Order Code RL30481
CRS Report for Congress
Received through the CRS Web
Satellite Television: An Analysis of Legislation
Creating Loan Guarantees for Providing Local
Broadcast TV Signals
Updated January 22, 2001
Marcia S. Smith
Specialist in Aerospace and Telecommunications Policy
Resources, Science, and Industry Division
Congressional Research Service ˜ The Library of Congress
Satellite Television: An Analysis of Legislation Creating
Loan Guarantees for Providing Local Broadcast TV
Signals
Summary
The 106th Congress passed legislation to establish a loan guarantee program to
help ensure that consumers can obtain local broadcast television channels via satellite
or other technologies. Called the “Launching Our Communities Access to Local
Television Act,” or LOCAL, it is Title X of the FY2001 Commerce-Justice-State
(CJS) appropriations bill, enacted as part of the FY2001 District of Columbia (DC)
appropriations bill (P.L. 106-553).
The impetus for the legislation was passage of the Satellite Home Viewer
Improvement Act (SHVIA, see CRS Report RS20425) in 1999, which allowed
satellite companies, for the first time, to offer local network television to their
customers—called “local-into-local” service. A major factor in Congress’ decision to
allow satellites to offer local stations was to increase competition to cable because of
consumer complaints about cable rate increases. The two existing satellite TV
companies, EchoStar and DirecTV, plan to offer local-into-local only to the top
markets in the country, however. Some Members were concerned that consumers in
small and rural markets would not benefit from the new service, while others more
broadly wanted to ensure that consumers in all markets, regardless of size, have
competition to cable. Consequently, a provision was added to SHVIA during
conference in 1999 to offer loan guarantees to satellite and other companies to build
systems to provide local TV stations. The provision was removed before final
passage, however, and House and Senate leaders agreed that new legislation reflecting
the same concerns would be considered by each chamber in 2000.
By mid-April 2000, the House and Senate had passed H.R. 3615 and S. 2097,
respectively. No conferees were appointed. Instead, a modified version was included
in the conference version of the FY2001 DC/CJS appropriations bill as noted above.
Representative Markey expressed concern during floor debate on that version of the
bill on October 26 (Congressional Record, page H11283) over the extent to which
cable companies will be able to apply for the loan guarantees. While the bill contains
some limitations on cable companies, but certain Members wanted stricter
requirements. Generally, the bill is technology neutral.
As enacted, LOCAL establishes a four person Board (Secretaries of Treasury,
Agriculture, and Commerce, and the Chairman of the Federal Reserve) to select
recipients of loan guarantees for up to $1.25 billion in loans (generally, 80% of the
loan may be guaranteed). The loans are to be used to build systems that would ensure
that consumers throughout the country can receive local television signals. The
Board is to take into account whether a project would provide service to “nonserved”
or “underserved” areas and whether it also would provide high-speed Internet access.
The program will be administered by the Rural Utilities Service in the U.S.
Department of Agriculture.
Contents
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Rural Television Loan Guarantee Legislation: The Launching Our
Communities Access to Local Television Act (LOCAL) . . . . . . . . . . . 4
Major Similarities in House- and Senate-Passed Bills . . . . . . . . . . . . . 5
Major Differences Between the House- and Senate-Passed Bills and How
They Were Resolved in H.R. 4942 . . . . . . . . . . . . . . . . . . . . . . . 7
Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Targeted Consumers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Eligible Companies and Technologies . . . . . . . . . . . . . . . . . . . . . . . . 13
Providing Other Telecommunications Services . . . . . . . . . . . . . . . . . 14
Composition of the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Modification to Must Carry Requirements . . . . . . . . . . . . . . . . . . . . 15
Northpoint Technology Ltd . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
List of Tables
Table 1. Major Differences Between House and Senate Versions and How They
Were Resolved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Satellite Television: An Analysis of
Legislation Creating Loan Guarantees for
Providing Local Broadcast TV Signals
Background
The Satellite Home Viewer Improvement Act (SHVIA, Title I of the Intellectual
Property and Communications Omnibus Reform Act of 1999, included by cross
reference in P.L. 106-113, the FY2000 Consolidated Appropriations Act) was
enacted in 1999.1 SHVIA allows satellite companies, for the first time, to offer local
network television signals to their subscribers—called “local-into-local.”2 Previously,
satellites could offer only distant network signals originating outside a customer’s
local market area to the very small percentage of households in the United States that
cannot receive network broadcast television any other way (called “unserved
households” or “white areas”).
That restriction had been enacted in 1988 to protect network broadcasters and
their affiliates from having out-of-market signals being brought into their market areas
by satellites, possibly reducing advertising revenue and threatening their economic
viability. Policy makers want to ensure the survival of local television stations so
consumers can watch local news and weather, particularly to receive weather alerts.
During the 1990s, however, Congress and the Administration became concerned
about rising cable rates and sought to increase competition to cable. Satellites were
viewed as one of the most potentially effective competitors, leading to the local-into-
local provisions in SHVIA which would still protect broadcasters through
1For more information on the debate over SHVIA and its predecessor, the Satellite Home
Viewer Act (SHVA), see CRS Report 98-942, Satellite-Delivered Television: Issues
Concerning Consumer Access to Broadcast Network Television Via Satellite. For
information on what was included in SHVIA and a summary of continuing issues for
Congress, see CRS Report RS20425, Satellite Television: Provisions of the Satellite Home
Viewer Improvement Act (SHVIA) and Continuing Issues for Congress.
