[Federal Register Volume 85, Number 49 (Thursday, March 12, 2020)]
[Rules and Regulations]
[Pages 14393-14409]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-04086]
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Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
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Federal Register / Vol. 85, No. 49 / Thursday, March 12, 2020 / Rules
and Regulations
[[Page 14393]]
DEPARTMENT OF AGRICULTURE
Rural Utilities Service
7 CFR Parts 1738 and 1739
[Docket No. RUS-19-Telecom-0003]
RIN 0572-AC46
Rural Broadband Loans, Loan/Grant Combinations, and Loan
Guarantees
AGENCY: Rural Utilities Service, USDA.
ACTION: Interim final rule; request for comments.
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SUMMARY: The Rural Utilities Service (RUS), an agency of the United
States Department of Agriculture, hereinafter referred to as the
Agency, is amending its regulation for the Rural Broadband Program,
previously referred to as the Rural Broadband Access Loan and Loan
Guarantee Program, to implement the Agricultural Act of 2018 (the 2018
Farm Bill). The Agency is publishing this regulation as an interim
final rule, which will take effect upon publication in the Federal
Register. In addition, the Agency is seeking comments regarding this
interim final rule to guide its efforts in drafting the final rule for
the Rural Broadband Program and Community Connect Grant Program.
DATES:
Effective date: This rule is effective May 11, 2020.
Comment date: Comments due on or before May 11, 2020.
ADDRESSES: You may submit comments by utilizing the Federal eRulemaking
Portal: https://www.regulations.gov. The rule can be identified by
docket number RUS-19-Telecom-0003 and RIN number 0572-AC46. Please
follow the instructions for submitting comments.
RUS will post all comments received without change, including any
personal information that is included with the comment, on https://www.regulations.gov. Comments will be available for inspection online
at https://www.regulations.gov. Additional information about RUS
Telecommunication programs is available at https://www.rd.usda.gov/programs-services/all-programs/telecom-programs.
FOR FURTHER INFORMATION CONTACT: For information about this document or
to view supplemental materials call or email Laurel Leverrier, Acting
Assistant Administrator; Telecommunication Program; Rural Development;
U.S. Department of Agriculture; 1400 Independence Avenue SW; Room 5153-
S; Washington, DC 20250; telephone 202-720-3416, email
[email protected]. Persons with disabilities or who require
alternative means for communication should contact the USDA Target
Center at 202-720-2600.
SUPPLEMENTARY INFORMATION:
Table of Contents for Preamble
I. Definition and Abbreviations
II. Background
III. Discussion of Rule Changes
IV. Procedural Matters
I. Definitions and Abbreviations
2014 Farm Bill Agricultural Act of 2014
2018 Farm Bill Agricultural Improvement Act of 2018
CFDA Catalog of Federal Domestic Assistance
CFR Code of Federal Regulations
FTTH Fiber-to-the-home
FR Federal Register
GPO Government Publishing Office
GSA General Services Administration
OMB Office of Management and Budget
RE Act Rural Electrification Act of 1936
RUS Rural Utilities Services
Sec. Section
U.S.C. United States Code
USDA U.S. Department of Agriculture
II. Background
A. Introduction
The Agency improves the quality of life in rural America by
providing investment capital for deployment of rural telecommunications
infrastructure. In order to achieve the goal of increasing economic
opportunity in rural America, the Agency finances infrastructure that
enables access to a seamless, nationwide telecommunications network.
With access to the same advanced telecommunications networks as its
urban counterparts, especially those designed to accommodate distance
learning, telework, and telemedicine, rural America will eventually see
improving educational opportunities, health care, economies, safety and
security, and ultimately higher employment. The Agency shares the
assessment of Congress, State and local officials, industry
representatives, and rural residents that broadband service is a
critical component to the future of rural America. The Agency is
committed to ensuring that rural America will have access to
affordable, reliable, broadband services and to provide a healthy,
safe, and prosperous place to live and work.
B. Regulatory History
On May 13, 2002, the Farm Security and Rural Investment Act of
2002, Public Law 107-171 (2002 Farm Bill), was signed into law. The
2002 Farm Bill amended the Rural Electrification Act of 1936 to include
Title VI, the Rural Broadband Access Loan and Loan Guarantee Program,
to be administered by the Agency. Title VI authorized the Agency to
approve loans and loan guarantees for the costs of construction,
improvement, and acquisition of facilities and equipment for broadband
service in eligible rural communities. Under the 2002 Farm Bill, the
Agency was directed to promulgate regulations without notice and
comment. Implementing the program required a different lending approach
for the Agency than it employed in its earlier telephone program
because of the unregulated, highly competitive, and technologically
diverse nature of the broadband market. Those regulations were
published on January 30, 2003, at 68 FR 4684.
In an attempt to enhance the Broadband Loan Program and to
acknowledge growing criticism of funding competitive areas, the Agency
proposed to amend the program's regulations on May 11, 2007, at 72 FR
26742 to make eligibility of certain service areas more restrictive
than set out in the 2002 Farm Bill. In addition to eligibility changes,
the proposed rule included, among others, changes to persistent
problems the Agency had encountered while implementing the program over
the years, especially regarding equity requirements, the market survey,
and the legal notice requirements. As the Agency began analysis of the
public comments it received on the proposed regulations, the Food,
Conservation, and Energy Act of 2008 (2008 Farm Bill) was working its
way through Congress. The proposed
[[Page 14394]]
rule and key aspects of the public comments were shared with Congress
during its deliberations, and the majority of the proposed changes in
the Agency's proposed rule were incorporated into the legislation, with
and without modification. On March 14, 2011 (76 FR 13770), the Agency
published an interim rule implementing the requirements of the 2008
Farm Bill. The Agency did not receive any significant comments to the
interim rule and published a final rule on February 6, 2013 (78 FR
8353).
With the passage of the Agricultural Act of 2014, Public Law 113-79
(2014 Farm Bill), Congress made additional changes to the program, and
the Agency again published a final rule on July 30, 2015 (80 FR 45397).
Those changes included the prioritization of approving applications, a
minimum benchmark of broadband service, a more transparent public
notice requirement, and the first statutorily required reporting
standards.
Again, on December 20, 2018, under the Agricultural Improvement Act
of 2018, Public Law 115-334 (2018 Farm Bill), Congress made even more
significant improvements to the program, most notably by furnishing
grant assistance to reach the most underserved rural areas lacking
broadband access. This regulation implements those required statutory
changes.
III. Discussion of Rule Changes
Below is a table showing each updated section and subpart and its
previous location.
Updated 7 CFR Part 1738 Sections and Subparts
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Previous section
New section number and title New subpart number and title Previous subpart
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Sec. 1738.1 Overview............. A........................ Sec. 1738.1 Overview Unchanged.
Sec. 1738.2 Definitions.......... A........................ Sec. 1738.2 Unchanged.
Definitions.
Sec. 1738.3 Funding Parameters... A........................ New................... New.
Sec. 1738.51 Eligible Entities... B........................ Sec. 1738.101 C.
Eligible Applicants.
Sec. 1738.52 Eligible Projects... B........................ New................... New.
Sec. 1738.53 Eligible Service B........................ Sec. 1738.102 C.
Area. Eligible service area.
Sec. 1738.54 Eligible service B........................ Sec. 1738.103 C.
area Exceptions for Broadband Eligible service area
Facility Upgrades. exceptions for
broadband facility
upgrades.
Sec. 1738.55 Broadband Lending B........................ New................... New.
Speed Requirements.
Sec. 1738.56 Eligible Assistance B........................ Sec. 1738.51 Unchanged.
Purposes. Eligible loan
purposes.
Sec. 1738.57 Ineligible B........................ Sec. 1738.52 B.
Assistance Purposes. Ineligible loan
purposes.
Sec. 1738.101 Grant Assistance... C........................ New................... New.
Sec. 1738.102 Payment Assistance C........................ New................... New.
for loans.
Sec. 1738.103 Substantially C........................ Sec. 1738.3 A.
underserved trust areas. Substantially
underserved trust
areas.
Sec. 1738.104 Technical C........................ New................... New.
Assistance.
Sec. 1738.105 Priorities for C........................ Sec. 1738.203 E.
approving assistance. Priority for
approving loan
applications.
Sec. 1738.106 Public Notice...... C........................ Sec. 1738.204 Public E.
notice.
Sec. 1738.107 Additional C........................ New................... New.
Reporting for Awardees.
Sec. 1738.108 Environmental C........................ New................... New.
Reviews.
Sec. 1738.109 Civil Rights C........................ New................... New.
procedures and requirements.
Sec. 1738.151 General............ D........................ New................... New.
Sec. 1738.152 Interest rates..... D........................ Unchanged............. Unchanged.
Sec. 1738.153 Terms and D........................ Unchanged............. Unchanged.
conditions.
Sec. 1738.154 Security........... D........................ Sec. 1738.154 Loan Unchanged.
security.
Sec. 1738.155 Advance of Funds... D........................ New................... New.
Sec. 1738.156 Buy American D........................ New................... New.
Requirement.
Sec. 1738.201 Application E........................ Unchanged............. Unchanged.
submission.
Sec. 1738.202 Elements of a E........................ Unchanged............. Unchanged.
complete application.
Sec. 1738.203 Notification of E........................ Sec. 1738.205 Unchanged.
completeness. Notification of
completeness.
Sec. 1738.204 Evaluation for E........................ Sec. 1738.206 Unchanged.
feasibility. Evaluation for
feasibility.
Sec. 1738.205 Competitive E........................ Sec. 1738.210 Unchanged.
Analysis. Competitive Analysis.
Sec. 1738.206 Financial E........................ Sec. 1738.211 Unchanged.
information. Financial information.
Sec. 1738.207 Network design..... E........................ Sec. 1738.212 Unchanged.
Network design.
Sec. 1738.208 Award E........................ Sec. 1738.213 Loan Unchanged.
determinations. determination.
Sec. 1738.251 Offer and Closing.. F........................ Sec. 1738.251 Loan Unchanged.
offer and loan
closing.
Sec. 1738.252 Construction....... F........................ Unchanged............. Unchanged.
Sec. 1738.253 Servicing of loan F........................ Unchanged............. Unchanged.
and loan/grant combinations.
Sec. 1738.254 Accounting, F........................ Unchanged............. Unchanged.
reporting, and monitoring
requirements.
Sec. 1738.255 Default and de- F........................ Unchanged............. Unchanged.
obligation.
Sec. 1738.301 General............ G........................ Unchanged............. Unchanged.
Sec. 1738.302 Fees............... G........................ New................... New.
Sec. 1738.350 OMB control number. G........................ Unchanged............. Unchanged.
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The following summarizes the substantive changes introduced in this
rule. The changes are presented in the order in which they appear
within the interim rule.
Subpart A
Section 1738.1--Overview
In this section, the Agency simplified the title of the ``Rural
Broadband Access Loan and Loan Guarantee Program'' to the ``Rural
Broadband Program,'' and added ``loan/grant combinations'' as an
eligible Award category. The Agency anticipates that the addition of
grant funding will help the financial feasibility of projects in rural
areas with low density.
