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106th Congress Rept. 106-508
HOUSE OF REPRESENTATIVES
2d Session Part 2
RURAL LOCAL BROADCAST SIGNAL ACT
April 6, 2000.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
Mr. Bliley, from the Committee on Commerce, submitted the following
R E P O R T
[To accompany H.R. 3615]
[Including cost estimate of the Congressional Budget Office]
The Committee on Commerce, to whom was referred the bill
(H.R. 3615) to amend the Rural Electrification Act of 1936 to
ensure improved access to the signals of local television
stations by multichannel video providers to all households
which desire such service in unserved and underserved rural
areas by December 31, 2006, having considered the same, report
favorably thereon with an amendment and recommend that the bill
as amended do pass.
Purpose and Summary.............................................. 11
Background and Need for Legislation.............................. 11
Committee Consideration.......................................... 13
Committee Votes.................................................. 13
Committee Oversight Findings..................................... 20
Committee on Government Reform Oversight Findings................ 20
New Budget Authority, Entitlement Authority, and Tax Expenditures 20
Committee Cost Estimate.......................................... 20
Congressional Budget Office Estimate............................. 20
Federal Mandates Statement....................................... 24
Advisory Committee Statement..................................... 24
Constitutional Authority Statement............................... 24
Applicability to Legislative Branch.............................. 24
Section-by-Section Analysis of the Legislation................... 24
Changes in Existing Law Made by the Bill, as Reported............ 29
Dissenting Views................................................. 31
The amendment is as follows:
Strike out all after the enacting clause and insert in lieu
thereof the following:
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Rural Local
Broadcast Signal Act''.
(b) Table of Contents.--The table of contents of this Act is as
Sec. 1. Short title; table of contents.
Sec. 2. Purpose.
Sec. 3. Rural television loan guarantee board.
Sec. 4. Approval of loan guarantees.
Sec. 5. Administration of loan guarantees.
Sec. 6. Prohibition on use of funds for spectrum auctions.
Sec. 7. Prohibition on use of funds by incumbent cable operators.
Sec. 8. Annual audit.
Sec. 9. Exemption from must carry requirements.
Sec. 10. Additional availability of broadcast signals in rural areas.
Sec. 11. Prevention of interference to satellite services applying for
rural loan guarantees.
Sec. 12. Improved cellular service in rural areas.
Sec. 13. Technical amendment.
Sec. 14. Definitions.
Sec. 15. Authorizations of appropriations.
Sec. 16. Sunset.
SEC. 2. PURPOSE.
The purpose of this Act is to facilitate access, on a technologically
neutral basis and by December 31, 2006, to signals of local television
stations for households located in unserved areas.
SEC. 3. RURAL TELEVISION LOAN GUARANTEE BOARD.
(a) Establishment.--There is established the Rural Television Loan
Guarantee Board (in this Act referred to as the ``Board'').
(1) In general.--Subject to paragraph (2), the Board shall
consist of the following members:
(A) The Secretary of the Treasury, or the designee of
(B) The Secretary of Agriculture, or the designee of
(C) The Secretary of Commerce, or the designee of the
(2) Requirement as to designees.--An individual may not be
designated a member of the Board under paragraph (1) unless the
individual is an officer of the United States pursuant to an
appointment by the President, by and with the advice and
consent of the Senate.
(c) Functions of the Board.--
(1) In general.--The Board shall determine whether or not to
approve loan guarantees under this Act. The Board shall make
such determinations consistent with the purpose of this Act and
in accordance with this subsection and section 4 of this Act.
(2) Consultation authorized.--
(A) In general.--In carrying out its functions under
this Act, the Board shall consult with such departments
and agencies of the Federal Government as the Board
considers appropriate, including the Department of
Commerce, the Department of Agriculture, the Department
of the Treasury, the Department of Justice, the
Department of the Interior, the Board of Governors of
the Federal Reserve System, the Federal Communications
Commission, the Federal Trade Commission, and the
National Aeronautics and Space Administration.
(B) Response.--A department or agency consulted by
the Board under subparagraph (A) shall provide the
Board such expertise and assistance as the Board
requires to carry out its functions under this Act.
(3) Approval by majority vote.--The determination of the
Board to approve a loan guarantee under this Act shall be by a
vote of a majority of the Board.
SEC. 4. APPROVAL OF LOAN GUARANTEES.
(a) Authority To Approve Loan Guarantees.--Subject to the provisions
of this section and consistent with the purpose of this Act, the Board
may approve loan guarantees under this Act.
(1) Requirements.--The Administrator (as defined in section 5
of this Act), under the direction of and for approval by the
Board, shall prescribe regulations to implement the provisions
of this Act and shall do so not later than 120 days after funds
authorized to be appropriated under section 15 of this Act have
been appropriated in a bill signed into law.
(2) Elements.--The regulations prescribed under paragraph (1)
(A) set forth the form of any application to be
submitted to the Board under this Act;
(B) set forth time periods for the review and
consideration by the Board of applications to be
submitted to the Board under this Act, and for any
other action to be taken by the Board with respect to
(C) provide appropriate safeguards against the
evasion of the provisions of this Act;
(D) set forth the circumstances in which an
applicant, together with any affiliate of an applicant,
shall be treated as an applicant for a loan guarantee
under this Act;
(E) include requirements that appropriate parties
submit to the Board any documents and assurances that
are required for the administration of the provisions
of this Act; and
(F) include such other provisions consistent with the
purpose of this Act as the Board considers appropriate.
(3) Construction.--(A) Nothing in this Act shall be construed
to prohibit the Board from requiring, to the extent and under
circumstances considered appropriate by the Board, that
affiliates of an applicant be subject to certain obligations of
the applicant as a condition to the approval or maintenance of
a loan guarantee under this Act.
(B) If any provision of this Act or the application of such
provision to any person or entity or circumstance is held to be
invalid by a court of competent jurisdiction, the remainder of
this Act, or the application of such provision to such person
or entity or circumstance other than those as to which it is
held invalid, shall not be affected thereby.
(c) Authority Limited by Appropriations Acts.--The Board may approve
loan guarantees under this Act only to the extent provided for in
advance in appropriations Acts.
(d) Requirements and Criteria Applicable to Approval.--
(1) In general.--The Board shall utilize the underwriting
criteria developed under subsection (g), and any relevant
information provided by the departments and agencies with which
the Board consults under section 3, to determine which loans
may be eligible for a loan guarantee under this Act.
(2) Prerequisites.--In addition to meeting the underwriting
criteria under paragraph (1), a loan may not be guaranteed
under this Act unless--
(A) the loan is made to finance the acquisition,
improvement, enhancement, construction, deployment,
launch, or rehabilitation of the means by which local
television broadcast signals will be delivered
principally to an unserved area;
(B) the proceeds of the loan will not be used for
operating, advertising, or promotion expenses;
(C) the proposed project, as determined by the
National Telecommunications and Information
Administration, is not likely to have a substantial
adverse impact on competition that outweighs the
benefits of improving access to the signals of a local
television station in an unserved area, and is
(D) the loan is provided by--
(i) an insured depository institution (as
that term is defined in section 3 of the
Federal Deposit Insurance Act) that is
acceptable to the Board; or
(ii) a lender that is acceptable to the
(I) has not fewer than one issue of
outstanding debt that is related within
the highest three rating categories of
a nationally recognized statistical
rating agency; or
(II) has provided financing to
entities with outstanding debt from the
Rural Utilities Service and which
possess, in the judgment of the Board,
the expertise, capacity, and capital
strength to provide financing pursuant
to this Act;
(E) the loan has terms, in the judgment of the Board,
that are consistent in material respects with the terms
of similar obligations in the private capital market;
(F) repayment of the loan is required to be made
within a term of the lesser of--
(i) 25 years from the date of the execution
of the loan; or
(ii) the economically useful life, as
determined by the Board or in consultation with
persons or entities deemed appropriate by the
Board, of the primary assets to be used in the
delivery of the signals concerned; and
(G) the loan meets any additional criteria developed
under subsection (g).
(3) Protection of united states financial interests.--The
Board may not approve the guarantee of a loan under this Act
(A) the Board has been given documentation,
assurances, and access to information, persons, and
entities necessary, as determined by the Board, to
address issues relevant to the review of the loan by
the Board for purposes of this Act; and
(B) the Board makes a determination in writing that--
(i) to the best of its knowledge upon due
inquiry, the assets, facilities, or equipment
covered by the loan will be utilized
economically and efficiently;
(ii) the terms, conditions, security, and
schedule and amount of repayments of principal
and the payment of interest with respect to the
loan protect the financial interests of the
United States and are reasonable;
(iii) to the extent possible, the value of
collateral provided by an applicant is at least
equal to the unpaid balance of the loan amount
covered by the loan guarantee (the ``Amount''
for purposes of this clause); and if the value
of collateral provided by an applicant is less
than the Amount, the additional required
collateral is provided by any affiliate of the
applicant; and if the combined value of
collateral provided by an applicant and any
affiliate is not at least equal to the Amount,
the collateral from such affiliate represents
all of such affiliate's assets;
(iv) all necessary and required regulatory
and other approvals, spectrum rights, and
delivery permissions have been received for the
loan, the project under the loan, and the Other
Debt, if any, under subsection (f)(2)(B);
(v) the loan would not be available on
reasonable terms and conditions without a loan
guarantee under this Act; and
(vi) repayment of the loan can reasonably be
(1) Type of market.--
(A) Priority considerations.--To the maximum extent
practicable, the Board shall give priority in the
approval of loan guarantees under this Act to projects
that will serve the greatest number of households in
unserved areas. In each instance, the Board shall
consider the project's estimated cost per household to
(B) Prohibition.--The Board may not approve a loan
guarantee under this Act for a project that is designed
primarily to serve 1 or more of the 40 most populated
designated market areas (as that term is defined in
section 122(j) of title 17, United States Code).