2The phrase “ local-into-local” refers to the fact that the local TV signal is transmitted up to
the satellite and back down into the same local market, instead of to some other market.
CRS-2
implementation of “must carry” rules3 and hopefully increase competition to cable at
the same time.
As SHVIA was being debated in conference, however, concern arose that the
two U.S. companies that offer direct broadcast satellite (DBS) television today,
EchoStar4 and DirecTV,5 were not planning to offer local programs in all parts of the
country. Instead, they plan to offer local-into-local only to the top markets. There
are 210 “designated market areas” (DMAs) as defined by Nielsen Media Research.6
EchoStar originally said it would offer local-into-local service in the top 67 of these
market areas. Later it said it would serve 33 markets by the end of the year 2000, and
more recently stated that it will serve up to 60 markets with local-into-local after two
more satellites are launched late in 2001.7 DirecTV plans to offer local-into-local to
the top 20 markets. This means that viewers in most DMAs will not receive local
television via satellite. (DirecTV states that the top 20 markets represent
approximately half of U.S. television households, so although most DMAs will not
get local-into-local, a sizeable percentage of households will.)
The decision by the two satellite television companies to offer local-into-local
only in the top markets reflects a blend of economic, technical, and regulatory factors.
For example, there is a satellite capacity limitation involving the amount of spectrum
allocated to the companies by the Federal Communications Commission (FCC) and
the number of orbital locations (“slots”) allocated to the United States by the
International Telecommunication Union for direct broadcast satellite services.
Capacity is also affected by the number of satellites the companies have in orbit or
plan to build and the number of television channels that can be transmitted via each
“transponder” on the satellites. There are 1600 local channels across the country.
The satellite television companies argue that they could not develop a successful
business plan that included building enough satellites to carry all those channels plus
the other channels (HBO, CNN, ESPN, etc.) that customers want. They explain that
3For more information on “must carry” rules for satellites, which go into effect on January
1, 2002, see CRS Report RS20425. Under SHVIA, the FCC had to issue regulations on
precisely how the must carry rules will apply to satellite companies by November 29, 2000.
According to industry sources, the FCC did adopt such regulations that day, but they are not
yet publicly available. Pursuant to the 1992 Cable Act (P.L. 102-385), cable companies
already are subject to must carry regulations where each cable system must carry any
commercial broadcast television station in a particular market that wants to be carried up to
a certain percentage of the cable system’s capacity. According to the FCC’s cable televison
fact sheet [http://www.fcc.gov/Bureaus/Cable/WWW/facts/csgen.html] , each cable system
with more than 12 channels must set aside one-third of its channel capacity for must carry
stations.
4EchoStar is headquartered in Littleton, CO. Its Website is [http://www.echostar.com].
5DirecTV, headquartered in El Segundo, CA, is a unit of Hughes Electronics Corp., which is
a subsidiary of General Motors. Its Website is [http://www.directv.com].
6The DMAs are listed in Television and Cable Factbook, 1999 Edition, Stations Volume No.
67, Warren Publishing, Inc., Washington, D.C.
7EchoStar Adds Satellites and Expands Dish Services, Communications Daily, February 24,
2000, p. 4.
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the limited number of viewers in the smaller markets would not garner sufficient
revenue to pay for the additional satellites needed to serve every household. Future
improvements in technology could increase the number of televison channels that can
be transmitted per transponder, but the pace of those technological developments and
the timing and cost of incorporating the technology into new satellites is uncertain.
DirecTV and EchoStar also argue that the must carry rules significantly reduce
the number of markets they can serve with local-into-local because after January 1,
2002, they will have to carry all local signals in any market where they offer any local
signals. Until that date, both satellite television companies are providing only four or
five local channels (typically ABC, CBS, NBC, Fox, and PBS) in each market they
serve with local-into-local. Once must carry goes into effect, they will have to carry
more than 20 channels in large markets such as New York or Los Angeles, using up
capacity on their satellites. They argue that if they could offer only a basic set of local
channels, they could offer those to many more markets. They do concede, however,
that even without must carry they could not serve all 210 markets with local-into-local
because of capacity limits. DirecTV, EchoStar, and the Satellite Broadcasting and
Communications Association filed suit in U.S. District Court, Alexandria, VA, in
September 2000 to have the must carry requirement overturned on First Amendment
and Fifth Amendment grounds. (The cable industry sought to have its must carry
requirements overturned as well, but the Supreme Court ruled in favor of those must
carry requirements in a 1997 decision.)
During deliberations over SHVIA in 1999, DirecTV’s and EchoStar’s plans to
offer local-into-local only to the top markets were widely known. Another company,
Local TV on Satellite (LTVS), had announced plans in 1997 to build two satellites
operating at different frequencies from those used by DirecTV and EchoStar that
would carry only local channels. LTVS had originally said it would provide all 1600
local channels to all DBS providers for distribution to their customers.8 As LTVS
further examined its concept, however, it determined that for economic reasons
similar to those espoused by DirecTV and EchoStar, it could only provide half as
many channels (800), so that only the top 70 markets or so would be served.
