Ops Could Benefit from Local-TV Aid

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WASHINGTON -Under a new law passed last month, cable operators and satellite carriers now have access to $1.25 billion in federal loan guarantees to provide local TV signals in rural areas.

For a while, it appeared that cable operators would be shut out. However, heavy lobbying by the National Cable Television Association and the American Cable Association prevailed upon lawmakers to keep the law technology-neutral.

"We are pleased that the language that was finally passed [adhered to] the principles that we were concerned about," said Matt Polka, president of the ACA, a group that includes 300 small cable operators with a total of 3 million subscribers.

As a result, cable operators will be able to seek loan guarantees to finance the extension of their wires into low-density communities both within and outside their franchise areas.

Congress began work on the law soon after President Clinton signed the Satellite Home Viewer Improvement Act on Nov. 29, 1999. That law allowed direct-broadcast satellite carriers to provide local TV signals for the first time.

But Capitol Hill lawmakers, including many with rural constituents, felt SHVIA represented only partial progress because the two leading DBS carriers-DirecTV Inc. and EchoStar Communications Corp.-had no plans to offer local-TV signals beyond the top 40 markets.

Many lawmakers believed a loan-guarantee program would provide the stimulus to extend DBS-delivered local TV signals to the remaining 170 media markets, which include about 50 percent of U.S. households.

Although cable operators may seek funding, satellite carriers were really the video providers that key sponsors of the law had in mind when they created the loan guarantee program.

One of the biggest supporters of the bill was the National Rural Telecommunications Cooperative, whose members distribute DirecTV in rural markets. NRTC's largest DBS affiliate is Pegasus Communications Corp., which serves about 1.3 million rural subscribers.

NRTC spokesman Andy Brown hailed the new law as a boon for rural America, but said it was too early to announce whether NRTC members would assemble a proposal to seek some or all of the $1.25 billion.

"We are going to give it a good hard look to see where we fit," Brown said. "From a policy perspective, we certainly endorsed it and pushed for it as a statement of legislative and federal policy-that there needs to be some help getting local-into-local into rural areas."

Polka said he expects the NRTC, whose members compete with small cable in rural markets, to dip into the fund.

"I think they will participate," Polka said. "That's why it's there."

Last week, officials at DirecTV and EchoStar were not prepared to say if they would seek loan guarantees.

"We are certainly interested in serving rural communities which we believe are underserved with local channels," EchoStar spokesman Marc Lumpkin said. "But we will make our decision after we've had time to evaluate the criteria of the loan-guarantee law."

DirecTV spokesman Bob Marsocci said his company could serve more than 40 local markets if Congress hadn't required DBS carriers to offer all local signals in a served market starting in 2002.

"We have never supported the bill. We were opposed to the bill," Marsocci said. "We have said repeatedly that under must-carry.we will be limited to 41 to 42 markets."

The mechanics of the law are complicated, mainly because Senate Banking Committee chairman Sen. Phil Gramm (R-Texas), a fiscal conservative, wanted to protect taxpayers from absorbing losses due to default and bankruptcy.

The federal government will not make direct loans. Rather, it will back up to 80 percent of long-term loans that local TV signal providers have obtained in the commercial market. Federal backing typically ensures the best interest rate, making the loan more affordable.

No loan guarantees may be approved without the consent of three members of the four-person loan guarantee board: the Federal Reserve Board chairman and the secretaries of the Treasury, Agriculture and Commerce departments. Board loans cannot be challenged in court.

Day-to-day supervision of the program will reside with the administrator of the Rural Utilities Service, a division of the Agriculture Department that's subject to annual audit by the General Accounting Office.

In making loans, the board must give priority to projects aimed at "nonserved" areas (communities considered beyond the reach of broadcast signals) and "underserved" areas (communities on the fringe of markets that do not have access to DBS-delivered local TV signals).

The board is also instructed to give "additional" consideration to applicants that intend to provide high-speed Internet access and to take into account proposals that provide local TV signals as a separate tier of service.

Although the loan guarantee program enjoyed wide support on Capitol Hill, the Congressional Budget Office raised numerous concerns about the program.

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