Rural Loan Plan Stalls as Time Runs Down

Washington-Legislation that would offer cheap loans to cable competitors that want to provide local TV signals to small markets has been hung up on Capitol Hill since early spring.

And with the clock running down on an election-year Congress, the legislation will die without a breakthrough soon.

One reason for the delay is the fact that two powerful lawmakers-Sen. John McCain (R-Ariz.) and Rep. Billy Tauzin (R-La.)-have been at loggerheads over a provision in the House bill that would overturn a Federal Communications Commission decision that is at least a decade old to deny licenses to a few rural cellular-phone companies.

Sources said McCain has problems with additional provisions in the House bill that he thinks encroach on his jurisdiction. One would effectively ban cable's ability to tap into the funds, while another would ease TV-station must-carry burdens on non- cable loan recipients.

"There's a matter of personalities going right now, and a couple of pretty powerful individuals are actually holding back the will of 99 percent," said one cable lobbyist who still believes there's a good chance Congress will send the White House a bill this year.

Both bills passed early in the year-by a wide majority in the House, unanimously in the Senate. But a conference committee of House and Senate members that would reconcile the two measures has never been appointed and, therefore, has never convened.

As a result, the legislation has languished for 150 days, and time is running short. Capitol Hill leaders have set Oct. 6 as the target adjournment date. Over the next few weeks, the legislative calendar is clogged with spending bills and tax-code changes that Republican leaders need to negotiate with President Clinton.

Lawmakers and lobbyists with their eye on the legislation said they remain hopeful of a turnaround.

Tauzin spokesman Ken Johnson said his boss "still believes we have time to work out a compromise before the end of the session. The problem is in the Senate, it's not in the House."


The National Rural Telecommunications Cooperative is championing the loan bills. NRTC members-which include rural electric and phone companies-have exclusive rights to market DirecTV Inc.'s satellite service to 11 million rural households, and have signed up 1.6 million homes so far.

The addition of local TV signals to the NRTC package, funded through low-cost government loans, would likely enhance NRTC members' ability to sign up subscribers.

"We are [confident of passage] because of the reassurances we've been given by key people like [Sen.] Conrad Burns [R-Mont.] and others," NRTC senior vice president of external affairs Jay Downen said. "I have been assured by key people that will drive this, I think, to a successful conclusion."

Under both bills, the federal government would provide $1.25 billion in long-term loan guarantees to applicants that provide local TV signals outside of the top 40 markets. Both bills would guarantee up to 80 percent of a loan.

The Senate bill (S. 2097), sponsored by Sen. Phil Gramm (R-Texas), is neutral on the question of who can apply for loans. The House bill (H.R. 3615) took a different position thanks to a move by old cable nemesis Rep. Edward Markey (D-Mass.).

Markey's amendment would stop funds from flowing to cable operators "for the extension of any cable system to any area or areas for which the cable operator has a cable franchise if such franchise obligates the operators to extend such systems to such area or areas."

Further, Markey would deny loan money for the "upgrading or enhancement" of cable systems unless operators want to use the money to extend service beyond the current boundary of their franchise.

Markey's effort all but guaranteed that cable operators would be denied loans. And sources said both McCain and Gramm oppose such a restriction.

The cable industry would like to see Markey's language stripped from the bill in order to preserve competitive neutrality among loan applicants.

But the industry is well aware that perfecting the bill from its standpoint probably wouldn't mean much because lawmakers have been candid in stating that they expect the loan money to flow to the satellite industry, in any case.


If a conference committee ever meets, it has other matters to reconcile.

Unlike the Senate bill, the House bill would allow a loan-guarantee recipient to provide less than all of the local TV signals in a market. The carriage obligation would require carriage of the same number of local TV signals that are carried by the largest cable system in the same market.

Tauzin sponsored the carriage provision. McCain is taking a close look at the language because must-carry policies fall within the jurisdiction of his Commerce Committee. McCain would not comment on specific problems with the must carry provision.

Sen. Max Baucus (D-Mont.) inserted into the Senate bill a provision that would require loans to go "to the maximum extent possible" to applicants that would also provide high-speed Internet access and National Weather Service warnings. The House bill does not contain a similar provision.

The bills differ with respect to membership of the tripartite board that would authorize loans. The Senate bill would require participation of the secretary of the treasury, the secretary of agriculture and the chairman of the board of the Federal Reserve System. The House bill would bump Fed chairman Alan Greenspan for the secretary of commerce.

Gramm-who oversees the Fed as chairman of the Senate Banking Committee-wants Greenspan on the board. Gramm "wants some changes in the makeup of the board," Banking Committee spokeswoman Christi Harlan said.

But sources said the most controversial issue is Tauzin's amendment helping the cellular-phone companies.

Washington lawyer Philip L. Verveer, who represents the firms, said they were denied licenses years ago based on an FCC finding that they had too much foreign ownership, even though the commission had awarded licenses to other companies with similar ownership structures.


"Basically, these folks got treated differently from others," said Verveer, a partner at Willkie Farr & Gallagher. The companies involved are Great Western Cellular Partners, Monroe Telephone Co. and FutureWave General Partners L.P.

Johnson said it was "a phony argument" that Tauzin's support for the cell-phone carriers was the cause for months of inaction.

"If there is enough objection to the Tauzin amendment, all members have to do is pull it out, but you have to go to conference first. We are not the ones holding up a conference," he added.

One way to break the logjam is to skip the conference committee altogether. This could be done if the House were to pass the Senate bill or the Senate were to pass the House bill. The measure could then head to the White House, which has indicated support for the loan program.

Harlan said Gramm is "hopeful that things can be worked out without convening a formal conference."