Publish Interum Rule 3-12-2020

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Rules and Regulations

Federal Register
Vol. 85, No. 49
Thursday, March 12, 2020

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.

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
Rural Utilities Service, USDA.
ACTION: Interim final rule; request for
comments.
AGENCY:

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

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SUMMARY:

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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 laurel.leverrier@
usda.gov. 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
§ 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

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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

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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
New section number and title

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§ 1738.1 Overview ........................................................
§ 1738.2 Definitions ......................................................
§ 1738.3 Funding Parameters ......................................
§ 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 ....................
§ 1738.101 Grant Assistance .......................................
§ 1738.102 Payment Assistance for loans ...................
§ 1738.103 Substantially underserved trust areas .......
§ 1738.104 Technical Assistance .................................
§ 1738.105 Priorities for approving assistance ............
§ 1738.106 Public Notice ..............................................
§ 1738.107 Additional Reporting for Awardees ............
§ 1738.108 Environmental Reviews .............................
§ 1738.109 Civil Rights procedures and requirements
§ 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 ......................
§ 1738.201 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 ................................
§ 1738.251 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 de-obligation ..........................
§ 1738.301 General ......................................................
§ 1738.302 Fees ...........................................................
§ 1738.350 OMB control number .................................

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.

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Previous section
number and title

New subpart
A
A
A
B
B
B
B

....................
....................
....................
....................
....................
....................
....................

B ....................
B ....................
B ....................
C ....................
C ....................
C ....................
C ....................
C ....................
C ....................
C ....................
C ....................
C ....................
D ....................
D ....................
D ....................
D ....................
D ....................
D ....................
E ....................
E ....................
E ....................
E ....................
E ....................
E ....................
E ....................
E ....................
F .....................
F .....................
F .....................

§ 1738.1 Overview ........................................................
§ 1738.2 Definitions ......................................................
New ..............................................................................
§ 1738.101 Eligible Applicants .....................................
New ..............................................................................
§ 1738.102 Eligible service area ..................................
§ 1738.103 Eligible service area exceptions for
broadband facility upgrades.
New ..............................................................................
§ 1738.51 Eligible loan purposes .................................
§ 1738.52 Ineligible loan purposes ..............................
New ..............................................................................
New ..............................................................................
§ 1738.3 Substantially underserved trust areas ...........
New ..............................................................................
§ 1738.203 Priority for approving loan applications .....
§ 1738.204 Public notice ..............................................
New ..............................................................................
New ..............................................................................
New ..............................................................................
New ..............................................................................
Unchanged ...................................................................
Unchanged ...................................................................
§ 1738.154 Loan security .............................................
New ..............................................................................
New ..............................................................................
Unchanged ...................................................................
Unchanged ...................................................................
§ 1738.205 Notification of completeness .....................
§ 1738.206 Evaluation for feasibility ............................
§ 1738.210 Competitive Analysis .................................
§ 1738.211 Financial information .................................
§ 1738.212 Network design ..........................................
§ 1738.213 Loan determination ....................................
§ 1738.251 Loan offer and loan closing .......................
Unchanged ...................................................................
Unchanged ...................................................................

New.
Unchanged.
B.
New.
New.
A.
New.
E.
E.
New.
New.
New.
New.
Unchanged.
Unchanged.
Unchanged.
New.
New.
Unchanged.
Unchanged.
Unchanged.
Unchanged.
Unchanged.
Unchanged.
Unchanged.
Unchanged.
Unchanged.
Unchanged.
Unchanged.

F .....................

Unchanged ...................................................................

Unchanged.

F .....................
G ....................
G ....................
G ....................

Unchanged ...................................................................
Unchanged ...................................................................
New ..............................................................................
Unchanged ...................................................................

Unchanged.
Unchanged.
New.
Unchanged.

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

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Unchanged.
Unchanged.
New.
C.
New.
C.
C.

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.

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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.

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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

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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.

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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
Program

Community Connect

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

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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-theurban-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

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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
Costs .........................
Benefits .....................

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Annual estimate
(2019 $)
2,189,350
Qualitative

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Annual estimate
(2019 $)

Category
Transfers ...................

350,000,000

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

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Federal Register / Vol. 85, No. 49 / Thursday, March 12, 2020 / Rules and Regulations
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.

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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-forprofit 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

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14397

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 governmentto-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

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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-togovernment 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 EGovernment 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.

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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.