(2) Other considerations.--The Board shall consider other
factors, which shall include projects that would--
(A) offer a separate tier of local broadcast signals;
(B) provide lower projected costs to consumers of
such separate tier; and
(C) enable the delivery of local broadcast signals
consistent with the purpose of this Act by a means
reasonably compatible with existing systems or devices
predominantly in use.
(f) Guarantee Limits.--
(1) Limitation on aggregate value of loans.--The aggregate
value of all loans for which loan guarantees are issued under
this Act (including the unguaranteed portion of loans issued
under paragraph (2)(A)) and Other Debt under paragraph (2)(B)
may not exceed $1,000,000,000.
(2) Guarantee level.--A loan guarantee issued under this
(A) may not exceed an amount equal to 80 percent of a
loan meeting in its entirety the requirements of
subsection (d)(2)(A). If only a portion of a loan meets
the requirements of that subsection, the Board shall
determine that percentage of the loan meeting such
requirements (the ``applicable portion'') and may issue
a loan guarantee in an amount not exceeding 80 percent
of the applicable portion; or
(B) may, as to a loan meeting in its entirety the
requirements of subsection (d)(2)(A), cover the amount
of such loan only if that loan is for an amount not
exceeding 80 percent of the total debt financing for
the project, and other debt financing (also meeting in
its entirety the requirements of subsection (d)(2)(A))
from the same source for a total amount not less than
20 percent of the total debt financing for the project
(``Other Debt'') has been approved.
(g) Underwriting Criteria.--Within the period provided for under
subsection (b)(1), the Board shall, in consultation with the Director
of the Office of Management and Budget and an independent public
accounting firm, develop underwriting criteria relating to the
guarantee of loans that are consistent with the purpose of this Act,
including appropriate collateral and cash flow levels for loans
guaranteed under this Act, and such other matters as the Board
(h) Credit Risk Premiums.--
(1) Establishment and acceptance.--The Board may establish
and approve the acceptance of credit risk premiums with respect
to a loan guarantee under this Act in order to cover the cost,
as determined under section 504(b)(1) of the Federal Credit
Reform Act of 1990, of the loan guarantee. To the extent that
appropriations of budget authority are insufficient to cover
the cost, as so determined, of a loan guarantee under this Act,
credit risk premiums shall be accepted from a non-Federal
source under this subsection on behalf of the applicant for the
(2) Credit risk premium amount.--
(A) In general.--The Board shall determine the amount
of any credit risk premium to be accepted with respect
to a loan guarantee under this Act on the basis of--
(i) the financial and economic circumstances
of the applicant for the loan guarantee,
including the amount of collateral offered;
(ii) the proposed schedule of loan
(iii) the business plans of the applicant for
(iv) any financial commitment from a
broadcast signal provider; and
(v) the concurrence of the Director of the
Office of Management and Budget as to the
amount of the credit risk premium.
(B) Proportionality.--To the extent that
appropriations of budget authority are sufficient to
cover the cost, as determined under section 504(b)(1)
of the Federal Credit Reform Act of 1990, of loan
guarantees under this Act, the credit risk premium with
respect to each loan guarantee shall be reduced
(C) Payment of premiums.--Credit risk premiums under
this subsection shall be paid to an account (the
``Escrow Account'') established in the Treasury which
shall accrue interest and such interest shall be
retained by the account, subject to subparagraph (D).
(D) Deductions from escrow account.--If a default
occurs with respect to any loan guaranteed under this
Act and the default is not cured in accordance with the
terms of the underlying loan or loan guarantee
agreement, the Administrator, in accordance with
subsections (h) and (i) of section 5 of this Act, shall
liquidate, or shall cause to be liquidated, all assets
collateralizing such loan as to which it has a lien or
security interest. Any shortfall between the proceeds
of the liquidation net of costs and expenses relating
to the liquidation, and the guarantee amount paid
pursuant to this Act shall be deducted from funds in
the Escrow Account and credited to the Administrator
for payment of such shortfall. At such time as
determined under subsection (d)(2)(F) when all loans
guaranteed under this Act have been repaid or otherwise
satisfied in accordance with this Act and the
regulations promulgated hereunder, remaining funds in
the Escrow Account, if any, shall be refunded, on a pro
rata basis, to applicants whose loans guaranteed under
this Act were not in default, or where any default was
cured in accordance with the terms of the underlying
loan or loan guarantee agreement.
(i) Judicial Review.--The decision of the Board to approve or
disapprove the making of a loan guarantee under this Act shall not be
subject to judicial review.
SEC. 5. ADMINISTRATION OF LOAN GUARANTEES.
(a) In General.--The Administrator of the Rural Utilities Service (in
this Act referred to as the ``Administrator'') shall issue and
otherwise administer loan guarantees that have been approved by the
Board in accordance with sections 3 and 4 of this Act.
(b) Security for Protection of United States Financial Interests.--
(1) Terms and conditions.--An applicant shall agree to such
terms and conditions as are satisfactory, in the judgment of
the Board, to ensure that, as long as any principal or interest
is due and payable on a loan guaranteed under this Act, the
(A) shall maintain assets, equipment, facilities, and
operations on a continuing basis;
(B) shall not make any discretionary dividend
payments that impair its ability to repay obligations
guaranteed under this Act;
(C) shall remain sufficiently capitalized; and
(D) shall submit to, and cooperate fully with, any
audit of the applicant under section 8(a)(2) of this
(A) Existence of adequate collateral.--An applicant
shall provide the Board such documentation as is
necessary, in the judgment of the Board, to provide
satisfactory evidence that appropriate and adequate
collateral secures a loan guaranteed under this Act.
(B) Form of collateral.--Collateral required by
subparagraph (A) shall consist solely of assets of the
applicant, any affiliate of the applicant, or both
(whichever the Board considers appropriate), including
primary assets to be used in the delivery of signals
for which the loan is guaranteed.
(C) Review of valuation.--The value of collateral
securing a loan guaranteed under this Act may be
reviewed by the Board, and may be adjusted downward by
the Board if the Board reasonably believes such
adjustment is appropriate.
(3) Lien on interests in assets.--Upon the Board's approval
of a loan guarantee under this Act, the Administrator shall
have liens on assets securing the loan, which shall be superior
to all other liens on such assets, and the value of the assets
(based on a determination satisfactory to the Board) subject to
the liens shall be at least equal to the unpaid balance of the
loan amount covered by the loan guarantee, or that value
approved by the Board under section 4(d)(3)(B)(iii) of this
(4) Perfected security interest.--With respect to a loan
guaranteed under this Act, the Administrator and the lender
shall have a perfected security interest in assets securing the
loan that are fully sufficient to protect the financial
interests of the United States and the lender.
(5) Insurance.--In accordance with practices in the private
capital market, as determined by the Board, the applicant for a
loan guarantee under this Act shall obtain, at its expense,
insurance sufficient to protect the financial interests of the
United States, as determined by the Board.
(c) Assignment of Loan Guarantees.--The holder of a loan guarantee
under this Act may assign the loan guaranteed under this Act in whole
or in part, subject to such requirements as the Board may prescribe.
(d) Modification.--The Board may approve the modification of any term
or condition of a loan guarantee or a loan guaranteed under this Act,
including the rate of interest, time of payment of principal or
interest, or security requirements only if--
(1) the modification is consistent with the financial
interests of the United States;
(2) consent has been obtained from the parties to the loan
(3) the modification is consistent with the underwriting
criteria developed under section 4(g) of this Act;
(4) the modification does not adversely affect the interest
of the Federal Government in the assets or collateral of the
(5) the modification does not adversely affect the ability of
the applicant to repay the loan; and
(6) the National Telecommunications and Information
Administration has been consulted by the Board regarding the
(e) Performance Schedules.--
(1) Performance schedules.--An applicant for a loan guarantee
under this Act for a project covered by section 4(e)(1) of this
Act shall enter into stipulated performance schedules with the
Administrator with respect to the signals to be provided
through the project.
(2) Penalty.--The Administrator may assess against and
collect from an applicant described in paragraph (1) a penalty
not to exceed 3 times the interest due on the guaranteed loan
of the applicant under this Act if the applicant fails to meet
its stipulated performance schedule under that paragraph.
(f) Compliance.--The Administrator, in cooperation with the Board and
as the regulations of the Board may provide, shall enforce compliance
by an applicant, and any other party to a loan guarantee for whose
benefit assistance under this Act is intended, with the provisions of
this Act, any regulations under this Act, and the terms and conditions
of the loan guarantee, including through the submittal of such reports
and documents as the Board may require in regulations prescribed by the
Board and through regular periodic inspections and audits.
(g) Commercial Validity.--A loan guarantee under this Act shall be
(1) in the hands of an applicant on whose behalf the loan
guarantee is made, unless the applicant engaged in fraud or
misrepresentation in securing the loan guarantee; and
(2) as to any person or entity (or their respective successor
in interest) who makes or contracts to make a loan to the
applicant for the loan guarantee in reliance thereon, unless
such person or entity (or respective successor in interest)
engaged in fraud or misrepresentation in making or contracting
to make such loan.
(h) Defaults.--The Board shall prescribe regulations governing
defaults on loans guaranteed under this Act, including the
administration of the payment of guaranteed amounts upon default.
(i) Recovery of Payments.--
(1) In general.--The Administrator shall be entitled to
recover from an applicant for a loan guarantee under this Act
the amount of any payment made to the holder of the guarantee
with respect to the loan.
(2) Subrogation.--Upon making a payment described in
paragraph (1), the Administrator shall be subrogated to all
rights of the party to whom the payment is made with respect to
the guarantee which was the basis for the payment.
