[House Report 106-508]
[From the U.S. Government Publishing Office]



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

                             together with

                            DISSENTING VIEWS

                        [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.

                                CONTENTS

                                                                   Page
Amendment........................................................     2
Purpose and Summary..............................................    11
Background and Need for Legislation..............................    11
Hearings.........................................................    13
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

                               Amendment

    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 
follows:

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'').
  (b) Members.--
          (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 
                the Secretary.
                  (B) The Secretary of Agriculture, or the designee of 
                the Secretary.
                  (C) The Secretary of Commerce, or the designee of the 
                Secretary.
          (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.
  (b) Regulations.--
          (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) 
        shall--
                  (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 
                such applications;
                  (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 
                commercially viable;
                  (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 
                        Board, and--
                                  (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 
        unless--
                  (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 
                        expected.
  (e) Considerations.--
          (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 
                be served.
                  (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 
        Act--
                  (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 
considers appropriate.
  (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 
        loan guarantee.
          (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 
                        disbursements;
                          (iii) the business plans of the applicant for 
                        providing service;
                          (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 
                proportionately.
                  (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 
        applicant--
                  (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 
                Act.
          (2) Collateral.--
                  (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 
        Act.
          (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 
        agreement;
          (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 
        applicant;
          (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 
        modification.
  (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 
incontestable--
          (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 
                States.
                  (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 
such action.
  (m) Fees.--
          (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 
        Act.
          (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 
        Administrator.
  (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 
                affiliates;
                  (B) any breach by the applicant or any of its 
                affiliates of their obligations under the loan 
                guarantee agreement;
                  (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); 
                and
                  (E) any other circumstances that the Board considers 
                appropriate.
          (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 
first.
  (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 
U.S.C. 309(j)).

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 
market.

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 
window.

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).
  (d) Definitions.--
          (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'' 
        means--
                  (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 
                Commission--
                          (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 
                proceeding; and
                  (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 
        (1992).
  (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 
        paragraph (1).
          (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 
service.
  (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 
        Communications Commission.
          (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 
        deactivation.''.

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, 
2006.

                          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 
        sources;''
           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 
        Government assistance.''
    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.

                                Hearings

    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 
Association (NTA).

                        Committee Consideration

    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 
vote.

                            Committee Votes

    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); 
        and,
          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 
amendments:

          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 
        unanimous consent;
          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 
amendments:

          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 
Reform.

   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:

                                     U.S. Congress,
                               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).
            Sincerely,
                                          Barry B. Anderson
                                    (For Dan L. Crippen, Director).
    Enclosure.

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 
housing credit).

----------------------------------------------------------------------------------------------------------------
                                                                     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 
percent, respectively.
    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 
period.
    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 
Act.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                   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 
repaid.
    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 Board.
    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 
guarantee program.

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 
                    CARRIERS.

  (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 
        deactivation.

           *       *       *       *       *       *       *


                            DISSENTING VIEWS

                              Introduction

    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 
the way.
    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 
federal largesse.
    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 
``must-carry.''
    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 
local content.
    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 
it.''
    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' 
exposure.

            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 
and losses.
    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 
nationwide.
    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 
EchoStar?
    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?

                               Conclusion

    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.

                                                   Christopher Cox.

                                  
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