[Federal Register Volume 59, Number 207 (Thursday, October 27, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-26761]


[[Page Unknown]]

[Federal Register: October 27, 1994]


                                                   VOL. 59, NO. 207

                                         Thursday, October 27, 1994

DEPARTMENT OF AGRICULTURE

Rural Electrification Administration

7 CFR Part 1751

RIN 0572-AB07

 

Telecommunications System Planning and Design Criteria, and 
Procedures

AGENCY: Rural Electrification Administration, USDA.

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: The Rural Electrification Administration (REA) proposes to 
amend its interim rule regarding the State Telecommunications 
Modernization Plan requirements. The proposed changes are in response 
to comments received from the public regarding the interim rule. All 
Telephone Borrowers will be affected by this proposed rule.

DATES: Comments concerning this proposed rule must be received by REA 
or bear a postmark or its equivalent no later than November 28, 1994.

ADDRESSES: Submit written comments to Matthew P. Link, Director, Rural 
Telephone Bank Management Staff, U.S. Department of Agriculture, Rural 
Electrification Administration, 14th & Independence Avenue, SW., Room 
2832-S, Washington, DC 20250-1500. REA requests an original and three 
copies of all comments (7 CFR part 1700). All comments received will be 
made available for public inspection at Room 2238-S, at the address 
listed above, between 8:30 a.m. and 5 p.m. (7 CFR 1.27(b)).

FOR FURTHER INFORMATION CONTACT: Robert Peters, Assistant 
Administrator, Telephone Program, at the address listed above, 
telephone number (202) 720-9554.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This proposed rule has been determined to be significant and was 
reviewed by the Office of Management and Budget (OMB) under Executive 
Order 12866.

Executive Order 12778

    This proposed rule has been reviewed under Executive Order 12778, 
Civil Justice Reform. If adopted, this proposed rule will not: (1) 
Preempt any State or local laws, regulations, or policies, unless they 
present an irreconcilable conflict with this rule; (2) Have any 
retroactive effect; and (3) Require administrative proceedings before 
parties may file suit challenging the provisions of this rule.

Regulatory Flexibility Act Certification

    REA has determined that this proposed rule will not have a 
significant economic impact on a substantial number of small entities, 
as defined in the Regulatory Flexibility Act (5 U.S.C. 601 et seq.). 
The REA program provides loans to REA Borrowers at interest rates and 
terms that are more favorable than those generally available from the 
private sector. REA Borrowers, as a result of obtaining federal 
financing, receive economic benefits which ultimately offset any direct 
economic costs associated with complying with REA regulations and 
requirements. Moreover, this action is in response to the Rural 
Electrification Loan Restructuring Act of 1993.

Information Collection and Recordkeeping Requirements

    The reporting and recordkeeping requirements contained in the 
proposed rule have been submitted to OMB for approval in accordance 
with the Paperwork Reduction Act of 1980 (44 U.S.C. 3501 et seq.). Send 
comments regarding this collection of information to: Department of 
Agriculture, Clearance Office, Office of Information Resources 
Management, Room 404-W, Washington, DC 20250, and Regulatory Affairs of 
OMB, Attention: Desk Officer for USDA, Room 3201, New Executive Office 
Building, Washington, DC 20503.

National Environmental Policy Act Certification

    REA has determined that this proposed rule will not significantly 
affect the quality of the human environment as defined by the National 
Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.). Therefore, 
this action does not require an environmental impact statement or 
assessment.

Catalog of Federal Domestic Assistance

    The program described by this proposed rule is listed in the 
Catalog of Federal Domestic Assistance Programs under 10.851, Rural 
Telephone Loans and Loan Guarantees, and 10.852, Rural Telephone 
Bank Loans. This catalog is available on a subscription basis from 
the Superintendent of Documents, the United States Government 
Printing Office, Washington, DC 20402-9325.

Executive Order 12372

    This proposed rule is excluded from the scope of Executive Order 
12372, Intergovernmental Consultation. A Notice of Final Rule entitled 
Department Programs and Activities Excluded from Executive Order 12372 
(50 FR 47034) exempts REA and RTB loans and loan guarantees to 
governmental and nongovernmental entities from coverage under this 
Order.