(3) Disposition of property.--
(A) Sale or disposal.--The Administrator shall, in an
orderly and efficient manner, sell or otherwise dispose
of any property or other interests obtained under this
Act in a manner that maximizes taxpayer return and is
consistent with the financial interests of the United
(B) Maintenance.--The Administrator shall maintain in
a cost-effective and reasonable manner any property or
other interests pending sale or disposal of such
property or other interests under subparagraph (A).
(j) Action Against Obligor.--
(1) Authority to bring civil action.--The Administrator may
bring a civil action in an appropriate district court of the
United States in the name of the United States or of the holder
of the obligation in the event of a default on a loan
guaranteed under this Act. The holder of a loan guarantee shall
make available to the Administrator all records and evidence
necessary to prosecute the civil action.
(2) Fully satisfying obligations owed the united states.--The
Administrator may accept property in satisfaction of any sums
owed the United States as a result of a default on a loan
guaranteed under this Act, but only to the extent that any cash
accepted by the Administrator is not sufficient to satisfy
fully the sums owed as a result of the default.
(k) Breach of Conditions.--The Administrator shall commence a civil
action in a court of appropriate jurisdiction to enjoin any activity
which the Board finds is in violation of this Act, the regulations
under this Act, or any conditions which were duly agreed to, and to
secure any other appropriate relief, including relief against any
affiliate of the applicant.
(l) Attachment.--No attachment or execution may be issued against the
Administrator or any property in the control of the Administrator
pursuant to this Act before the entry of a final judgment (as to which
all rights of appeal have expired) by a Federal, State, or other court
of competent jurisdiction against the Administrator in a proceeding for
(1) Application fee.--The Board shall charge and collect from
an applicant for a loan guarantee under this Act a fee to cover
the cost of the Board in making necessary determinations and
findings with respect to the loan guarantee application under
this Act. The amount of the fee shall be reasonable.
(2) Loan guarantee origination fee.--The Board shall charge,
and the Administrator may collect, a loan guarantee origination
fee with respect to the issuance of a loan guarantee under this
(3) Use of fees collected.--Any fee collected under this
subsection shall be used to offset administrative costs under
this Act, including costs of the Board and of the
(n) Requirements Relating to Affiliates.--
(1) Indemnification.--The United States shall be indemnified
by any affiliate (acceptable to the Board) of an applicant for
a loan guarantee under this Act for any losses that the United
States incurs as a result of--
(A) a judgment against the applicant or any of its
(B) any breach by the applicant or any of its
affiliates of their obligations under the loan
(C) any violation of the provisions of this Act, and
the regulations prescribed under this Act, by the
applicant or any of its affiliates;
(D) any penalties incurred by the applicant or any of
its affiliates for any reason, including violation of a
stipulated performance schedule under subsection (e);
(E) any other circumstances that the Board considers
(2) Limitation on transfer of loan proceeds.--An applicant
for a loan guarantee under this Act may not transfer any part
of the proceeds of the loan to an affiliate.
(o) Effect of Bankruptcy.--(1) Notwithstanding any other provision of
law, whenever any person or entity is indebted to the United States as
a result of any loan guarantee issued under this Act and such person or
entity is insolvent or is a debtor in a case under title 11, United
States Code, the debts due to the United States shall be satisfied
(2) A discharge in bankruptcy under title 11, United States Code,
shall not release a person or entity from an obligation to the United
States in connection with a loan guarantee under this Act.
SEC. 6. PROHIBITION ON USE OF FUNDS FOR SPECTRUM AUCTIONS.
Notwithstanding any other provision of this Act, no loan guarantee
under this Act may be granted or used to provide funds for the
acquisition of licenses for the use of spectrum in any competitive
bidding under section 309(j) of the Communications Act of 1934 (47
SEC. 7. PROHIBITION ON USE OF FUNDS BY INCUMBENT CABLE OPERATORS.
Notwithstanding any other provision of this Act, no loan guarantee
under this Act may be granted or used to provide funds for--
(1) the extension of any cable system to any area or areas
for which the cable operator of such cable system has a cable
franchise, if such franchise obligates the operator to extend
such system to such area or areas; or
(2) the upgrading or enhancement of the services provided
over any cable system, unless such upgrading or enhancement is
principally undertaken to extend services to areas outside of
the previously existing franchise area of the cable operator.
SEC. 8. ANNUAL AUDIT.
(a) Requirement.--The Comptroller General of the United States shall
conduct on an annual basis an audit of--
(1) the administration of the provisions of this Act; and
(2) the financial position of each applicant who receives a
loan guarantee under this Act, including the nature, amount,
and purpose of investments made by the applicant.
(b) Report.--The Comptroller General shall submit to the Congress a
report on each audit conducted under subsection (a).
SEC. 9. EXEMPTION FROM MUST CARRY REQUIREMENTS.
A facility of a satellite carrier, cable system, or other
multichannel video programming distributor that is financed with a loan
guaranteed under this Act and that delivers local broadcast signals in
a television market pursuant to the provisions of section 338, 614, or
615 of the Communications Act of 1934 (47 U.S.C. 338, 534, or 535)
shall not be required to carry in such market a greater number of local
broadcast signals than the number of such signals that is carried by
the cable system serving the largest number of subscribers in such
SEC. 10. ADDITIONAL AVAILABILITY OF BROADCAST SIGNALS IN RURAL AREAS.
(a) Opening of Filing for Additional Translator and Low-Power
Stations.--The Federal Communications Commission shall, in accordance
with its regulations, open a filing period window for the acceptance of
applications for television translator stations and low-power
television stations in rural areas.
(b) Deadlines for Notice.--The Commission shall announce the filing
period window no less than 90 days prior to the commencement of the
SEC. 11. PREVENTION OF INTERFERENCE TO SATELLITE SERVICES APPLYING FOR
RURAL LOAN GUARANTEES.
(a) Testing for Harmful Interference.--The Board shall approve no
loan guarantee until the Federal Communications Commission has
determined on the basis of a technical demonstration or, if infeasible,
an analysis, that any terrestrial service proposing to operate in the
satellite broadcast frequency band will not cause harmful interference
to any satellite service eligible for a loan guarantee under the
provisions of this Act.
(b) Technical Demonstration.--For the purpose of making the
determination required by subsection (a), the demonstration or analysis
shall be conducted and the results analyzed by an engineering firm or
other qualified entity that is independent of any interested party.
Such demonstration and resulting analysis shall be subject to public
notice and comment, and shall be completed within 90 days after the
date of enactment of this Act.
(c) Terrestrial Uses of Satellite Frequencies Prohibited.--In order
to ensure that there is no harmful interference to satellite services
eligible for loan guarantees under the provisions of this Act, the
Federal Communications Commission shall not allocate spectrum for, or
issue any license or other authorization with respect to, any
terrestrial service proposing to operate in the satellite broadcast
frequency band during the 90-day period described in subsection (b).
(1) Direct broadcast satellite service frequency band.--The
term ``satellite broadcast frequency band'' means the band of
frequencies at 12.2 to 12.7 gigahertz.
(2) Satellite services.--The term ``satellite services''
(A) all systems licensed by the Commission to operate
in the direct broadcast satellite services; and
(B) all nongeostationary orbit fixed satellite
service systems that may be licensed by the
(i) that are authorized, on the date of
enactment of this Act, to use the satellite
broadcast frequency band; or
(ii) for which applications to use such
frequency band are pending before the
Commission on such date.
SEC. 12. IMPROVED CELLULAR SERVICE IN RURAL AREAS.
(a) Reinstatement of Applicants as Tentative Selectees.--
(1) In General.--Notwithstanding the order of the Federal
Communications Commission in the proceeding described in
paragraph (3), the Commission shall--
(A) reinstate each applicant as a tentative selectee
under the covered rural service area licensing
(B) permit each applicant to amend its application,
to the extent necessary to update factual information
and to comply with the rules of the Commission, at any
time before the Commission's final licensing action in
the covered rural service area licensing proceeding.
(2) Exemption from petitions to deny.--For purposes of the
amended applications filed pursuant to paragraph (1)(B), the
provisions of section 309(d)(1) of the Communications Act of
1934 (47 U.S.C. 309(d)(1)) shall not apply.
(3) Proceeding.--The proceeding described in this paragraph
is the proceeding of the Commission In re Applications of
Cellwave Telephone Services L.P, Futurewave General Partners
L.P., and Great Western Cellular Partners, 7 FCC Rcd No. 19
(b) Continuation of License Proceeding; Fee Assessment.--
(1) Award of licenses.--The Commission shall award licenses
under the covered rural service area licensing proceeding
within 90 days after the date of the enactment of this Act.
(2) Service requirements.--The Commission shall provide that,
as a condition of an applicant receiving a license pursuant to
the covered rural service area licensing proceeding, the
applicant shall provide cellular radiotelephone service to
subscribers in accordance with sections 22.946 and 22.947 of
the Commission's rules (47 CFR 22.946, 22.947); except that the
time period applicable under section 22.947 of the Commission's
rules (or any successor rule) to the applicants identified in
subparagraphs (A) and (B) of subsection (d)(1) shall be 3 years
rather than 5 years and the waiver authority of the Commission
shall apply to such 3-year period.
(3) Calculation of license fee.--
(A) Fee required.--The Commission shall establish a
fee for each of the licenses under the covered rural
service area licensing proceeding. In determining the
amount of the fee, the Commission shall consider--
(i) the average price paid per person served
in the Commission's Cellular Unserved Auction
(Auction No. 12); and
(ii) the settlement payments required to be
paid by the permittees pursuant to the consent
decree set forth in the Commission's order, In
re the Tellesis Partners (7 FCC Rcd 3168
(1992)), multiplying such payments by two.
(B) Notice of fee.--Within 30 days after the date an
applicant files the amended application permitted by
subsection (a)(1)(B), the Commission shall notify each
applicant of the fee established for the license
associated with its application.