Thus, in the fall of 1999, after SHVIA had passed both the House and Senate,
the National Rural Telecommunications Cooperative (NRTC)9 began lobbying for
inclusion of a loan guarantee program through which it could build its own satellite
system for providing local signals to small and rural markets. NRTC was initially
successful and the conference version of SHVIA (H.R. 1554, H.Rept. 106-464)
included a $1.25 billion loan guarantee program for providing local television to areas
that would not be served by existing satellite television companies. The program
would have been administered by the U.S. Department of Agriculture (USDA).
Senator Burns and Representative Boucher are credited with spearheading the effort
to get such language included.
8Testimony of James Goodmon in: U.S. Congress. House. Committee on the Judiciary.
Copyright Licensing Regimes Covering Retransmission of Broadcast Signals. October 30,
1997. 105th Congress, 1st session. Washington, U.S. Govt. Print. Off., 1999, p. 39-41.
9NRTC is a not-for-profit cooperative association consisting of approximately 1000 rural
utilities that provide electric or telephone service to rural markets.
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The House passed that conference report, but Senator Gramm objected to the
loan guarantee provision because it had not been included in either the House or
Senate versions of the bill. He also wanted the Senate Banking Committee (which he
chairs) to have an opportunity to consider it. Proponents of the loan guarantee
program agreed to withdraw it from the conference version of the bill on the condition
that legislation on this topic be considered by the House and Senate by the end of
March 2000. A new version of the bill, S. 1948, was thereby crafted, removing the
loan guarantee provision. That bill (for which there is no conference report) was
incorporated by cross reference into the Consolidated Appropriations Bill, which was
signed into law (P.L. 106-113) on November 29, 1999.
Rural Television Loan Guarantee Legislation: The Launching
Our Communities Access to Local Television Act (LOCAL)
Congress passed and the President signed into law on December 21, 2000 the
Launching Our Communities Access to Local Television Act (LOCAL). It creates
a $1.25 billion loan guarantee program, administered by the Rural Utilities Service in
the Department of Agriculture. The loans are for companies to build systems that will
allow consumers, particularly in small and rural markets, to receive local television
signals. The Act is technology neutral, so companies can obtain loans for providing
local TV to consumers via satellite, cable, or other means.
The House and Senate had each passed legislation addressing the loan guarantee
issue: H.R. 3615 and S. 2097. The bills were quite different as introduced, but
became closer as they moved through the respective chambers. Remaining differences
were not resolved by conference, however (no conferees were appointed). Instead,
a new version was included as Title X of the conference report on the FY2001
Commerce-Justice-State (CJS) appropriations act (H.R. 5548), which was enacted
as part of the FY2001 District of Columbia (DC) appropriations act (H.R. 4942),
signed into law December 21, 2000. The following text tracks the evolution of the
final language in H.R. 4942.
Originally, three bills were introduced. On November 19, 1999, Senator Baucus
introduced S. 1980. The bill was based largely on the language that had been
removed from the SHVIA conference report and was referred to the Senate
Agriculture Committee, which oversees USDA. The bill specified that the Rural
Utilities Service (RUS), part of USDA, would be responsible for the program, both
choosing loan guarantee recipients and administering the program. RUS (formerly
the Rural Electrification Administration) administers $42 billion in loans and loan
guarantees for rural electric, telecommunications, water, and wastewater projects.
The Senate Agriculture Committee held a hearing on S. 1980 on February 3, 2000 but
there was no further action on that bill.
H.R. 3615 was introduced by Representative Goodlatte on February 15. As
introduced, it was very similar to S. 1980. It was referred to the House Agriculture,
Commerce, and Judiciary Committees. The House Agriculture Committee held a
hearing on the bill on February 9, and reported it on March 1 (H.Rept. 106-508, Part
I) with few changes. The House Commerce Committee’s Subcommittee on
Telecommunications, Trade and Consumer Protection held a hearing on March 16
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and marked up the bill on March 23. The full Commerce Committee reported the bill
on April 6 (H.Rept. 106-508, Part II). The bill was discharged from the House
Judiciary Committee on March 31 without action. The Agriculture and Commerce
committee versions of the bill were substantially different. Instead of either of those
versions, the House Rules Committee made in order an amendment in the nature of
a substitute (printed in the April 13, 2000 Congressional Record) for debate by the
House. It was close to the House Commerce Committee version of the bill with some
changes making it more similar to S. 2097 (see below), although differences remained.
It passed the House on April 13, 2000.
S. 2097 was introduced by Senators Burns and Gramm on February 24 and it
was referred to the Senate Banking Committee, which had held hearings on the topic
on February 1 and 9. The bill was reported from the Senate Banking Committee
on March 15 (S.Rept. 106-243) and passed the Senate, amended, on March 30.
In the reports accompanying H.R. 3615 and S. 2097, the Congressional Budget
Office (CBO) estimated the cost of H.R. 3615 as reported from the House
Agriculture Committee as $365 million and of S. 2097 as $265 million for loan
subsidy and administrative costs over the 2000-2005 time period, assuming
appropriation of the necessary amounts. It estimated the cost of H.R. 3615 as
reported from the House Commerce Committee as $210 million over the 2001-2005
time period, assuming appropriation of necessary amounts.
