[Federal Register Volume 67, Number 167 (Wednesday, August 28, 2002)]
[Notices]
[Pages 55201-55206]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-21975]


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DEPARTMENT OF COMMERCE

National Oceanic and Atmospheric Administration


Fair Market Value Analysis for a Fiber Optic Cable Permit in 
National Marine Sanctuaries

AGENCY: National Marine Sanctuary Program (NMSP), National Ocean 
Service (NOS), National Oceanic and Atmospheric Administration (NOAA), 
Department of Commerce (DOC).

ACTION: Notice of availability of final report.

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SUMMARY: Notice is hereby given of the availability of the final report 
``Fair Market Value Analysis for a Fiber Optic Cable Permit in National 
Marine Sanctuaries.'' The report describes the methodology by which 
NOAA will assess fair market value for submarine cables in national 
marine sanctuaries. In doing so, the report presents an overview of the 
relevant economic issues, including standard approaches to valuation, 
the market for cable rights of way and industry trends in 
telecommunications. It also provides the current range of fees that 
NOAA will consider to determine a final fee for fair market value.

DATES: August 28, 2002.

ADDRESSES: Copies of the final report are available from the NMSP's Web 
site (www.sanctuaries.nos.noaa.gov) or by contacting Matt Brookhart at 
the National Marine Sanctuary Program, 1305 East West Highway, N/ORM6, 
11512, Silver Spring, MD 20910, (301) 713-3125 x140, or 
[email protected].

FOR FURTHER INFORMATION CONTACT: Matt Brookhart at (301) 713-3125 x140.

SUPPLEMENTARY INFORMATION:

I. Background

    The National Marine Sanctuaries Act (NMSA) (16 U.S.C. 1431 et seq.) 
allows the Secretary of Commerce (Secretary) to issue special use 
permits (SUPs) for specific activities within a national marine 
sanctuary (16 U.S.C. 1441). If a SUP application is issued, the NMSA 
also authorizes the Secretary to collect fees for the conduct of any 
activity under a SUP. If a fee is assessed, the fee amount must be 
equal to the sum of the cost incurred or expected to be incurred for 
issuing the permit, fees for activities directly related to the conduct 
of the permitted activity (including costs of monitoring the activity), 
and an amount that represents the fair market value of the use of 
sanctuary resources.
    To date, the NMSP has issued two SUPs for submarine fiber optic 
cables in

[[Page 55202]]

national marine sanctuaries: One at the Olympic Coast National Marine 
Sanctuary (NMS) off of Washington State and the other at Stellwagen 
Bank NMS off the coast of Massachusetts. These SUPs allow for the long-
term presence of cables in the sanctuaries and were issued in 
conjunction with an authorization of United States Army Corps of 
Engineers (ACOE) permits. The ACOE permits allow for the cable's 
installation, maintenance, and, when necessary, repair and/or rebuttal.
    At the time of issuance of both of these SUPs, fees for the 
administrative costs of issuing the permits and for activities directly 
related to the permits were assessed. However, no amount representing 
the fair market value fee for a submarine cable in a NMS had been 
determined by the NMSP. As such, NOAA economists began drafting a 
methodology for determining the fair market value of these cable 
projects in December 1999. The draft report was published in the 
Federal Register for public comment on two separate occasions: first on 
January 5, 2001 (66 FR 1092) and then again on August 17 2001 (66 FR 
43135). The comment period closed on October 16, 2001. Approximately 30 
comments were submitted in total, 10 of which requested a time 
extension on the first comment period. Substantive comments have been 
reviewed and summarized by NOAA and are presented with responses in 
Section III of this notice.

