Boucher Plan Could Hurt Small Ops

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Washington -- In 1992, small cable operators were asleep,
and they didn't wake up until the nightmare of Federal Communications Commission rate
regulation was upon them.

This year, the federal government is poised to inflict more
pain. But small operators are wide awake and watching very carefully to see what happens.

Last week, Rep. Rick Boucher (D-Va.) announced an 11th-hour
bid to include in pending satellite legislation (H.R. 1554 and S. 247) a provision that
would subsidize satellite delivery of local TV signals in rural markets to the tune of $1
billion.

While many details need to be worked out, this much is
clear: Small cable could face competition from satellite carriers offering a vast number
of cable networks, supplemented by a local-TV-signal overlay underwritten by the federal
government.

"It's pointed right at our membership. To me, it's
just outrageous," said Matt Polka, president of the American Cable Association, which
represents 300 cable operators that serve about 3 million subscribers.

Boucher unveiled his plan last Tuesday at the first meeting
of the 18-member House-Senate conference committee, which is trying to draft a bill that
would allow direct-broadcast satellite carriers to offer all dish owners in a local market
access to their local TV stations.

It's unclear whether the Boucher plan will survive. But he
has at least one strong ally: the National Association of Broadcasters. "Our goal is
to make it happen," NAB president Edward Fritts said.

The thrust of the legislation is to provide
apples-to-apples competition between DBS and cable for the first time.

DBS companies, while growing rapidly, claim that most
consumers walk away when they learn they can't get their local TV signals via satellite.

DirecTV Inc. and EchoStar Communications Corp. are
planning, at least initially, to provide local-to-local service in the top 20 markets,
hoping to extend it to the top 67 in a few years.

Boucher's plan calls for serving markets No. 68 through 211
as soon as possible by injecting the federal government into the video business.

As proposed, Boucher's plan would require the Department of
Agriculture's Rural Utility Service to provide a $1 billion guaranteed loan to a nonprofit
entity (probably the National Rural Telecommunications Cooperative) for the deployment of
a satellite to beam the signals. It would also require the FCC to set aside the spectrum.

Sens. Byron Dorgan (D-N.D.) and Conrad Burns (R-Mont.) are
developing the Senate's version.

The NRTC is already in the satellite business through a
$120 million investment in DirecTV, which includes an exclusive distribution deal covering
9 million rural homes. The cooperative has signed up 1.3 million subscribers so far.

House Telecommunications Subcommittee chairman Billy Tauzin
(R-La.) said Boucher's plan would amount to federal subsidization of satellite service
against small-market cable operators.

But he added that the plan was fair because current law
does not allow commercial DBS providers to serve small markets with out-of-market signals
of ABC, CBS, NBC and Fox. "You've got to do something for those markets," Tauzin
said.

Boucher said he didn't see it as subsidized competition.
"It seems to me only fair to say that if we are going to have local-into-local
service in markets [No.] 1 through 67, we ought to take the steps that are necessary to
make sure that same service is provided up through market 211," he said.

Polka said he found it incredible that Congress was willing
to subsidize competitors to small cable at this point.

"Small cable has never asked [for], nor has been
given, a dime to build the telecommunications infrastructure that is out there today in
rural America. They have done it with their sweat," he said.

Sen. Orrin Hatch (R-Utah), who was elected chairman of the
conference committee at Tuesday's meeting, said he wants to complete work on the
legislation in about 10 days. He warned that he would not support an extension of current
law, which is set to expire Dec. 31.

"Let's see if we can get this wrapped up in a week or
a week-and-a-half," Hatch said.

Rep. John Dingell (D-Mich.) said he was hopeful of speedy
passage. "I think a quick resolution is in our hands," he said.

Hatch wouldn't say whether he supports Boucher's plan.
"We are going to look at all aspects here. We've got to bring together a lot of
people. This is legislating at its worst and its best, I'll put it that way," he
said.

The one-hour meeting gave the members a chance to read
statements and to articulate their goals for the bill.

Sen. Herbert Kohl (D-Wis.), for example, said he wanted to
remove satellite carriers' must-carry obligations regarding home shopping channels. And
Rep. John Conyers (D-Mich.) said he wanted to protect satellite carriers from unfair
retransmission-consent deals with broadcasters. EchoStar supports both of those positions.

Conyers said DBS carriers needed legal protection to ensure
that they are neither forced to pay exorbitant fees for network broadcast signals nor
denied access to them. "This is not an interference with the free market," he
added.

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