The following bullets show the major similarities between the House- and
Senate-passed bills and significant changes, if any, made in the final version as
enacted. The subsequent table describes the major differences.
Major Similarities in House- and Senate-Passed Bills.
! Aggregate amount of loans cannot exceed $1.25 billion.
! Up to 80% of the loan can be guaranteed. In H.R. 3615 and S. 2097, the loan
could have been split into two amounts so that one part (up to 80%) was
100% guaranteed and the remainder was unguaranteed as long as the same
lender provided all the financing. In final version, that provision was changed
so that if only a portion of a loan meets requirements under the Act, the Board
may issue a loan guarantee not exceeding 80% of that amount.
! Term of each loan guarantee is 25 years or the economic usefulness of the
primary assets to be used in the delivery of the signals, whichever is less.
! Recipients of loan guarantees would have been determined by majority vote of
a special three-person Board created for this purpose in H.R. 3615 and S. 2097
(the members were different in the two versions). Final version increases the
number of Board members to four and specified that affirmative votes of three
members was needed to approve an application.
! Loan guarantees are administered by the Rural Utilities Service (RUS), part of
USDA, which also prescribes regulations to implement the Act under the
direction of and for approval by the Board.
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! The Board shall consult such departments and agencies as the Board considers
appropriate.
! The Board must consult with NTIA to determine that a proposed project is not
likely to have a substantial adverse impact on competition that outweighs the
benefits of improving access to signals in an unserved area, and is commercially
viable. Final version uses the term “non-served” instead of “unserved.”
! The Board must consult with OMB on underwriting criteria and on credit risk
premium amounts.
! The Board must also consult with an independent public accounting on
underwriting criteria.
! Loan must be made by an entity engaged in business of commercial lending
(with certain requirements) or a nonprofit corporation, including the National
Rural Utilities Cooperative Finance Corporation, if the Board determines it has
one or more issues of outstanding long-term debt that is rated within the
highest three rating categories of a nationally recognized statistical rating
organization, and, if the Board determines that the making of the loan by such
nonprofit corporation will cause a decline in the debt rating mentioned above,
the Board at its discretion may disapprove the loan guarantee on this basis. No
loan may be made by a governmental entity or affiliate thereof, or by the
Federal Agricultural Mortgage Corporation, or any institution supervised by
the Office of Federal Housing Enterprise Oversight, the Federal Housing
Finance Board, or any affiliate of such entities.
! The Board shall consider certain priority factors (see following table for further
explanation) in determining who shall get loan guarantees, and other factors
including projects that offer a separate tier of local broadcast signals, provide
lower projected costs to consumers of such separate tier, and enable the
delivery of local signals consistent with purposes of the Act by a means
reasonably compatible with existing systems or devices predominantly in use.
! The Board must determine that an applicant has received all necessary and
required regulatory and other approvals, spectrum licenses, and delivery
permissions; that the loan would not be available on reasonable terms and
conditions without a loan guarantee; and repayment of loan can be reasonably
expected.
! GAO shall perform an annual audit of the program.
! Funding is subject to advance appropriations. Authorizes such sums as may be
necessary for FY2001-2006 for the cost of the loans, and for administrative
costs, and appropriations made pursuant to those authorizations remain
available until expended. Final version adds that the Board may accept credit
risk premiums from a non-federal source to cover the cost of a loan guarantee
to the extent that appropriations are insufficient.
CRS-7
! Sunset date of the Act is Dec. 31, 2006.
Major Differences Between the House- and Senate-Passed Bills and
How They Were Resolved in H.R. 4942. The following table compares the
major differences between H.R. 3615 and S. 2097 as they passed the House and
Senate, respectively. As already discussed, there was no conference on those bills,
but a new version was included in the conference version of the FY2001 Commerce-
Justice-State (CJS) Appropriations act, enacted as part of the FY2001 District of
Columbia (DC) Appropriations Act, H.R. 4942 (P.L. 106-553).
CRS-8
Table 1. Major Differences Between House and Senate Versions and How They Were Resolved
(List of acronyms appears at end of table)
Provision
H.R. 3615 (Goodlatte)
S. 2097 (Burns-Gramm)
H.R. 4942 (DC/CJS Appropriations)
As passed by the House
As passed by the Senate
As signed into law (P.L. 106-553)
Purpose
To facilitate access, on a
To facilitate access, on a technologically
To facilitate access, on a technologically
technologically neutral basis and by
neutral basis and by December 31, 2006, to
neutral basis and by December 31, 2006, to
December 31, 2006, to signals of local
signals of local television stations and
signals of local television stations for
television stations for households
related signals (including high-speed
households located in nonserved areas and
located in unserved and underserved
Internet access and National Weather
underserved areas.
areas.
Service warnings), for households located
in unserved areas and underserved areas.
Eligible Technologies and
No limitation on technologies, but loan
No limitation on technologies or companies
No limitation on technologies, but loan
Companies
guarantees may not be for extension of
guarantees may not be granted or used for a
any cable system to any area or areas
project that extends, upgrades, or enhances
for which the operator of such cable
the services provided over any cable system
system has a franchise if the franchise
to an area that, as of the date of the
obligates the operator to extend such
enactment of the Act, is covered by a cable
system to such area or areas; or the
franchise agreement that expressly obligates
upgrading or enhancement of the
a cable system operator to serve such area.
services provided over any cable
system, unless it is principally
undertaken to extend services to areas
outside the previously existing
franchise area.