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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:
■

1. Revise part 1738 to read as follows:

PART 1738—RURAL BROADBAND
LOANS, LOAN/GRANT
COMBINATIONS, AND LOAN
GUARANTEES
Subpart A—General

Subpart A—General
§ 1738.1

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]

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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.

Sec.
1738.1 Overview.
1738.2 Definitions.
1738.3 Funding parameters.
1738.4–1738.50 [Reserved]

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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]

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.
§ 1738.2

Definitions.

(a) The following definitions apply to
this part:
Acquisition means the purchase of
assets by an eligible entity as defined in
§ 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

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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

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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

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combined areas as if they were a single
area, and not the average densities.
Development costs mean the preapplication 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
§ 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.

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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

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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.

§§ 1738.4–1738.50

§ 1738.3

§ 1738.53

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.

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[Reserved]

Subpart B—Eligibility Requirements
§ 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.
§ 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 § 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.
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

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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 § 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 § 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.

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§ 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
§ 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 § 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.

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(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.
§ 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.
§ 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

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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 § 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 § 1738.203)
and a loan contract is entered into with
RUS. Entities that meet the
requirements in § 1738.101(d) may
request this funding be provided as a
grant. Otherwise, the funding will be
provided in the form of a loan.
§ 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 § 1738.56(e).
(b) To fund any costs associated with
the project incurred prior to the date on

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which notification of a complete
application is issued (see § 1738.203),
except for eligible development costs
under § 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
§ 1738.56(e).
(k) To provide grant funding, a
subsidized loan or payment assistance
to cover the costs to refinance an
outstanding loan.
§§ 1738.58–1738.100

[Reserved]

Subpart C—Award Requirements

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§ 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.

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(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 § 1738.105(a)(3)(i).
§ 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
§ 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 § 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,

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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.
§ 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
§ 1738.206(b)(2)(i) cannot be waived.
§ 1738.104

Technical assistance.

Projects which will serve
communities that meet, at least, three of
the priorities as identified in
§ 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.
§ 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

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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 lowincome 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.
§ 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

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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 § 1738.107, redacted as
appropriate to protect any proprietary
information in the report.
§ 1738.107 Additional reporting
requirements for Awardees.

(a) Entities receiving assistance from
the USDA to provide retail broadband

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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.
§ 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

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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.

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§ 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

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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.
§§ 1738.110–1738.150

[Reserved]

Subpart D—Loan and Loan/Grant
Combination Award Terms
§ 1738.151

General.

Direct loans shall be in the form of a
cost-of-money loan except as detailed in
§ 1738.152.
§ 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
§ 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.
§ 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

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Agency may reduce the percentage
required if it determines that the
amount is not commensurate with the
risk involved.
§ 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 selfcontained 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 § 1738.55 will
be rendered.
(e) The Agency will require adequate
financial, investment, operational,
reporting, and managerial controls in
the Award documents.
§ 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.

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§ 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.
§§ 1738.155–1739.200

[Reserved]

Subpart E—Loan and Loan/Grant
Combination Application Review and
Underwriting
§ 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.

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§ 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

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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 § 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
§ 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

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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 § 1738.55) to all premises in the
proposed funded service area.
(8) All environmental information as
required by § 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 § 1738.206.
(14) The historical and projected
financial information required in
§ 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

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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.
§ 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.

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§ 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

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§ 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.
§ 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.
§ 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 § 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

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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 5year 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

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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.

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§ 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 buildout requirements specified in § 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:

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(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.
§ 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
§ 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 § 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.

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§§ 1738.209–1738.250

14407

[Reserved]

Subpart F—Closing, Servicing, and
Reporting for Loan and Loan/Grant
Combination Awards
§ 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.
§ 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.

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§ 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.

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§ 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

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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.
§ 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.
§§ 1738.256–1738.300

[Reserved]

Subpart G—Loan Guarantee
§ 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 § 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 § 1738.105 and any
reference to Administrator or Agency

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shall have the meaning as defined in
§ 1738.2.
§ 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.
§§ 1738.303–1738.349
§ 1738.350

[Reserved]

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
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
3. In § 1739.3, revise the definition of
‘‘Broadband service’’ and ‘‘Critical
Community Facilities’’ to read as
follows:

■

§ 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 highquality 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)).
*
*
*
*
*
■ 4. Add § 1739.8 to read as follows:
§ 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

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Federal Register / Vol. 85, No. 49 / Thursday, March 12, 2020 / Rules and Regulations
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.
5. Amend § 1739.15 as follows:
■ 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’’;
■ b. Redesignate paragraph (l) as
paragraph (m);
■ 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
■ d. Add a new paragraph (l).
The addition reads as follows:
■

§ 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.
*
*
*
*
*
6. Amend § 1739.19 by adding
paragraph (f) to read as follows:

■

§ 1739.19 Reporting and oversight
requirements.

