[Federal Register Volume 60, Number 29 (Monday, February 13, 1995)]
[Rules and Regulations]
[Pages 8171-8177]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-3414]



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  Federal Register / Vol. 60, No. 29 / Monday, February 13, 1995 / 
Rules and Regulations  
[[Page 8171]]

DEPARTMENT OF AGRICULTURE

Rural Utilities Service

7 CFR Part 1751

RIN 0572-AB07


Telecommunications System Planning and Design Criteria, and 
Procedures

AGENCY: Rural Utilities Service, USDA.

ACTION: Final rule.

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

SUMMARY: The Rural Utilities Service (RUS) hereby amends its rule on 
State Telecommunications Modernization Plans to incorporate changes in 
RUS Telecommunications Program policy. These amendments also 
incorporate suggestions received from the public in response to the 
proposed rule. All Telephone Borrowers will be affected by this final 
rule.

EFFECTIVE DATE: March 15, 1995.

FOR FURTHER INFORMATION CONTACT: Orren E. Cameron III, Director, 
Telecommunications Standards Division, U.S. Department of Agriculture, 
Rural Utilities Service, 14th & Independence Avenue, SW., Room 2835-S, 
Washington, DC 20250-1500, telephone number (202) 720-8663.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This final 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 final rule has been reviewed under Executive Order 12778, 
Civil Justice Reform. This final 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

    RUS has determined that this final 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 RUS 
Telecommunications Program provides loans to RUS Borrowers at interest 
rates and terms that are more favorable than those generally available 
from the private sector. RUS Borrowers, as a result of obtaining 
federal financing, receive economic benefits which ultimately offset 
any direct economic costs associated with complying with RUS 
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 final 
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 10102, New Executive Office Building, 
Washington, DC 20503.

National Environmental Policy Act Certification

    RUS has determined that this final 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 final 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 final 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 RUS and RTB loans and loan guarantees to 
governmental and nongovernmental entities from coverage under this 
Order.

Background

    The Federal Crop Insurance Reform and Department of Agriculture 
Reorganization Act of 1994 (Pub. L. 103-354, 108 Stat. 3178), 
(Reorganization Act), signed by President Clinton on October 13, 1994, 
provides for a streamlining and reorganizing of the Department of 
Agriculture (Department). The Reorganization Act requires the Secretary 
of Agriculture (Secretary) to establish the Rural Utilities Service 
(RUS) within the Department. On October 20, 1994, the Secretary of 
Agriculture, in Secretary's Memorandum 1010-1, abolished the Rural 
Electrification Administration (REA) and established RUS, as required 
by the Reorganization Act.
    On December 20, 1993, RUS (formerly 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).
    On April 13, 1994, RUS 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), RUS 
published proposed amendments to 7 CFR Part 1751, Subpart B on October 
27, 1994 (59 FR 53939).
    During the comment period RUS received 39 comments regarding the 
proposed rule and these comments were taken into consideration in 
preparing the final rule. Comments were received from the following:

(1) Colorado Public Utilities Commission Staff.
(2) Florida Public Service Commission.
(3) Idaho Public Utilities Commission.
(4) Illinois Commerce Commission. [[Page 8172]] 
(5) Louisiana Public Service Commission.
(6) Michigan Public Service Commission Staff.
(7) Missouri Public Service Commission.
(8) Nebraska Public Service Commission.
(9) New England Conference of Public Utilities Commissioners, Inc.
(10) New York State Department of Public Service.
(11) Ohio Public Utilities Commission.
(12) Pennsylvania Public Utility Commission.
(13) Texas Public Utility Commission.
(14) Virginia State Corporation Commission.
(15) Wisconsin Public Service Commission.
(16) Wyoming Public Service Commission.
(17) National Association of Regulatory Utility Commissioners.
(18) GTE Service Corporation.
(19) Joint comments from 15 RUS Telephone Borrowers and 2 consulting 
engineering companies located in South Carolina.
(20) TDS Telecom.
(21) Unicom.
(22) United and Central Telephone Companies.
(23) National Emergency Number Association.
(24) Joint comments from the National Rural Telecom Association and the 
Western Rural Telephone Association.
(25) Nebraska Telephone Association.
(26) North Dakota Association of Telephone Cooperatives.
(27) National Telephone Cooperative Association.
(28) New York State Telephone Association, Inc.
(29) Joint comments from the Oklahoma Rural Telephone Coalition, Rural 
Arkansas Telephone Systems, and Texas Statewide Telephone Cooperative, 
Inc.
(30) Organization for the Protection and Advancement of Small Telephone 
Companies.
(31) Oregon Independent Telephone Association.
(32) United States Telephone Association.
(33) Bell Atlantic Telephone Companies.
(34) Southwestern Bell Telephone Company.
(35) U.S. West Communications, Inc.
(36) MCI Telecommunications Corporation.
(37) Kadrmas, Lee & Jackson, P.C.
(38) GVNW Inc/Management.
(39) Reed Veach Wurdeman and Associates.