Composition of Board
Three person Board composed of
Three person Board composed of Secretary
Four person Board composed of Secretary
Deciding Which Loan
Secretary of Treasury, Secretary of
of Treasury, Chairman of the Federal
of Treasury, Chairman of the Federal
Guarantees to Grant
Agriculture, and Secretary of
Reserve, and Secretary of Agriculture, or
Reserve, Secretary of Agriculture, and
Commerce, or their designees.
their designees.
Secretary of Commerce, or their designees.
Approval of loan guarantees requires at
least three affirmative votes.
CRS-9
Provision
H.R. 3615 (Goodlatte)
S. 2097 (Burns-Gramm)
H.R. 4942 (DC/CJS Appropriations)
As passed by the House
As passed by the Senate
As signed into law (P.L. 106-553)
Additional Authority to
No comparable language
Board may delegate to RUS Administrator
No comparable language.
RUS Administrator
authority to grant loan guarantees not
exceeding $20 million.
Areas Targeted for
Cannot be for systems designed
Cannot be for systems primarily designed
Cannot be for systems designed to serve one
Service and Priorities to
primarily to serve 1 or more of the top
to serve one or more of the top 40 DMAs.
or more of the top 40 DMAs or that would
Be Used in Determining
40 DMAs. Priority given first to
Priority given first to systems serving
alter or remove National Weather Service
Recipients
systems serving greatest number of
greatest number of households in unserved
warnings from local broadcast signals.
households in unserved areas and the
areas and the number of states (including
Priority given first to systems serving
number of states (including
noncontiguous states), and second to
nonserved areas, and second to systems
noncontiguous states), and second to
projects that will serve the greatest number
serving underserved areas, in each case
projects that will serve the greatest
of households in underserved areas. Board
balancing projects that will serve the largest
number of households in underserved
shall consider efficiency in providing
number of households with projects that will
areas. Board shall consider the
service given the area to be served. To the
serve remote, isolated communities
project’s estimated cost per household
maximum extent practicable, the Board
(including noncontiguous states) in areas
to be served.
should give additional consideration to
unlikely to be served through market
projects which also provide related signals
mechanisms. Board shall give priority to
(including high-speed Internet access and
those projects providing highest quality
National Weather Service warnings).
service at lowest cost per household. Board
should give additional consideration to
projects that also provide high-speed
Internet access.
CRS-10
Provision
H.R. 3615 (Goodlatte)
S. 2097 (Burns-Gramm)
H.R. 4942 (DC/CJS Appropriations)
As passed by the House
As passed by the Senate
As signed into law (P.L. 106-553)
Definitions of Unserved,
Unserved areas are outside Grade B
Unserved areas are outside Grade B
Nonserved areas are outside Grade B
Nonserved, or
contours1 of local TV signals serving a
contours1 of local TV signals serving a
contours1 of local TV signals serving a
Underserved Areas
particular DMA and do not have
particular DMA and do not have access to
particular DMA and do not have access to
access to local TV broadcast signals
such signals by other widely marketed
local TV broadcast signals from any
from any commercial, for-profit
means.
commercial, for-profit MVPD.
MVPD.
Underserved areas are outside Grade A
Underserved areas are outside Grade A
Underserved areas are outside Grade
contours1 of local TV signals and have
contours1 of local TV signals and have
A contours1 of local TV signals and
access to local TV broadcast signals from
access to local TV broadcast signals from
have access to local TV broadcast
not more than one commercial, for-profit
not more than one commercial, for-profit
signals from not more than one
MVPD.
MVPD.
commercial, for-profit MVPD.
Modification to Must
Satellite, cable, or other MVPD
No comparable language.
No comparable language.
Carry Requirements
provider financed under this Act shall
not be required to carry in a market a
greater number of local broadcast
signals than the number of such signals
carried by the cable system serving the
largest number of subscribers in such
market.
Other
FCC shall open a filing period for
No comparable language
No comparable language.
accepting applications for TV
translator stations and low-power TV
[Retains language concerning cellular
stations in rural areas.
telephone service in rural areas. Language in
House version prohibiting use of funds
[Also has language concerning cellular
provided by this Act for spectrum auctions
telephone service in rural areas, and
is not included, but proceeds from loans may
prohibiting use of funds provided by
not be used for acquiring licenses for the use
this Act for spectrum auctions.]
of spectrum in any competitive bidding.]
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Acronyms:
DMA: designated market area
MMDS: multichannel multipoint distribution system
MVPD: multichannel video programming distributor
NTIA: National Telecommunications and Information Administration, part of the Department of Commerce
OMB: Office of Management and Budget
RUS: Rural Utilities Service of the U.S. Department of Agriculture
1 Grade A and Grade B contours can be visualized as circles around a TV station’s transmitter indicating the strength of a signal received within that area. The Grade
A contour is close to the transmitter and reception there is better than in the Grade B contour, but reception within the Grade B contour is deemed acceptable. The FCC
describes these contours as follows: “a quality acceptable to the median observer is expected to be available for at least 90 percent of the time at the best 70 percent of
receiver locations at the outer limits of [Grade A] service. In the case of Grade B service the figures are 90 percent of the time and 50 percent of the locations.” (FCC
Cable Services Bureau, report FCC 99-14, CS Docket 98-201, paragraph 33.)