Background

    On December 20, 1993, REA published an interim rule (58 FR 66250) 
to incorporate changes to telephone loan policies required by the Rural 
Electrification Loan Restructuring Act of 1993 (RELRA) (107 Stat. 
1356). RELRA amended several provisions of the Rural Electrification 
Act of 1936, as amended (7 U.S.C. 901 et seq.) (RE Act), and mandated a 
restructuring of the telephone loan program.
    On April 13, 1994, REA adopted its interim rule as a final rule (59 
FR 17460) with one exception, 7 CFR Part 1751, Telecommunications 
System Planning and Design Criteria, and Procedures. Because of the 
overwhelming response and concerns regarding the requirements of the 
State Telecommunications Modernization Plan (Modernization Plan), REA 
is proposing to amend 7 CFR part 1751, subpart B.
    As revised, this Rule would require that Modernization Plans, at a 
minimum, apply to all REA borrowers. If a Modernization Plan is 
developed by the PUC or the State Legislature, REA encourages, but does 
not require, that the Modernization Plan's requirements apply to the 
rural service areas of all Telecommunications Providers. A State's 
decision not to include non-REA borrowers will not prejudice REA 
approval of their Plan. The PUC or the State Legislature may also, at 
its option, extend coverage of the Modernization Plan to all service 
areas of all Telecommunications Providers in the State. In addition, 
while requirements contained in Sec. 1751.106 apply only to wireline 
services, the State Legislature or PUC, at its discretion, may extend 
coverage of Modernization Plans to wireless or other communications 
services in a State as it deems appropriate.
    It is REA's policy that every State have a Modernization Plan which 
provides for the improvement of the State's Public Switched Network. If 
the Plan Developer is either the State Legislature or the PUC, such 
entity must submit for REA approval its Modernization Plan by a date 
one year from issuance of the Final Rule. After this date, if a State 
or its PUC declines or fails to submit for REA approval its 
Modernization Plan, eligibility to develop the Plan passes to a numeric 
majority of the Borrowers within the State. While there is no time 
limit requiring States to have an approved plan in place, REA, as 
required by RELRA, will not approve any direct loans in States without 
such a plan.
    During the comment period, REA received 81 comments regarding the 
interim rule, and these comments were taken into consideration in 
preparing the proposed amendments. Comments were received from the 
following:
    (1) Alaska Public Utilities Commission.
    (2) Arkansas Public Service Commission.
    (3) California Public Utilities Commission.
    (4) Joint comments from the Colorado Office of Consumer Counsel, 
Texas Office of Public Utility Counsel, Iowa Office of Consumer 
Advocate, and D.C. Office of the People's Counsel.
    (5) Colorado Public Utilities Commission Staff.
    (6) Florida Public Service Commission.
    (7) Idaho Public Utilities Commission.
    (8) Illinois Commerce Commission.
    (9) Indiana Utility Regulatory Commission.
    (10) Iowa Utilities Board.
    (11) Michigan Public Service Commission Staff.
    (12) Minnesota Public Utilities Commission.
    (13) Missouri Public Service Commission.
    (14) Nebraska Public Service Commission.
    (15) New England Conference of Public Utilities Commissioners, Inc.
    (16) New Hampshire Office of the Consumer Advocate.
    (17) New York State Department of Public Service.
    (18) North Carolina Public Staff Utilities Commission.
    (19) North Dakota Public Service Commission.
    (20) Pennsylvania Office of Consumer Advocate.
    (21) Pennsylvania Public Utility Commission.
    (22) Tennessee Public Service Commission.
    (23) Texas Public Utility Commission.
    (24) Utah Department of Commerce Division of Public Utilities.
    (25) Virginia State Corporation Commission.
    (26) Wisconsin Public Service Commission.
    (27) ALLTEL Service Corporation.
    (28) Century Telephone Enterprises, Inc.
    (29) Golden West Telecommunications Cooperative, Inc.
    (30) Great Plains Communications, Inc.
    (31) GTE Service Corporation.
    (32) Hiawatha Telephone Company.
    (33) Hills Telephone Company, Inc.
    (34) Interstate Telecommunications Cooperative, Inc.
    (35) James Valley Cooperative Telephone Company.
    (36) Kingdom Telephone Company.
    (37) Mark Twain Rural Telephone Company Group.
    (38) Martin and Associates, Inc., submitted comments on behalf of 
16 local exchange carriers located in South Dakota.
    (39) Matanuska Telephone Association, Inc.
    (40) MEBTEL Communications.
    (41) Pacific Telecom, Inc.
    (42) Project Mutual Telephone Company.
    (43) Rochester Telephone Corporation.
    (44) Sioux Valley Telephone Company.
    (45) Steelville Telephone Exchange, Inc.
    (46) TDS Telecom.
    (47) United and Central Telephone Companies.
    (48) Young, Van Assenderp, Varnadoe & Pennon, P.A., submitted 
comments on behalf of 7 REA Telephone Borrowers located in Florida and 
Alabama.
    (49) Association of Communications Engineers.
    (50) Eastern REA Borrowers Association.
    (51) Idaho Telephone Association.
    (52) Illinois Independent Telephone Association.
    (53) Illinois Telephone Association.
    (54) Iowa Telephone Association.
    (55) Missouri Telephone Association.
    (56) Montana Telephone Association.
    (57) Joint comments from the National Rural Telecom Association, 
and the Western Rural Telephone Association.
    (58) Nebraska Telephone Association.
    (59) New York State Telephone Association, Inc.
    (60) North Dakota Association of Telephone Cooperatives.
    (61) National Telephone Cooperative Association.
    (62) Joint comments from the Oklahoma Rural Telephone Coalition, 
Rural Arkansas Telephone Systems, and Texas Statewide Telephone 
Cooperative, Inc.
    (63) Organization for the Protection and Advancement of Small 
Telephone Companies.
    (64) Oregon Independent Telephone Association.
    (65) Pennsylvania Telephone Association.
    (66) Telecommunications Industry Association.
    (67) Texas Telephone Association.
    (68) United States Telephone Association.
    (69) Washington Independent Telephone Association.
    (70) Ameritech Operating Companies.
    (71) Bell Atlantic Telephone Companies.
    (72) BellSouth Telecommunications, Inc.
    (73) NYNEX (New York Telephone Company and New England Telephone 
and Telegraph Company).
    (74) Pacific Bell and Nevada Bell.
    (75) Southwestern Bell Corporation.
    (76) U.S. West Communications, Inc.
    (77) MCI Telecommunications Corporation.
    (78) Central Associated Engineers, Inc.
    (79) Fred Williamson & Associates, Inc.
    (80) Hastad Engineering Company.
    (81) Hicks & Ragland Engineering Co., Inc.

