Gramm: Rural Cablers Should Get Loans, Too

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Washington -- Small cable operators could gain access to
loan guarantees under a plan favored by Senate Banking Committee chairman Phil Gramm
(R-Texas).

At a hearing last week, Gramm said the $1.25 billion
program should include cable operators, even though satellite carriers -- whether
nonprofit or commercial -- seem to be the most likely recipients of the largesse.

"I am going to let the competition for the loan
guarantees decide technology. We are not going to write technology into the bill,"
Gramm said after a two-hour hearing on financing the delivery of local TV signals in
markets unserved by commercial direct-broadcast satellite carriers.

Matt Polka, president of the American Cable Association,
said he was pleased with Gramm's commitment. "That's exactly the direction
we had hoped he would go," said Polka, who represents 300 cable operators with 3.2
million subscribers.

Under an agreement reached in November, Capitol Hill is
working on a plan to promote the availability of local TV signals to rural America. The
effort began once lawmakers realized that the leading satellite companies -- DirecTV Inc.
and EchoStar Communications Corp. -- planned to offer local TV signals to no more than 50
percent of U.S. households for several years.

The House and Senate have agreed to vote on legislation
before April 1, but resolving communications-policy conflicts could drag the debate late
into the year before a bill goes to the White House.

"You're going to see a bill by March 30,"
Gramm said. "Our obligation is to report a bill. We will meet our obligation."

Cable operators, especially small ones, are concerned that
they will be shut out from the loan guarantees and see the subsidies flow to their
satellite competitors.

At the hearing, Richard Sjoberg, president of his own
7,500-subscriber cable company in northwest Minnesota, urged the Banking Committee not to
exclude cable. He said loan guarantees would reduce his capital costs and allow him to
penetrate lightly populated areas with both video and high-speed Internet services.

"I would like to see it be technology-neutral,"
Sjoberg said.

Witnesses split on where the funding should go. Assistant
Commerce Secretary Greg Rohde, speaking for the Clinton administration, said he supported
Gramm's approach. "Let's not exclude any technology," he said.
"We should not limit our options."

Dale Hatfield, chief of the Office of Engineering and
Technology at the Federal Communications Commission, agreed with Rohde.

But EchoStar senior vice president and general counsel
David Moskowitz said cable participation was inappropriate because cable operators remain
the dominant distributors of multichannel-video programming.

"This would be a mistake if the ultimate policy goal
is to provide equality to rural and city consumers alike," he added.

Gramm said he wants loan applicants to secure private
loans. He added that the Federal Reserve Board, the Treasury Department and perhaps the
Commerce Department should choose among loan applicants, with loan performance monitored
by the Rural Utilities Service in the Department of Agriculture.

He said he would require loan-guarantee applicants to have
equity in the venture. "We are not going to let people set up shell organizations and
borrow this money," Gramm added.

Gramm said he would not impose per-loan limits, meaning
that one applicant could get the entire $1.25 billion.

Despite the rhetoric about technological neutrality,
lawmakers are focusing on satellite delivery of local TV signals. After all, local TV
signals reach nearly every U.S. household, and cable wires pass about 95 percent.

Moskowitz told the panel EchoStar could serve additional
markets if Congress relaxed TV-signal-carriage rules. Beginning in 2002, EchoStar and
DirecTV are required to carry all local TV signals in markets they elect to serve with
even one local TV signal under a satellite-competition law passed last year. "No
single provision of the [law] hurts rural subscribers more," he said.

Moskowitz said he doubted that local TV service to rural
markets would return a profit. "The economics by themselves are suspect. Things could
come back to haunt us," he added.

Gramm said he opposed must-carry, but he all but ruled out
trying to overturn it. "I can't understand why some shopping channel in New York
has to be carried instead of Texas A&M [University] football on ABC in rural Texas. I
feel pretty strongly about that," Gramm said. "But I think the plain truth is
that if we get into those issues, we end up with no bill."

National Association of Broadcasters spokesman Dennis
Wharton said broadcasters wouldn't go along with relaxing must-carry rules to
accommodate the satellite industry, calling claims about a DBS capacity crunch
"ridiculous."

"We think there will be ample capacity given digital
compression and other technologies," Wharton said. "EchoStar and the other
satellite carriers will easily be able to handle must-carry."

Both Moskowitz and DirecTV senior vice president Steven Cox
testified that the FCC would have to provide additional spectrum for satellite carriers to
expand local TV service to all 211 markets.

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