    1. Comment Summary. Many commenters argued that the Modernization 
Plan requirements in the proposed rule go beyond a reasonable reading 
of RELRA. More specifically, they said that RELRA requires 
``objectives'', but the proposed rule translates those into 
requirements, and sets deadlines for accomplishment of those 
requirements that are insensitive to market forces, technological 
development, and State regulatory authority.
    Response. RUS believes that a Modernization Plan without service 
improvement requirements, and timeframes for achievement, would be 
ineffective in accomplishing the modernization of rural 
telecommunications infrastructure that RELRA clearly intends. RELRA 
makes the Modernization Plan a condition to eligibility for certain 
financing programs administered by RUS. An ineffective Modernization 
Plan would undermine this direction of financing resources under RELRA.
    In response to the substance of these comments, RUS has recast its 
requirements and timeframes. The long-term requirements have been 
changed to goals, and some requirements have been reduced. From the 
comments received, RUS believes that these changes will mitigate the 
concerns about marketability of required technologies. RUS again 
invites States to exercise their authority by taking advantage of the 
one year period of eligibility to prepare a Modernization Plan.
    2. Comment Summary. One commenter noted that if no Modernization 
Plan is developed for a State, thereby excluding the State from some 
RUS program benefits, service rates would probably increase in the 
State. Others expressed concern that investments made to comply with 
Modernization Plan requirements would affect other Telecommunications 
Providers through the universal service fund and other toll settlement 
plans.
    Response. The Telecommunications Providers covered by Modernization 
Plans are interconnected with other telecommunications carriers in many 
ways, and they are certainly interconnected economically. Borrowers and 
PUC's can make various decisions that can jeopardize RUS funding of 
projects, and these may affect service rates for subscribers and toll 
pool distributions. RELRA requires that no loans except guaranteed 
loans be made in a State without a Modernization Plan.
    3. Comment Summary. Many commenters suggested that the language in 
Sec. 1751.106(a)(5) is not consistent with the language in 
Sec. 1751.106(f) of the proposed rule. Some commenters preferred the 
language in the response to comments to the language presented in the 
proposed rule.
    Response. The language in Sec. 1751.106(a)(5) was a restatement of 
the provision in RELRA. Paragraph (g), (paragraph (f) in the proposed 
rule) of the subsection is RUS's effort to clarify the term ``uniform 
deployment schedules'' and is intended to allow Plan Developers some 
latitude in the timing of deployment of advanced services. 
Sec. 1751.106(a) has been rewritten to clarify that it is a restatement 
of RELRA so as to eliminate any appearance of a conflict with paragraph 
(g).
    4. Comment Summary. Many commenters wonder what guidelines RUS will 
use to determine whether something is ``technically or economically 
feasible'', under Sec. 1751.103(b) of the proposed rule.
    Response. Technical feasibility means the equipment is available to 
do the job. Economic feasibility means the job can be done at a 
reasonable cost. Every telecommunications loan processed by RUS is 
studied for technical and economic feasibility. Technical feasibility 
of the loan is determined by telecommunications engineers with 
knowledge of current technology and facility costs. Economic 
feasibility is determined by the loan feasibility study which is a 
comprehensive consideration of projected revenues and expenses for the 
particular Borrower. The results of RUS's studies are submitted to the 
Borrower for concurrence before a loan is approved.
    5. Comment Summary. One commenter pointed out that the extension 
process discussed in Sec. 1751.106(b) may require Borrowers to request 
extensions from groups of other Borrowers who might have competitive 
interests. This could happen if the Plan Developer is a Borrower group.
    Response. This has been rewritten to give this authority to RUS in 
those cases where the Plan Developer is the majority of RUS Borrowers.