II. Summary of Report

    When a SUP is issued, the NMSA authorizes the Secretary to collect 
a fee equal to the fair market value for the use of sanctuary 
resources. The determination of fair market value for the presence of a 
fiber optic cable in a sanctuary is analyzed in the report entitled 
``Fair Market Value Analysis for a Fiber Optic Cable Permit in National 
Marine Sanctuaries.'' The report presents an overview of the relevant 
economic issues, including standard approaches to valuation, the market 
for cable rights of way, industry trends in telecommunications, and 
protection of sanctuary resources in the context of economic value.
    The report recommends a valuation methodology based on analysis of 
previous right-of-way purchases. As fiber-optic cable networks have 
been developed and expanded over the past two decades, 
telecommunications companies have purchased numerous easements to 
extend cable over many thousands of miles (details of some of these 
transactions, or market ``comparables,'' are publicly available). By 
understanding the market conditions and business incentives that 
characterized previous transactions, the available data can be used to 
determine fair market value for rights to a given cable route. In the 
fair market value report, prices that prevail in the open market are 
applied to a SUP.
    In the context of sound economic policy, any public benefits and 
losses associated with cables in sanctuaries need to be considered. 
Generally, the benefits of fiber-optic cables are in the form of 
internet access and other telecommunications good sold in consumer 
markets. The value of these benefits is estimated and accounted for by 
the party seeking a sanctuary permit. The cost of allowing cables in 
sanctuaries includes the expense of environmental monitoring and 
certain non-market losses associated with intrusions in a protected 
area. Only if total benefits exceed total costs should a cable be 
placed in a sanctuary. While estimating the non-market losses 
difficult, they are certainly greater than zero since many people would 
prefer to route cables around sanctuaries whenever possible. Economic 
efficiency (as well as market value with respect to a willing seller) 
requires that this non-market value be included in the price of 
sanctuary access, putting a lower bound on the fair market fee. This 
lower bound has not been estimated.
    The telecommunications market has changed since a draft of the fair 
market value report was first released in September 2000. The current 
economic slowdown has led to a decline in the pace of fiber optic 
network expansion, and some evidence indicates that right of way values 
are lower. The revise report acknowledges the slowdown, but recent data 
on current market comparables is scarce. It is clear that the rapid 
expansion of fiber networks observed in the 1990s is no longer driving 
right-of-way values upward. But the report cites projections by 
industry analysts indicating that the pace of fiber deployment will 
rebound when the economy recovers, and will exceed previous levels by 
2004. Analysis of market comparables in the current economic climate 
should consider the full range of observed prices, emphasizing long-
term averages over short-term trends.
    The report emphasizes the need to consider additional information 
that becomes available, while noting that many of the comparables used 
in the report represent high-profile projects, similar to a sanctuary 
crossing, transacted with the expectation of public awareness and 
scrutiny. Unfavorable economic conditions militate against selecting a 
value much higher than the long-term average, while reasonable 
stewardship of sanctuary resources weighs against the use of a value 
that is too low.

III. Recommendations

    The authors of this report recommend the analysis of comparable 
previous transactions as the appropriate approach to determining fair 
market value. Most appraisers have rejected land-based, across-the-
fence methods as inadequate to address current market conditions in the 
fiber-optic communications market. While the scenario of the willing 
buyer and seller emphasizes build-around cost as an upper bound on 
market value for rights of way, the information required to evaluate 
build-around cost, particularly for submarine cables, is prohibitive. 
Income-based analysis also requires substantial information that is not 
readily available in most cases. Furthermore, expectations about future 
income are already incorporated into previous market transactions.
    The comparable transactions methodology leads to a current range of 
$40,000 to $100,000 per mile for the fair market value of a sanctuary 
permit. Valuation on a per-mile basis reflects common practice in the 
private right-of-way market. The range of values reflects the 
variability in fees observed over time and from case to case, as 
presented in Figure 1 of the report. Any figure within that range would 
be considered appropriate from the standpoint of economic valuation, 
and it is left to the judgment of the decision makers involved to weigh 
any relevant policy considerations in making a final determination.
    The fair market value of a permit will change over time. The set of 
comparable transactions used to assess fair market value should be 
updated to reflect current conditions at the time an assessment is 
made. As in the current assessment, emphasis should be place on 
selected transactions that are particularly relevant to the case of a 
sanctuary permit. For example, long-haul routes, especially submarine 
cable routes, are important market comparables. Recent transactions and 
those involving an informed buyer and seller should be emphasized. 
Also, adjustments in value should be made based on the number of 
conduits installed in a given right of way, and the term length of the 
contract. Finally, in a market characterized by rapid change and wide 
variation in transactions data, average price trends over time are an 
important indication of fair market value.