    1. Comment Summary: REA should not specify specific technologies.
    Response: This was a nearly unanimous comment and one with which 
REA concurs. REA's intent is to specify information carrying 
capability, i.e., bit rate. References to specific technologies, like 
ISDN, have been removed.
    2. Many commenters asserted that REA exceeded its statutory 
authority in one or more of the following ways:
    a. Comment Summary: Congress intended State Telecommunications 
Modernization Plans to be guidelines.
    Response: Many commenters believe that the use of the word 
``objectives'' in RELRA implies non-binding guidelines. REA believes 
the commenters are taking the word out of context. The entire provision 
is as follows:
    ``REQUIREMENTS.--For purposes of subparagraph (A), a 
telecommunications modernization plan must, at a minimum, meet the 
following objectives.''
    REA believes that an objective that must be met is mandatory. In 
the interim regulation (7 CFR part 1751, published December 20, 1993), 
REA set forth both ``requirements'' and ``objectives'' to be contained 
in the Modernization Plan. Requirements were to be binding while 
objectives were only goals or targets. This may have led to confusion 
because both words are used in RELRA. In the proposed rule, REA has 
included only requirements.
    b. Comment Summary: REA went beyond the intent of RELRA by 
establishing timeframes for modernization.
    Response: REA set timeframes because a requirement with no due date 
is not a requirement.
    REA believes that advanced telecommunications services should be 
available to the public within a reasonable time after they are 
developed. Broad experience in bringing modern telephone service to 
rural America teaches the value of caution and reflection before 
imposing binding requirements on future business activities. Varying 
construction schedules, economic conditions and rates of technological 
innovation affect even the most careful projections. REA conservatively 
projected the reasonably expected growth of both the public's need for 
telecommunications services and the ability of Telecommunications 
Providers and equipment manufacturers to provide those services.
    REA consulted both its past experience and its expectations of 
future technological development before setting the short-, medium- and 
long-term deadlines in the regulation. Our experience with new 
technology such as buried cable, digital switching, and fiber optic 
systems where the widespread deployment into the telecommunications 
network took two to five years, lead us to adopt the five year phase-in 
concept. The timetable is achievable, given the telecommunications 
services presently available, the resources of the Telecommunications 
Providers, and the accelerating engineering achievements likely in the 
next few years.
    The regulations phase in the requirements in three steps to provide 
for an orderly deployment of these telecommunications services. 
Facilities constructed more than one year after REA approves a 
Modernization Plan are required to provide those services that can be 
produced by equipment now in existence. The one year delay allows for 
construction-in-progress to be completed before the Modernization Plan 
requirements go into effect. The requirements for the medium and long 
terms simply expand the coverage of the requirements so that when the 
long term period (11-16 years) is reached, all subscribers will have 
the services deployed during the short term period available to them.
    c. Comment Summary: RELRA does not require that telecommunications 
improvements be deployed ``concurrently'' in rural and nonrural areas 
but only that ``the plan must provide for uniform deployment schedules 
to ensure that advanced services are deployed at the same time in rural 
and nonrural areas''.
    Response: Several commenters thought that REA intended all 
improvements to be made simultaneously throughout a service area. REA 
understands that there is a logical order to providing improvements and 
that they will often happen first in nonrural areas. REA intends that 
they should be deployed and available at approximately the same time in 
rural and nonrural areas. For example, if digital switching technology 
is being deployed in a nonrural area, replacement switches in rural 
areas would also employ digital technology. This does not mean that if 
a switch was replaced in a nonrural area, a switch would have to be 
replaced in the rural area. In the proposed rule, REA has clarified 
this requirement. See Sec. 1751.106(a).
    d. Comment Summary: REA has no basis for requiring either the 
elimination of mileage and/or zone charges or that Telecommunications 
Providers adopt flexible tariffs. These issues concern rates and are 
not ``service standards''.
    Response: The stated requirement in RELRA is the elimination of 
party line service. REA's experience has been that imposing zone and 
mileage charges on one-party service creates a large disincentive for 
subscribers to choose this service. However, REA will not require the 
Modernization Plan contain a provision to eliminate zone and mileage 
charges.
    RELRA provides that the Modernization Plan ``must provide for the 
availability of telecommunications services for improved business, 
educational, and medical services.'' Rigid rate structures have served 
as the primary impediment to the provision of distance learning and 
medical link services. REA has seen cases where states have set 
wideband rates in direct proportion to the voiceband rate resulting in, 
for example, rates for schools far beyond what they can afford. REA has 
clarified its intent on this subject in Sec. 1751.106(e).
    e. Comment Summary: It is not always practical to build only non-
loaded twisted pair plant.
    Response: REA concurs and has given the Plan Developer some 