    6. Comment Summary. Many commenters opposed the requirement in 
Sec. 1751.106(g)(2)(ii) for eliminating inductive loading of copper 
loops. Some commenters argued that Sec. 1751.106(g)(2)(ii) is 
contradictory to Sec. 1751.103(b) in the proposed rule.
    Response. The requirement in Sec. 1751.106(g)(2)(ii) has been 
deleted.
    7. Comment Summary. Some commenters expressed concern about the 
exception process mentioned in Sec. 1751.106(g)(2)(i) in the proposed 
rule for those who do not want the elimination of party line service. 
[[Page 8173]] 
    Response. The language providing for the elimination of party line 
service has been revised to focus this requirement on the capability of 
providing one-party service.
    8. Comment Summary. Many commenters argued that the powering 
requirement in Sec. 1751.106(h)(2)(ii) and Sec. 1751.106(i)(2)(iv) in 
the proposed rule is not supported by industry consensus at this time. 
Some suggested that this item be approached from a reliability 
standpoint. Some commenters believed this requirement covered powering 
of fax machines and PBXs.
    Response. RUS does not want to see the reliability of basic 
telecommunications service decline as a result of modernization. Such a 
decline will most certainly occur if local powering is relied upon even 
for basic voice telephone service, because the average annual outage 
time for a residential line connected to the public switched network is 
estimated at 105 minutes, whereas the average annual outage time for 
residential power users is over 300 minutes. The final rule has been 
revised to require that the Plan Developer make ``provision for'' 
service continuation during local power failure. Regarding the 
confusion over what has to be resilient to local power failure, this 
provision was carefully written in the proposed rule to cover only 
basic voice communications in the event of a local power failure. RUS 
has rewritten this provision to make this point without mentioning 
specific equipment and technologies that need not be provided with 
alternative power.
    9. Comment Summary. Many commenters expressed opposition to the 
medium-term requirement for switched 1.544 Mb/sec service. Some 
commenters suggested that this would be very expensive to provide. 
Others suggested that only a few central office switches could provide 
the service. One commenter suggested the capability would be useless 
unless interexchange carriers could carry such signals. One commenter 
noted that in Alaska, where satellites play an important role in 
connecting exchanges to the network, this requirement would be very 
difficult.
    Response. The substance of the comments received has caused RUS to 
reconsider this requirement. The requirement for switched 1.544 Mb/sec 
service in the proposed rule has been changed to a requirement for the 
transmission and reception of at least 1 Mb/sec and the reception of 
video. The Plan Developer may specify how this is to be accomplished.
    10. Comment Summary. Two commenters observed that the Modernization 
Plan would apply to all Borrowers, and as defined that would include 
past as well as present and future Borrowers. This would mean that RUS 
would apply RELRA requirements retroactively.
    Response. This was not RUS's intent. The language has been changed 
to clarify that the Modernization Plan for a State will only act to set 
requirements on Borrowers for certain kinds of loans, and further, only 
if the loan is approved after the date that the Modernization Plan is 
approved by RUS.
    11. Comment Summary. Some commenters thought that 
Sec. 1751.106(i)(2)(iii) in the proposed rule was intended to eliminate 
plain old telephone service (``POTS'') as a new service offering, and 
that this long-term requirement would force subscribers to purchase 
digital telephones.
    Response. This requirement has been deleted from the regulation as 
part of the recasting of the Modernization Plan discussed above.
    12. Comment Summary. One commenter suggested that Sec. 1751.105 be 
revised to state that no amended Modernization Plan could increase the 
requirements of a previously-approved Modernization Plan.
    Response. RUS disagrees. This could unreasonably limit a State or 
group of Borrowers in their efforts to continue to modernize 
