GAO Finds Flaws in LOCAL TV Program - Multichannel

GAO Finds Flaws in LOCAL TV Program

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The General Accounting Office claims the Bush administration has failed to launch a billion-dollar program designed to spread local TV service to nearly 20% of households in rural areas considered underserved by cable operators and broadcasters.

Three years ago, Congress passed the Launching Our Communities' Access to Local Television Act (LOCAL TV), which required the federal government to provide $1.25 billion in loan guarantees to bring local TV signals to unserved or underserved communities—about 23.4 million households in all.

Direct-broadcast satellite TV companies were considered the most likely candidates as loan recipients.

But in an Oct. 31 report, the GAO said the program — which was supposed to be up and running in March 2002 — has not even produced the paperwork necessary to accept loan applications.

"The LOCAL TV program has not been implemented within the time frames specified in the LOCAL TV Act. Notwithstanding considerable delays already incurred, it is important that the [loan] board begin to put the program in operation in an expedited fashion," the GAO said.

The program is overseen by a board that consists of the secretaries of commerce, treasury and agriculture, in addition to the chairman of the Federal Reserve. The board decides which entities receive loan guarantees. Post-loan administration is conducted by the Rural Utilities Service within the Department of Agriculture.

Loan guarantees are a financial tool of the federal government to allow private borrowers to obtain attractive loan rates that they otherwise couldn't obtain.

The LOCAL TV Act requires the GAO to conduct an annual audit. The GAO attributed the delay to the board's concerns about the lack of congressional funding and inadequate staffing.

Although not required by law, the board decided to seek public comment on how to craft a program consistent with the goals established by Congress. The rulemaking, launched in September 2002, added to the delay, the GAO said.

"The board plans to begin accepting loan-guarantee applications once the final rule is issued. The board stated that they believe this process will begin by February 2004," the GAO added.

Market developments could overtake the law. In April 2002, the RUS issued a notice of inquiry asking whether the program would remain necessary if EchoStar Communications Corp. were allowed to merge with Hughes Electronics Corp., parent of DirecTV Inc. That merger — rejected by the Department of Justice as anti-competitive — called for providing local TV signals in all 210 markets within two years.

News Corp., which is seeking federal approval to take control of Hughes, is promising to spend $1 billion on new satellites to serve all local TV markets no later than 2008.

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