[[Page 55203]]

IV. Summary of Comments and Responses

    The following section presents NOAA's responses to the substantive 
comments received on the report during the public comment periods.
    Comment 1: Charging for fair market value (FMV) fees in addition to 
other costs outlined in the SUP results in economic inefficiency.
    Response: The NMSA stipulates that the NMSP may collect fees when 
issuing a SUP. If a fee is assessed, it must include among other 
things, an amount equal to the fair market value of the use of 
sanctuary resources. To the extent that economic efficiency is a policy 
goal, it would be unlikely to significantly change the appropriate fee. 
Efficiency requires that the fair market fee should equal the full 
marginal cost of access to a sanctuary. This would include permitting 
and monitoring costs, as well as an estimate of marginal environmental 
cost and public loss resulting from the cable intrusions. It is 
reasonable to assume that were these losses calculated and included in 
the fair market fee, the sum of costs alone (``competitive price'' 
would fall within the range of market prices contained in the report's 
analysis.
    Comment 2: Because there is no scarcity of cable routes, the FMV 
should be zero or null.
    Response: The notion that there is no scarcity of cable routes or 
rights of way presumes unconstrained access to sanctuaries for those 
seeking undersea cable routes. NOAA believes this is not the case, as a 
matter of law and as a matter of economics. A scarcity of cable routes 
does exist, not because cables might cover the ocean floor, but because 
other uses compete for the same resources. These uses include private 
ones, such as fishing, and public ones, such as resource protection. 
Although it may be true that ``the number of usable routes across a 
sanctuary is likely to be far greater than the number likely to be 
demanded,'' NOAA believes the public does not view the sanctuary as a 
limitless supply of cable routes.
    Comment 3: The report's methodology leads to ``super-competitive'' 
fees flowing from an exercise of market power.
    Response: The concept of ``fair market value'' refers to the value 
that would be observed under conditions that prevail in a free and open 
market. It is probably true that many of the transactions used in the 
FMV analysis involve the exercise of market or ``monopoly'' power by 
the seller. This is true of virtually all prices throughout the U.S. 
economy, where ``pure'' competition exists only in rare cases, such as 
the market for agricultural products or other commodities. Confining 
the report's methodology to the constraints of pure competition is not 
called for by the NMSA and is not what economists commonly understand 
when they refer to ``fair market value.''
    In the case of a sanctuary permit, a price based on market power 
would use the concept of ``build-around'' cost. This is the cost to a 
telecommunications company of using the next best alternative route 
around a sanctuary. In other words, the power to exclude cables is the 
basis for a seller's market power, so a seller who fully exploits his 
market power would charge a price almost as high as the buyer's next 
best alternative. NOAA explicitly chose not to use this valuation 
method, avoiding reliance on market power in the calculation of fair 
market value. Also note that when the full public costs of allowing 
cables in sanctuaries are accounted for, an analysis of pure 
competition absent any market power is likely to lead to results 
similar to those of the draft report's methodologies (see response to 
Comment 1).
    Comment 4: The goal of the draft report is to generate a right-of-
way fee reflecting noncompetitive market conditions. The report 
specifically selects previous right-of-way transactions that involve a 
captive buyer.
    Response: This was not the goal or method of the report. Data used 
in the report included all available transactions for underground 
fiber-optic rights of way greater than five miles in length. Proposed 
transactions and general fee policies were not included, only 
consummated transactions. As noted previously in Comment 3, 
noncompetitive conditions may be a characteristic of the market for 
fiber-optic cable rights of way.
    Comment 5: Mitigation and monitoring fees should be deducted from 
any fair market value fee.
    Response: Under the NMSA, if a fee is collected for issuance of 
SUP, that fee must include: (1) Costs incurred, or expected to be 
incurred, for the issuance of the permit; (2) costs incurred, or 
expected to be incurred, as a direct result of the conduct of the 
activity for which the permit is issued, including costs of monitoring 
the conduct of the activity; and (3) an amount which represents the 
fair market value of the use of a sanctuary resource.
    The methodology has been developed to determine the third condition 
above (an amount which represents fair market value). Because fees or 
monitoring and damage mitigation would be addressed by condition two, 
they would not be included in the determination of fair market value, 
but handled as separate costs incurred for the issuance of the permit.
    Comment 6: The draft report does not attempt to adjust for 
differences between comparable transactions and the sanctuary right-of-
way fee.
    Response: The report does adjust for differences between comparable 
transactions. For example, shorter routes commanding a high price per 
lineal foot are excluded from the analysis. The reasons for this 
adjustment, along with support for other similar adjustments, are 
provided in the report.
    The report does not follow the practice, common in the appraisal 
profession, of using a single similar transaction as a starting point. 
According to this practice, differences are accounted for between the 
chosen comparable and the transaction that is the subject of the 
valuation. As noted in the report, NOAA believes that information about 
the market value for a sanctuary permit is best obtained using data 
from numerous transactions. The report develops a methodology by 
analyzing trends in the market and understanding the conditions and 
characteristics that create right-of-way value. It should be noted that 
among the available data, the comparable transaction most similar to a 
sanctuary right of way would be the undersea cable permit issued by the 
California Coastal Commission. It was one of the most expensive routes 
observed anywhere.
    Comment 7: NOAA should use rural routes adjacent to low-value lands 
as the most realistic comparables. Corridor values should not be 
included in the NOAA analysis. Routes serving major markets like New 
York City are more valuable than rural routes.
    Response: Many of the routes included in the report's analysis are 
rural, long-haul routes connecting urban markets, similar to undersea 
cables. Based on the available data and the opinions of many market 
analysts, NOAA concludes that market value for long-haul routes does 
not significantly depend on the value of adjacent lands. It is not 
clear that excluding urban routes would be appropriate, nor that it 
would significantly change the methodology's results. To exclude 
corridor values from the analysis would be to accept the price of 
adjacent land as the appropriate measure of value, which, as stated, 
does not reflect market conditions. To the extent that urban market are 
associated with high-priced high-capacity routes with many fiber 
conduits, an adjustment has been made