[[Page 14395]]
Section 1738.2--Definitions
The Agency amended the definition section to add additional terms
to comply with changes to the 2018 Farm Bill and to clarify and
standardize definitions.
Subpart B
Section 1738.52--Eligible Projects
The Agency revised the required time to complete the build-out of
the broadband system described in the application from 3 years to 5
years from the day the Applicant is notified that loan funds are
available and revised the commencement period from 120 days after the
date of the contract to begin from the date that the legal documents
are cleared and funds are made available to the Awardee. Also, the
Agency removed the required equity position percentage for Applicants.
Section 1738.53--Eligible Service Area
As per the 2018 Farm Bill, the Agency revised eligible service
areas to open up, starting after October 1, 2020, those service areas
of grantees that are not providing service at least 10 Mbps downstream
or 1 Mbps upstream. This ensures that certain rural communities that
received prior, older grants are not excluded from receiving Federal
assistance to modernize their facilities. Additionally, as required by
the 2018 Farm Bill, this section specifies that mobile and satellite
services will not be considered when determining the number of
households in the proposed service area that do not have access to
broadband service.
Section 1738.55--Broadband Lending Speed Requirements
This section outlines the required broadband lending speeds, which
are now tied to the term of the Award, as required by the 2018 Farm
Bill. This is to ensure, for example, that projects with 20-year loan
terms will be capable of providing broadband service at the necessary
projected speeds during the entire term of the loan.
Subpart C
Section 1738.101--Grant Assistance
This section outlines the requirements of receiving grant
assistance, the correlation between the levels of grant assistance and
the density of the rural areas to be served, as well as lays out the
requirement to receive additional grant funding for development costs.
This new authority is intended to assist the neediest of rural areas
that lack sufficient levels of broadband service in recovering costs
associated with putting together a broadband application. These costs
are often a bar to applying to the program for such areas. As a result,
the Agency anticipates that funding will be better directed to those
areas that are in most need of broadband service.
Section 1738.102--Payment Assistance for Loans
The 2018 Farm Bill not only provided newly available grant
assistance, but authorized significant assistance to loans. This
section outlines the conditions under which Applicants would be
eligible to receive loans with subsidized interest rates.
Section 1738.104--Technical Assistance
This section outlines the conditions under which RUS will provide
technical assistance and training through grant funding. This new
authority is intended to help the most rural areas without sufficient
access to broadband actually prepare applications for submission. As
with the assistance for development costs, this should direct funding
to where it is most needed.
Section 1738.105--Priorities for Approving Assistance
The 2018 Farm Bill extensively revised the criteria for
prioritizing applications. Most significantly, however, the Agency will
now prioritize applications for rural areas that do not have access to
service of at least 10 Mbps upstream and 1 Mbps downstream.
Subpart D
Section 1738.156--Buy American Requirement
Executive Order 13858 directs Federal agencies to encourage
recipients of Federal funds on infrastructure projects to use those
funds, to the greatest extent practicable, to purchase goods and
products that are produced in the United States. As a result, RUS will
apply its Buy American requirement, promulgated under 7 CFR part 1787,
to grants funds under the Broadband Program and Community Connect
Programs. The Buy American requirement is already a statutory
requirement for loan funds.
Subpart G
Section 1738.301--General
The Agency revised this section to outline loan guarantee
application requirements and conditions for Agency approval of loan
guarantees. Applicants are also directed to the applicable guarantee
regulations in 7 CFR parts 4279 and 4287.
Section 1738.302--Fees
This section was added pursuant to the 2018 Farm Bill, which now
requires that fees be collected from the lender when issuing loan
guarantees, in order to lower the costs of such guarantees to the
Federal Government.
7 CFR Part 1739 Community Connect Program
Subpart A
Section 1739.3--Definitions
The Agency updated the definition of Critical Community Facilities
to be in alignment with 7 U.S.C 1926(a).
The Agency updated the definition of Broadband Service to remove
mobile and satellite service from being included in the definition.
Section 1739.8--Buy American Requirement
Executive Order 13858 directs Federal agencies to encourage
recipients of Federal funds on infrastructure projects to use those
funds, to the greatest extent practicable, to purchase goods and
products that are produced in the United States. As a result, RUS will
apply its Buy American requirement, promulgated under 7 CFR part 1787,
to grants funds under the Broadband Program and Community Connect
Programs. The Buy American requirement is already a statutory
requirement for loan funds.
Section 1739.15--Completed Application
The Agency added a requirement to publish a public notice
requirement for each application.
IV. Procedural Matters
Executive Order 12866 and 13563
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches to maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). Executive
Order 13563 emphasizes the importance of quantifying both costs and
benefits, of reducing costs, of harmonizing rules, and of promoting
flexibility.
This rule has been determined to be economically significant and
was reviewed by the Office of Management and Budget under Executive
Order 12866. In accordance with Executive Order 12866, a Regulatory
Impact Analysis was completed, outlining the costs and benefits of
implementing this
[[Page 14396]]
program in rural America. A brief summary can be found below or for the
complete analysis please see Regulations.gov with the Docket number
RUS-19-Telecom-0003.
Regulatory Impact Analysis
USDA's RUS programs improve the quality of life in rural America by
providing investment capital for deployment of rural telecommunications
infrastructure in a financially responsible manner. Financial
assistance is provided to corporations, limited liability companies,
cooperative or mutual organizations, Indian tribes or tribal
organizations, or State and local governments.
Unfortunately, too many rural Americans still lack access to
broadband service today. The Federal Communications Commission's (FCC)
2019 Broadband Deployment Report (https://docs.fcc.gov/public/attachments/FCC-19-44A1.pdf), which was issued in May, noted that over
21 million Americans lack access to broadband service of 25 Mbps
download and 3 Mbps upload. More than 26 percent of Americans in rural
areas and 32 percent of Americans in Tribal lands lack broadband
service.
Remoteness, mountainous and difficult terrain, and sparsely
populated areas can make it difficult for service providers to make a
business case to extend broadband service. As noted in a report by the
National League of Cities regarding bridging the urban-rural divide,
``broadband access tends to cluster in urban areas because it is a
guaranteed market for private providers, unlike less densely populated
rural areas.'' Furthermore, the report noted that rural communities
have 37 percent more residents without broadband access when compared
to their urban counterparts. Alaska has the most significant divide,
with a gap of 62 percent (https://www.nlc.org/sites/default/files/2018-03/nlc-bridging-the-urban-rural-divide.pdf).
There are numerous technologies and network configurations that
service providers can utilize to extend broadband service. The Rural
Broadband Program is technology neutral, meaning that any technology
that can meet RUS' broadband lending speed threshold (currently set at
25 Mbps download and 3 Mbps upload) is eligible for program funding.
The current broadband lending speed standard of 25 Mbps download and 3
Mbps upload was first established in 2017. The standard for the 2016
fiscal year was 10 Mbps download and 1 Mbps upload. The table below
identifies the type of technology deployed for the Rural Broadband
Program projects which have been funded since 2016.
The Rural Broadband Program provides important funding to help
address these issues and enable rural service providers to make the
business case to build-out broadband service in rural communities
across the nation. Through this program, the number of subscribers that
are expected to benefit from each project can vary greatly between
projects, depending on the density, remoteness, and topography of the
communities being served. Additionally, RUS expects the number of
households and businesses benefiting from these projects to grow over
time.
Rural communities benefit tremendously from the availability of
broadband service that results from the awards from RUS' Rural
Broadband Program. Some of these benefits have can clearly be observed
with the previous Broadband program. These benefits include more
service to underserved areas, more consistent technology and speed of
service.
The following table summarizes the benefits and costs of this rule,
as required by OMB's Circular A-4. Given that future appropriations
will dictate the size of this program going forward, RUS has elected to
conduct an annual analysis based on the current best estimate of
program size, with the implicit assumption of a constant program size
in the absence of more reasonable assumptions. The costs of this rule
are estimated as the annual information collection burden and occur in
the year of application/award. Because of the significant changes to
program operation, any estimate of the benefits would be speculative,
and based on the projected increase in the number of applications.
Thus, the benefits of this rule qualitatively described, in Section C.
The benefits from each year's awards likely accrue over a number of
years, although RUS can only describe this time frame qualitatively.
The main economic impact of this rule is the potential annual transfer
associated with the $350 million of authorized funding. Given the
speculative nature of assumptions about the future time stream of
costs, benefits and transfer other than these amounts as constant
annual levels, applying the 3% and 7% discount rates would produce
results equivalent to the annual estimates reported here.
------------------------------------------------------------------------
Category Annual estimate (2019 $)
------------------------------------------------------------------------
Costs..................................... 2,189,350
Benefits.................................. Qualitative
Transfers................................. 350,000,000
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RUS has not presented an in-depth alternatives analysis with this
rule, because the 2018 Farm Bill is fairly prescriptive regarding this
rule. That being said, one possible option would be for RUS to forgo
the loan/grant opportunities and provide broadband services directly.
There are a few issues with this option, however, which include the
lack of resources within RUS to manage these types of projects. This
option would also lead to the choice of technology being dictated by
the Government. The costs of this option would be significantly higher,
the transfers would be significantly lower, and the benefits could be
similar or lower, depending on the technology choice.
Congressional Review Act
Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.),
the Office of Information and Regulatory Affairs designated this rule
as a major rule, as defined by 5 U.S.C. 804(2).
Executive Order 12372
This rule is excluded from the scope of Executive Order 12372
(Intergovernmental Consultation), which may require a consultation with
State and local officials. See the final rule related notice entitled,
``Department Programs and Activities Excluded from Executive Order
12372'' (50 FR 47034).
Catalog of Federal Domestic Assistance
The Catalog of Federal Domestic Assistance (CFDA) number assigned
to this program is 10.886, Rural Broadband Program. The Catalog is
available on the internet at https://beta.sam.gov. The SAM.gov website
also contains a PDF file version of the Catalog that, when printed, has
the same layout as the printed document that the Government Publishing
Office (GPO) provides. GPO prints and sells the CFDA to interested
buyers. For information about purchasing the Catalog of Federal
Domestic Assistance from GPO, call the Superintendent of Documents at
202-512-1800 or toll free at 866-512-1800, or access GPO's online
bookstore at http://bookstore.gpo.gov.
Information Collection and Recordkeeping Requirements
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C.
Chapter 35, as amended), the RUS invites comments on this information
[[Page 14397]]
collection for which approval from the Office of Management and Budget
(OMB) will be requested. These requirements have been approved by
emergency clearance under OMB Control Number 0572-0154.
Comments must be received by May 11, 2020.
Comments are invited on (a) whether the collection of information
is necessary for the proper performance of the functions of the Agency,
including whether the information will have practical utility; (b) the
accuracy of the Agency's estimate of burden including the validity of
the methodology and assumption used; (c) ways to enhance the quality,
utility and clarity of the information to be collected; and (d) ways to
minimize the burden of the collection of information on those who are
to respond, including through the use of appropriate automated,
electronic, mechanical, or other technological collection techniques on
other forms of information technology.
Title: 7 CFR 1738, Rural Broadband Program.
OMB Control Number: 0572-0154.
Type of Request: Extension of an existing collection.