Prepared by CRS
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Issues
Following is a discussion of the issues that were most contentious between the
House and Senate while the bill was being debated and how they were resolved in the
final version. One of these issues—the extent to which cable companies are eligible
for loan guarantees—remains controversial.
Targeted Consumers.
One of the most significant issues concerned what
consumers are being targeted by the legislation: those who cannot receive any local
broadcast signals; those who can receive local stations only via an over-the-air
(rooftop or “rabbit ear”) antenna; or those who may have access to both over-the-air
broadcasts and cable, but do not have competition to cable for multichannel video
services.
Most households can receive local television today via over-the-air antennas
although the quality of the signal varies. Those that cannot receive any over-the-air
TV signals are termed “white areas” or “unserved households” and represent
approximately 5% of U.S. households according to FCC estimates. In its January
2000 annual report10 on competition in the multichannel video market,11 the FCC
reported that 97% of U.S. television households are passed by cable. Approximately
12.5% receive direct broadcast satellite (DBS) service.12 Thus only 3-5% cannot
receive television either by cable or over-the-air broadcasts, but a much larger
percentage do not have competition to cable for multichannel video services or do not
receive good quality over-the-air reception.
Determining which consumers are being targeted can have a significant impact
on the desired solution. The loan guarantee proposal emanated from the passage of
SHVIA, one goal of which was to increase competition to cable. Therefore, to some
involved in the debate, the goal of the loan guarantee program was to ensure that all
communities in America had competition to cable. To others, however, it was an
issue of ensuring that consumers can access local news and weather advisories, so
what is needed is systems that will reach those consumers who cannot receive any
local stations or get poor reception via over-the-air antennas. During the early days
of the debate, it was not clear which approach was favored.
If the goal of the legislation had been ensuring competition to cable, then cable
companies probably would not have been eligible for the loan guarantees. The
House-passed version of H.R. 3615 included language added by the House
10 Federal Communications Commission. Annual Assessment of the Status of Competition
in Markets for the Delivery of Video Programming. (FCC 99-418). CS Docket No. 99-
230. Adopted December 30, 1999; released January 14, 2000. Available at
[http://www.fcc.gov/Bureaus/Cable/News_Releases/2000/nrcb0003.html]. Critics assert that
the FCC report overestimates the number of households passed by cable.
11 Often called “multichannel video programming distribution” (MVPD) services. MVPD
services offer a package of video programming, often including television broadcast
programming, to subscribers for a fee.
12Another 2.2% receive satellite television over larger “C-band” antennas.
CRS-13
Commerce Committee that placed some limitations on cable company eligibility for
the loan guarantees (see next issue). S. 2097 placed no limits on cable companies.
If the goal was ensuring that consumers could receive local broadcast television
stations regardless of the technology employed, broadcasters could (with FCC
permission) invest in facilities to boost the power of their transmitters to reach more
distant areas. Or “translators” could be used, which pick up a station’s signal, amplify
it, and rebroadcast the signal on another frequency, thus enabling the signal to reach
further. R. Kent Parsons of the National Translators Association testified at the
March 16 House Commerce hearing that the deployment of translators has been
hindered by the lack of opportunities to file at the FCC for licenses13 and the House-
passed version of H.R.3615 included a provision added by the House Commerce
Committee requiring the FCC to open a filing opportunity for translators. The Senate
bill had no comparable provision and it was not included in the final version of the
Act.
Although all the loan guarantee bills as introduced referred to providing local TV
services to “unserved” and/or “underserved” areas, only S. 2097 originally included
definitions of those terms. As passed by the House, H.R. 3615 also defined those
terms. The definition of underserved area was identical in both bills. Underserved
areas are outside Grade A contours14 of local TV signals and can receive local TV
broadcast signals from not more than one commercial, for-profit multichannel video
provider (i.e., cable, satellite, or MMDS). There was a slight difference in the
definition of “unserved area,” however. H.R. 3615 defined an unserved area as one
that is outside the Grade B contour of local TV broadcast stations and does not have
access to local TV broadcast signals from any commercial, for-profit multichannel
video provider. S. 2097 defined it as one that is outside the Grade B contour and that
does not have access to local TV broadcast signals by other widely marketed means.
In the final version, the term “unserved” was replaced with “nonserved” and defined
essentially the way “unserved” was defined in the House bill.
Eligible Companies and Technologies. A number of technologies are
available for providing television to consumers. As discussed earlier, the FCC
publishes an annual survey of competition in the multichannel video marketplace. It
identifies the main multichannel competitors today as cable, direct-to-home satellite
(including Direct Broadcast Satellites and Home Satellite Dishes), Satellite Master
Antenna TV (SMATV, sometimes called “private cable”), and multichannel
multipoint distribution systems (MMDS, sometimes called “wireless cable”). The
report also notes that Local Exchange Carriers and electric utilities may become
competitors in the future, as well as open video systems (OVS) and Internet video.
The report cites broadcast television and home video sales and rental as competitors
to multichannel providers.