discretion in this matter. Section 1751.106(g)(2)(ii) has been revised 
to allow a Telecommunications Provider to request additional time from 
the Plan Developer in the case of a PUC or State Legislature developed 
plan, or from the REA in the case of a REA Borrower developed plan. The 
Plan Developer or REA, as the case may be, must consider each request 
separately and can grant additional time only if either the best 
available telecommunications technology lacks the capability to enable 
the Telecommunications Provider to comply with the non-loaded 
requirement or complying with the requirement would impose prohibitive 
cost on the Telecommunications Provider.
    f. Comment Summary: Nothing in the law suggests the need for 150 
Mb/sec transmission rate for video. Many compression technologies are 
available which allow video to be transmitted over ordinary telephone 
lines.
    Response: In the interim rule, all references to provision of 150 
Mb/sec service were non-binding ``objectives'', see paragraph 2a. REA 
focused on the requirement in RELRA that telephone lines be capable of 
carrying at least 1,000,000 bits per second. REA adjusted this to the 
standard North American rate of 1.544 Mb/sec. Such a rate allows for 
both the transmission of at least 1 million bits per second and for the 
transmission of modest quality, highly compressed video. A higher rate 
is not required by the proposed rule.
    3. Comment Summary: Many radio based services such as cellular and 
BETRS will be unable to meet REA bandwidth requirements.
    Response: REA interprets the Modernization Plan requirements of 
RELRA to apply to service provided by telephone lines, i.e., ``Wireline 
Service'', the basic service most Americans receive. This 
interpretation has been clarified in the proposed rule.
    4. Comment Summary: REA has not defined ``Public Switched Network'' 
or ``Telecommunications Providers''.
    Response: REA has defined these terms in the proposed regulation.
    5. Comment Summary: The interim rule violates section 202 of the RE 
Act which states that nothing in the RE Act shall be construed to 
deprive any State commission of jurisdiction to regulate telephone 
service, including the rates for such service.
    Response: REA believes there is no conflict between RELRA and 
section 202 of the RE Act. The PUC is neither required to develop a 
Modernization Plan nor to approve REA loans that are consistent with a 
Modernization Plan whoever is the Plan Developer. Therefore the PUC's 
jurisdiction to regulate telephone service is not impaired. No change 
has been made to the regulation based on this comment.
    6. Comment Summary: REA has not considered how the proposed 
services can be offered at affordable rates. The regulation could 
result in an REA Borrower-developed Modernization Plan which requires 
investments that a PUC would not approve.
    Response: The requirements included in the proposed regulation 
apply almost entirely to new construction. New construction has to be 
economically justified to receive either REA financing or PUC approval 
for inclusion in the rate base. REA believes strongly in universal 
service and would not issue a regulation which it believed to be an 
impediment to that goal. No change has been made to the regulation 
based on these comments.
    7. Comment Summary: REA should include a requirement that other 
interested parties be notified of intent to develop a Modernization 
Plan.
    Response: REA concurs with this comment and has changed the wording 
on notification to include other interested parties. See Sec. 1751.102 
(b) and (c)(2).
    8. Comment Summary: A Modernization Plan should cover only REA 
Borrowers or should cover all Telecommunications Providers only if 
developed by the PUC or a State Legislature.
    Response: As redrafted, the Modernization Plan must apply only to 
REA Borrowers unless a PUC or a State Legislature decides, at its 
option, to apply the Modernization Plan to non-REA Borrower 
Telecommunications Providers. The REA does, however, encourage the PUCs 
and State Legislatures to apply the Modernization Plans to all 
Telecommunications Providers in the State.
    9. Comment Summary: REA requires integration of PCS when it doesn't 
exist.
    Response: REA intended that a Modernization Plan should encourage 
integration of new technologies into the network. REA has substituted 
``emerging technologies'' for PCS and clarified its intent. See 
Sec. 1751.106(d).
    10. Comment Summary: Modernization Plans should be based on market 
principles.
    Response: The modern telecommunications system envisioned by RELRA 
and the Modernization Plan requirements can succeed only if it is 
supported by market demand. REA's electric and telecommunications 
programs have repeatedly demonstrated how quickly rural America takes 
advantage of new utility services. RELRA and the Modernization Plans 
lead the way for today's nonrural and rural subscribers to receive the 
modern telecommunications services they want and need. REA believes 
that the Modernization Plan requirements of this regulation rest on a 
sound economic basis. True to its statutory mandate, REA will finance 
projects only if it believes there is adequate security and the loan 
will be repaid within the time agreed.
    11. Comment Summary: It is untimely for REA to develop a rule when 
other laws concerning telecommunications have been introduced in 
Congress. It is inappropriate for REA to develop rules for 
telecommunications. That should be the responsibility of the FCC.
    Response: REA, as the agency responsible for promoting rural 
telecommunications, has long experience in setting the engineering and 
technical standards for service in rural areas and is ideally suited 
for the responsibility it was given by Congress. REA is working to 