Abstract: The Rural Utilities Service is authorized under Title VI
of the Rural Electrification Act of 1936, as amended (RE Act), to
provide loans, loan/grant combinations and loan guarantees to fund the
cost of construction, improvement, or acquisition of facilities and
equipment for the provision of broadband service in eligible rural
areas in States and Territories of the United States. In conjunction
with this interim final rulemaking, RUS is submitting an information
collection package to OMB as required by the Paperwork Reduction Act of
1995. The information collection package for 7 CFR part 1738 includes
the estimated burden related to the application process for the Rural
Broadband Program. Since the inception of the program in 2003, the
Agency has tried to accurately determine the burden to respondents
applying for assistance, including soliciting comments from the public.
The items covered by this collection include forms and related
documentation to support an application for financial assistance,
including all information required by RUS' online application system.
The 2018 Farm Bill added a new type of loan mechanism that included
a grant portion to that loan. This provides a new opportunity for
entities to apply with the hope of minimizing the loan portion based on
how much of the service area is provided to underserved locations.
The Agency has addressed these issues as follows:
(1) Adding additional respondents based on the new loan/grant
combination opportunity. The increase is based on an estimate of how it
is believed this new opportunity will impact how new applications are
received. Since this is a new opportunity for this program, other
similar programs were reviewed to help provide a realistic number.
(2) The Rural Broadband Program, currently, has the public notice
aspect accounted for, however, there were two programs impacted by the
program notice supplement under the 2018 Farm Bill. The
Telecommunication Infrastructure Program and the Community Connect
Program were impacted by the changes to the public notice item and were
incorporated into this Paperwork reduction Act package, thus increasing
the overall burden of the program.
The Agency seeks comments on its estimate of burden related to the
application process for the Rural Broadband Program and welcomes
comments related to further reducing application paperwork and costs.
Comments may be submitted by, identified by docket number RUS-19-
Telecom-0003 and RIN number 0572-AC46, through the Federal eRulemaking
Portal: https://www.regulations.gov.
Estimate of Burden: Public reporting for this collection of
information is estimated to average 134 hours per response.
Respondents: Businesses and Not-for-profit institutions.
Estimated Number of Respondents: 156.
Estimated Total Annual Burden on Respondents: 20,942 hours.
Copies of this information collection can be obtained from Jeanne
Jacobs, Rural Development Innovation Center--Regulations Support
Branch--1, USDA, 1400 Independence Avenue SW, STOP 1522, South
Building, Washington, DC 20250-1522. Telephone: (202) 692-0040 or via
email: [email protected]. Regulation Management Division.
All responses to this information collection and recordkeeping
notice will be summarized and included in the request for OMB approval.
All comments will also become a matter of public record.
National Environmental Policy Act Certification
The Administrator has determined that this rule will not
significantly affect the quality of the human environment as defined by
the National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.).
Therefore, this action does not require an environmental impact
statement or assessment.
Regulatory Flexibility Act Certification
It has been determined that the Regulatory Flexibility Act is not
applicable to this rule because the Agency is not required by 5 U.S.C.
553 or any other provision of law to publish a notice of proposed
rulemaking with respect to the subject matter of this rule.
Executive Order 12988, Civil Justice Reform
This rule has been reviewed under Executive Order 12988. The Agency
has determined that this rule meets the applicable standards provided
in section 3 of the Executive order. In addition, all state and local
laws and regulations that are in conflict with this rule will be
preempted. No retroactive effort will be given to this rule.
Unfunded Mandates Reform Act
This rule contains no Federal mandates (under the regulatory
provisions of Title II of the Unfunded Mandates Reform Act of 1995) for
State, local, and tribal governments or the private sector. Thus, this
rule is not subject to the requirements of section 202 and 205 of the
Unfunded Mandates Reform Act of 1995.
Executive Order 13132, Federalism
The policies contained in this rule do not have any substantial
direct effect on the States, on the relationship between the National
Government and the States, or on the distribution of power and
responsibilities among the various levels of government. Nor does this
rule impose substantial direct compliance costs on state and local
governments. Therefore, consultation with the States is not required.
Executive Order 13175, Consultation and Coordination With Indian Tribal
Governments
This rule has been reviewed in accordance with the requirements of
Executive Order 13175, ``Consultation and Coordination with Indian
Tribal Governments.'' Executive Order 13175 requires Federal agencies
to consult and coordinate with tribes on a government-to-government
basis on policies that have tribal implications, including regulations,
legislative comments or proposed legislation, and other policy
statements or actions that have substantial direct effects on one or
more Indian tribes, on the relationship between the Federal Government
and Indian tribes or on the distribution of
[[Page 14398]]
power and responsibilities between the Federal Government and Indian
tribes.
Rural Development has assessed the impact of this rule on Indian
tribes and determined that this rule does not, to our knowledge, have
tribal implications that require tribal consultation under Executive
Order 13175. However, since deploying broadband infrastructure
throughout Indian Country presents unique challenges, the Agency
commits to provide at least one Tribal listening session focused on
those unique challenges (and potential solutions) prior to the
implementation of this rule. If a Tribe requests government-to-
government consultation, Rural Development will work with the Office of
Tribal Relations to ensure meaningful consultation is provided where
changes, additions and modifications identified herein are not
expressly mandated by Congress. If a tribe would like to engage in
government-to-government consultation with Rural Development on this
rule, please contact Rural Development's Native American Coordinator at
(720) 544-2911 or [email protected].
E-Government Act Compliance
The Agency is committed to the E-Government Act, which requires
Government agencies in general to provide the public the option of
submitting information or transacting business electronically to the
maximum extent possible. The Agency is updating its online system for
submitting applications.
Civil Rights Impact Analysis
Rural Development has reviewed this rule in accordance with USDA
Regulation 4300-4, Civil Rights Impact Analysis, to identify any major
civil rights impacts the rule might have on program participants on the
basis of age, race, color, national origin, sex or disability. After
review and analysis of the rule and available data, it has been
determined that implementation of the rule will not adversely or
disproportionately impact very low, low- and moderate-income
populations, minority populations, women, Indian tribes or persons with
disability by virtue of their race, color, national origin, sex, age,
disability, or marital or familiar status. No major civil rights impact
is likely to result from this rule.
List of Subjects
7 CFR Part 1738
Loan programs--communications, Rural areas, Telecommunications,
Telephone.
7 CFR Part 1739
Grant programs--communications, Rural areas, Telecommunications,
Telephone.
For the reasons discussed in the preamble, the Agency amends 7 CFR
parts 1738 and 1739 as follows:
0
1. Revise part 1738 to read as follows:
PART 1738--RURAL BROADBAND LOANS, LOAN/GRANT COMBINATIONS, AND LOAN
GUARANTEES
Subpart A--General
Sec.
1738.1 Overview.
1738.2 Definitions.
1738.3 Funding parameters.
1738.4-1738.50 [Reserved]
Subpart B--Eligibility Requirements
1738.51 Eligible entities.
1738.52 Eligible projects.
1738.53 Eligible service area.
1738.54 Eligible service area exceptions for broadband facility
upgrades.
1738.55 Broadband lending speed requirements.
1738.56 Eligible assistance purposes.
1738.57 Ineligible assistance purposes.
1738.58-1738.100 [Reserved]
Subpart C--Award Requirements
1738.101 Grant assistance.
1738.102 Payment assistance for loans.
1738.103 Substantially Underserved Trust Areas (SUTA).
1738.104 Technical assistance.
1738.105 Priorities for approving assistance.
1738.106 Public notice.
1738.107 Additional reporting requirements for Awardees.
1738.108 Environmental reviews.
1738.109 Civil rights procedures and requirements.
1738.110-1738.150 [Reserved]
Subpart D--Loan and Loan/Grant Combination Award Terms
1738.151 General.
1738.152 Interest rates.
1738.153 Terms and conditions.
1738.154 Security.
1738.155 Advance of funds.
1738.156 Buy American requirement.
1738.157-1738.200 [Reserved]
Subpart E--Loan and Loan/Grant Combination Application Review and
Underwriting
1738.201 Application submission.
1738.202 Elements of a complete application.
1738.203 Notification of completeness.
1738.204 Evaluation for feasibility.
1738.205 Competitive analysis.
1738.206 Financial information.
1738.207 Network design.
1738.208 Award determinations.
1738.209-1738.250 [Reserved]
Subpart F--Closing, Servicing, and Reporting for Loan and Loan/Grant
Combination Awards
1738.251 Offer and closing.
1738.252 Construction.
1738.253 Servicing of loan and loan/grant combinations.
1738.254 Accounting, reporting, and monitoring requirements.
1738.255 Default and deobligation.
1738.256-1738.300 [Reserved]
Subpart G--Loan Guarantee
1738.301 General.
1738.302 Fees.
1738.303-1738.349 [Reserved]
1738.350 OMB control number.
Authority: 7 U.S.C. 901 et seq.
Subpart A--General
Sec. 1738.1 Overview.
(a) The Rural Broadband Program furnishes loans, loan/grant
combinations, and loan guarantees for the costs of construction,
improvement, or acquisition of facilities and equipment needed to
provide service at the broadband lending speed in eligible rural areas.
This part sets forth the general policies, eligibility requirements,
types and terms of loans, loan/grant combinations and loan guarantees,
and program requirements under 7 U.S.C. 901 et seq.
(b) Additional information and application materials regarding the
Rural Broadband Program can be found on the Rural Development website.
Sec. 1738.2 Definitions.
(a) The following definitions apply to this part:
Acquisition means the purchase of assets by an eligible entity as
defined in Sec. 1738.51 to acquire facilities, equipment, operations,
licenses, or majority stock interest of one or more organizations.
Stock acquisitions must be arm's-length transactions.
Administrator means the Administrator of the Rural Utilities
Service (RUS).
Advance means the transfer of loan or grant funds from the Agency
to the Awardee.
Affiliate or affiliated company of any specified person or entity
means any other person or entity directly or indirectly controlling of,
controlled by, under direct or indirect common control with, or related
to, such specified entity, or which exists for the sole purpose of
providing any service to one company or exclusively to companies which
otherwise meet the definition of affiliate. For the purpose of this
definition, ``control'' means the possession directly or indirectly, of
the power to direct or cause the direction of
[[Page 14399]]
the management and policies of a company, whether such power is
exercised through one or more intermediary companies, or alone, or in
conjunction with or pursuant to an agreement with, one or more other
companies, and whether such power is established through a majority or
minority ownership voting of securities, common directors, officers, or
stockholders, voting trust, or holding trusts (other than money
exchanged) for property or services.
Agency means the Rural Utilities Service (RUS).
Applicant means an entity requesting approval of assistance under
this part.
Assistance means a request for a loan, loan/grant combination, or
loan guarantee.
Associated loan means any loan that is granted in association with
a grant. Every grant will have an associated loan.
Award means a loan, loan/grant combination, or loan guarantee made
under this part.
Award documents means, as applicable, all associated loan
agreements, loan/grant combination agreements, or loan guarantee
documents.
Award term means the term of the loan as defined in the Award
documents. The Award term shall be equal to the composite economic life
of the facilities being financed with RUS loan or grant funding plus 3
years.
Awardee means an entity that has applied for and been awarded
assistance under this part.
Borrower means an entity that has applied for and been awarded loan
funding under this part.