telecommunications systems in the State.
    13. Comment Summary. One commenter is concerned whether RUS will 
follow 5 U.S.C. Sec. 553 regarding notice and comment procedures if the 
rule is changed in the future. Another commenter felt that RUS has no 
statutory authority to revise the rule after the final rule is issued.
    Response. The underlying purpose of the Modernization Plan is to 
stimulate the continuing modernization of telephone service. RUS 
believes that it has the obligation to provide guidance to Plan 
Developers for updating their Modernization Plans. As is stated in 
Sec. 1751.105(e), RUS, if it revises the rule, must follow the 
Administrative Procedures Act.
    14. Comment Summary. One commenter expressed concern that under 
Sec. 1751.103 as written in the proposed rule, RUS could deny loans to 
all Borrowers in a State if any Borrower does not participate in the 
Modernization Plan.
    Response. This was not RUS's intent. Language in this subsection 
has been revised to clarify that only the Borrower who does not 
participate in the Modernization Plan is denied certain types of loans.
    15. Comment Summary. Many commenters expressed displeasure with the 
one year period for State eligibility with no extensions, and the 
rejection of Borrower-prepared plans before the end of that year. Also, 
one commenter recommended that States be required to notify other 
interested parties 180 days before the expiration of the one year 
period of their intent to file or not to file a proposed Modernization 
Plan.
    Response. Beginning with the publication of this Final Rule, States 
have a one year period of eligibility for preparing a Modernization 
Plan. There is no provision in RELRA for any party other than a State 
to prepare a Modernization Plan until the expiration of that one year. 
Regarding the suggestion for advance notice of the State's intent to 
file, RUS agrees and has added language to Sec. 1751.102 (b) to request 
a State to inform RUS if it does not intend to submit a proposed 
Modernization Plan. RUS will inform its Borrowers as well as telephone 
industry associations when it has been notified that a State does not 
intend to develop a Modernization Plan.
    16. Comment Summary. Several commenters expressed opposition to 
Sec. 1751.106(e) in the proposed rule, which provides for Modernization 
Plan guidelines for the development of affordable tariffs for medical 
links and distance learning services. Two commenters argued that this 
provision would usurp a PUC's rate regulatory authority by mandating a 
subsidy.
    Response. One of the requirements of RELRA is that the 
``Modernization Plan must provide for the availability of 
telecommunications services for improved business, educational, and 
medical services.'' If such services are to be ``available'' in any 
reasonable sense, they must be affordable.
    17. Comment Summary. Several commenters suggested that RUS should 
provide a model Modernization Plan.
    Response. RUS believes, and most commenters have strongly asserted, 
that Modernization Plans can best be developed by local State groups 
and Telecommunications Providers. In view of the preponderance of 
comments received on the proposed rule, RUS declines to issue suggested 
language that might be seen as an ad hoc standard for Modernization 
Plans.
    18. Comment Summary. One commenter suggested that requirements for 
improvements under Modernization Plans should be made conditional upon 
adequate available federal capital and cost recovery mechanisms.
    Response. Unless the PUC decides otherwise, the Modernization Plan 
requirements only apply to RUS [[Page 8174]] Borrowers. Moreover, the 
only enforcement of a Modernization Plan pursuant to RELRA is denial of 
a loan to a Borrower that is not participating in the Modernization 
Plan. Therefore, to a considerable extent, Modernization Plan 
requirements are conditional upon the availability of federal capital 
and cost recovery mechanisms.
    19. Comment Summary. Several commenters argued that RELRA did not 
give RUS the authority to require a modernization of the national 
communications infrastructure. These commenters noted that this is 
contrary to the Communications Act of 1934 objective of consolidating 
federal authority over telecommunications into one agency.