ensure that Modernization Plan requirements and the Proposed Rule 
governing their preparation are flexible enough to accommodate evolving 
national policies promoting the National Information Infrastructure.
    REA will revise, within our statutory constraints, these 
regulations and approve amendments to Modernization Plans if the 
National Information Infrastructure develops along lines not presently 
envisioned. However, the legislative imperative of RELRA and rural 
America's urgent need for modern telecommunications services require 
that the regulations not be delayed.
    12. Comment Summary: The rule is not clear on Plan Developer 
eligibility as related to time. The law says the one year period starts 
after publication of the final rule. Can Borrowers submit a 
Modernization Plan before the end of the year if the PUC or State 
Legislature does not intend to? What if a PUC or State Legislature 
submits a Modernization Plan on the last day? Won't loans be delayed if 
a PUC or State Legislature does not develop a plan and an REA Borrower-
developed one has not been approved?
    Response: RELRA sets forth the method of determining Plan Developer 
eligibility. With regard to the specific points mentioned above:
    a. The one year period starts with publication of the final rule 
developed in response to comments on this proposed rule.
    b. Modernization Plans developed by REA Borrowers will not be 
accepted until a PUC's and State Legislature's eligibility has expired, 
unless the PUC and State Legislature officially reject eligibility.
    c. A Modernization Plan submitted on the last day will be approved 
by REA if it meets the minimum requirements without alteration. The 
proposed rule includes language which recommends that to ensure a PUC 
or a State Legislature has sufficient time to respond to any REA 
comments on its proposed Modernization Plan, the PUC or State 
Legislature should submit its plan at least 90 days in advance of the 
expiration of its eligibility. See Sec. 1751.104(b)(2).
    d. Loans will not be made between the end of a PUC's and State 
Legislature's eligibility and the approval of a Borrower-developed 
Modernization Plan.
    13. Comment Summary: The regulation should allow for waivers to a 
Modernization Plan.
    Response: REA has changed the regulation to allow the Modernization 
Plan developer the authority to grant time extensions necessitated by 
the state of technology as long as the extensions are granted on a 
case-by-case basis, do not exceed five years, and the circumstances for 
which extensions are granted are spelled out in the Modernization Plan. 
See Sec. 1751.106(b).
    14. Comment Summary: What is a generic design for Broadband 
service? How can this be done without local power?
    Response: REA believes that the lack of consensus on how to bring 
wider band switched service to the home and small business, 
particularly in rural areas, means that Telecommunications Providers 
continue to build and rebuild their systems essentially for traditional 
voiceband service. In many cases this plant can not be adapted to wider 
band services.
    In the interim rule (dated December 20, 1993) REA had required a 
``generic design'' for broadband service. Since REA is no longer 
including non-binding goals in the proposed regulation, the requirement 
for a generic design has been changed to a requirement for the 
developer to provide a strategic development proposal which provides 
the Plan Developer's vision of a State telecommunications structure for 
the future.
    With regard to local power, REA retains a concern over system 
reliability. The proposed rule requires that no matter what level of 
service is being offered, sufficient system power must be available to 
provide voice service during electric utility outages. See 
Sec. 1751.106(h)(2)(ii) and (i)(2)(iv).
    General Summary: It is REA's belief that national 
telecommunications ``highways'' will not and cannot be fully utilized 
unless improvements are made to what might be called the 
telecommunications ``driveways'', the local loops. Most loops cannot 
transmit information over 9600 bits per second (b/s). Consequently, 
many advanced telecommunications services are not available on the 
Public Switched Network or, where available, operate only on short 
loops. This limits use of these advanced services to densely populated 
areas.
    RELRA requires that telephone lines be capable of transmitting: (1) 
Information at no less than 1,000,000 bits per second (1Mb/s) and (2) 
video images. REA believes both requirements can be satisfied by 
telephone lines which can transmit and receive 1.544 Mb/s, the North 
American standard digital transmission rate. This rate is sufficient to 
carry both 1 million bits per second and highly compressed, modest 
quality video.
    To carry 1.544 Mb/sec, the capacity of ordinary telephone loops 
must be increased by several orders of magnitude. The other 
requirements in the law are more easily met. Therefore, improving the 
loop has been REA's focus in preparing minimum Modernization Plan 
requirements.
    REA believes that the requirements and time limits set forth in 
this section will achieve the service standards of RELRA.
    However, REA is concerned about coordination between States. REA 
recommends that Modernization Plan Developers should work with Plan 
Developers in other States both before and after their Modernization 
Plans are approved to coordinate proposed improvements.
    REA recommends that Modernization Plan Developers give 
consideration to planning for outside plant which can ultimately 
provide future broadband Wireline Service with a bandwidth equivalent 
to a digital rate on the order of 150 Mb/sec. Such facilities could 
carry one or more channels of conventional video with the quality 
depending on the modulation technique.