Broadband grant means a Community Connect, Broadband Initiatives
Program, ReConnect Program, or Rural Broadband Program grant approved
by the Agency.
Broadband lending speed means the minimum bandwidth requirements,
as published by the Agency in its latest notice in the Federal Register
that Applicants must propose to deliver to every customer in the
proposed funded service area in order for the Agency to approve a
broadband Award. Broadband lending speeds will vary depending on the
technology proposed and the term of the average composite economic life
of the facilities. Initially, the broadband lending speed for
terrestrial service, whether fixed or wireless, as well as mobile
broadband serving ranches and farmland is 25 megabits per second (Mbps)
downstream and 3 Mbps upstream, until further amended by notice. If a
new broadband lending speed is published in the Federal Register while
an application is pending, the pending application will be processed
based on the broadband lending speed that was in effect when the
application was submitted.
Broadband loan means any loan approved under Title VI of the Rural
Electrification Act of 1936, as amended (RE Act).
Broadband service means any technology identified by the
Administrator as having the capacity to provide transmission facilities
that enable the subscriber to receive a minimum level of service equal
to at least a downstream transmission capacity of 25 Mbps and an
upstream transmission capacity of 3 Mbps. The Agency will publish the
minimum transmission capacity with respect to terrestrial service that
will qualify as broadband service in a notice in the Federal Register.
If a new minimum transmission capacity is published in the Federal
Register while an application is pending, broadband service for the
purpose of reviewing the application will be defined by the minimum
transmission capacity that was required at the time the application was
received by the Agency.
Build-out means the construction, improvement, or acquisition of
facilities and equipment, except for customer premises equipment (CPE).
Competitive analysis means a study that identifies service
providers and products in the service area that will compete with the
Applicant's operations.
Composite economic life means the weighted (by dollar amount of
each class of facility in the requested assistance) average economic
life as determined by the Agency of all classes of facilities financed
by the award.
Current Ratio (CR) means the current assets divided by the current
liabilities.
Customer premises equipment (CPE) means any network-related
equipment used by a customer to connect to a service provider's
network.
Debt Service Coverage Ratio (DSCR) means the ratio of the sum of
the Awardee's total net income or margins, depreciation and
amortization expense, and interest expense, minus an allowance for
funds used during construction and amortized grant revenue, all divided
by the sum of interest on funded debt, other interest, and principal
payment on debt and capital leases.
Density means the total population to be served by the project
divided by the total number of square miles to be served by the
project. If multiple service areas are proposed, the density
calculation will be made on the combined areas as if they were a single
area, and not the average densities.
Development costs mean the pre-application costs associated with
construction, design of the system, and other professional labor, as
approved by the Agency. Further guidance on what constitutes approved
development costs will be outlined in the Agency's application guide.
Economic life means the estimated useful service life of an asset
financed by the loan or grant, as determined by the Agency.
Feasibility study means the pro forma financial analysis performed
by the Agency, based on the financial projections prepared by the
Applicant, to determine the financial feasibility of a loan or loan/
grant combination request.
Financial feasibility means the Applicant's ability to generate
sufficient revenues to cover its expenses, sufficient cash flow to
service its debts and obligations as they become due and meet the Net
worth and minimum Times Interest Earned Ratio (TIER), CR, or DSCR
requirements of Sec. 1738.206(b)(2)(i) by the end of the forecast
period. Financial feasibility of an application is based on a
projection that spans the forecast period and the entire operation of
the Applicant, not just the proposed project.
Fiscal year refers to the Applicant or awardee's fiscal year,
unless otherwise indicated.
Forecast period means the time period used in the feasibility study
to determine if an application is financially feasible.
GAAP means generally accepted accounting principles in the United
States of America.
Grant documents means the grant contract and security agreement
between the Agency and the Awardee securing the grant.
Grantee means an entity that has an outstanding broadband grant
made by the Agency, with outstanding obligations under the Award
documents.
Incumbent service provider means a service provider that provides
terrestrial broadband service to at least 5 percent of the households
in the proposed funded service area at the time of application
submission. Resellers are not considered incumbent service providers.
If an Applicant proposes an acquisition, the Applicant will be
considered a service provider for that area. The Agency will not
consider mobile or satellite providers when determining the incumbent
service providers in the area.
[[Page 14400]]
Indefeasible right to use (IRU) means the long-term agreement of
the rights to capacity, or a portion thereof specified in terms of a
certain amount of bandwidth or number of fibers.
Interim financing means funds used for eligible Award purposes
after an Award offer has been extended to the Applicant by the Agency.
Such funds may be eligible for reimbursement from Award funds if an
Award is made.
Loan guarantee means Federal assistance in the form of a guarantee
of a loan, or a portion thereof, made by another lender.
Loan funds means funds provided pursuant to a broadband loan made
or guaranteed under this part by the Agency.
Market survey means the collection of information on the supply,
demand, usage, and rates for proposed services to be offered by an
Applicant in support of the Applicant's financial projections.
Net worth means the difference between an entity's total assets and
total liabilities.
Project means all work to be performed to bring broadband service
to all premises in the proposed funded service area under the
Application that is approved for assistance. This includes the
construction, purchase and installation of equipment, and professional
services including engineering and accountant/consultant fees. A
project may be funded with Federal assistance or other funds.
Project completion means that all Award funds for construction of
the broadband system, excluding those funds for subscriber connections
and CPE, have been advanced to the Awardee by RUS.
Proposed funded service area means the geographic service territory
within which the Applicant is proposing to offer service at the
broadband lending speed.
RE Act means the Rural Electrification Act of 1936, as amended (7
U.S.C. 901 et seq.).
Reseller means a company that purchases network services from
service providers in bulk and resells them to commercial businesses and
residential households. Resellers are not considered incumbent service
providers.
Rural area(s) means any area which is not located within:
(i) A city, town, or incorporated area that has a population of
greater than 20,000 inhabitants; or
(ii) An urbanized area contiguous and adjacent to a city or town
that has a population of greater than 50,000 inhabitants. For purposes
of this definition, an urbanized area means a densely populated
territory as defined in the latest decennial census of the U.S. Census
Bureau; and
(iii) Which excludes certain populations pursuant to 7 U.S.C.
1991(a)(13), or as otherwise provided by law.
RUS Borrower or RUS Grantee means any recipient of a loan or grant
administered by the RUS Telecommunications Program that has a loan
outstanding, or a grant which still has unadvanced funds available.
Security documents means any mortgage, deed of trust, security
agreement, financing statement, or other document which grants or
perfects to the Agency a security interest in collateral given as
security for the assistance under this part.
Service area or Service territory means the geographic area within
which a service provider offers broadband service.
Service provider means an entity providing broadband service.
System of accounts means the Agency's system of accounts for
maintaining financial records as described in 7 CFR part 1770, subpart
B.
TIER means times interest earned ratio. TIER is the ratio of an
Applicant's net income (after taxes) plus interest expense, all divided
by interest expense and with all financial terms customarily-required
by GAAP or by the Uniform System of Accounts (USOA).
Total project cost means all eligible costs associated with the
project that are laid out in the application budget schedule, including
RUS loan and grant funding and non-RUS funds, as approved by the
Agency.
(b) Accounting terms not otherwise defined in this part shall have
the commonly-accepted meaning under GAAP and shall be recorded using
the Agency's system of accounts.
Sec. 1738.3 Funding parameters.
(a) The amount of funds available for assistance, as well as the
maximum and minimum Award amounts, will be published in the Federal
Register. Applicants may apply for loans, loan/grant combinations, and
loan guarantees.
(b) An Applicant that provides telecommunications or broadband
service to at least 20 percent of the households in the United States
is limited to an Award amount that is no more than 15 percent of the
funds available to the Rural Broadband Program for the Federal fiscal
year.
Sec. Sec. 1738.4-1738.50 [Reserved]
Subpart B--Eligibility Requirements
Sec. 1738.51 Eligible entities.
(a) To be eligible for funding, an Applicant may be either a
nonprofit or for-profit organization, and must take one of the
following forms:
(1) Corporation;
(2) Limited liability company (LLC);
(3) Cooperative or mutual organization;
(4) Indian tribe or tribal organization as defined in 25 U.S.C.
5304; or
(5) State or local government, including any agency, subdivision,
or instrumentality thereof.
(b) For loan guarantees, the underlying loan must be issued to an
entity that meets the requirements in this part.
Sec. 1738.52 Eligible projects.
To be eligible for assistance under this part, the Applicant must:
(a) Agree to complete the build-out of the broadband system
described in the application within 5 years from the day the Applicant
is notified that funds are available. Under the terms of the Award
documents, this 5-year period will commence from the date that the
legal documents are cleared, and funds are made available to the
Awardee. The application must demonstrate that all proposed
construction can be completed within this 5-year period with the
exception of CPE;
(b) Demonstrate an ability to provide service at the broadband
lending speed to all premises in the proposed funded service area; and
(c) Provide additional equity, if necessary, to ensure financial
feasibility (see Sec. 1738.204) as determined by the Administrator.
(d) For loan guarantees, the underlying loan must be issued on a
project that meets all eligibility requirements required in this part.
Sec. 1738.53 Eligible service area.
(a) A service area may be eligible for assistance as follows:
(1) For loan and loan/grant combinations, the proposed funded
service area is completely contained within a rural area. For loan
guarantee applications, the proposed funded service area must be
contained within an area with a population of 50,000 or less, as
defined in 7 U.S.C. 1991(a)(13);
(2) For loan/grant combinations, at least 90 percent of the
households in the proposed service area must not have access to
broadband service. For loans and loan guarantees, at least 50 percent
of the households in the proposed
[[Page 14401]]
service area must not have access to broadband service;
(3) No part of the proposed funded service area has three or more
incumbent service providers; and
(4) No part of the proposed funded service area overlaps with the
service area of current RUS borrowers or grantees with outstanding
obligations. Notwithstanding, after October 1, 2020, the service areas
of grantees that are providing service that is less than 10 Mbps
downstream or less than 1 Mbps upstream will be considered unserved
unless, at the time of the proposed application, the grantee has begun
to construct broadband facilities that will meet the minimum acceptable
level of service established in Sec. 1738.55.
(b) Non-contiguous areas in the same application will be considered
separate service areas and must be treated separately for the purpose
of determining service area eligibility. If one or more non-contiguous
areas within an application are is determined to be ineligible, the
Agency may consider the remaining areas in the application for
eligibility.
(c) When determining the eligibility of a proposed funded service
area, the Agency will use the information submitted through the public
notice response (see Sec. 1738.106) as well as all available
information collected through various means by the Agency, including
but not limited to consultation with other Federal and State agencies
and RUS' own site-specific assessment of the level of service in an
area.
(d) Mobile and satellite services will not be considered in making
the determination that households in the proposed service area do not
have access to broadband service.
Sec. 1738.54 Eligible service area exceptions for broadband facility
upgrades.
(a) Applicants upgrading existing broadband facilities in their
existing service area are exempt from the requirement concerning the
limit of incumbent service providers in Sec. 1738.53(a)(3).
Additionally, applicants for loans or loan guarantee funding that have
received a broadband loan under Section 601 of the RE Act are exempt
from the requirement concerning the number of households in Sec.