13Testimony of R. Kent Parsons to the House Commerce Committee, Subcommittee on
Telecommunications, Trade, and Consumer Protection, March 16, 2000, unpublished but
available at the Committee’s Web site [http://www.house.gov/commerce].
14See footnote to preceding table for explanation of Grade A and Grade B contours.
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S. 2097 as passed by the Senate was technology neutral, with no limitations on
what technologies or companies can qualify for loan guarantees. The House-passed
version of H.R. 3615 was technology neutral except that it placed certain restrictions
on the eligibility of certain cable companies. Essentially, if a cable company that was
already providing service in a particular area (an “incumbent”) was required by its
franchise agreement with local authorities to provide cable service to certain
households, it could not receive a loan guarantee to meet those requirements. It also
could not obtain loan guarantees to upgrade or enhance its services unless the
upgrade or enhancement was principally undertaken to extend services to consumers
beyond the current franchise area.
Section 1004 (i) of LOCAL, as enacted, states the following:
Limitations on Guarantees for Certain Cable Operators.— Notwithstanding
any other provision of this Act, no loan guarantee under this Act may be
granted or used to provide funds for a project that extends, upgrades, or
enhances the services provided over any cable system to an area that, as of
the date of the enactment of this Act, is covered by a cable franchise
agreement that expressly obligates a cable system operator to serve such
area.
That language was controversial because of its use of the word “expressly” and
the fact that it is limited to franchise agreements in effect at the time of enactment.
Representative Markey stated during floor debate on H.R. 4942 on October 26, 2000,
that this version of the bill —
... guts key provisions that were adopted in the Commerce Committee that
instilled a preference for competition. This bill will not only run the risk of
subsidizing large media companies who do not need taxpayer subsidies, it
has now been changed so that incumbent cable companies who already
provide local TV stations can get a taxpayer subsidy as well. This makes
no sense as a public policy.15
Representative Markey went on to explain that by introducing the phrase
“expressly” to the provision limiting what cable companies are eligible for loan
guarantees, it opened a loophole that allowing many cable companies to obtain
taxpayer backed loans because few cable companies have explicit provisions in their
franchise agreements regarding building out their systems. Also, the final version of
the bill applies only to franchise agreements in effect when the bill was enacted. Thus
as franchise agreements expire and are renewed or negotiated, they will not be
covered by this provision, further permitting incumbent cable companies to compete
for loan guarantees. Representative Markey argued that the language is “bad for
competition, bad for consumers, and unfair to taxpayers.”16
Providing Other Telecommunications Services. Another issue that was
debated was whether the legislation should cover only the provision of local television
15Congressional Record, October 26, 2000, page H11283.
16Ibid, page H11284.
CRS-15
signals, or also of other telecommunications services such as high-speed Internet
access. Congress has expressed concern about the formation of a “digital divide”
between citizens who have access to advanced telecommunications services and those
who do not.17 During its February 3, 2000 hearing on S. 1980, the Senate Agriculture
Committee highlighted the interrelationship between the digital divide issue and the
loan guarantee legislation since some of the technologies for providing TV signals
could also be used to provide Internet access.
During floor debate on S. 2097 on March 30, 2000, the Senate adopted a
Baucus amendment that expanded the reach of S. 2097 into the high-speed Internet
access arena. The amendment revised the purpose of the legislation and the priorities
to be considered by the Board in determining recipients of loan guarantees by adding
“related signals (including high-speed Internet access and National Weather Service
Warnings)” to local TV signals. The House-passed version of H.R. 3615 did not
include language about these additional services.
In the final version of LOCAL, as enacted, the Board is directed to take into
account whether a project would also provide high-speed Internet access as a factor
in determining which projects receive loan guarantees.
Composition of the Board. The concept of using a specially created Board
to approve loan guarantees originated in S. 2097. In that bill, the Board was
composed of the Secretary of the Treasury, the Chairman of the Federal Reserve, and
the Secretary of Agriculture, or their designees. Although H.R. 3615 originally would
have assigned the responsibility for selecting loan guarantee recipients to the Rural
Utilities Service, the House Commerce Committee version created a Board similar to
that in S. 2097 and it was included in the House-passed version of the bill. The
language creating the Board originated in a Largent amendment in the nature of a
substitute that was adopted (amended) during markup by the telecommunications
subcommittee. In the original Largent amendment, the Board would have had the
same composition as in S. 2097 except that the Secretary of Commerce was added.
However, during markup the argument was made that having four members opened
the possibility of tie votes. At first, Representative Boucher offered an amendment
to change the manner in which the Board would make decisions from majority vote
to unanimous vote. That amendment failed, following which Representative Boucher
proposed an amendment dropping the Chairman of the Federal Reserve from the
Board to reduce the size of the Board to three while retaining the requirement for a
majority vote. That amendment was adopted.
In the final version of LOCAL, the Board is composed of four members
(Secretaries of Treasury, Agriculture, and Commerce, and the Chairman of the
Federal Reserve, or their designees) and the bill requires that approval of loan
applications be made by affirmative vote of at least three Board members.
Modification to Must Carry Requirements. As discussed earlier, the
satellite TV companies object to the requirement in SHVIA that they follow must
17For a discussion of that issue, see CRS Issue Brief IB10045, Broadband Internet Access:
Background and Issues, by Lennard G. Kruger and Angele A. Gilroy.