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*

*
*
*
*
(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

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DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 39
[Docket No. FAA–2019–0713; Product
Identifier 2019–NM–116–AD; Amendment
39–19855; AD 2020–04–18]
RIN 2120–AA64

Airworthiness Directives; Airbus SAS
Airplanes
Federal Aviation
Administration (FAA), Department of
Transportation (DOT).
ACTION: Final rule.
AGENCY:

The FAA is adopting a new
airworthiness directive (AD) for all
Airbus SAS Model A330–941 airplanes.
This AD was prompted by reports
indicating premature aging of certain
chemical oxygen generators. This AD
requires repetitively removing the
affected chemical oxygen generators and
replacing them with serviceable parts,
as specified in a European Union
Aviation Safety Agency (EASA) AD,
which is incorporated by reference. The
FAA is issuing this AD to address the
unsafe condition on these products.
DATES: This AD is effective April 16,
2020.
The Director of the Federal Register
approved the incorporation by reference
of a certain publication listed in this AD
as of April 16, 2020.
ADDRESSES: For the material
incorporated by reference (IBR) in this
AD, contact the EASA, KonradAdenauer-Ufer 3, 50668 Cologne,
Germany; telephone +49 221 89990
1000; email [email protected];
internet www.easa.europa.eu. You may
find this IBR material on the EASA
website at https://ad.easa.europa.eu.
You may view this IBR material at the
FAA, Transport Standards Branch, 2200
South 216th St., Des Moines, WA. For
information on the availability of this
material at the FAA, call 206–231–3195.
It is also available in the AD docket on
the internet at https://
www.regulations.gov by searching for
and locating Docket No. FAA–2019–
0713.
SUMMARY:

Examining the AD Docket
You may examine the AD docket on
the internet at https://
www.regulations.gov by searching for
and locating Docket No. FAA–2019–
0713; or in person at Docket Operations
between 9 a.m. and 5 p.m., Monday
through Friday, except Federal holidays.
The AD docket contains this final rule,
the regulatory evaluation, any

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14409

comments received, and other
information. The address for Docket
Operations is U.S. Department of
Transportation, Docket Operations, M–
30, West Building Ground Floor, Room
W12–140, 1200 New Jersey Avenue SE,
Washington, DC 20590.
FOR FURTHER INFORMATION CONTACT:
Vladimir Ulyanov, Aerospace Engineer,
International Section, Transport
Standards Branch, FAA, 2200 South
216th St., Des Moines, WA 98198;
telephone and fax 206–231–3229; email
[email protected].
SUPPLEMENTARY INFORMATION:
Discussion
The EASA, which is the Technical
Agent for the Member States of the
European Union, has issued EASA AD
2019–0140, dated June 12, 2019 (‘‘EASA
AD 2019–0140’’) (also referred to as the
Mandatory Continuing Airworthiness
Information, or ‘‘the MCAI’’), to correct
an unsafe condition for all Airbus SAS
Model A330–941 airplanes.
The FAA issued a notice of proposed
rulemaking (NPRM) to amend 14 CFR
part 39 by adding an AD that would
apply to all Airbus SAS Model A330–
941 airplanes. The NPRM published in
the Federal Register on October 9, 2019
(84 FR 54046). The NPRM was
prompted by reports indicating
premature aging of certain chemical
oxygen generators. The NPRM proposed
to require repetitively removing the
affected chemical oxygen generators and
replacing them with serviceable parts.
The FAA is issuing this AD to address
premature aging of chemical oxygen
generators. This condition, if not
corrected, could lead to the generator
failing to deliver oxygen during an
emergency, possibly resulting in injury
to airplane occupants. See the MCAI for
additional background information.
Comments
The FAA gave the public the
opportunity to participate in developing
this final rule. The following presents
the comments received on the NPRM
and the FAA’s response to each
comment.
Support for the NPRM
The Air Line Pilots Association,
International, expressed support for the
NPRM.
Request To Revise the Proposed AD To
Apply to All Affected Components
Regardless of Airplane Model
Delta Air Lines (DAL) requested that
the proposed AD be revised to be
applicable to all B/E Aerospace oxygen
generators having part number 117042–
XX, regardless of the airplanes on which

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