1738.53(a)(2) without access to broadband service.
(b) Applicants submitting one application to upgrade existing
broadband facilities and to expand service beyond their existing
service area must segregate the upgrade and expansion into two service
areas, even if the upgrade and expansion areas are contiguous. The
expansion service area will not be subject to any exemptions.
(c) Applicants will be asked to remove areas determined to be
ineligible from their proposed funded service area. The application
will then be evaluated based on what remains if the resultant service
territory is de minimis in change. Otherwise, the Applicant will be
requested to provide additional information to the Agency relating to
the ineligible areas, such as updated pro forma financials. If the
Applicant fails to respond, the application may be returned.
Sec. 1738.55 Broadband lending speed requirements.
(a) Projects must meet the broadband build-out standards in
paragraphs (a)(1) through (5) of this section in order to be considered
for assistance.
(1) Projects with an Award term of less than 5 years must provide
service at the broadband lending speed;
(2) Projects with an Award term of 5 to 10 years must provide
service at four times the broadband lending speed;
(3) Projects with an Award term of 11 to 15 years must provide
service at six times the broadband lending speed;
(4) Projects with an Award term of 16 to 20 years must provide
service at eight times the broadband lending speed; and
(5) Projects with an Award term over 20 years must provide service
at ten times the broadband lending speed.
(b) If an Applicant demonstrates that it would be cost prohibitive
to meet the broadband lending speed in paragraph (a) of this section in
the proposed funded service area due to the unique characteristics of
the service territory, the Administrator may agree to utilize
substitute service standards. In such cases, Applicants must document
in their application why the unique characteristics of such an area
make it cost prohibitive to provide service at the broadband lending
speed. Note that the proof of burden on Applicants will be extremely
high.
Sec. 1738.56 Eligible assistance purposes.
Assistance under this part may be used to pay for any of the
following expenses:
(a) To fund the construction, improvement, or acquisition of all
facilities required to provide service at the broadband lending speed
to rural areas, including facilities required for providing other
services over the same facilities.
(b) To fund the cost of leasing facilities required to provide
service at the broadband lending speed if such lease qualifies as a
capital/finance lease under GAAP. Notwithstanding, assistance can only
be used to fund the cost of the capital/finance lease for no more than
the first three years of the lease period. If an IRU qualifies as a
capital/finance lease, the entire cost of the lease will be amortized
over the life of the lease and only the first 3 years of the amortized
cost can be funded.
(c) To fund an acquisition, provided that:
(1) The acquisition is necessary for furnishing or improving
service at the broadband lending speed;
(2) The acquired service area, if any, meets the eligibility
requirements set forth in Sec. 1738.53;
(3) The acquisition cost does not exceed 50 percent of the
broadband assistance; and
(4) For the acquisition of another entity, the purchase provides
the Applicant with a controlling majority interest in the entity
acquired.
(d) To refinance an outstanding obligation of the Applicant on
another telecommunications loan made under the RE Act or on a non-RUS
loan if that loan would have been for an eligible purpose under the
Rural Broadband Program provided that:
(1) No more than 50 percent of the broadband assistance amount is
used to refinance a non-RUS loan;
(2) The Applicant is current with its payments on the RUS
telecommunications loan(s) to be refinanced; and
(3) The amortization period for that portion of the broadband loan
that will be needed for refinancing will not exceed the remaining
amortization period for the loan(s) to be refinanced. If multiple notes
are being refinanced, an average remaining amortization period will be
calculated based on the weighted dollar average of the notes being
refinanced.
(e) To fund development costs in an amount not to exceed 5 percent
of the total Award amount excluding amounts requested to refinance
outstanding telecommunications loans. Development costs may be
reimbursed only if they are incurred prior to the date on which
notification of a complete application is issued (see Sec. 1738.203)
and a loan contract is entered into with RUS. Entities that meet the
requirements in Sec. 1738.101(d) may request this funding be provided
as a grant. Otherwise, the funding will be provided in the form of a
loan.
Sec. 1738.57 Ineligible assistance purposes.
Assistance under this part must not be used for any of the
following purposes:
(a) To fund operating expenses of the Applicant except for eligible
development costs under Sec. 1738.56(e).
(b) To fund any costs associated with the project incurred prior to
the date on
[[Page 14402]]
which notification of a complete application is issued (see Sec.
1738.203), except for eligible development costs under Sec.
1738.56(e).
(c) To fund the acquisition of the stock of an affiliate.
(d) To fund the purchase or acquisition of any facilities or
equipment of an affiliate.
(e) To fund the purchase of CPE and the installation of associated
inside wiring, unless the CPE will be owned by the Applicant throughout
its economic life.
(f) To fund the purchase or lease of any vehicle unless it is used
primarily in construction or system improvements.
(g) To fund the cost of systems or facilities that have not been
designed and constructed in accordance with the Award contract and
other applicable requirements.
(h) To fund broadband facilities leased under the terms of an
operating lease, a short-term lease, or more than 3 years of a capital/
finance lease.
(i) To fund merger or consolidation of entities.
(j) To fund non-capitalized labor in accordance with 2 CFR part 200
except for eligible development costs under Sec. 1738.56(e).
(k) To provide grant funding, a subsidized loan or payment
assistance to cover the costs to refinance an outstanding loan.
Sec. Sec. 1738.58-1738.100 [Reserved]
Subpart C--Award Requirements
Sec. 1738.101 Grant assistance.
(a) To be eligible for grant funding, the Applicant must:
(1) Submit an application for an associated loan component under
Title I, Title II, or Title VI of the RE Act; and
(2) Not be the recipient of any other broadband grant from RUS with
unadvanced grant funds.
(b) The amount of grant funding on any project shall not exceed:
(1) 75 percent of the total project cost when the proposed funded
service area has a density of fewer than 7 people per square mile;
(2) 50 percent of the total project cost when the proposed funded
service area has a density of 7 or more and fewer than 12 people per
square mile; and
(3) 25 percent of the total project cost with respect to an area
with a density of 12 or more and 20 or fewer people per square mile.
(c) Subsequent density determinations, as well as density
requirements for projects on tribal lands will be set by notice in the
Federal Register.
(d) The Agency may provide additional grant funding of up to 75
percent of the development costs of projects requesting funding under
Title VI that serve rural areas that:
(1) Lack access to broadband service with speeds of at least 10
Mbps downstream and 1 Mbps upstream; and
(2) Meet any one of the priorities set forth in Sec.
1738.105(a)(3)(i).
Sec. 1738.102 Payment assistance for loans.
(a) Grant funding may also be used to provide assistance to Title
VI Awardees in the form of subsidized loans at such rates as the Agency
will issue from time to time by notice in the Federal Register, or in
the form of a payment assistance loan, which shall require no interest
and principal payments or require nominal periodic payments as
determined by the Agency and published in the Federal Register.
(b) Subsidized loans shall only be available to projects which will
serve rural areas lacking access to service with speeds of at least 10
Mbps downstream and 1 Mbps upstream and meets any one of the priorities
set forth in Sec. 1738.105(a)(3)(i).
(c) The Agency may determine, at its sole discretion, to provide a
payment assistance loan which shall require no interest and principal
payments or such nominal payments as the Secretary determines to be
appropriate. Such loans will only be provided to projects which will
serve rural areas lacking access to service of speeds of 10 Mbps
downstream and 1 Mbps upstream and meets any two of the priorities set
forth in Sec. 1738.105(a)(3)(i). When considering the authority to
provide a payment assistance loan, the Agency will consider how such
assistance will:
(1) Improve the Applicant's compliance with the commitments of the
Agency's standard Award agreement, in addition to any additional
requirements imposed by the Agency specific to the project;
(2) Promote the completion of the broadband project;
(3) Protect taxpayer resources; and
(4) Support the integrity of the Agency's broadband programs.
(d) The Agency and recipients of payment assistance loans must
agree to specific milestones and objectives for the project which must
be met, in addition to the other requirements of this part. Such terms
may be amended by mutual agreement for good cause. Failure to meet the
agreed upon terms, upon the Agency's determination that such failure
was a direct result of the Awardee's own actions, may result in the
Agency's request to the return of all, or any portion, of the grant
funds used for the payment assistance loan.
(e) Additionally, Applicants with an associated loan under Title I
and Title II of the RE Act and which are seeking any grant assistance
under this part, are not eligible for a subsidized loan or payment
assistance loans.
Sec. 1738.103 Substantially Underserved Trust Areas (SUTA).
Applicants seeking assistance may request consideration under the
SUTA provisions in 7 U.S.C. 936f.
(a) If the Administrator determines that a community within ``trust
land'' (as defined in 38 U.S.C. 3765) has a high need for the benefits
of the Rural Broadband Program, he/she may designate the community as a
``substantially underserved trust area'' (as defined in section 306F of
the RE Act).
(b) To receive consideration under SUTA, the Applicant must submit
to the Agency a completed application that includes all of the
information requested in 7 CFR part 1700, subpart D. In addition, the
Applicant must notify the Agency in writing that it seeks consideration
under SUTA and identify the discretionary authorities of 7 CFR part
1700, subpart D, it seeks to have applied to its application. Note,
however, that the two years of historical audited financial statements
and Net worth requirement for loan and loan/grant combination
Applicants in Sec. 1738.206(b)(2)(i) cannot be waived.
Sec. 1738.104 Technical assistance.
Projects which will serve communities that meet, at least, three of
the priorities as identified in Sec. 1738.105(a)(3)(i) may request
technical assistance and training from the Agency to:
(a) Prepare reports and surveys necessary to request grants, loans,
and loan guarantees for broadband deployment;
(b) Improve management, including financial management, relating to
the proposed broadband deployment;
(c) Prepare applications for grants, loans, and loan guarantees;
and
(d) Assist with other areas of need as identified by the Agency
through a notice in the Federal Register.
Sec. 1738.105 Priorities for approving assistance.
(a) The Agency will compare and evaluate all applications for
assistance and shall give priority to applications in the manner set
out in paragraphs (a)(1) through (4) of this section, which shall be
scored as outlined in a notice published in the Federal Register. (Note
[[Page 14403]]
that for applications containing multiple proposed funded service
areas, the percentage will be calculated combining all proposed funded
service areas.)
(1) Applicant's providing broadband service to rural areas that do
not have access to service of at least 10 Mbps upstream and 1 Mbps
downstream.
(2) Projects that provide the maximum level of broadband service to
the greatest proportion of rural households.
(3) Projects that:
(i) Serve rural areas:
(A) With a population of less than 10,000 permanent residents;
(B) Are experiencing outmigration and have adopted a strategic
community investment plan under section 379H(d) of the Consolidated
Farm and Rural Development Act (7 U.S.C. 2008v) that includes
considerations for improving and expanding broadband service;
(C) With a high percentage of low-income families or persons (as
defined in section 501(b) of the Housing Act of 1949 (42 U.S.C.
1471(b)));
(D) That are isolated from other significant population centers; or
(E) That provide rapid and expanded deployment of fixed and mobile
broadband on cropland and ranchland within a service territory for use
in various applications of precision agriculture; and
(ii) Were developed with the participation of, and will receive a
substantial portion of the funding for the project from two or more
stakeholders, including:
(A) State, local, and tribal governments;
(B) Nonprofit institutions; and
(C) Community anchor institutions, such public libraries, schools,
institutions of higher education, health care facilities, private
entities, philanthropic organizations and cooperatives.