List of Subjects in 7 CFR Part 1751

    Loan programs--communications, Telecommunications, Telephone.

    For reasons set forth in the preamble, chapter XVII of Title 7 of 
the Code of Federal Regulations is proposed to be amended by revising 
part 1751 to read as follows:

PART 1751--TELECOMMUNICATIONS SYSTEM PLANNING AND DESIGN CRITERIA, 
AND PROCEDURES

Subpart A--[Reserved]

Sec.
1751.1-1751.99  [Reserved]

Subpart B--State Telecommunications Modernization Plan

1751.100  Definitions.
1751.101  General.
1751.102  Modernization Plan developer--eligibility.
1751.103  Loan requirements.
1751.104  Obtaining REA approval of a proposed Modernization Plan.
1751.105  Amending a Modernization Plan--
1751.106  Modernization Plan--requirements.

    Authority: 7 U.S.C. 901 et seq., 1921 et seq.

Subpart A--[Reserved]


Secs. 1751.1-1751.99  [Reserved]

Subpart B--State Telecommunications Modernization Plan


Sec. 1751.100  Definitions.

    As used in this subpart:
    Bit rate. The rate of transmission of telecommunications signals or 
intelligence in binary (two state) form in bits per unit time, e.g., 
Mb/s (megabits per second), kb/s (kilobits per second), etc.
    Borrower. Any organization which has an outstanding telephone loan 
made by REA or the Rural Telephone Bank, or guaranteed by REA, or which 
has a completed loan application with REA.
    Emerging technologies. New or not fully developed methods of 
telecommunications.
    Hardship loan. A loan made by REA under section 305(d)(1) of the RE 
Act bearing interest at a rate of 5 percent per year.
    Local power. Electrical source, provided by someone other than the 
telecommunications utility, used for powering a subscriber's station 
equipment.
    Loop. A dedicated facility which connects the customer's station to 
the Public Switched Network. The loop may consist of twisted pair 
copper wire, coaxial cable, fiber optic cable, radio, or a combination 
of these. It may also include dedicated electronic or lightwave 
transmission equipment.
    Modernization Plan (State Telecommunications Modernization Plan). A 
plan, which has been approved by REA, for improving the Public Switched 
Network of a State. The Modernization Plan must conform to the 
provisions of this subpart.
    Plan Developer. The PUC, State Legislature, or a numeric majority 
of the REA borrowers within the State that have the responsibility for 
creating the Modernization Plan.
    Public Switched Network. The network intended for public use 
furnished by Telecommunications Providers on a switched basis.
    PUC (Public Utilities Commission). The public utilities commission, 
public service commission or other State body with such jurisdiction 
over rates, service areas or other aspects of the services and 
operation of providers of telecommunications services as vested in the 
commission or other body authority, to the extent provided by the 
State, to guide development of telecommunications services in the 
State.
    RE Act. The Rural Electrification Act of 1936, as amended (7 U.S.C. 
901 et seq.).
    REA cost-of-money loan. A loan made under section 305(d)(2) of the 
RE Act bearing an interest rate as determined under 7 CFR 1735.31(c). 
REA cost-of-money loans are made concurrently with RTB loans.
    RTB loan. A loan made by the Rural Telephone Bank (RTB) under 
section 408 of the RE Act bearing an interest rate as determined under 
7 CFR 1610.10. RTB loans are made concurrently with REA cost-of-money 
loans.
    State. Each of the 50 states of the United States, the District of 
Columbia, and the territories and insular possessions of the United 
States. This does not include countries in the Compact of Free 
Association.
    Telecommunications. The transmission or reception of voice, data, 
sounds, signals, pictures, writings, or signs of all kinds, by wire, 
fiber, radio, light, or other visual or electromagnetic means.
    Telecommunications Providers. Local exchange carriers, competitive 
access providers, and interexchange carriers which provide 
telecommunications service in the State covered by the Modernization 
Plan and such other entities providing telecommunications services as 
the developer of the Modernization Plan (See Sec. 1751.102) may 
determine.
    Wireline Service. Telecommunications service provided over 
telephone lines. It is characterized by a wire or wirelike connection 
carrying electricity or light between the subscriber and the Public 
Switched Network. Wireline Service implies a physical connection. 
Although radio may form part of the circuit, it is not the major method 
of transmission as in radiotelephone.


Sec. 1751.101  General.

    (a) It is the policy of REA that every State have a Modernization 
Plan which provides for the improvement of the State's Public Switched 
Network.
    (b) A proposed Modernization Plan must be submitted to REA for 
approval. REA will approve the proposed Modernization Plan if it 
conforms to the provisions of this subpart. Once obtained, REA's 
approval of a Modernization Plan cannot be rescinded.
    (c) The Modernization Plan shall not interfere with REA's authority 
to issue such other telecommunications standards, specifications, 
requirements, and procurement rules as may be promulgated from time to 
time by REA including, without limitation, those set forth in 7 CFR 
part 1755.
    (d) The Modernization Plan must, at a minimum, apply to all REA 
borrowers. If a Modernization Plan is developed by the PUC or the State 
Legislature, REA encourages, but does not require, that the 
Modernization Plan's requirements apply to the rural service areas of 
all Telecommunications Providers. A State's decision not to include 
non-REA borrowers will not prejudice REA approval of their Plan. The 
PUC or the State Legislature may also, at its option, extend coverage 
of the Modernization Plan to all service areas of all 
Telecommunications Providers in the State. In addition, while 
requirements contained in Sec. 1751.106 apply only to wireline 
services, the State Legislature or PUC, at its discretion, may extend 
coverage of Modernization Plans to wireless or other communications 
services in a State as it deems appropriate.


Sec. 1751.102  Modernization Plan developer--eligibility.