    Response. Through various financing programs and technical 
initiatives, the REA, now RUS, has been instrumental in the 
modernization of the national rural telecommunications infrastructure. 
The provisions of RELRA as set forth in this final rule will continue 
that modernization.
    20. Comment Summary. One commenter pointed out that since a 
Borrower-developed Modernization Plan can only apply to Borrowers, the 
rule should make that clear.
    Response. Language has been added to Sec. 1751.102(c) to clarify 
that a Borrower-developed plan will only apply to Borrowers.
    21. Comment Summary. One commenter said that Borrower-developed 
plans can affect others, and proposed that RUS require that Borrowers 
allow outside participation in development of a plan.
    Response. RUS encourages all Plan Developers to include outside 
participation, but does not believe it is necessary for Borrower groups 
to be required to include outside participation.
    22. Comment Summary. One commenter expressed concern that 
Modernization Plan requirements would threaten universal service 
because it would require Borrowers and non-Borrowers to build 
infrastructure whether or not it met customer needs.
    Response. The regulation has been revised to alleviate this 
concern. RUS performs feasibility studies to ensure that the proposed 
construction does not threaten the viability of a Borrower.
    23. Comment Summary. One commenter suggested that in the balance 
between cost and improved service, cost is clearly secondary to RUS.
    Response. RUS is concerned with improved service to rural 
subscribers at reasonable prices. RUS strongly feels that 
communications infrastructure is essential to rural economic 
development. The real cost of failing to provide this infrastructure is 
a failing rural economy, decline in rural subscribers and less revenue 
to the rural telecommunications provider.
    24. Comment Summary. Many commenters found the approximate 
restatement of a part of RELRA in Sec. 1751.106(a) to be confusing and 
vague. It uses terms that do not seem to apply to any communications 
industry segment such as ``video images'' and ``proper routing of 
information to subscribers''.
    Response. This language has been clarified to show that 
Sec. 1751.106(a) is a restatement of RELRA while the balance of the 
section implements the law.
    25. Comment Summary. One commenter proposed that RUS should 
automatically grant lien accommodations for Borrowers that do not meet 
the minimum requirements of their State Modernization Plan.
    Response. RUS disagrees. To do so would negate RELRA's purpose of 
improving and modernizing telecommunications and might jeopardize the 
security of RUS loans.
    26. Comment Summary. One commenter proposed that RUS review 
Modernization Plans within 30 days without exception, and asserts that 
as written the rule allows RUS to postpone denial until it is too late 
for a developer to resubmit a plan for approval.
    Response. Both Plan Developers and RUS face difficult schedules as 
a result of this regulation. RUS has developed an internal processing 
procedure intended to deal with the estimated 45 Modernization Plans 
that could be received simultaneously. It is the intent of RUS to 
process all Modernization Plans within 30 days of receipt of the 
proposed Modernization Plan. If the submission of the proposed Plan is 
timely, this will not be a problem.
    27. Comment Summary. One commenter noted that RELRA places no time 
limit on RUS as to promulgation of a final rule. This commenter 
suggested that RUS should wait for further congressional direction.
    Response. RUS was required under RELRA to issue the interim 
regulation, and RUS wishes to respond to the public by issuing a final 
rule that implements the requirements of RELRA in a reasonable and 
effective manner. Without this final rule, the interim rule remains in 
effect.
    28. Comment Summary. One commenter asked why the rule does not 
apply to RUS electric borrowers and grant recipients who may compete 
with RUS telephone Borrowers either directly or through a subsidiary.
    Response. As written, the Modernization Plan will serve as 
requirements for all telephone Borrowers seeking new financing. 
Modernization Plans developed by the States may expand coverage to 
others in the telecommunications industry.