(4) New construction projects requesting no refinancing.
(b) The Agency may assign special consideration priority points
that will be issued in a notice in the Federal Register with respect to
any funding opportunity.
(c) With respect to two or more applications that have the same
priority, as outlined in paragraphs (a) and (b) of this section, the
Agency shall give priority to the application that requests the least
amount of grant funding as calculated based on the total amount of
grant funds requested.
Sec. 1738.106 Public notice.
(a) The Agency will publish a public notice of each application
requesting assistance under this part. The application must provide a
summary of the information required for such public notice including
all of the following information:
(1) The identity of the Applicant;
(2) A map of each proposed funded service area showing the rural
area boundaries and the areas without broadband service using the
Agency's mapping tool;
(3) The amount and type of support requested;
(4) The estimated number of households in each proposed funded
service area without broadband service, excluding mobile and satellite
service; and
(5) A description of all the types of services that the Applicant
proposes to offer in each proposed funded service area.
(b) The public notice will remain available for 45 calendar days on
the Agency's website, and will request existing service providers to
submit to the Agency, within the same period, the following
information:
(1) The number of residential and business customers within the
Applicant's proposed funded service area that are currently offered,
and that are purchasing, broadband service by the existing service
provider, and the cost of each level of broadband service charged by
the existing service provider;
(2) The number of residential and business customers within the
Applicant's proposed funded service area that receive non-broadband
services from the existing service provider, and the associated rates
for these other services; and
(3) A map showing where the existing service provider's services
coincide with the Applicant's proposed funded service area using the
Agency's mapping tool.
(c) For purposes of 5 U.S.C. 552, information received from
existing service providers under paragraph (b) of this section shall be
exempt from disclosure.
(d) If an application is approved, an additional notice will be
published on the Agency's website that will include the following
information:
(1) The name of the entity receiving the financial assistance;
(2) The amount and type of assistance being received;
(3) The purpose of the assistance; and
(4) Each annual report submitted under Sec. 1738.107, redacted as
appropriate to protect any proprietary information in the report.
Sec. 1738.107 Additional reporting requirements for Awardees.
(a) Entities receiving assistance from the USDA to provide retail
broadband service must submit annual reports for 3 years after project
completion. The reports must include the following information:
(1) The purpose of the financing, including new equipment and
capacity enhancements that support high-speed broadband access for
educational institutions, health care providers, and public safety
service providers (including the estimated number of end users who are
currently using or forecasted to use the new or upgraded
infrastructure); and
(2) The progress towards fulfilling the objectives for which the
assistance was granted, including:
(i) The number of service points that will receive new broadband
service, existing network service improvements, and facility upgrades
resulting from the Federal assistance;
(ii) The speed of broadband services;
(iii) The average price of the most subscribed tier of broadband
service in each proposed service area; and
(iv) The number of new subscribers generated from the project.
(b) Awardees must provide complete, reliable, and precise
geolocation information that indicates the location of new broadband
service that is being provided or upgraded within the service territory
supported by the assistance no later than 30 days after the earlier of
the date of:
(1) Completion of the project milestone established in the
applicable assistance contract; or
(2) Project completion.
(c) Any other reporting requirements established by the
Administrator by notice in the Federal Register before an application
is submitted.
Sec. 1738.108 Environmental reviews.
(a) Federal agencies are required to analyze the potential
environmental impacts, as required by the National Environmental Policy
Act (NEPA) and the National Historic Preservation Act (NHPA) for
Applicant projects or proposals seeking funding. Please refer to 7 CFR
part 1970 for all of Rural Development's environmental policies. All
Applicants are required to provide environmental review documents,
provide a description of program activities, and to submit all other
required environmental documentation as requested in the application
system or by the Agency after the application is submitted. It is the
Applicant's responsibility to obtain all necessary Federal, tribal,
State, and local governmental permits and approvals necessary for the
proposed work to be conducted. Applicants are expected to design their
projects so that they
[[Page 14404]]
minimize the potential for adverse impacts to the environment.
Applicants also will be required to cooperate with the granting
agencies in identifying feasible measures to reduce or avoid any
identified adverse environmental impacts of their proposed projects.
The failure to do so may be grounds for not making an Award.
(b) The Agency may obligate, but not disperse, funds under Title VI
of the Rural Electrification Act of 1936, before the completion of the
otherwise required environmental historical, or other types of reviews
if the Secretary determines that subsequent site-specific review shall
be adequate and easily accomplished for the location of towers, poles,
or other broadband facilities in the service area of the awardee
without compromising the project or the required reviews.
Sec. 1738.109 Civil rights procedures and requirements.
(a) Equal opportunity and nondiscrimination. The agency will ensure
that equal opportunity and nondiscriminatory requirements are met in
accordance with the Equal Credit Opportunity Act and 7 CFR part 15. In
accordance with Federal civil rights law and USDA civil rights
regulations and policies, the USDA, its agencies, offices, and
employees, and institutions participating in or administering USDA
programs are prohibited from discriminating based on race, color,
national origin, religion, sex, gender identity (including gender
expression), sexual orientation, disability, age, marital status,
family/parental status, income derived from a public assistance
program, political beliefs, or reprisal or retaliation for prior civil
rights activity, in any program or activity conducted or funded by USDA
(not all bases apply to all programs).
(b) Civil rights compliance. Recipients of Federal assistance under
this part must comply with the Americans with Disabilities Act of 1990,
Title VI of the Civil Rights Act of 1964, and Section 504 of the
Rehabilitation Act of 1973. In general, recipients should have
available for the Agency racial and ethnic data showing the extent to
which members of minority groups are beneficiaries of federally
assisted programs. The Agency will conduct compliance reviews in
accordance with 7 CFR part 15. Awardees will be required to complete
Form RD 400-4, ``Assurance Agreement,'' for each Federal Award
received.
(c) Discrimination complaints. Persons believing they have been
subjected to discrimination prohibited by this section may file a
complaint personally or by an authorized representative with USDA,
Director, Office of Adjudication, 1400 Independence Avenue SW,
Washington, DC 20250. A complaint must be filed no later than 180 days
from the date of the alleged discrimination, unless the time for filing
is extended by the designated officials of USDA or the Agency.
Sec. Sec. 1738.110-1738.150 [Reserved]
Subpart D--Loan and Loan/Grant Combination Award Terms
Sec. 1738.151 General.
Direct loans shall be in the form of a cost-of-money loan except as
detailed in Sec. 1738.152.
Sec. 1738.152 Interest rates.
(a) Direct cost-of-money loans shall bear interest at a rate equal
to the cost of borrowing to the Department of Treasury for obligations
of comparable maturity unless the project qualifies for a reduced
interest rate as detailed in Sec. 1738.102. The applicable interest
rate will be set at the time of each advance.
(b) The interest rate for Applicants receiving payment assistance
or Substantially Underserved Trust Areas (SUTA) consideration will be
set at the time of the Award.
Sec. 1738.153 Terms and conditions.
Terms and conditions of the loan and loan/grant combinations are
set forth in a mortgage, note, and loan contract. Samples of the
mortgage, note, and loan contract can be found on the Agency's website.
(a) Unless requested to be shorter by the Applicant, loans must be
repaid with interest within a period that, rounded to the nearest whole
year, is equal to the expected composite economic life of the assets to
be financed, as determined by the Agency based upon acceptable
depreciation rates. Expected composite economic life means the weighted
average economic life of all classes of facilities necessary to
complete construction of the broadband facilities plus 3 years.
(b) Principal payments for each advance are amortized over the
remaining term of the loan and are due monthly. Principal payments will
be deferred until 3 years after the date of the first advance of loan
funds. Interest begins accruing when the first advance of loan funding
is made and interest payments are due monthly, with no deferral period.
(c) Awardees are required to carry fidelity bond coverage.
Generally, this amount will be 15 percent of the loan or loan/grant
combination Award amount, not to exceed $5 million. The Agency may
reduce the percentage required if it determines that the amount is not
commensurate with the risk involved.
Sec. 1738.154 Security.
(a) The broadband loan or loan/grant combination must be secured by
the assets purchased with the loan or loan/grant combination funds, as
well as all other assets of the Applicant and any other cosigner of the
Award documents except as allowed under section 601(h)(2) of the RE
Act. With respect to loan/grant combinations, all grant assets must
also be covered by a security interest in favor of the Government for
the average composite economic life of all project assets financed with
assistance, regardless of whether the loan is paid off before the
maturity date. Additionally, the sale of all such grant assets shall be
governed by 2 CFR part 200, regardless of the entity type of the
Awardee.
(b) The Agency must be given an exclusive first lien, in form and
substance satisfactory to the Agency, on all of the Applicant's
property and revenues and such additional security as the Agency may
require. The Agency may share its first lien position with another
lender on a pari passu, prorated basis if security arrangements are
acceptable to the Agency.
(c) Unless otherwise designated by the Agency, all property
purchased with loan and loan/grant combination funds must be owned by
the Applicant.
(d) In the case of loan and loan/grant combinations that include
financing of facilities that do not constitute self-contained operating
systems, the Applicant shall furnish assurance, satisfactory to the
Agency, that continuous and efficient service that meets the broadband
build-out requirements as noted in Sec. 1738.55 will be rendered.
(e) The Agency will require adequate financial, investment,
operational, reporting, and managerial controls in the Award documents.
Sec. 1738.155 Advance of funds.
RUS loan and grant advances are made at the request of the Awardee
according to the procedures stipulated in the Award documents. For loan
and loan/grant combination Awards, all non-RUS funds must be expended
first, followed by loan funds and then grant funds, except for RUS
approved development costs. Grant funds for eligible development costs,
if any, will be used only on the first advance request.
[[Page 14405]]
Sec. 1738.156 Buy American requirement.
Awardees shall use in connection with the expenditure of loan and
grant funds only such unmanufactured articles, materials, and supplies,
as have been mined or produced in the United States or in any eligible
country, and only such manufactured articles, materials, and supplies
as have been manufactured in the United States or in any eligible
country, substantially all from articles, materials, or supplies mined,
produced, or manufactured, as the case may be, in the United States or
in any eligible country. For purposes of this section, an ``eligible
country'' is any country that applies with respect to the United States
an agreement ensuring reciprocal access for United States products and
services and United States suppliers to the markets of that country, as
determined by the United States Trade Representative. The Buy American
regulations may be found at, and any requests for waiver must be
submitted pursuant to, 7 CFR part 1787.
Sec. Sec. 1738.155-1739.200 [Reserved]
Subpart E--Loan and Loan/Grant Combination Application Review and
Underwriting
Sec. 1738.201 Application submission.
(a) Loan and loan/grant combination applications must be submitted
through the Agency's online application system.
(b) The Agency may publish additional application submission
requirements in the Federal Register.
Sec. 1738.202 Elements of a complete application.
(a) Online application system. Loan and loan/grant combination
applications must be submitted through RUS' online application system
and include all information as required by that system and detailed in
the Rural Broadband Program Application Guide (the Application Guide),
available on the Agency's website, so that applications can be
uniformly evaluated and compared.