[[Page 55204]]

in report's analysis: the price of a route is divided over the several 
conduits installed, resulting in a lower pro-rated for cable capacity.
    Comment 8: The public benefits associated with development of the 
nation's telecommunications infrastructure should be taken into account 
in the fair market fee.
    Response: Economic efficiency requires that all costs and benefits 
of a transaction be reflected in the transaction price. This includes 
costs and benefits reflected in market prices, such as the revenue 
fiber-optic carriers collect from consumers. It also includes costs and 
benefits not reflected in the market. The most significant non-market 
cost that should be included in the right-of-way fee is the 
environmental loss associated with having fiber-optic cables in 
national marine sanctuaries. The only non-market benefits included in 
the right-of-way fee should be those specifically associated with 
laying a cable through a sanctuary (as opposed to some other route). 
There is no information available to NOAA indicating that such benefits 
exist.
    Comment 9: The economic state of the telecommunications industry is 
less favorable today than is reflected in the draft report.
    Response: Periodic updates of the fee are envisioned in the report 
and additional efforts to update the report based on recent economic 
conditions has been undertaken. Additional criteria may also be 
considered when applying the methodology to determine the fee, 
including Federal telecommunications policy as established by the 
Department of Commerce and current market trend data.
    Comment 10: The California State Land Commission (CLC) transactions 
of $280,000 per mile are a more appropriate basis for a fair market fee 
than the land-based transactions compiled in the report.
    Response: More than a single transaction is needed to establish a 
reasonable basis for fair market value. Multiple transactions are 
required so that unusual circumstances of any given transaction do not 
unduly influence the establish fee. Furthermore, the CLC fees are for 
rights of way of only four miles in length. The report's analysis 
focuses on rights of way greater than five miles in length in order to 
obtain results most relevant to long-haul sanctuary routes.
    Comment 11: The fee set for a submarine cable permit by the NMSP 
should be deliberately high to discourage companies from seeking routes 
through sanctuaries.
    Response: The NMSP is authorized to collect fair market value for 
special uses of sanctuary resources. It does not use the fair market 
fee as a disincentive to those seeking to obtain a permit. The decision 
to grant, deny or place conditions on the permit is the proper 
mechanism for limiting use of sanctuary resources in the interest of 
resource protection.
    Comment 12: Because no market exists for access to national marine 
sanctuaries, fair market valuation is inappropriate.
    Response: Any fair market valuation must rely on market information 
absent the transaction being valued. While there is no open market 
trading for access to sanctuaries, there is a market for fiber-optic 
rights of way, and it is this market on which the report relies.
    Comment 13: The income approach to valuation is inappropriate 
because the company receiving a sanctuary permit does not obtain 
complete ownership of the right of way and because there is no way to 
allocate the value of the right of way use to the right of way itself.
    Response: The report does not recommend the income approach for 
valuation of sanctuary permits. A description of the approach is 
included in the report for completeness, based on use of the income 
approach in some right-of-way transactions and in asset valuation 
generally. However, it should be noted that the issues of incomplete 
ownership and allocation of value are not insurmountable, since they 
are specifically accounted for in some market transactions.
    Comment 14: The report does not consider all possible environmental 
impacts from a specific cable project (such as marine mammal 
entanglement, strumming, release of drilling fluids, etc.)
    Response: Environmental impacts of undersea fiber optic cables in 
marine sanctuaries are addressed in an environmental review that is 
part of the cable permitting process. The purpose of the fair market 
value analysis is to determine the fee for sanctuary access in those 
cases when a permit is issued. The determination of fair market value 
does not rely on an analysis of environmental impacts, and the fair 
market value report only addresses environmental impacts in an economic 
context, as a related issue.
    Comment 15: NOAA's use of terrestrial examples as comparable 
transactions are inappropriate due to the fundamental difference 
between marine and terrestrial environments and differences in impacted 
user groups (e.g., fishers).
    Response: The market value for fiber-optic rights of way is not 
significantly tied to land values, but rather depends on constraints 
and incentives in the telecommunications industry and the role of a 
right of way in a larger fiber-optic network. These conditions are not 
dependent on the terrestrial or marine environment where the right of 
way is located. Also, the information available for submarine cables 
indicates that right-of-way transaction fees are similar in the two 
environments.
    Comment 16: Any evaluation methodology for FMV should be based on 
the concept of the sanctuary as a non-willing seller (and nothing 
else).
    Response: The concept of the willing buyer and willing seller is 
central to determining fair market value. The basis of fair market 
value is the price that would prevail in a free market transaction 
between a willing buyer and a willing seller. By examining previous 
transactions, the methodology used in the report follows this commonly 
accepted approach.
    Comment 17: The methodology does not consider all types of rights 
of way and any Federal fair market value analysis should be conducted 
separately from those in the private sector.
    Response: The NMSA requires that any fee collected by NOAA include 
fair market value for the use of sanctuary resources when issuing a 
special use permit (16 U.S.C. 1441(d)). By definition of fair market 
value, this requirement necessitates the use of market data involving 
buyers and sellers of privately owned assets. Transactions involving 
public entities are included in the analysis to the extent that they 
reflect values determined through private market incentives.
    Comment 18: The NOAA FMV analysis ignores the intrinsic value of 
sanctuaries as pristine habitats and provides a windfall to businesses 
seeking to use them for private gain.
    Response: It is true that the methodology endorsed in the report 
does not specifically rely on the calculation of environmental amenity 
value. The report considers such values, and concludes that they are 
correctly viewed as a lower bound on the appropriate fair market fee.
    Comment 19: The two concepts of value used in the report (``fair 
market value'' and ``amenity value'') must be clearly distinguished.
    Response: Fair market value refers to the price that would be 
agreed upon by a willing buyer and seller in an open market 
transaction. Amenity value refers to the importance placed on 
protecting the sanctuaries from the intrusion of cable and the loss 
associated with allowing a fiber-optic project. The report has been 
revised and