CRS-16
carry rules. They argue that it limits the number of markets in which they can offer
local-into-local by using up capacity on their satellites that could be used for offering
a basic set of local TV channels to more markets. As noted earlier, EchoStar,
DirecTV, and the Satellite Broadcasting and Communications Association have filed
suit to overturn the must carry provision. Others argue, however, that satellites
should have to conform to the same rules as cable or the two would not be competing
on a level playing field. The must carry battle was hard fought during debate over
SHVIA, with a decision that satellites would have to follow those rules, but with a 3-
year delay. Hence they do not go into effect for satellite TV until January 1, 2002.
During markup of H.R. 3615 by the House Commerce telecommunications
subcommittee, Representative Cox successfully argued that not all local TV stations
needed to be carried by the companies receiving loan guarantees under the bill. He
argued that only those clearly providing local programming should qualify since some
“local” stations (such as home shopping stations) might carry only national content.
His amendment, which was adopted, required that any TV station requesting must
carry status broadcast an annual average of 21 hours per week of local news, sports,
and weather programming.
When the bill reached full committee, however, Representative Tauzin offered
an amendment to the Cox language that was adopted by the committee and included
in the bill as passed by the House. Under the Tauzin version, any company receiving
a loan guarantee would be required to carry no more than the number of local TV
signals as carried by the cable system serving the largest number of subscribers in a
market. As described earlier, cable companies that offer more than 12 channels must
set aside one-third of their channel capacity for must carry stations. Thus, depending
on their size, different cable companies around the country may carry a different
number of local signals. The Tauzin language therefore would have made the
requirements for companies receiving the loan guarantees the same as for cable
companies.
The Senate bill had no comparable provision and it was not included in the final
version of the Act.
Northpoint Technology Ltd. A new provision included in the final version
of LOCAL requires the FCC to choose an independent engineering firm or other
qualified entity to perform tests to determine whether any terrestrial service proposed
by any entity that has filed an application to provide terrestrial service in the DBS
frequency band (12.2-12.7 gigahertz) will cause harmful interference to direct
broadcast satellites. The demonstration must be concluded with 60 days of
enactment, and is subject to public notice and comment for not more than 30 days
thereafter. The law was enacted on December 21, 2000.
This is often referred to as the “Northpoint” provision because a company named
Northpoint Technology is seeking FCC approval to use the DBS frequency band for
terrestrial transmission of television programming and data. Prior to the passage of
SHVIA in 1999, when satellite television companies were not permitted to retransmit
local television signals, Northpoint proposed providing local television signals to
consumers by transmitting them into a special device mounted to the back of a
consumer’s satellite dish. The company asserted that by transmitting into the back of
CRS-17
the dish, its signals would not interfere with the signals being transmitted to the same
dish by a satellite, allowing consumers to get both local television and satellite signals.
To accomplish its plan, Northpoint needed FCC permission to use the same frequency
band used by the satellite television companies. The satellite television companies
objected to Northpoint’s proposal almost from the beginning on the basis that the
signals would indeed interfere with their transmissions.
Although satellites now are permitted to offer local signals, Northpoint has
continued with its proposal and now plans to offer not only local television signals,
but other television signals and possibly data services. Essentially it would provide
services similar to those offered already by MMDS companies (discussed earlier).
MMDS does not operate in the 12.2-12.7 Gigahertz band, so does not pose
interference issues for satellite television companies. Some argue that Northpoint
should have filed for an application in the MMDS band rather than the satellite
television band.
Northpoint’s pending application is for a license to operate in the satellite
television band, however. The FCC opened a Notice of Proposed Rulemaking
regarding Northpoint’s application in early 1999.18 Apparently concerned that the
FCC was moving too slowly, Congress included a provision in SHVIA requiring the
FCC to make a decision within one year of enactment (i.e. by November 29, 2000)
on license applications for facilities that would deliver local television signals to
satellite television subscribers in unserved and underserved local television markets
using spectrum otherwise allocated to commercial use. Northpoint’s proposal fits
within that description. In accordance with SHVIA, the FCC adopted a Report and
Order19 on November 29, 2000, that concluded it is possible for Northpoint-type
systems to share the same frequency band with DBS on a non-harmful basis. The
Commission is seeking comment through a Further Notice of Proposed Rulemaking,
however, on technical sharing criteria and other issues.20 Hence, the Commission
stopped short of issuing a license for Northpoint, but formally opened the door for
discussions on spectrum sharing. Some argue that the spectrum should be
auctioned.21
18ET Docket No. 98-206, FCC 98-310, published in the Federal Register January 12, 1999,
p. 1786-1789.
19FCC 00-418, ET Docket No. 98-206. A press release is available at
[http://www.fcc.gov/Bureaus/Engineering_Technology/News_Releases/2000/nret0014.html]
20The Report and Order also addressed Northpoint’s ability to coexist with other satellite
systems called NGSOs (Non-Geostationary Satellite Orbits). The NGSO compatibility issue
is outside the scope of this report. The FCC created a new type of service, Multichannel
Video Distribution and Data Service, MVDDS, for Northpoint-type systems.
21Northpoint and DBS Rivals Begin Legal Wrangling at FCC. Communications Daily, Dec.
4, 2000, p. 6.