(b) DUNS registration. All Applicants must register for a Dun and
Bradstreet Universal Numbering System (DUNS) number as part of the
application. The Applicant can obtain the DUNS number free of charge by
calling Dun and Bradstreet. Go to http://fedgov.dnb.com/webform for
more information on assignment of a DUNS number or confirmation.
(c) SAM registration. Prior to submitting an application, all
Applicants requesting loan/grant combination funds must register in the
System for Award Management (SAM) at https://www.sam.gov/SAM/ and
supply a Commercial and Government Entity (CAGE) code number as part of
the application. SAM registration must be active with current data at
all times, from the application review throughout the active Federal
Award funding period. To maintain active SAM registration, the
Applicant must review and update the information in the SAM database
annually from the date of initial registration or from the date of the
last update. The Applicant must ensure that the information in the
database is current, accurate, and complete.
(d) Contents of the application. A complete application will
include the following information as requested in the RUS online
application system and Application Guide:
(1) General information on the Applicant and the project including:
(i) A description of the project that will be made public
consistent with the requirements in this part; and
(ii) The estimated dollar amount of the funding request.
(2) An executive summary of the proposed project. The summary shall
include, but not be limited to, a detailed description of the existing
operations, discussion of key management, description of the workforce
and a detailed description of the proposed project.
(3) A description of the proposed funded service area including the
number of premises passed.
(4) Subscriber projections including the number of subscribers for
broadband, video and voice services and any other service that may be
offered. A description of the proposed service offerings and the
associated pricing plan that the Applicant proposes to offer, and an
explanation showing that the proposed service offerings are affordable.
(5) A map, utilizing the RUS mapping tool, of the proposed funded
service areas identifying the areas lacking access to broadband service
and the areas lacking access to service of speeds of at least 10 Mbps
downstream and 1 Mbps upstream and any non-funded service areas of the
Applicant
(6) A competitive analysis of the entire proposed service
territory(ies) as required by Sec. 1738.205.
(7) A network design which includes a description of the proposed
technology used to deliver service at the required broadband lending
speed (see Sec. 1738.55) to all premises in the proposed funded
service area, a network diagram, a build-out timeline and milestones
for implementation of the project, and a capital investment schedule
showing that the system can be built within 5 years from the date funds
are made available to the Awardee. All of which must be certified by a
professional engineer who is certified in at least one of the states
where the project is to be constructed. The certification from the
professional engineer must clearly state that the proposed network can
deliver service at the required broadband lending speed (see Sec.
1738.55) to all premises in the proposed funded service area.
(8) All environmental information as required by Sec. 1738.108.
(9) Resumes of key management personnel, a description of the
organization's readiness to manage a broadband services network, and an
organizational chart showing all parent organizations and/or holding
companies (including parents of parents, etc.) and all subsidiaries and
affiliates.
(10) A legal opinion that addresses the Applicant's ability to
enter into loan or loan/grant combination as requested in the
application for financial assistance, to pledge security as required by
the Agency, to describe all pending litigation matters, and such other
requirements as are detailed in the Application Guide.
(11) A summary and itemized budgets of the infrastructure costs of
the proposed project, including if applicable, the ratio of loans to
grants, and any other sources of outside funding.
(12) A detailed description of working capital requirements and the
sources of those funds.
(13) Complete copies of audited financial statements for the two
years preceding the application submission as detailed in Sec.
1738.206.
(14) The historical and projected financial information required in
Sec. 1738.206.
(15) Documentation proving that all required licenses and
regulatory approvals for the proposed operation have been obtained, or
the status of obtaining such licenses or approvals.
(16) If service is being proposed on tribal land, a certification
from the proper tribal official that they are in support of the project
and will allow construction to take place on tribal land. The
certification must:
(i) Include a description of the land proposed for use as part of
the proposed project;
(ii) Identify whether the land is owned, held in Trust, land held
in fee simple by the Tribe, or land under a long-term lease by the
Tribe;
(iii) If owned, identify the land owner; and
(iv) Provide a commitment in writing from the land owner
authorizing the
[[Page 14406]]
Applicant's use of that land for the proposed project.
(17) Scoring sheet, analyzing the scoring criteria set forth in
this part and most recent funding opportunity announcement.
(18) Additional items that may be required by the Administrator
through a notice in the Federal Register.
(e) Material representations. The application, including
certifications and all forms submitted as part of the application, will
be treated as material representations upon which RUS will rely in
awarding loans and loan/grant combinations.
Sec. 1738.203 Notification of completeness.
If all proposed funded service areas in a loan or loan/grant
combination application are eligible, the Agency will review the
application for completeness. The completeness review will include an
assessment of whether all required documents and information have been
submitted and whether the information provided is of adequate quality
to allow further analysis.
(a) If the application contains all documents and information
required by this part and is sufficient, in form and substance
acceptable to the Agency, the Agency will notify the Applicant, in
writing, that the application is complete. A notification of
completeness is not a commitment that assistance will be approved. By
submitting an application, the Applicant acknowledges that no
obligation to enter into an agreement exists until the actual Award
documents have been executed.
(b) If the application is considered to be incomplete or
inadequate, the Agency will notify the Applicant, in writing, with
detailed information regarding the reasons the applications was found
to be incomplete or inadequate.
Sec. 1738.204 Evaluation for feasibility.
After a loan or loan/grant combination Applicant is notified that
the application is complete, the Agency will evaluate the application's
financial and technical feasibility. Only applications that, as
determined by the Agency, are technically and financially feasible will
be considered for funding.
(a) The Agency will determine financial feasibility by evaluating
the impact of the facilities financed with the proceeds of the loan and
the associated debt, the Applicant's equity, competitive analysis,
financial information--including the Applicant's ability to meet the
Agency's Net worth and TIER, DSCR, or CR requirements in Sec.
1738.206(b)(2)(i)--and other relevant information in the application.
(b) The Agency will determine technical feasibility by evaluating
the Applicant's network design and other relevant information in the
application.
Sec. 1738.205 Competitive analysis.
The Applicant must submit a competitive market analysis for each
service area regardless of projected penetration rates. Each analysis
must identify all existing service providers and all resellers in each
service area regardless of the provider's market share, for each type
of service the Applicant proposes to provide. The analysis must compare
the rates, services, and the quality of that service being offered by
competitors against those that will be offered by the Applicant. The
analysis must also discuss strategies the Applicant will use to
compete, as well as the impacts of the competitors on the projected
penetration rates for the project.
Sec. 1738.206 Financial information.
(a) The Applicant must submit financial information acceptable to
the Agency that demonstrates that the Applicant has the financial
capacity to fulfill the loan or loan/grant combination requirements in
this part and to successfully complete the proposed project.
(1) Applicants must provide complete copies of audited financial
statements (opinion letter, balance sheet, income statement, statement
of changes in financial position, and notes to the financial statement)
for the two years preceding the application submission. For
governmental entities financial statements must be accompanied with
certifications identifying unrestricted cash that will be available on
a yearly basis to the Applicant. Subsidiary operations formed from
existing utility providers may provide audited financial statements for
the two previous years from the parent company, as long as the parent
will be a cosigner of the loan or loan/grant documents, pledging its
assets in accordance with Sec. 1738.154(a), or will guarantee the
debt.
(2) If the Applicant relies on services provided by a parent or
affiliated operation, it must also provide complete copies of audited
financial statements for those entities for the fiscal year preceding
the application submission. If audited statements are not available,
unaudited statements and tax returns for the previous year must be
submitted.
(3) Applicants must provide detailed information for all
outstanding obligations. Copies of existing notes, loan agreements,
security agreement, or other legal documents covering loans, grants,
leases, or other loan guarantees must be included in the application.
(4) Applicants must provide a detailed description of working
capital requirements and the source of these funds, if internally
generated funds are insufficient.
(b) Applicants must submit the following documents that demonstrate
the proposed project's financial viability and ability to repay the
requested loan.
(1) Customer projections for the 5-year forecast period that
substantiate the projected revenues for each service that is to be
provided. The projections must be provided on at least an annual basis
and must be developed separately for each service area and must be
clearly supported by evidence such as market surveys or current company
take rates.
(2) Pro forma financial forecast, including a balance sheet, income
statement, and statement of cash flows. For non-regulated entities, the
pro forma should be prepared in conformity with U.S. GAAP and the
Agency's guidance on grant accounting found at https://www.rd.usda.gov/files/AccountingGuidance10.pdf. Regulated telecommunications providers
may follow the USOA and RUS accounting standards for their pro forma,
including accounting for grant-funded assets as a contribution, in
accordance with 47 CFR 32.2, if the project assets will be treated as
regulated plant. The pro forma should validate the sustainability of
the project by including subscriber estimates related to all proposed
service offerings; annual financial projections with balance sheets,
income statements, and cash flow statements; supporting assumptions for
a 5-year forecast period and a depreciation schedule for existing
facilities and those funded with Federal assistance, and other funds.
This pro forma should indicate the committed sources of capital funding
and include a bridge year prior to the start of the forecast period.
This bridge year is the year in which the application is submitted and
serves as a buffer between the historical financial information and the
forecast period. Including the bridge year, the pro forma statements
span a 6-year period.
(i) The financial projections submitted by Applicants must
demonstrate that their entire operation will be able to meet two of the
following three ratio requirements: A minimum TIER, CR, or DSCR equal
to 1.25 by the end of the 5-year forecast period. Additionally, the
projections must demonstrate the Applicant's ability to maintain a Net
worth of at least 20 percent throughout the forecast period.
Demonstrating that the operation can achieve a projected
[[Page 14407]]
Net worth of 20 percent and TIER, CR, or DSCR of 1.25 does not ensure
that the Agency will approve the loan or loan/grant combination.
(ii) If the financial analysis suggests that the operation will not
be able to achieve the Net worth requirement or two of the required
TIER, CR, or DSCR in paragraph (b)(2)(i) of this section, the Agency
will not approve the loan or loan/grant combination Award without
additional capital, additional cash, additional security, and/or a
change in the Award terms.
(c) Based on the financial evaluation, the Award documents will
specify the Net worth and TIER, CR, or DSCR requirements in paragraph
(b)(2)(i) of this section that must be met throughout the amortization
period.
Sec. 1738.207 Network design.
(a) Applications for loan or loan/grant combinations must include a
network design that demonstrates the project's technical feasibility.
The network design must fully support the delivery of service to meet
the broadband build-out requirements specified in Sec. 1738.55,
together with any other services to be provided. In measuring speed,
the Agency will take into account industry and regulatory standards.