[[Page 55205]]

an attempt has been made to clarify this distinction.
    Comment 20: The methodology must figure the cost of monitoring 
cable installation, cable burial, and damage mitigation fees into a 
final FMV fee (if such conditions are not agreed to in a permit).
    Response: If a fee is collected for issuance of special use permit, 
that fee must include: (1) Costs incurred, or expected to be incurred, 
for the issuance of the permit; (2) costs incurred, or expected to be 
incurred, as a direct result of the conduct of the activity for which 
the permit is issued, including costs of monitoring the conduct of the 
activity; and (3) an amount which represents the fair market value of 
the use of a Sanctuary resource.
    The methodology has been developed to determine the third amount 
above (an amount which represents fair market value). Because fees for 
monitoring and damage mitigation would be addressed by condition two, 
they would not be included in the determination of fair market value.
    Comment 21: Because the NMSP does not hold title to the seabed in a 
sanctuary (and is not, therefore, a property owner), it cannot be 
compared to the landowners used by the report in its comparable 
transaction analysis.
    Response: As stated in the response to Comment 17, the 
NMSA authorizes NOAA to collect a fee when issuing a SUP. If a fee is 
collected, that fee must include among other things, an amount equal to 
the fair market value for the use of sanctuary resources. By definition 
of fair market value, this requirement necessitates the use of market 
data involving buyers and sellers of privately owned assets. 
Transactions involving public entities are included in the analysis to 
the extent that they reflect values determined through private market 
incentives.
    Comment 22: The NOAA methodology is contrary to the 
Telecommunications Act of 1996, which supports a cost-based approach 
and mandates ``fair and reasonable'' fees for the installation and 
maintenance of telecommunications projects.
    Response: NOAA believes that the methodology contained in the 
report will lead to fair and reasonable fees. A cost-based approach 
must include economic costs, not just accounting costs. For this 
reason, municipalities have considered disruptions to the flow of 
traffic when setting a reasonable fee for cable installation on public 
streets. The protected nature of a sanctuary also presents costs 
associated with cable installation, but these costs are difficult to 
evaluate. For this reason, NOAA believes that market values can be 
reasonably applied to the presence of cables in a sanctuary and that 
more conservation accounting measures of cost should be avoided.
    Comment 23: Any FMV fee should be prorated over the period of the 
permit and paid on an annual basis (rather than a one-time, up front 
fee).
    Response: NOAA intends to determine the FMV fee for any permit 
issued up front and in full. The payment schedule for such a fee, 
however, would be negotiated on a case-by-case basis between NOAA and 
the permittee. Any payment schedule that is not a one-time fee would be 
adjusted for inflation. Any negotiated payment schedule would also 
include safeguards (e.g., performance bond) to ensure that full payment 
is made to NOAA. For any future SUPs issued for a cable in national 
marine sanctuary, all payment schedules and payment safeguards will be 
included as permit conditions.
    Comment 24: the NMSP should consider reducing individual fees on a 
per-cable basis for cables located within an approved corridor.
    Response: At this time, NOAA is developing a policy on the 