(4) Payment for licenses.--No later than 18 months after the
date that an applicant is granted a license, each applicant
shall pay to the Commission the fee established pursuant to
paragraph (3) for the license granted to the applicant under
(5) Auction authority.--If, after the amendment of an
application pursuant to subsection (a)(1)(B), the Commission
finds that the applicant is ineligible for grant of a license
to provide cellular radiotelephone services for a rural
service area or the applicant does not meet the requirements
under paragraph (2) of this subsection, the Commission shall
grant the license for which the applicant is the tentative
selectee (pursuant to subsection (a)(1)(B) by competitive
bidding pursuant to section 309(j) of the Communications Act
of 1934 (47 U.S.C. 309(j)).
(c) Prohibition of Transfer.--During the 5-year period that begins on
the date that an applicant is granted any license pursuant to
subsection (a), the Commission may not authorize the transfer or
assignment of that license under section 310 of the Communications Act
of 1934 (47 U.S.C. 310). Nothing in this Act may be construed to
prohibit any applicant granted a license pursuant to subsection (a)
from contracting with other licensees to improve cellular telephone
(d) Definitions.--For the purposes of this section, the following
definitions shall apply:
(1) Applicant.--The term ``applicant'' means--
(A) Great Western Cellular Partners, a California
general partnership chosen by the Commission as
tentative selectee for RSA #492 on May 4, 1989;
(B) Monroe Telephone Services L.P., a Delaware
limited partnership chosen by the Commission as
tentative selectee for RSA #370 on August 24, 1989
(formerly Cellwave Telephone Services L.P.); and
(C) FutureWave General Partners L.P., a Delaware
limited partnership chosen by the Commission as
tentative selectee for RSA #615 on May 25, 1990.
(2) Commission.--The term ``Commission'' means the Federal
(3) Covered rural service area licensing proceeding.--The
term ``covered rural service area licensing proceeding'' means
the proceeding of the Commission for the grant of cellular
radiotelephone licenses for rural service areas #492 (Minnesota
11), #370 (Florida 11), and #615 (Pennsylvania 4).
(4) Tentative selectee.--The term ``tentative selectee''
means a party that has been selected by the Commission under a
licensing proceeding for grant of a license, but has not yet
been granted the license because the Commission has not yet
determined whether the party is qualified under the
Commission's rules for grant of the license.
SEC. 13. TECHNICAL AMENDMENT.
Section 339(c) of the Communications Act of 1934 (47 U.S.C. 339(c))
is amended by adding at the end the following new paragraph:
``(5) Definition.--Notwithstanding subsection (d)(4), for
purposes of paragraphs (2) and (4) of this subsection, the term
`satellite carrier' includes a distributor (as defined in
section 119(d)(1) of title 17, United States Code), but only if
the satellite distributor's relationship with the subscriber
includes billing, collection, service activation, and service
SEC. 14. DEFINITIONS.
In this Act:
(1) Affiliate.--The term ``affiliate''--
(A) means any person or entity that controls, or is
controlled by, or is under common control with, another
person or entity; and
(B) may include any individual who is a director or
senior management officer of an affiliate, a
shareholder controlling more than 25 percent of the
voting securities of an affiliate, or more than 25
percent of the ownership interest in an affiliate not
organized in stock form.
(2) Common terms.--Except as provided in paragraph (1), any
term used in this Act that is defined in the Communications Act
of 1934 (47 U.S.C. 151 et seq.) has the meaning given that term
in the Communications Act of 1934.
SEC. 15. AUTHORIZATIONS OF APPROPRIATIONS.
(a) Cost of Loan Guarantees.--For the cost of the loans guaranteed
under this Act, including the cost of modifying the loans, as defined
in section 502 of the Congressional Budget Act of 1974 (2 U.S.C. 661a),
there are authorized to be appropriated for fiscal years 2001 through
2006, such amounts as may be necessary.
(b) Cost of Administration.--There is hereby authorized to be
appropriated such sums as may be necessary to carry out the provisions
of this Act, other than to cover costs under subsection (a).
(c) Availability.--Any amounts appropriated pursuant to the
authorizations of appropriations in subsections (a) and (b) shall
remain available until expended.
SEC. 16. SUNSET.
No loan guarantee may be approved under this Act after December 31,
Purpose and Summary
The purpose of H.R. 3615, the Rural Local Broadcast Signal
Act, is to authorize the Federal government to subsidize the
construction of cable, satellite and other multichannel video
programming distribution (``MVPD'') systems that can deliver
local broadcast signals to unserved areas.
Background and Need for Legislation
Recent developments in the MVPD Market. The Federal
Communications Commission's (``FCC's'') recent report on the
state of competition in the MVPD market found that incumbent
cable operators maintain a dominant share of the market (82
percent). But satellite television, direct broadcast satellite
(``DBS'') service in particular, is gaining ground. The report
found that between 1998 and 1999, DBS subscribership rose from
7.2 million households to 10.1 million households, which
accounts for 12.5 percent of all MVPD subscribers.
The FCC's report also notes that satellite service will
likely continue to erode cable's dominant market share, due in
large part to the fact that Congress last year enacted the
Satellite Home Viewer Improvements Act (``SHVIA'') of 1999.
SHVIA, among other things, provides satellite carriers with a
compulsory license to carry local broadcast signals into their
market of origination (also known as ``local-into-local'').
Thus, in markets where carriers offer local-into-local,
consumers will have a complete alternative to cable. In fact,
the largest satellite carriers have already begun providing
local-into-local to the largest markets. DirecTV currently
provides local-into-local to 23 metropolitan markets, and
EchoStar currently provides local-into-local to 26 metropolitan
markets. In the long run, DirecTV and Echostar will be offering
local-into-local to about 70 percent of American households.
For the remaining 30 percent of American households, most
of which are located in sparsely populated rural areas,
consumers will still have the same options that existed prior
to SHVIA. In other words, most of these consumers will have
access to their local broadcast signals through either over-
the-air reception and/or cable retransmission of local signals.
Industry analysts and the FCC note that probably less than one
percent of all television households in the United States
(e.g., somewhere between 800,000 and 1 million) have no access
to an over-the-air signal. In addition, analysts note that,
while only 65 percent of American homes subscribe to cable
service, 97 percent of all American homes are passed by a cable
operator that offers MVPD access to local broadcast signals.
Nevertheless, the likelihood that incumbent satellite
carriers will not provide local-into-local in many rural areas
has led some to call for government intervention. H.R. 3615,
and its companion in the Senate (S. 2097), would authorize the
Rural Utilities Service (an agency within the Department of
Agriculture) to subsidize the MVPD industry's deployment and/or
modification of multichannel systems that will enable the
delivery of local broadcast signals to rural areas.
The Rural Utilities Service (RUS). Among other things, the
RUS (which used to be known as the Rural Electrification
Administration (``REA'')) is charged with making direct loans,
as well as guaranteeing private loans, to rural telephone
companies and rural electric utilities for the purpose of
developing local infrastructure. The Inspector General (``IG'')
for the Department of Agriculture recently completed two audits
of the telephone and electric utility loan programs. The IG's
audit of the telephone loan program, which was released in
February 2000, found:
that notwithstanding the General Accounting
Office's similar findings in 1998, the ``RUS continues
to make and service loans to financially strong
borrowers who likely could obtain financing from other
that the ``RUS has not established
procedures and requirements for financially strong
borrowers to seek credit from other sources,'' and,
that the RUS has not ``established a loan
graduation program for borrowers who no longer need
With regard to the RUS' electric utility loan program, the
IG's March 2000 audit of that program examined the outside
investment activity of utilities that had received direct or
guaranteed financing from the RUS. Current law provides that an
electric utility that borrows from the RUS is permitted to make
outside investments of up to 15 percent of the utility's total
value without RUS approval--provided the utility invests in the
rural community in which it is located.
But the IG's audit of the electric utility loan program
found that most RUS borrowers are failing to re-invest in their
rural communities. The audit estimated that, based on a
statistical sample from 1997, the electric utility borrowers
made approximately $10.9 billion in outside investments, but
that these same borrowers invested only one-half of one percent
of that sum in rural infrastructure development. The audit
concluded that borrowers invested primarily in the stock and
bond markets, and that some borrowers made no investments
whatsoever in rural infrastructure development.
The Subcommittee on Telecommunications, Trade, and Consumer
Protection held a legislative hearing on March 16, 2000. The
Subcommittee received testimony from: The Honorable Bob
Goodlatte, M.C., the sponsor of H.R. 3615; Mr. Dan L. Crippen,
Director, Congressional Budget Office (CBO); Mr. Christopher A.
McLean, Acting Administrator, Rural Utilities Service; Mr.
Roger C. Viadero, Inspector General, Department of Agriculture;
and Mr. R. Kent Parsons, Vice President, National Translators
On March 23, 2000, the Subcommittee on Telecommunications,
Trade, and Consumer Protection met in open markup session and
approved H.R. 3615, the Rural Local Broadcast Signal Act for
Full Committee consideration, as amended, by a voice vote. The
Full Commerce Committee met in open markup session on March 29,
2000, and ordered H.R. 3615 reported, as amended, by a voice
Clause 3(b) of rule XIII of the Rules of the House requires
the Committee to list the record votes on the motion to report
legislation and amendments thereto. There were no record votes
taken in connection with ordering H.R. 3615 reported. A motion
by Mr. Bliley to order H.R. 3615 reported to the House, without
amendment, was agreed to by a voice vote.
The following amendments were agreed to by voice vote:
An amendment by Mr. Tauzin, No. 3, limiting the
number of local broadcast signals that must be carried
by a multichannel video programming distributor in a
particular market to no more than the number of local
broadcast signals carried by the cable system serving
the largest number of subscribers in the market;
An amendment by Mr. Oxley, No. 8, conditioning
approval of any loan guarantees under the bill to the
FCC conducting an independent test of harmful
interference to satellite services that are eligible
for loan guarantees (The amendment was modified to
change the period in which the independent test was to
occur from 180 days to 90 days by unanimous consent);
An amendment by Mrs. Cubin, No. 11, redefining the
term ``satellite carrier'' for the purpose of
determining which entities may submit consumer waivers
for distant signal eligibility.