    (a) Each State, either by statute or through its Public Utility 
Commission, is eligible until one year after publication of the final 
rule in the Federal Register to develop a proposed Modernization Plan 
and deliver it to REA. REA will review and consider for approval all 
PUC or State Legislature-developed Modernization Plans received by REA 
within this one year period. The review and approval, if any, may occur 
after the one year period ends even though the PUC or State Legislature 
is no longer eligible to submit a proposed Modernization Plan.
    (b) The PUC must notify all Telecommunications Providers in the 
State that are part of the Public Switched Network and other interested 
parties of its intent to develop a proposed Modernization Plan. The PUC 
is encouraged to consider all such Providers' and interested parties' 
views and incorporate these views in the Modernization Plan.
    (c) If the State Legislature or PUC is no longer eligible to 
develop a Modernization Plan, as described in paragraph (a) of this 
section, eligibility to develop the Modernization Plan passes to a 
numeric majority of the Borrowers within the State. In this case, the 
following apply:
    (1) All Borrowers shall be given reasonable notice of and shall be 
encouraged to attend and contribute to all meetings and other 
proceedings relating to the development of the Modernization Plan; and
    (2) Borrowers developing a Modernization Plan are encouraged to 
solicit the views of other Telecommunications Providers and interested 
parties in the State.
    (3) There is no time limit placed on the REA Borrowers to develop a 
Modernization Plan, however, REA, as required by the Rural 
Electrification Loan Restructuring Act of 1993 (107 Stat. 1356), will 
not approve any direct loans in States that do not have an approved 
Modernization Plan. See Sec. 1751.103 of this subpart.


Sec. 1751.103  Loan requirements.

    For information about loan eligibility requirements in relation to 
the Modernization Plan, see 7 CFR part 1735. In particular, one year 
after publication of the final rule, REA will make hardship loans, REA 
cost-of-money loans, and RTB loans for facilities and other RE Act 
purposes for Telephone Borrowers in a State only if:
    (a) The State has an REA approved Modernization Plan; and
    (b) The Borrower is participating in the Modernization Plan for the 
State. A Borrower is considered to be participating if, in REA's 
opinion, the purposes of the loan requested by the Borrower are 
consistent with the Borrower achieving the requirements stated in the 
Modernization Plan within the timeframe stated in the Modernization 
Plan unless REA has determined that achieving the requirements is not 
technically or economically feasible.


Sec. 1751.104  Obtaining REA approval of a proposed Modernization Plan.

    (a) To obtain REA approval of a proposed Modernization Plan, the 
Plan Developer must submit the following to REA:
    (1) A certified copy of the statute or PUC order, if the State is 
the Plan Developer, or a written request for REA approval of the 
proposed Modernization Plan signed by an authorized representative of 
the Plan Developer, if a majority of Borrowers is the Plan Developer; 
and
    (2) Three copies of the proposed Modernization Plan.
    (b) Generally, REA will review the proposed Modernization Plan 
within (30) days and either:
    (1) Approve the Modernization Plan if it conforms to the provisions 
of this subpart in which case REA will return a copy of the 
Modernization Plan with notice of approval to the Plan Developer; or,
    (2) Not approve the proposed Modernization Plan if it does not 
conform to the provisions of this subpart. In this event, REA will 
return the proposed Modernization Plan to the Plan Developer with 
specific written comments and suggestions for modifying the proposed 
Modernization Plan so that it will conform to the provisions of this 
subpart. If the Plan Developer remains eligible, REA will invite the 
Plan Developer to submit a modified proposed Modernization Plan for REA 
consideration. This process can continue until the Plan Developer gains 
approval of a proposed Modernization Plan unless the Plan Developer is 
a PUC or State Legislature whose eligibility has expired. If the PUC's 
or State Legislature's eligibility has expired, REA will return the 
proposed Modernization Plan unapproved. Because REA does not have 
authority to extend a PUC's or State Legislature's eligibility, REA 
recommends that a PUC or State Legislature submit a proposed 
Modernization Plan at least 90 days in advance of one year after 
publication of the final rule to allow time for this process.


Sec. 1751.105  Amending a Modernization Plan.

    (a) REA understands that changes in standards, technology, 
regulation, and the economy could indicate that an REA-approved 
Modernization Plan should be amended.
    (b) The Plan Developer of the Modernization Plan may amend the 
Modernization Plan if REA finds the proposed changes continue to 
conform to the provisions of this subpart.
    (c) The procedure for requesting approval of an amended 
Modernization Plan is identical to the procedure for a proposed 
Modernization Plan except that there are no time limits on the 
eligibility of the Plan Developer.
    (d) The existing Modernization Plan remains in force until REA has 
approved the proposed amended Modernization Plan.
    (e) REA may from time to time revise these regulations to 
incorporate newer technological and economic standards that REA 
believes represent more desirable goals for the future course of 
telecommunications services. Such revisions will be made in accordance 
with the Administrative Procedure Act. These revisions shall not 
invalidate Modernization Plans approved by REA but shall be used by REA 
to determine whether to approve amendments to Modernization Plans 
presented for REA approval after the effective date of the revision.


Sec. 1751.106  Modernization Plan--requirements.