installation of submarine cables in national marine sanctuaries. Cable 
corridors are one of the issues that will be considered while 
developing this policy.
    Comment 25: It is inaccurate for NOAA to assume in the report that 
all cables can be successfully buried.
    Response: The fair market value report deals with environmental 
impacts as a matter of general background and in the limited context of 
economic efficiency (see responses to comments 8 and 
14. Since the methodology presented does not rely on an 
assessment of environmental impacts, the report does not attempt to 
describe the impacts in a complete and thorough manner. NOAA agrees, 
however, that submarine cables are not always successfully buried and 
that burial might not be possible in some locations.
    Comment 26: Under restrictions imposed by the NMSA, special use 
permits cannot be used to generate income for NOAA and the Federal 
government.
    Response: NOAA agrees. Any fair market value fee would not be used 
to generate extraneous income for the NMSP or the Federal government. 
It would, rather, be used wholly in accordance with the NMSA as 
``expenses for managing National Marine Sanctuaries'' (16 U.S.C. 
1441(d)(3)(B).)
    Comment 27: The use of the term ``fair market value'' is contrary 
to certain Federal telecommunications and security policies that lift 
governmental barriers to the facilitation of communications networks 
for reasons of both economy and national security.
    Response: NOAA disagrees. Please see the responses to Comments 
22 and 40.
    Comment 28: NOAA's imposition of exorbitant fees on cable operators 
is contrary to the Department of Commerce's mission of strengthening 
and safeguarding the country's economy.
    Response: The mission of the Department of Commerce is comprised of 
three basic tenets: (1) Build for the future and promote U.S. 
competitiveness in the global marketplace by strengthening and 
safeguarding the nation's economic infrastructure; (2) Keep America 
competitive with cutting-edge science and technology and an unrivaled 
information base; and (3) Provide effective management and stewardship 
of the nation's resources and assets to ensure sustainable economic 
opportunities.
    To date, no fees have been established or imposed regarding FMV for 
submarine cables in national marine sanctuaries. However, when the FMV 
fees are applied to the existing special use permit holders, they will 
be taken from a range of current comparable transactions (many of which 
focus on the telecommunications industry). NOAA believes this range 
ensures that any FMV fees are sound, fair, and reasonable and do not 
promote a contradiction of any of the tenets of the DOC mission 
statement.
    Comment 29: The report's methodologies will result in exceedingly 
high fees compared to the negligible impact of cable installation.
    Response: As mentioned in the response to Comment 28, 
methodologies employed by the report ensure fees remain with a range of 
current comparable transactions from a variety of different examples.
    Comment 30: NOAA's FMV fees are wholly unrelated to its mission of 
protection of sanctuary resources.
    Response: The NMSA authorizes the NMSP's collection of fair market 
value for the use of sanctuary resources. Should NOAA allow the cable 
and issue a SUP, such amounts will be used for ``expenses of managing 
national marine sanctuaries'' (16 U.S.C. 1441(d)(3)(B)).
    Comment 31: NOAA has no experience in the telecommunications 
industry and, therefore, has little business setting fee structures 
regarding fiber optic cables.