The following amendment was not agreed to by voice vote:
An amendment by Mr. Cox, No. 2, imposing a $200
million cap on appropriations for loan subsidy costs
under the bill.
The Committee took other action on the following
An amendment by Mr. Markey, No. 1, requiring that
borrowers seek loans from commercial lenders on
reasonable terms before obtaining guaranteed loans from
the Rural Utilities Service (RUS), was not agreed to by
a division vote of 6 yeas and 24 nays;
An amendment by Mrs. Wilson, No. 6, carving out
public booster and translator stations, as well as
instructional television fixed service (ITFS), from the
FCC's competitive bidding authority, was withdrawn by
An amendment by Mr. Stupak, No. 9, adding a new title
of the bill directing the FCC to initiate a proceeding
to provide federal universal service support for the
deployment of broadband service to eligible rural
communities, was ruled nongermane by the Chair; and,
An amendment by Mr. Lazio, No. 12, authorizing
appropriations of $10 million for fiscal year 2000 for
public television stations' transition to digital
television, was withdrawn by unanimous consent.
The Committee took record votes on the following
A substitute amendment by Mr. Markey for the
amendment offered by Mr. Tauzin, No. 3a, providing that
MVPDs that obtain guaranteed loans are not subject to
must-carry requirements for any local broadcast
station, unless that station broadcasts 7 hours a week
of local news, public affairs, sports, weather, or
other locally-originated programming;
An amendment by Mr. Cox, No. 4, requiring the Board
to collect a ``loan guarantee origination fee'' to
cover the administrative costs of the program;
An amendment by Mr. Largent, No. 5, defining the term
``unserved areas'' to be those areas outside local
broadcast stations' grade A contours and those areas
where consumers have no access to any MVPD that offers
local broadcast signals;
An amendment by Mr. Cox, No. 7, requiring that at
least one of the officers or directors of an applicant
for a loan guarantee under the bill personally
guarantee the repayment of sums owed the United States
as a result of default on the loan; and,
An amendment by Mr. Cox, No. 10, accelerating the
sunset date for the program from 2006 to 2004.
The vote totals and names of Members voting for and against
each amendment follow:
Committee Oversight Findings
Pursuant to clause 3(c)(1) of rule XIII of the Rules of the
House of Representatives, the Committee held a legislative
hearing and made findings that are reflected in this report.
Committee on Government Reform Oversight Findings
Pursuant to clause 3(c)(4) of rule XIII of the Rules of the
House of Representatives, no oversight findings have been
submitted to the Committee by the Committee on Government
New Budget Authority, Entitlement Authority, and Tax Expenditures
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee concurs in the
finding of the Congressional Budget Office that H.R. 3615, the
Rural Local Broadcast Signal Act, would result in new or
increased budget authority, entitlement authority, or tax
expenditures or revenues as described in the cost estimate
prepared pursuant to section 402 of the Congressional Budget
Act of 1974.
Committee Cost Estimate
The Committee adopts as its own the cost estimate prepared
by the Director of the Congressional Budget Office pursuant to
section 402 of the Congressional Budget Act of 1974.
Congressional Budget Office Estimate
Pursuant to clause 3(c)(3) of rule XIII of the Rules of the
House of Representatives, the following is the cost estimate
provided by the Congressional Budget Office pursuant to section
402 of the Congressional Budget Act of 1974:
Congressional Budget Office,
Washington, DC, April 6, 2000.
Hon. Tom Bliley,
Chairman, Committee on Commerce,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 3615, the Rural
Local Broadcast Signal Act.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contacts are Mark Hadley
and Kathleen Gramp (for federal costs), and Shelley Finlayson
(for the state and local impact).
Barry B. Anderson
(For Dan L. Crippen, Director).
H.R. 3615--Rural Local Broadcast Signal Act
Summary: H.R. 3615 would establish a loan guarantee program
for certain companies to provide local television service to
areas of the country that do not receive local television
stations from satellite companies. The bill would authorize the
Administrator of the Rural Utilities Service (RUS) at the
Department of Agriculture to guarantee up to 80 percent of
private loans authorized to be made to qualified borrowers. The
bill would authorize the appropriation of amounts necessary for
the costs of the loan guarantees for up to $1 billion of
private borrowing, and associated administrative expenses.
Qualifying loans would be payable in full within the lesser of
25 years or the useful life of the assets purchased. The
authority to guarantee loans would be contingent upon future
appropriation action and would expire on December 31, 2006.
Other provisions in the bill would direct the Federal
Communications Commission (FCC) to allow certain television
stations to file license applications, award rural cellular
telephone licenses to selected entities, and conduct a study
related to direct broadcast services. Finally, the bill would
change the definition of satellite carriers under
telecommunications law to include distributors of satellite
television services, which would allow customers to receive
distant network signals.
CBO estimates that implementing H.R. 3615 would increase
discretionary spending by a total of $210 million over the
2000-2005 period, assuming appropriation of the necessary
amounts. We estimate that provisions in section 11 regarding
rural cellular licenses would reduce offsetting receipts (a
form of direct spending) by about $1 million in 2001. The
provision in section 14 that would redefine the term
``satellite carrier'' would have a negligible affect on
collections and distributions made by the Copyright Office.
Because H.R 3615 would affect direct spending and receipts,
pay-as-you-go procedures would apply. H.R. 3615 contains no
intergovernmental or private-sector mandates as defined in the
Unfunded Mandates Reform Act (UMRA) and would not affect the
budgets of state, local, or tribal governments.
Estimated cost to the Federal Government: For the purpose
of this estimate, CBO assumes that H.R. 3615 will be enacted in
fiscal year 2000 and that funds will be provided for its
implementation each year. The estimated budgetary impact of
H.R. 3615 is shown in the following table. The costs of this
legislation fall within budget function 370 (commerce and
By fiscal year, in millions of dollars--
2000 2001 2002 2003 2004 2005
SPENDING SUBJECT TO APPROPRIATION
Estimated Authorization Level................................... 6 196 2 2 2 2
Estimated Outlays............................................... 3 129 72 2 2 2
CHANGES IN DIRECT SPENDING
Estimated Budget Authority...................................... 0 1 (\1\) (\1\) (\1\) (\1\)
Estimated Outlays............................................... 0 1 (\1\) (\1\) (\1\) (\1\)
CHANGES IN REVENUES
Estimated Revenue Increase...................................... 0 (\1\) (\1\) (\1\) (\1\) (\1\)
\1\ Less than $500,000.
Spending subject to appropriation
CBO estimates that implementing the loan program authorized
by this bill would cost $210 million over the 2001-2005 period,
subject to appropriation of the necessary amounts. Under
procedures established by the Federal Credit Reform Act of
1990, the subsidy cost of a loan guarantee is the estimated
long-term cost to the government, calculated on a net present
value basis (excluding administrative costs). We estimate that
the loan guarantees provided under the bill would cost about 20
percent of the total amount borrowed--or $200 million, subject
to appropriation of the necessary funds. The bill would
authorize the Administrator of the RUS to charge fees, which
would offset some of the subsidy costs, but this estimate
assumes no such fees would be charged.
To prepare this estimate, CBO consulted with industry
experts and investment analysts and examined the credit ratings
of firms in the satellite television and related industries.
The information on credit ratings is useful because different
credit ratings reflect analysts' expectations of defaults.
Based on this information, we assume that the rural television
loanslikely to be guaranteed under this bill would have a
credit risk comparable to debt rated as ``B'' and ``CCC,'' which
typically have default rates ranging from about 30 percent to 45
In addition, CBO estimates that administering the loan
program would cost about $5 million in 2000 and about $2
million in each subsequent year. The bill would require the
Secretary of Agriculture to charge fees to offset some of the
administrative costs. Based on the amount of fees collected
under other federal credit programs, CBO expects the RUS would
charge a 0.5 percent fee and collect $5 million in 2001.
Finally, H.R. 3615 would direct the FCC to conduct a study
within 90 days after enactment on the compatibility of
satellite and terrestrial services in the 12.2 gigahertz to
12.7 gigahertz band now used for direct broadcast services.
According to the FCC, this study would cost about $500,000 in
2000. Under current law, the FCC is authorized to collect fees
to cover costs related to its regulatory, enforcement, and
other functions. Because such fees typically are assessed in
June, the commission probably would be unable to offset this
additional expense until the next billing cycle. Hence,
assuming appropriation of the necessary amounts in 2000 and
assuming the commission could collect the fees in 2001, CBO
estimates that this provision would increase discretionary
outlays by $500,000 in fiscal year 2000 but reduce outlays by a
corresponding amount in 2001.
Direct spending and revenues
H.R. 3615 would designate certain companies for the award
of cellular telephone licenses in three rural service areas:
one in the Florida Keys, one in northeastern Pennsylvania, and
one in southern Minnesota. These companies would be awarded the
licenses within 90 days after enactment if they satisfy certain
license requirements and agree to pay a fee within 18 months
after receiving the licenses. For purposes of this estimate,
CBO assumes that the companies would comply with these
conditions, and we estimate that offsetting receipts from the
fees would be $1 million less than the amounts that would have
been collected if the licenses were awarded through competitive
bidding. (Offsetting receipts are a credit against direct
spending.) Thus, this provision would increase direct spending
by about $1 million in 2001.
