March 30, 2007, about 986 of an estimated 1,374 
commercial television stations (or approximately 72 percent) had 
revenues of $13 million or less. We therefore estimate that the 
majority of commercial television broadcasters are small entities.
    20. We note, however, that in assessing whether a business concern 
qualifies as small under the above definition, business (control) 
affiliations must be included. Our estimate, therefore, likely 
overstates the number of small entities that might be affected by our 
action, because the revenue figure on which it is based does not 
include or aggregate revenues from affiliated companies. In addition, 
an element of the definition of ``small business'' is that the entity 
not be dominant in its field of operation. We are unable at this time 
to define or quantify the criteria that would establish whether a 
specific television station is dominant in its field of operation. 
Accordingly, the estimate of small businesses to which rules may apply 
does not exclude any television station from the definition of a small 
business on this basis and is therefore possibly over-inclusive to that 
extent.
4. Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements for Small Entities
    21. So long as cable operators already maintain accurate business 
and technical records that would allow them to determine whether or not 
they fall within one of the two exemption classes, the Fourth Report 
and Order creates no additional reporting, recordkeeping, or compliance 
requirements for small cable operators. Small broadcast stations will 
also be affected by the rules in the Fourth Report and Order, but we do 
not have any reason to expect that the compliance burden will be any 
greater than under the prior rules.
5. Steps Taken To Minimize Significant Economic Impact on Small 
Entities, and Significant Alternatives Considered
    22. The RFA requires an agency to describe any significant 
alternatives that it has considered in reaching its proposed approach, 
which may include the following four alternatives (among others): (1) 
The establishment of differing compliance or reporting requirements or 
timetables that take into account the resources available to small 
entities; (2) the clarification, consolidation, or simplification of 
compliance or reporting requirements under the rule for small entities; 
(3) the use of performance, rather than design, standards; and (4) an 
exemption from coverage of the rule, or any part thereof, for small 
entities.
    23. Because the requirements in this Order are in the manner of an 
exemption from existing cable rules, they do not impose a negative 
economic impact on any small cable operators, and provide a positive 
economic impact to any operator that operates a system that is 
exempted. Although we sought comment on whether there was a specific 
legal basis for affording relief to small cable operators, we have 
declined to adopt exemptions based on such grounds. Instead, we extend 
the exemptions to specific cable systems with certain characteristics. 
Many of these systems are owned by small entities, who, as noted, will 
receive positive economic impact from the exemptions. The rules do not 
impose any significant burdens on small television stations.
B. Report to Congress
    24. The Commission will send a copy of the Fourth Report and Order, 
including this FRFA, in a report to be sent to Congress pursuant to the 
Congressional Review Act. In addition, the Commission will send a copy 
of the Fourth Report and Order, including this FRFA, to the Chief 
Counsel for Advocacy of the SBA. The Fourth Report and Order and FRFA 
(or summaries thereof) will also be published in the Federal Register.
C. Paperwork Reduction Act of 1995 Analysis
    25. The Fourth Report and Order has been analyzed with respect to 
the Paperwork Reduction Act of 1995 (PRA). This document does not 
contain new or modified information collection requirements subject to 
the PRA, Public Law 104-13. In addition, therefore, it does not contain 
any new or modified ``information collection burden for small business 
concerns with fewer than 25 employees,'' pursuant to the Small Business 
Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 
3506(c)(4).
D. Congressional Review Act
    26. The Commission will include a copy of this Fourth Report and 
Order in a report to be sent to Congress and the Government 
Accountability Office pursuant to the Congressional Review Act, see 5 
U.S.C. 801(a)(1)(A).
E. Additional Information
    27. For more information on this Fourth Report and Order, please 
contact Lyle Elder, <a href="/cdn-cgi/l/email-protection#88c4f1e4eda6cde4ecedfac8eeebeba6efe7fe"><span class="__cf_email__" data-cfemail="8ec2f7e2eba0cbe2eaebfccee8ededa0e9e1f8">[email protected]</span></a>, of the Media Bureau, Policy 
Division, 202-418-2120, or Eloise Gore, <a href="/cdn-cgi/l/email-protection#8ecbe2e1e7fdeba0c9e1fcebcee8ededa0e9e1f8"><span class="__cf_email__" data-cfemail="60250c0f0913054e270f1205200603034e070f16">[email protected]</span></a>, of the 
Media Bureau, 202-418-7200.

IV. Ordering Clauses

    28. Accordingly, it is ordered, that, pursuant to authority found 
in sections 4(i), 4(j), 303(r), 614, and 615 of the Communications Act 
of 1934, as amended, 47 U.S.C. 154(i), 154(j), 303(r), 534, and 535, 
and Sec.  1.3 of the Commission's rules, 47 CFR 1.3, this Fourth Report 
and Order is hereby adopted and shall become effective November 17, 
2008.

[[Page 61746]]

    29. It is further ordered that cable systems with (1) 2,500 or 
fewer subscribers that are not affiliated with a cable operator serving 
more than 10% of all MVPD subscribers, or (2) an activated channel 
capacity of 552 MHz or less, are exempt, from February 18, 2009 through 
February 17, 2012, from the requirement, under 47 CFR 76.62, to carry 
high definition versions of broadcast stations' signals.
    30. It is further ordered that the Consumer and Governmental 
Affairs Bureau, Reference Information Center, shall send a copy of this 
Fourth Report and Order, including the Final Regulatory Flexibility 
Analysis, to the Chief Counsel for Advocacy of the Small Business 
Administration.
    31. It is further ordered that the Commission shall send a copy of 
this Fourth Report and Order in a report to be sent to Congress and the 
General Accountability Office pursuant to the Congressional Review Act, 
see 5 U.S.C. 801(a)(1)(A).

List of Subjects in 47 CFR Part 76

    Cable television.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.
[FR Doc. E8-24317 Filed 10-16-08; 8:45 am]
BILLING CODE 6712-01-P


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