Senate Passes Loan-Guarantee Bill

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Washington-Congress appears to be well on its way toward providing about $1 billion in loan guarantees to the satellite industry in an effort to spur the delivery of local TV signals in small cities currently considered unserved or underserved.

Last Thursday, the Senate unanimously approved a $1.25 billion bill (S. 2097) that would put taxpayers on the line for 80 percent of that amount for use generally in the roughly 180 markets where cable and satellite do not each offer local TV signals.

A three-member federal board, including the secretary of the treasury, would have to approve any loan guarantee.

"I believe that we have done as good a job as we can do," bill sponsor Sen. Phil Gramm (R-Texas) said moments before the bill sailed through on a 97-0 vote. "We want to be good stewards of the taxpayers' money."

The Senate bill is technology-neutral in the sense that cable operators can apply for loan guarantees. But Senate and House lawmakers expect the money to flow to the satellite industry to expand its local-TV service from the top 30 or so markets today to all 210 markets delineated by Nielsen Media Research.

The Congressional Budget Office predicted that the risky venture-supporting a service already being provided to all but 2 million to 3 million households free-of-charge or by cable-could lead to $250 million in defaults and $15 million in administrative costs over six years.

Under current budget law, Congress has to appropriate the $265 million or the program won' t take effect.

"We' ll find it. It' s not a budget-breaker," said Sen. Ted Stevens (R-Alaska), chairman of the Senate Appropriations Committee.

Even though the bill is very popular, free-market fiscal conservatives such as Gramm like neither the concept nor the price tag. "Am I still skeptical about having the taxpayers do this? Yes," Gramm told reporters after the vote.

A day before Senate action, the House Commerce Committee advanced its own version (H.R. 3615) to the full House on a voice vote. Committee chairman Rep. Tom Bliley (R-Va.), concerned about the cost of the bill outlined by the CBO, voted against the measure.

The House panel diluted the must-carry provisions inserted by the Telecommunications Subcommittee the week before. Before the change, a TV station that offered fewer than 21 hours per week in local news, sports and weather programming could not demand carriage.

Rep. Billy Tauzin (R-La.) won voice-vote approval of an amendment that would require a loan-guarantee recipient to carry no more local-TV signals than the cable system serving the largest number of subscribers in the market.

Tauzin said he wanted to ensure "absolute parity" between cable and satellite.

Senate consideration took up nearly the entire day, but most of the action occurred off the floor, allowing Gramm to negotiate amendments with Sens. Max Baucus (D-Mont.), Tim Johnson (D-S.D.) and Orrin Hatch (R-Utah).

Baucus won support for an amendment that would require the board to give additional consideration "to the maximum extent practicable" to loan-guarantee applicants that will provide not only local TV signals, but also high-speed Internet access and National Weather Service warnings.

Baucus said the change would "give a little boost" to applicants willing to provide broadband to rural areas. At first, he wanted the board to give priority to applicants offering broadband and weather reports, but he decided to back away from that position.

Gramm struck a deal with Johnson to allow some nonprofit corporations to make loans. But Gramm insisted that the board should be allowed to withhold backing if the loan would sink the nonprofit' s debt rating.

Gramm' s bill included a provision intended to require loan-guarantee recipients to carry all local TV signals in a market, even though current must-carry rules apply to wireless cable operators and private cable operators.

Hatch won Gramm' s support to strip the language. A Senate source said Hatch wanted the provision struck not because he wanted to effect a policy change, but because it had been poorly crafted.

As a result, removal of the language did not change the direct-broadcast satellite industry' s obligation to carry all local signals in a served market in 2002, the source said.

The White House' s Office of Management and Budget typically issues a statement of administration policy concerning legislation that reaches either the House or Senate floor. However, an OMB spokesman said last week that it would not have a statement on the Senate loan-guarantee bill.

The House has two versions of H.R. 3615 pending-one passed by the Agriculture Committee and last week' s Commerce Committee version.

The Agriculture Committee would provide $1.25 billion with 100 percent backing. One entity would eligible for a loan not to exceed $625 million, and all other loans would have to be less than $100 million. The bill would allow cable to apply. Loans are intended to flow first to providers outside of the top 40 markets.

The Commerce bill cut the totals to $1 billion and 80 percent, yet one entity could apply for the entire $1 billion. This version would bar cable operators from applying for loans to build out systems in franchise areas they are already obligated to serve. It also has no definition of the "unserved" areas the loans should target for local TV service.

The Commerce Committee adopted at least one rider that would be helpful to DBS. The panel backed an amendment by Rep. Mike Oxley (R-Ohio) that would freeze the loan program and bar the Federal Communications Commission from allowing Northpoint Technology Ltd. to use DBS frequencies until a third party has tested to determine whether Northpoint' s terrestrial-video service would cause harmful interference to DBS. The FCC has 90 days to finish the study.

"We would rather deploy immediately," Northpoint president Sophia Collier said. "We don' t support this delay."

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