Under current law, satellite carriers pay a monthly royalty
fee for each subscriber to the U.S. Copyright Office for the
right to retransmit distant network signals by satellite to
certain subscribers for private home viewing. This fee is
recorded on the budget as a governmental receipt (i.e., a
revenue). The Copyright Office later distributes (without
further appropriation) the fees with interest to those who own
copyrights on the material retransmitted by satellite. Such
fees are about $0.15 per subscriber per channel per month
through December 31, 2004. H.R. 3615 would expand the
definition of satellite carriers to include satellite
distributors. This would allow some customers of such satellite
distributors to receive distant network signals. Based on
information from the satellite broadcast industry, CBO
estimates that the additional royalty fees collected and
subsequently distributed by the Copyright Office for such
signals would be less than $500,000 a year over the 2000-2005
Pay-as-you-go considerations: The Balanced Budget and
Emergency Deficit Control Act sets up pay-as-you-go procedures
for legislation affecting direct spending or receipts. The net
changes in outlays that are subject to pay-as-you-go procedures
are shown in the following table. For the purposes of enforcing
pay-as-you-go procedures, only the effects in the current year,
the budget year, and the succeeding four years are counted.
By fiscal year, in millions of dollars--
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Changes in outlays................. 0 1 0 0 0 0 0 0 0 0 0
Changes in receipts................ Not applicable
Intergovernmental and private-sector impact: H.R. 3615
contains no intergovernmental or private-sector mandates as
defined in UMRA and would not affect the budgets of state,
local, or tribal governments. These governments may experience
some minimal benefits to the extent that they wish to file
applications for television translator stations and low-power
television stations in rural areas. The bill would require the
FCC to establish and announce an open filing period during
which some applications could be filed.
Previous CBO estimates: On March 1, 2000, CBO transmitted a
cost estimate for H.R. 3615, as ordered reported by the House
Committee on Agriculture on February 16, 2000. That bill would
authorize the RUS to guarantee 100 percent of the value of
loans made for this purpose--up to $1.25 billion in private
borrowing. It also would allow the government's guarantee to be
subordinate to third-party financing. CBO estimated that
implementing the Agriculture Committee's version of H.R. 3615
would cost $365 million over the 2000-2005 period, subject to
appropriate of the necessary funds.
On March 15, 2000, CBO transmitted a cost estimate for S.
2097, the Launching Our Communities' Access to Local Television
Act of 2000, as ordered reported by the Senate Committee on
Banking, Housing, and Urban Affairs on March 8, 2000. That bill
would authorize the RUS to guarantee 80 percent of the value of
loans made for this purpose--up to $1.25 billion in private
borrowing. CBO estimated that implementing S. 2097 would cost
$265 million over the 2000-2005 period, subject to
appropriation of the necessary funds.
Estimate prepared by: Federal costs: Mark Hadley and
Kathleen Gramp. Federal revenues: Hester Grippando. Impact on
State, local, and tribal governments: Shelley Finlayson. Impact
on the private sector: Jean Wooster.
Estimate approved by: Peter H. Fontaine, Deputy Assistant
Director for Budget Analysis.
Federal Mandates Statement
The Committee adopts as its own the estimate of Federal
mandates prepared by the Director of the Congressional Budget
Office pursuant to section 423 of the Unfunded Mandates Reform
Advisory Committee Statement
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
Constitutional Authority Statement
Pursuant to clause 3(d)(1) of rule XIII of the Rules of the
House of Representatives, the Committee finds that the
Constitutional authority for this legislation is provided in
Article I, section 8, clause 3, which grants Congress the power
to regulate commerce with foreign nations, among the several
States, and with the Indian tribes.
Applicability to Legislative Branch
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of section
102(b)(3) of the Congressional Accountability Act.
Section-by-Section Analysis of the Legislation
Section 1. Short title; table of contents
Section 1 provides the short title of the bill, the ``Rural
Local Broadcast Signal Act,'' and lists a table of contents.
Section 2. Purpose
Section 2 establishes the purpose of the Act as
facilitating access, on a technologically neutral basis and by
December 31, 2006, to signals of local television stations for
households located in unserved areas.
Section 3. Rural Television Loan Guarantee Board
Section 3 establishes and describes the responsibilities of
the Rural Television Loan Guarantee Board (``the Board''). The
Board is made up of three members: the Secretary of the
Treasury, the Secretary of Agriculture, and the Secretary of
Commerce. Each members of the Board may appoint a designee,
provided the designee is an officer of the United States who
has been appointed by the President with the advice and consent
of the Senate.
The Board is responsible for determining which entities
will receive loan guarantees under the Act. The Board must
consult with such departments and agencies of the Federal
Government as it considers appropriate to carry out its
responsibilities under the Act, and these departments and
agencies are required to assist the Board. Loan guarantees may
be made only with the approval of a majority of the Board.
Section 4. Approval of loan guarantees
Section 4 authorizes the Board to approve loan guarantees.
The Administrator of the Rural Utilities Service (RUS) will
prescribe regulations to implement the Act under the direction
of and for approval by the Board. The regulations will include
provisions for the time period to review applications,
safeguards against evasion of the provisions of the Act, the
description of who will be considered an applicant, and
requirements for the submission of documents and other
information necessary for the administration of the provisions
of the Act. The Board is authorized to approve loan guarantees
only to the extent that funds for this purpose are provided for
in advance in appropriations acts.
Section 4 also stipulates the requirements that must be met
in order for a loan guarantee to be approved. Specifically, the
loan to be guaranteed must be used to finance the means by
which local television signals will be delivered principally to
an unserved area, and the proceeds from such loan may not be
used for operating, advertising, or promotional expenses. The
proposed project, as determined by the National
Telecommunications and Information Administration (NTIA), may
not have a substantial adverse effect on competition that
outweighs the benefits of the proposed project.
In addition, the proposed project, in the estimation of the
NTIA, must be commercially viable. The Committee expects that,
in assessing commercial viability, NTIA will ensure that the
loan applicant has demonstrated that the proposed project will
be forward compatible with the conversion to digital
television. To this end, NTIA and the Board must determine that
the loan applicant has a plan that demonstrates that the
proposed local television signal delivery system will be
forward compatible and in compliance with the digital
television rollout requirement in section 336 of the
Communications Act of 1934, as amended (47 U.S.C. Sec. 336).
The loan must also be provided by certain qualifying
lenders, including depository institutions that are insured by
the Federal Deposit Insurance Corporation. The loan may not be
for a term longer than 25 years or the economically useful life
of the asset, whichever is less.
Other requirements for approval of a loan guarantee include
a written determination that the collateral is sufficient to
protect U.S. financial interests. To this end, the Board must
determine that the collateral is equal to the unpaid balance of
the loan amount covered by the loan guarantee. If such
collateral is of a lower amount, then the collateral of an
affiliate of the applicant must be added to the existing
collateral. If necessary to meet requirements for sufficient
collateral under the Act, the assets of the applicant and all
assets from any affiliate can be required. Finally, the Board
must determine in writing that all necessary and required
regulatory approvals have been received for the loan and the
project that is associated with the loan, that the loan would
not have been available on reasonable terms and conditions
without the guarantee provided under the Act, and that there is
a reasonable expectation by the Board that the loan will be
The Board will prioritize applicants for loan guarantees
using certain criteria. The Board's chief priority will be for
projects that serve the greatest number of households in
unserved areas. The Board must also consider the cost per
household served for the proposed projects. The Board may not
approve a loan guarantee for a project that is designed
primarily to serve one or more of the 40 most populated
designated market areas.
The aggregate value of all loans for which loan guarantees
may be issued under this Act cannot exceed $1 billion, but
otherwise there is no minimum or maximum value required for a
loan guarantee. The Board may guarantee up to 80 percent of
that portion of a loan that will be used to provide local
television signals and that otherwise meets the requirements
established by the Board and the Act. The 80 percent loan
guarantee may take one of two forms. The guarantee may
represent up to 80 percent of a loan that comprises all (100
percent) of the debt associated with a project meeting the
purposes of the Act. Alternatively, the guarantee may represent
a full guarantee (100 percent) of a loan that comprises up to
80 percent of the debt associated with a project. Under this
second scenario, the same lender must provide all of the
financing for the project, including both the guaranteed and
the unguaranteed portions.
The Board also is authorized to establish and accept credit
risk premiums with respect to loan guarantees under the Act. To
the extent appropriations of budget authority are not
sufficient to cover the cost of loan guarantees under the Act,
the Board must require credit risk premiums from applicants to
cover this shortfall. Credit risk premiums will be paid into an
account established in the Treasury and shall accrue interest.
The Board shall use the proceeds of this account to cover any
shortfall between a guaranteed amount paid pursuant to the Act
and the net proceeds earned upon liquidation of all assets used
as collateral for the loan. When all loans guaranteed by the
Act have been repaid or otherwise satisfied, the Board will
refund any remainder in the account to those borrowers who did
not default or who cured any default, on a pro rata basis.
Section 5. Administration of loan guarantees
Section 5 provides that the Administrator of the Rural
Utilities Service (``Administrator'') will be responsible for
administering loan guarantees issued pursuant to the Act. The
Administrator will enforce the terms and conditions specified
by the Board and monitor the performance of loans guaranteed by
The Administrator will have superior status to all other
lienholders on assets used to secure a loan guaranteed under
the Act and a perfected security interest in such assets. The
Administrator must also ensure that an applicant has obtained
sufficient insurance. The Board may approve the modification of
a loan guarantee under this Act, provided the Board satisfies
certain criteria. The Administrator must establish performance
schedules with all applicants, and impose penalties for failure
to meet such schedules. The Administrator mustalso enforce
compliance with this Act and the provisions of a loan guarantee.
The Board is required to establish rules governing defaults
on loans guaranteed under the Act. In the event of default, all
property or related interests must be sold or disposed of in an
orderly and efficient manner so as to maximize return to the
taxpayer. The Administrator is authorized to accept property as
payment of amounts owed to the United States, but only to the
extent that the obligation is not fully satisfied by cash.