The design must demonstrate that the project will be complete within
the 5-year forecast period and must include the following items:
(1) A detailed description of the proposed technology that will be
used to provide service at the broadband lending speed. This
description must clearly demonstrate that all premises in the proposed
funded service area will be able to receive service at the broadband
lending speed;
(2) A detailed description of the existing network. This
description should provide a synopsis of the current network
infrastructure;
(3) A detailed description of the proposed network. This
description should provide a synopsis of the proposed network
infrastructure;
(4) A description of the approach and methodology for monitoring
ongoing service delivery and service quality for the services being
deployed;
(5) Estimated project costs detailing all facilities that are
required to complete the project. These estimated costs must be broken
down to indicate costs associated with each proposed service area and
must specify how Agency and non-Agency funds will be used to complete
the project;
(6) A construction build-out schedule of the proposed facilities by
service area on an annual basis. The build-out schedule must include:
(i) A description of the workforce that will be required to
complete the proposed construction;
(ii) A timeline demonstrating project completion within the
forecast period; and
(iii) Detailed information showing that all premises within the
proposed funded service area will be offered service at the broadband
lending speed when the system is complete;
(7) A depreciation schedule for all facilities financed with loan
and loan/grant combination funds;
(8) An environmental report prepared in accordance with 7 CFR part
1970; and
(9) Any other system requirements required by the Administrator
through a notice published in the Federal Register.
(b) The network design must be prepared by a registered
Professional Engineer with telecommunications experience who is
certified in at least one of the states where a project is to be
constructed or by qualified personnel on the Applicant's staff. If the
network design is prepared by the Applicant's staff, the application
must clearly demonstrate the staff's qualifications, experience, and
ability to complete the network design. To be considered qualified,
staff must have at least 3 years of experience in designing the type of
broadband system proposed in the application.
Sec. 1738.208 Award determinations.
(a) If the loan or loan/grant combination application meets all
statutory and regulatory requirements and the feasibility study
demonstrates that the Net worth and TIER, CR, or DSCR requirements in
Sec. 1738.206(b)(2)(i) can be satisfied and the business plan is
sustainable, the application will be submitted to the Agency's credit
committees for consideration according to the priorities in Sec.
1738.105. Such submission of an application to the Agency's credit
committees does not guarantee that a loan or loan/grant combination
will be approved. In making a loan and/or loan/grant combination Award
determination, the Administrator shall consider the recommendations of
the credit committees.
(b) The Applicant will be notified of the Agency's decision in
writing. If the Agency does not approve the loan or loan/grant
combination, a rejection letter will be sent to the Applicant, and the
application will be returned with an explanation of the reasons for the
rejection.
Sec. Sec. 1738.209-1738.250 [Reserved]
Subpart F--Closing, Servicing, and Reporting for Loan and Loan/
Grant Combination Awards
Sec. 1738.251 Offer and closing.
The Agency will notify the Applicant of the loan or loan/grant
combination offer in writing, and the date by which the Applicant must
accept the offer. If the Applicant accepts the terms of the offer, a
loan or loan/grant combination contract, note, security agreement, and
any other necessary documents will be executed by the Agency and sent
to the Applicant. The Applicant must execute the Award documents and
satisfy all conditions precedent to closing within the timeframe
specified by the Agency. If the conditions are not met within this
timeframe, the loan or loan/grant combination offer may be terminated,
unless the Applicant requests and the Agency approves, an extension.
The Agency may approve such a request if the Applicant has diligently
sought to meet the conditions required for closing and has been unable
to do so for reasons outside its control.
Sec. 1738.252 Construction.
(a) Construction paid for with loan or loan/grant combination funds
must comply with 7 CFR parts 1787, 1788, and 1970, the RUS Broadband
Construction Procedures located at https://reconnect.usda.gov, and any
other guidance from the Agency.
(b) Once the Agency has extended a loan or loan/grant combination
offer, the Applicant, at its own risk, may start construction that is
included in the application on an interim financing basis. For this
construction to be eligible for reimbursement with loan or loan/grant
combination funds, all construction procedures contained in this part
must be followed. Note, however, that the Agency's extension of a loan
or loan/grant combination offer is not a guarantee that a loan or loan/
grant combination will be made, unless and until a contract has been
entered into between the Applicant and RUS.
(c) All Awardees must complete build-out within 5 years from the
date that funds have been made available. Build-out is considered
complete when the network design has been fully implemented, the
service operations and management systems infrastructure is
operational, and the awardee is ready to support the activation and
commissioning of individual customers to the new system.
[[Page 14408]]
Sec. 1738.253 Servicing of loan and loan/grant combinations.
(a) Borrowers must make payments on the broadband loan as required
in the note.
(b) Awardees must comply with all terms, conditions, affirmative
covenants, and negative covenants contained in the Award documents.
(c) In the event of default of any required payment or other term
or condition:
(1) The Agency may exercise the default remedies provided in the
Award documents and any remedy permitted by law but is not required to
do so.
(2) If the Agency chooses not to exercise its default remedies, it
does not waive its right to do so in the future.
Sec. 1738.254 Accounting, reporting, and monitoring requirements.
(a) Loan and loan/grant combination Awardees must adopt a system of
accounts for maintaining financial records acceptable to the Agency, as
described in 7 CFR part 1770, subpart B.
(b) Loan and loan/grant combination Awardees must submit annual
audited financial statements along with a report on compliance and on
internal control over financial reporting and management letter in
accordance with the requirements of 7 CFR part 1773. The Certified
Public Accountant (CPA) conducting the annual audit is selected by the
awardee and must be approved by RUS as set forth in 7 CFR 1773.4.
(c) Loan and loan/grant combination Awardees must submit to RUS 30
calendar days after the end of each calendar year quarter, balance
sheets, income statements, statements of cash flow, rate package
summaries, and the number of customers subscribing to broadband service
from the Awardee utilizing RUS' online reporting system. These reports
must be submitted throughout the loan amortization period.
(d) Loan and loan/grant combination Awardees must submit annually
updated service area maps through the RUS mapping tool showing the
areas where construction has been completed and premises are receiving
service until the entire proposed funded service area can receive
service at the broadband lending speed. At the end of the project,
Awardees must submit a service area map indicating that all
construction has been completed as proposed in the application. If
parts of the proposed funded service area have not been constructed,
RUS may require a portion of the Award to be rescinded and/or paid
back.
(e) Loan and loan/grant combination Awardees must comply with all
reasonable Agency requests to support ongoing monitoring efforts. The
Awardee shall afford RUS, through its representatives, reasonable
opportunity, at all times during business hours and upon prior notice,
to have access to and the right to inspect the broadband system, and
any other property encumbered by the mortgage or security agreement,
and any or all books, records, accounts, invoices, contracts, leases,
payrolls, timesheets, cancelled checks, statements, and other
documents, electronic or paper of every kind belonging to or in the
possession of the Awardee or in any way pertaining to its property or
business, including its subsidiaries, if any, and to make copies or
extracts therefore.
(f) Awardee records shall be retained and preserved in accordance
with the provisions of 7 CFR part 1770, subpart A.
Sec. 1738.255 Default and deobligation.
If a default under the loan or loan/grant combination documents
occurs and such default has not been cured within the timeframes
established in the Award documents, the Applicant acknowledges that the
Agency may, depending on the seriousness of the default, take any of
the following actions:
(a) To the greatest extent possible recover the maximum amount of
grant and loan funds;
(b) De-obligate all funds that have not been advanced or
demonstrate an insufficient level of performance or fraudulent
spending; and
(c) Reallocate recovered funds to the extent possible.
Sec. Sec. 1738.256-1738.300 [Reserved]
Subpart G--Loan Guarantee
Sec. 1738.301 General.
(a) To be eligible for a loan guarantee, the Applicant must submit
an application that meets the requirements in this part along with the
requirements as stated in 7 CFR part 4279, subparts A and B, as well as
any additional requirements published in the Federal Register.
(b) The Agency may approve Rural Broadband Program loan guarantees
in excess of $10 million but less than $25 million when the project
meets one of the priorities in Sec. 1738.105(a)(3)(i).
(c) The lender will service the loan in accordance with 7 CFR part
4287, subpart B.
(d) Any reference to priorities in 7 CFR part 4279 or 4287 shall
have the meaning as stated in Sec. 1738.105 and any reference to
Administrator or Agency shall have the meaning as defined in Sec.
1738.2.
Sec. 1738.302 Fees.
The Agency shall charge and collect from the lender fees in such
amounts as to bring down the costs of subsidies for guaranteed loans,
except that such fees shall not act as a bar to participation in the
programs nor be inconsistent with current practices in the marketplace.
Sec. Sec. 1738.303-1738.349 [Reserved]
Sec. 1738.350 OMB control number.
The information collection requirements in this part are approved
by the Office of Management and Budget (OMB) and assigned OMB control
number 0572-0154.
PART 1739--BROADBAND GRANT PROGRAM
0
2. The authority citation for part 1739 continues to read as follows:
Authority: Title III, Public Law 108-199, 118 Stat. 3.
Subpart A--Community Connect Grant Program
0
3. In Sec. 1739.3, revise the definition of ``Broadband service'' and
``Critical Community Facilities'' to read as follows:
Sec. 1739.3 Definitions.
* * * * *
Broadband service means any terrestrial technology having the
capacity to provide transmission facilities that enable subscribers of
the service to originate and receive high-quality voice, data,
graphics, and video at the minimum rate of data transmission described
in the funding opportunity. Satellite and mobile services are not
considered broadband service. The broadband service speed may be
different from the broadband grant speed for the Community Connect
program.
* * * * *
Critical Community Facilities means an essential community facility
as defined pursuant to section 306(a) of the Consolidated Farm and
Rural Development Act (7 U.S.C. 1926(a)).
* * * * *
0
4. Add Sec. 1739.8 to read as follows:
Sec. 1739.8 Buy American requirement.
Awardees shall use in connection with the expenditure of grant
funds only such unmanufactured articles, materials, and supplies, as
have been mined or produced in the United States or in any eligible
country, and only such manufactured articles, materials, and
[[Page 14409]]
supplies as have been manufactured in the United States or in any
eligible country, substantially all from articles, materials, or
supplies mined, produced, or manufactured, as the case may be, in the
United States or in any eligible country. For purposes of this section,
an ``eligible country'' is any country that applies with respect to the
United States an agreement ensuring reciprocal access for United States
products and services and United States suppliers to the markets of
that country, as determined by the United States Trade Representative.
The Buy American regulations may be found at, and any requests for
waiver must be submitted pursuant to, 7 CFR part 1787.
0
5. Amend Sec. 1739.15 as follows:
0
a. In paragraph (d) introductory text, after the text ``in accordance
with 7 CFR part 1970'' add the text ``and as supplemented by 7 CFR
1738.108'';
0
b. Redesignate paragraph (l) as paragraph (m);
0
c. In newly redesignated paragraph (m)(8), after the text ``in
accordance with 7 CFR part 1970'' add the text ``and as supplemented by
7 CFR 1738.108''; and
0
d. Add a new paragraph (l).
The addition reads as follows:
Sec. 1739.15 Completed application.
* * * * *
(l) Public notice. The Agency will publish a public notice of each
application requesting assistance under this part. The application must
provide a summary of the information required for such public notice.
The information required can be found in 7 CFR 1738.106.
* * * * *
0
6. Amend Sec. 1739.19 by adding paragraph (f) to read as follows:
Sec. 1739.19 Reporting and oversight requirements.
* * * * *
(f) Entities that receive assistance from the Agency under this
part to provide retail broadband service must submit annual reports for
3 years after project completion. The information required can be found
in 7 CFR 1738.107(a) and (c).
Chad Rupe,
Administrator, Rural Utilities Service.
[FR Doc. 2020-04086 Filed 3-11-20; 8:45 am]
BILLING CODE P