    (a) A Modernization Plan must set service requirements for 
improving the Public Switched Network and must at a minimum meet the 
following requirements:
    (1) The Modernization Plan must provide for the elimination of 
party line service.
    (2) The Modernization Plan must provide for the availability of 
telecommunications services for improved business, educational, and 
medical services.
    (3) The Modernization Plan must encourage and improve computer 
networks and information highways for subscribers in rural areas.
    (4) The Modernization Plan must provide for:
    (i) Subscribers in rural areas to be able to receive through 
telephone lines:
    (A) Conference calling;
    (B) Video images; and
    (C) Data at a rate of at least 1,000,000 bits of information per 
second; and
    (ii) The proper routing of information to subscribers.
    (5) The Modernization Plan must provide for uniform deployment 
schedules to ensure that advanced services are deployed at the same 
time in rural and nonrural areas.
    (b) In addition to the requirements set forth in paragraph (a) of 
this section, minimum requirements are described in paragraphs (g) 
through (i) of this section and are grouped by timeframe, i.e., short-
term, medium-term, and long-term. The Modernization Plan shall provide 
that such requirements be implemented as set forth in this section of 
the regulation except that the Modernization Plan may authorize the 
Plan Developer to approve extensions if the required investment is not 
economically reasonable or if the best available telecommunications 
technology lacks the capability to enable the Telecommunications 
Provider receiving the extension to comply with the Modernization Plan. 
Extensions shall be granted only on a case-by-case basis and shall not 
exceed a total of five years from the first extension except under 
unusual circumstances.
    (c) Each State's Modernization Plan shall include a strategic 
development proposal for rebuilding the Public Switched Network within 
the State. The strategic development proposal shall provide all 
Telecommunications Providers in the State the Plan Developer's vision 
of a State telecommunications structure for the future. Within the 
scope of paragraph (d) of Sec. 1751.101 of this subpart, the 
Modernization Plan shall state whether all Telecommunications Providers 
in the State are required to construct their systems in a manner 
consistent with the strategic development proposal.
    (d) The Modernization Plan must require that the design of the 
Public Switched Network allow for the expeditious deployment and 
integration of such emerging technologies as may from time to time 
become commercially feasible.
    (e) The Modernization Plan must provide guidelines to 
Telecommunications Providers for the development of affordable tariffs 
for medical links and distance learning services.
    (f) With regard to the uniform deployment requirement set forth in 
paragraph (a)(5) of this section, if services cannot be deployed at the 
same time, only the minimum feasible interval of time shall separate 
availability of the services in rural and nonrural areas.
    (g) Short-term requirements. (1) The ``short-term requirements 
start date'' is the date one year after the date REA approves the 
Modernization Plan for the State.
    (2) All facilities providing Wireline Service wholly or partially 
constructed or reconstructed after the short-term requirements start 
date, even if the construction began before such date, shall be 
constructed so that:
    (i) Every subscriber can be provided 1-party service. Existing 
party line subscribers would be allowed to maintain party line service 
only if they requested it and approval is granted by the PUC.
    (ii) Twisted-pair copper plant is non-loaded, unless the PUC, in 
the case of a PUC or State Legislature-developed Modernization Plan, or 
the REA, in the case of a REA Borrower-developed Modernization Plan, 
determines, on a case-by-case basis, after written request from a 
Telecommunications Provider, that the Telecommunications Provider 
should be granted additional time because either the best available 
telecommunications technology lacks the capability to enable the 
Telecommunications Provider to comply with this requirement or 
complying with this requirement would impose prohibitive cost on the 
Telecommunications Provider.
    (3) All switching equipment installed by a Telecommunications 
Provider after the short-term requirements start date shall contain the 
hardware, but not necessarily the software, to be capable of:
    (i) Switching 1.544 Mb/sec. traffic.
    (ii) Providing custom calling features. At a minimum, custom 
calling features must include call waiting, call forwarding, 
abbreviated dialing, and three-way calling.
    (iii) Providing E911 service when required by any local government 
for areas served by the Telecommunications Provider.
    (h) Medium-term requirements. (1) The ``medium-term requirements 
start date'' is the date six years after the date REA approves the 
Modernization Plan for the State, or such earlier date as the 
Modernization Plan shall provide.
    (2) All facilities providing Wireline Service wholly or partially 
constructed or reconstructed after the medium-term requirements start 
date, even if the construction began before such date, shall be 
constructed so that:
    (i) Switched 1.544 Mb/sec service is available to any subscriber. 
Available means the service will be provided on demand after a 
reasonable waiting period.
    (ii) The system does not rely exclusively on local power at the 
subscriber end. There must be sufficient system power to operate 
subscriber voice service during electric utility power outages.
    (3) No later than the medium-term start date, all switching 
equipment must be provisioned with the necessary hardware to be capable 
of providing E911 service when required by any local government for 
areas served by the Telecommunications Provider.
    (i) Long-term requirements. (1) The ``long-term requirements start 
date'' is the date eleven years after the date REA approves the 
Modernization Plan for the State, or such earlier date as the 
Modernization Plan shall provide.
    (2) After the long-term requirements start date, the following 
requirements shall apply to all Wireline Service provided by 
Telecommunications Providers:
    (i) Telecommunications Providers shall eliminate party line 
service.
    (ii) Telephone service shall be available to any subscriber at 
1.544 Mb/sec. Available means the service will be provided on demand 
after a reasonable waiting period.
    (iii) No service lower than one digital voice circuit (56-64 kb/
sec) shall be offered as a new service.
    (iv) The system must not rely exclusively on local power at the 
subscriber end. There must be sufficient system power to operate 
subscriber voice service during electric utility power outages.

    Dated: October 24, 1994.
Bob J. Nash,
Under Secretary, Small Community and Rural Development.
[FR Doc. 94-26761 Filed 10-26-94; 8:45 am]
BILLING CODE 3410-15-P