The Board is required to charge and collect an application
fee, and must also charge a loan origination fee. The fees
collected under the Act shall offset its administrative costs.
Affiliates of an applicant must indemnify the United States for
any losses incurred by the United States.
Notwithstanding any other provision of law, if any person
or entity indebted to the United States as a result of this Act
files for bankruptcy protection, the person's or entity's debts
due to the United States must be satisfied first. A discharge
in bankruptcy will not release a person or entity from
obligations under this Act.
Section 6. Prohibition on use of funds for spectrum auctions
Section 6 provides that no loan guarantee under this Act
may be granted or used to provide funds for the acquisition of
licenses for the use of spectrum in an FCC auction.
Section 7. Prohibition on use of funds by incumbent cable operators
Section 7 provides that no loan guarantee under this Act
may be granted or used to provide funds for either (1) the
extension of any cable system to any area or areas for which
the cable operator of such cable system has a cable franchise,
if such franchise obligates the operator to extend such system
to such area or areas; or (2) the upgrading or enhancement of
the services provided over any cable system, unless such
upgrading or enhancement is principally undertaken to extend
services to areas outside of the previously existing franchise
area of the cable operator.
Section 8. Annual audit
Section 8 requires the General Accounting Office (GAO) to
conduct an annual audit of (1) the loan guarantee program, and
(2) the financial position of each applicant who receives a
loan guarantee under this Act, including the nature, amount,
and purpose of investments made by the applicant. The GAO is
required to submit a report of each audit to Congress.
Section 9. Exemption from must carry requirements
Section 9 establishes that a facility of a satellite
carrier, cable system, or other multichannel video programming
distributor that is financed with a loan guaranteed under this
Act and that delivers local broadcast signals in a television
market pursuant to the provisions of section 338, 614, or 615
of the Communications Act of 1934 (47 U.S.C. Sec. Sec. 338,
534, or 535) is not required to carry in such market a greater
number of local broadcast signals than the number of such
signals that is carried by the cable system serving the largest
number of subscribers in such market.
Section 10. Additional availability of broadcast signals in rural areas
Section 10 directs the FCC to open a filing period window
for the acceptance of applications for television translator
stations and low-power television stations in rural areas.
Section 11. Prevention of interference to satellite services applying
for rural loan guarantees
Section 11 forbids the Board from approving a loan
guarantee under the Act until the FCC has determined on the
basis of a technical demonstration or, if infeasible, an
analysis, that any terrestrial service proposing to operate in
the satellite broadcast frequency band will not cause harmful
interference to any satellite service eligible for a loan
guarantee under the Act.
Section 11 also requires that the technical demonstration
or analysis be both conducted and analyzed by an independent
engineering firm or other qualified entity. The independent
demonstration and analysis must be subject to public notice and
comment, and be completed within 90 days after the date of
enactment. During that 90-day period, to ensure no harmful
interference to eligible satellite services, the FCC is
precluded from allocating spectrum for, or issuing licenses to,
any terrestrial service proposing to operate in the satellite
broadcast frequency band.
Section 12. Improved cellular service in rural areas
Section 12 directs the FCC to tentatively reinstate three
applicants that intend to provide much-needed cellular
competition in Pennsylvania, Minnesota, and Florida, and to
permit each applicant to amend its application to update
factual information and to comply with the rules of the FCC.
The Committee notes that this problem has persisted for ten
years, and will help to ensure that valuable spectrum is put to
its highest, best, and fullest use.
Section 13. Technical amendment
Section 13 is intended to correct an oversight from the
Satellite Home Viewer Improvements Act that has led to
unnecessary confusion for many consumers. Among other things,
SHVIA clarified the circumstances under which DBS subscribers
are eligible to receive distant network signals. SHVIA
specifically established procedures under which subscribers who
are presumptively ineligible to receive distant network
stations may ask for a waiver of that ineligibility from their
local broadcaster, or should that request be denied, arrange
for their eligibility to be determined on the basis of a signal
strength test conducted at the subscriber's residence.
Unfortunately, for many consumers, the right to seek a
waiver has been frustrated by some local broadcasters who are
narrowly interpreting their right to do so. Specifically, SHVIA
provides that a consumer's request for a waiver must be
conveyed to the local broadcaster by a ``satellite carrier,''
which under SHVIA is defined as a facilities-based satellite
operator that has a direct relationship with the consumer
(e.g., DirecTV or EchoStar).
The problem is that more than a million consumers subscribe
to DBS service through a retail distributor that has a
wholesale contractual arrangement with carriers like DirecTV,
and as such, lacks the requisite facilities to qualify as a
``satellite carrier'' as that term is presently defined in
SHVIA. Nevertheless, these retail distributors have unique
relationships with their consumers in the billing, collection,
activation and deactivation of their customer's satellite
service. Moreover, from the consumers' perspective, these
distributors are no different than facilities-based
distributors. Congress never intended, and is disappointed to
learn, that some local broadcasters would refuse to consider a
consumer's waiver request based upon whether the entity is
facilities-based. Section 13 therefore clarifies that, for
purposes only of consumer requests of a waiver from SHVIA's
distant signal eligibility requirements, the term ``satellite
carrier'' shall include a retail distributor, provided the
distributor serves the subscriber and engages in basic
subscriber functions such as billing, collecting, activating
service accounts and service changes.
Section 14. Definitions
Section 14 defines certain terms.
Section 15. Authorization of appropriations
Section 15 authorizes appropriations for both the cost of
the guaranteed loans and the cost of the administering the loan
Section 16. Sunset
Section 16 prohibits the Board from approving any loan
guarantee under this Act after December 31, 2006.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (new matter is
printed in italic and existing law in which no change is
proposed is shown in roman):
SECTION 339 OF THE COMMUNICATIONS ACT OF 1934
SEC. 339. CARRIAGE OF DISTANT TELEVISION STATIONS BY SATELLITE
(a) * * *
* * * * * * *
(c) Eligibility for Retransmission.--
(1) * * *
* * * * * * *
(5) Definition.--Notwithstanding subsection (d)(4),
for purposes of paragraphs (2) and (4) of this
subsection, the term ``satellite carrier'' includes a
distributor (as defined in section 119(d)(1) of title
17, United States Code), but only if the satellite
distributor's relationship with the subscriber includes
billing, collection, service activation, and service
* * * * * * *
I share the goals of the sponsors of H.R. 3615 to ensure
the speedy deployment of television service and new
technologies to rural America. Where we differ is on how best
to get there. H.R. 3615 chooses the wrong path: it will
actually inhibit competition and retard the deployment of new
technologies in rural areas.
H.R. 3615 keeps in place the onerous government mandates
that now preclude satellite broadcasters and other television
providers from delivering local television signals into small
and rural markets. Instead, the bill proposes to have the
government ``solve'' this problem of its own making by creating
a new $1 billion subsidy program--in the process further
injuring the very market that would gladly serve rural America
of its own accord if the government wasn't already standing in
Adding insult to injury, the bill puts a 70-year-old
federal bureaucracy within the U.S. Department of Agriculture,
which has no television technology expertise, in charge of
administering the new $1 billion subsidy program. The ``Rural
Utilities Service'' (the re-named Rural Electrification
Administration, a notoriously wasteful and outmoded bureaucracy
now in search of a new mission) has--to quote from Rep.
Markey--``perhaps the worst record in U.S. history of the
public or private sector in the administration of loan
programs.'' These government bureaucrats will now play high-
tech venture capitalist, using taxpayer dollars to pick one
winner in a market (and thus also to pick many losers, who
won't get subsidies and won't want to enter the market against
a subsidized competitor). From among the many current and
would-be competitors trying to deliver local television service
to any given rural market, only one will be blessed with
The result will be disastrous:
Even if satellite technology wins the government
subsidy lottery (as seems likely), satellite companies will now
face unfair competition from a government-run or government-
subsidized satellite venture.
Worse, government regulations will continue to
hinder satellite companies from delivering local television
service to smaller markets.
Taxpayers will lose several hundreds of millions
(and potentially a billion) dollars if the government's
technology bets and business decisions don't pay off (as the
Congressional Budget Office predicts they won't).
A dinosaur of a federal agency that might
otherwise finally be on the verge of being shut down will
instead be given new life.
Worst of all, the bill seems certain to subsidize existing
rather than new technology, which in turn will dissuade new
entrants from developing new, more effective, and less
expensive ways to deliver local TV signals--and other digital
services--to rural communities.
i. i'm with the government and i'm here to help
``I'm with the government and I'm here to help'' is a
phrase that Americans have learned to regard with great
suspicion. They've learned that often many of the problems the
government is trying to solve, it has in fact helped to create.
The story is no different when it comes to the delivery of
local TV broadcasts to small cities and rural areas.
In 1999, when Congress finally made it legal for satellite
broadcasters to transmit local TV signals (``local-into-local''
service), there was a major catch. The law contains a
burdensome mandate: in order to carry even one local TV signal
in a market, a satellite broadcaster must carry all local TV
signals in that market. This draconian mandate is called
What it means is that a satellite broadcaster who wants to
include a local station in Los Angeles can only do so if it
agrees to carry all the local TV stations throughout the LA
region. This is true no matter how few viewers some of the
stations might have, or how lousy the quality of their
programming. In Los Angeles, must-carry covers 23 government-
mandated stations that Uncle Sam, not the marketplace, requires
you to buy.
Small cities and rural areas pay most dearly for this must-
carry mandate, in the form of lost service. Because satellite
capacity is limited, having to carry all 23 stations in order
to serve Los Angeles means 23 fewer channel slots on the
satellite system. Because there are so many local TV stations
in the top 20 to 30 markets, and because no satellite provider
would ever give up Los Angeles or New York to serve a small
rural market, there just isn't room for satellites to add local
stations in rural areas. Today, as a result of must-carry, the
nationwide capacity for the major satellite broadcasters is
completely filled up in serving just the large markets.
