Gramm, Burns Pitch Loan Guarantee


Washington -- Senate Banking Committee chairman Phil Gramm
(R-Texas) is planning to stage a vote Friday (March 3) on his bill, which would offer
$1.25 billion in federal loan guarantees to providers of local TV signals in rural

While insisting that the bill would not favor any specific
technology, Gramm and his chief co-sponsor, Sen. Conrad Burns (R-Mont.), said satellite
carriers looked like the most promising candidates for the loans.

"Cable is just not economically feasible [in rural
areas]," Burns said

"I think the truth is that probably as of right now,
based on everything we know, the satellite is an attractive technology," he added,
"but the way the bill is written, we are not prejudging that technology."

Loans will be awarded by a panel composed of the treasury
secretary, the agriculture secretary and the Federal Reserve Board chairman, and they will
be administered by the Agriculture Department's Rural Utilities Service.

Gramm and Burns unveiled the bill at a Capitol Hill press
conference on the heels of two Banking Committee hearings earlier in February. The
lawmakers are pressing ahead to meet an April 1 deadline for a full Senate vote under an
agreement reached in November.

The cable industry -- especially small operators -- is
concerned that the bill will turn out to be a handout to the satellite industry.

"We are not opposing it. We want to make sure it's
technologically neutral," a National Cable Television Association spokesman said.
"We want it to apply to any multichannel-video-programming distributor, including
cable operators, that offers service in rural areas."

The bill needs to be evaluated by the Congressional Budget
Office to determine whether taxpayers might have to cover loan defaults. In analysis of a
House bill that surfaced last year, the CBO found that taxpayers would be on the hook for
$350 million in potential defaults.

"We want to make good loans that generate a good
service, and we want the loans to be repaid," Gramm said. "I think we have
written a bill that will not lead to defaults at that level."

Gramm added that the bill would allow one entity to apply
for the full $1.25 billion. To protect taxpayers, the three-member board could guarantee
up to 70 percent of the applicant's loan.

The House Agriculture Committee unanimously approved
similar legislation two weeks ago. That bill (H.R. 3615) would back 100 percent of loans,
while limiting the largest loan to $625 million.

Under satellite-competition legislation enacted last year,
satellite carriers won the right to provide dish owners with local TV signals. But DirecTV
Inc. and EchoStar Communications Corp. have no immediate plans to stretch that service
much beyond 50 percent to 60 percent of U.S. households, the bulk of them in the largest

Believing that rural TV markets were being shortchanged,
Burns and Reps. Bob Goodlatte (R-Va.) and Rick Boucher (D-Va.) began an effort last year
to rely on loan guarantees to extend local-into-local TV service to those markets.

Many dish owners in Montana receive local TV signals beamed
from such places as New York and Los Angeles. "We've got people who live in Montana
who know more about what's going in Los Angeles than they do in Billings because they
can't receive local-into-local," Burns said.