[[Page 55206]]

    Response: NOAA economists, working in conjunction with a number of 
contracted non-Federal economists, have produced a comprehensive report 
that uses several approaches to determining fair market value, 
including recent comparables from various telecommunications industry 
transactions. The collective experience of these economists with 
valuation is extensive. Furthermore, the report was submitted for peer 
review to two leading economic analysts: Dr. Richard Schmallensee, Dean 
of the MIT Sloan School of Business and the KMI Corporation, a 
consulting firm in the telecommunications industry that has evaluated 
the right of way market on several occasions and does on-going research 
on undersea cables and the transoceanic fiber optic market. Both 
analysts concluded that the methodology was sound, fair, and 
reasonable.
    Comment 32: NOAA should not implement a fee-setting methodology for 
special use permits before it determines whether the issuance of such 
permits is appropriate.
    Response: NOAA has developed the FMV analysis as part of its 
process for developing an overall policy concerning the installation of 
submarine cables in national marine sanctuaries that have already been 
issued. These permits were issued as independent, site-specific actions 
and would not be affected retroactively by any future programmatic 
policy or regulations the NMSP may develop on submarine cables. The 
fair market value fee will be applied to both of the current special 
use permit holders and to any other cable that may receive a special 
use permit in a national marine sanctuary in the future.
    Comment 33: Administrative law condemns retroactive application of 
any FMV fee.
    Response: NOAA will not assess FMV fees retroactively. NOAA will 
apply the methodology in the report to determine the FMV fee for 
current special use permit holders with the payment of FMV stipulated 
in their permits. NOAA will also use the report's methodology to 
determine the FMV for any future special use permit that may be issued 
for a submarine cable in an NMS.
    Comment 34: The NMSP has no jurisdiction outside of Sanctuaries and 
cannot impose any FMV fees on cable carriers outside of Sanctuaries.
    Response: FMV Fees assess by the NMSP apply only to cables located 
in sanctuaries.
    Comment 35: Submarine cables, do not ``use'' sanctuary resources as 
stipulated in the NMSA and therefore cannot be subjected to special use 
permits and/or any FMV fee.
    Response: ``Sanctuary resource'' is defined by the NMSA as ``any 
living or nonliving resource of a national marine sanctuary that 
contributes to the conservation, recreational, ecological, historical, 
educational, cultural, archaeological, scientific, or aesthetic value 
of the sanctuary'' (16 U.S.C. 1432 (8)). Seafloor substrate fits this 
definition as it contributes to all of the criteria. A submarine cable 
depends on the substrate as a means of support. In this regard, a cable 
(as a permanent or semi-permanent structure) uses a sanctuary resource 
(the seafloor) to bear it from one point to another and may preclude 
other uses of the resource. Therefore, it is subject to the NMSA if it 
is in a national marine sanctuary.
    Comment 36: All FMV fees should be used solely by the NMSP.
    Response: All FMV fees will be used solely by the NMSP.
    Comment 39: When applying FMV fees, NOAA should distinguish between 
commercial and research cables (and not apply FMV to research cables).
    Response: FMV fees apply for those activities authorized under a 
special use permit. When the purpose of an activity is scientific 
research related to NMS resources, the activity can be permitted under 
a research permit (which has no associated fee).
    Comment 40: The imposition of fees proposed in the report will 
significantly impact costs associated with international electronic 
commerce and stifle efforts to extend global digital information 
opportunities.
    Response: The range of fees proposed in the report is based on 
recent comparable transactions from a number of different examples. 
These comparables ensure that any FMV fees will fall within an array of 
current market figures and will not be exorbitant or crippling to 
international electronic commerce.
    Section V: Next Steps.
    NOAA will meet with the existing special use permit holders to 
determine the fair market value owed on their permits. The fee will be 
based on the methodology in this report. The range of fees presented in 
the report will also be used as the basis for determining FMV for any 
future special use permit that may be issued by the NMSP for a 
submarine cable in a national marine sanctuary. To remain current, it 
is envisioned that NOAA will periodically update the range of fees with 
current data.

    Dated: August 21, 2002.
Jamison S. Hawkins,
Deputy Assistant Administrator for Ocean Services and Coastal Zone 
Management.
[FR Doc. 02-21975 Filed 8-27-02; 8:45 am]
BILLING CODE 3510-08-M