The federal mandates that cause smaller media markets to go
unserved are blatantly unfair to residents outside of big
cities. In practice, the must-carry law says it is more
important for a resident in Los Angeles or New York to receive
all 23 local TV stations than it is for a resident of Roanoke,
Buffalo, Louisville, or Omaha to get even a single channel of
Today, the major satellite broadcasters deliver local-into-
local signals to 50% of the nation's population. If it weren't
for the must-carry law, satellite broadcasters told the
Commerce Committee that they would have enough capacity on
their satellites to immediately expand local-into-local service
to 80 million Americans in smaller markets.
ii. if it moves, tax it. if it keeps moving, regulate it. and if it
stops moving, subsidize it
President Ronald Reagan summed up the typical Washington
view of economic policy as follows: ``If it moves, tax it. If
it keeps moving, regulate it. And if it stops moving, subsidize
President Reagan's aphorism is nowhere better applied than
to today's bill subsidizing television in small markets--a
``solution'' to a problem government created in the first
place. The government, of course, steeply taxes the satellite
broadcasters who will now simultaneously be subsidized to
overcome their ``capital shortage.'' It regulates satellite
broadcasters so heavily that they can't broadcast to smaller
markets. And now the government will subsidize broadcasts to
smaller communities, because the ``market'' has ``failed.'' The
$1 billion loan subsidy program will, in turn, force higher-
still taxes on millions of working Americans, almost none of
whom will get the subsidized TV they're paying for.
While no specific platform for delivering the TV service is
mentioned, the sponsors of the legislation have made it clear
that they intend the loans to be used to finance the
construction and launch of a new satellite television service.
This will put the government, and taxpayers, in the satellite
TV business. But the commercial satellite business is extremely
risky. And Congressional Budget Office Director Dan Crippen
testified on March 16, 2000 that the new $1 billion loan
program, just like the underlying industry, ``is likely to
prove financially and technically risky.'' CBO concluded, after
consulting with industry experts and financial analysts, that
the likely default rate for the loans will be between 30% and
45%. This will result in losses to taxpayers of hundreds of
millions of dollars. Unfortunately, the Commerce Committee
defeated a number of amendments offered at Subcommittee and
full Committee markup that would have reduced taxpayers'
III. A ``DINOSAUR'' ENTERS THE INFORMATION AGE
The agency charged by H.R. 3615 with administering this
information-age loan program is not up to the task. The Rural
Utilities Service, a branch of the U.S. Department of
Agriculture, is a 70-year-old bureaucracy with no specialty in
television or satellites, but with one salient feature above
all others: a disastrous loan management track record that has
caused taxpayers to suffer billions of dollars of write-offs
A quick look at the track record of the Rural Utilities
Service should leave taxpayers worried indeed about giving
billions more to the RUS for this new program:
The RUS makes loans to people who can't even get a
business off the ground with a federal subsidy. In just the
last five years, the U.S. Department of Agriculture has been
forced to write off nearly $2 billion in money owed to
taxpayers by RUS borrowers who have gone belly up. The GAO has
identified another $8 billion in loans--roughly one-fifth of
RUS's outstanding loan portfolio--that are not likely to be
collected because the borrowers are in bankruptcy or
``experiencing serious financial difficulties.''
If RUS loans aren't written off, it's because
they've been made to people who don't need them. According to
the March 16, 2000 testimony by the USDA's own Inspector
General: ``[H]alf of RUS telephone borrowers are in strong
financial condition. * * * good enough financial condition to
satisfy their credit needs from their own financial
organizations or from other credit sources.'' A 1998 GAO report
also concluded that RUS loans are often made to ``financially
healthy borrowers that may not need federal assistance. * * *
56 percent of the borrowers had equity--total assets less
liabilities--of $10 million or more at the end of the year
prior to receiving the loans.''
The RUS makes loans for purposes other than what
Congress intended. While the clear purpose of the Rural
Electrification Act is to promote development in rural and
unserved areas, many RUS loans have gone to support service to
wealthy communities far removed from the ``little house on the
prairie.'' The Office of Management and Budget found that RUS
loans have been used to subsidize electricity bills for the
residents of such ``needy'' communities as Aspen, Vail, and
Hilton Head, and for such ``rural'' areas as Atlanta,
Minneapolis, and Nashville. The USDA's Inspector General
testified before the Committee that RUS borrowers ``have not
become major players in financing America's rural
infrastructure, despite the fact that these borrowers hold
almost $11 billion in total investments. Disappointingly, only
one-half of one percent of this amount--about $61 million--is
actually invested in rural America.''
President Reagan also once said that the closest thing to
eternal life on earth is a government bureaucracy. Once
America's farms were hooked up to electricity and telephones,
the Rural Electrification Administration was a bureaucracy
without a purpose. That has never retarded its growth, however.
With its recent name change to the ``Rural Utilities Service''
and a potential new venture into satellite TV and maybe even
cyberspace, the 70-year-old RUS will surely outlive us all.
IV. BUREAUCRATS AS VENTURE CAPITALISTS
By far the biggest failing of H.R. 3615 is that it would
put the government in the business of speculating--with
taxpayer dollars--on which financial risks in the television
technology marketplace are likely to be ``winners'' and
``losers.'' It is foolish to think that the government can do a
better job of allocating risk capital than the free market
does. Yet this is the presumption of H.R. 3615.
The original mission of the RUS--providing electricity and
telephone service to farms that didn't already have service--
was a technologically simple one. First, there was no
competition to worry about: electric utilities and the phone
company were monopolies. Second, the technology was static:
electricity was electricity, and phones were phones.
By contrast, today's television technology is not plain
vanilla. There are an endless variety of flavors, from wireless
cable to Internet broadcasting to digital cable to satellite
broadcast to TV service offered by your electric or phone
company--not tomention a dozen new technologies currently in
incubation. Asking bureaucrats and political appointees at the U.S.
Department of Agriculture to step into this rapidly changing
marketplace and figure out whom to subsidize is a recipe for disaster.
It will coddle inefficiency and subsidize losers, promote unwanted
services, sustain old technologies, impose high-cost solutions, and
create new monopolies--all the while retarding the advancement of
technologies that could solve today's rural TV service problem far
better than any government program.
Here is a business question that RUS might ask themselves
for starters: Is the consumer demand for satellite delivery of
local TV signals sufficient to make a profit in the current
regulated environment? The answer to this question is critical,
as the argument mustered by supporters of H.R. 3615 is not that
rural America cannot receive any television signals. (In fact,
the main reason satellite TV came of age over the last two
decades is that it can provide nationwide service to rural
areas that would be too costly to wire for cable service.)
Rural households can already receive scores of channels of
television programming via satellite service or cable TV. In
fact, the availability of numerous national TV signals like
CNN, ESPN, and the Weather Channel in rural markets is often
advanced as an explanation of the sluggish demand for local TV
signal in those same markets.
Moreover, most rural households can already receive local
TV signals for free via over-the-air broadcast. Whether
consumers in rural areas will be willing to pay for satellite
delivery of local signals (and only pay TV will be subsidized
under H.R. 3615) is another matter. Yet H.R. 3615 simply takes
it for granted that millions of consumers will do so.
This is an extremely risky assumption. According to
Congressional Budget Office estimates, satellite providers will
need to acquire 1.6 million new rural customers paying $6 a
month for local TV service merely to cover debt service on $1
billion in loans. But CBO notes that the total number of homes
that cannot now receive local TV service is only 3 million
Moreover, paying back the principal on the loan is another
matter altogether. The second largest satellite television
company in America today still loses money after five years of
operation, even though it has 3.4 million subscribers. Can the
technological expertise and business savvy of a 70-year-old
federal agriculture bureaucracy acquire more subscribers than
The 25-year term of the loans to be issued under H.R. 3615
further assumes that what we know today as ``television'' will
remain static. But it is far from obvious that in five years--
let alone 25--consumers will prefer their local news, sports,
and weather information to be packaged as they are today on
television programs, rather than in the many new formats
currently being tested on the Internet. Is it unreasonable to
think that farmers might actually someday soon get TV over the
Internet? If so, would you want to make a $1 billion, 25-year
bet on the older technology the Internet wiped out?
If this loan program were set up 100 years ago, the
government might today be subsidizing home newspaper delivery
to rural areas. But just as television replaced newspapers as
the primary local news source for much of America, so too the
Internet might one day soon replace traditional television
broadcasts as the primary source for local news. Undoubtedly,
there are other technologies not yet on the market that might
soon supplant even the Internet.
The sponsors of H.R. 3615 have made it clear that they
intend the loans to be used primarily to start up a new
satellite television service. But transmission of high-quality
digital TV signals can be carried over a variety of different
technologies--from copper wire to fiber optics, from satellites
to terrestrial fixed wireless, and over electricity wires. As
more and more companies roll out newer and faster data services
to rural areas, any number of new technologies will likely
prove better and cheaper means of serving rural markets. Who is
the government to say that it knows for certain the best way to
deliver TV to rural America?
The world of technology is complex, fast-changing, and
unstructured. H.R. 3615 unwisely presumes that the government
should play the role of high-tech venture capitalist. The bill
is likely to coddle inefficient and high-cost enterprises,
rather than subjecting them to the discipline of the capital
markets and of consumers. It is likely to produce significant
losses for taxpayers. And it will result in subsidies for
existing technologies, inhibiting the development of
innovations that could deliver, at cheaper prices, improved
services for residents of rural and urban America alike.
During markup in the Commerce Committee, one of our
colleagues offered an amendment to expand this ill-advised
subsidy program from $1 billion to $4 billion--and to add
``digital services'' including the Internet as potential
objects of the government's affection. It is very clear where
this kind of thinking, like another well-known road, will lead.