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 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 and loan advance requirements.
1751.104  Obtaining RUS 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.; Pub. L. 103-354, 
108 Stat. 3178 (7 U.S.C. 6941 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 that has received an RUS loan 
designation number and which has an outstanding telephone loan made by 
RUS or the Rural Telephone Bank, or guaranteed by RUS, or which has a 
completed loan application with RUS.
    Emerging technologies. New or not fully developed methods of 
telecommunications.
    Modernization Plan (State Telecommunications Modernization Plan). A 
State plan, which has been approved by RUS, for improving the 
telecommunications network of those Telecommunications Providers 
covered [[Page 8175]] by the plan. A Modernization Plan must conform to 
the provisions of this subpart.
    New facilities. Facilities which are wholly or partially 
constructed or reconstructed after a short- or medium-term requirements 
start date, as appropriate. This does not include connections or 
capacity extensions within the wired capacity of existing plant such as 
adding line cards to existing equipment.
    Plan Developer. The entity creating the Modernization Plan for the 
State, which may be the State PUC, the State legislature, or a numeric 
majority of the RUS Borrowers within the State. When this part refers 
to the PUC as the Plan Developer, this includes the State legislature.
    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. When this part refers to the PUC as the Plan Developer, this 
includes the State legislature.
    RE Act. The Rural Electrification Act of 1936, as amended (7 U.S.C. 
901 et seq.).
    REA. The Rural Electrification Administration, formerly an agency 
of the United States Department of Agriculture and predecessor agency 
to RUS with respect to administering certain electric and telephone 
loan programs.
    RELRA. The Rural Electrification Loan Restructuring Act of 1993 
(107 Stat. 1356).
    RUS. The Rural Utilities Service, an agency of the United States 
Department of Agriculture established pursuant to Section 232 of the 
Federal Crop Insurance Reform and Department of Agriculture 
Reorganization Act of 1994 (Pub. L. 103-354, 108 Stat. 3178 (7 U.S.C. 
6941 et seq.)), successor to REA with respect to administering certain 
electric and telephone programs. See 7 CFR 1700.1.
    RUS cost-of-money loan. A loan made under section 305(d)(2) of the 
RE Act bearing interest as determined under 7 CFR 1735.31(c). RUS cost-
of-money loans are made concurrently with RTB loans.
    RUS hardship loan. A loan made by RUS under section 305(d)(1) of 
the RE Act bearing interest at a rate of 5 percent per year.
    RTB loan. A loan made by the Rural Telephone Bank (RTB) under 
section 408 of the RE Act bearing interest as determined under 7 CFR 
1610.10. RTB loans are made concurrently with RUS 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. RUS Borrowers and if the Plan 
Developer is a PUC, such other entities providing telecommunications 
services as the developer of the Modernization Plan (See Sec. 1751.101) 
may determine.
    Wireline Service. Telecommunica-tions service provided over 
telephone lines. It is characterized by a wire or wirelike connection 
carrying electricity or light between the subscriber and the rest of 
the telecommunications 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 RUS that every State have a Modernization 
Plan which provides for the improvement of the State's 
telecommunications network.
    (b) A proposed Modernization Plan must be submitted to RUS for 
approval. RUS will approve the proposed Modernization Plan if it 
conforms to the provisions of this subpart. Once obtained, RUS's 
approval of a Modernization Plan cannot be rescinded.
    (c) The Modernization Plan shall not interfere with RUS's authority 
to issue such other telecommunications standards, specifications, 
requirements, and procurement rules as may be promulgated from time to 
time by RUS including, without limitation, those set forth in 7 CFR 
part 1755.
    (d) The Modernization Plan must, at a minimum, apply to RUS 
Borrowers' wireline service areas. If a Modernization Plan is developed 
by the PUC, RUS encourages, but does not require, that the 
Modernization Plan's requirements apply to the rural service areas of 
all providers of telecommunications services in the State. A PUC's 
decision not to include non-RUS Borrowers will not prejudice RUS 
approval of that PUC's Modernization Plan. The PUC may also, at its 
option, extend coverage of the Modernization Plan to all service areas 
of all providers of telecommunications services in the State. In 
addition, while the requirements and goals contained in Sec. 1751.106 
apply only to wireline services, the PUC, at its discretion, may extend 
coverage of Modernization Plans to wireless or other communications 
services in the State as it deems appropriate. Borrower-developed 
Modernization Plans apply only to Borrowers.


Sec. 1751.102  Modernization Plan Developer; eligibility.

    (a) Each PUC is eligible until February 13, 1996 to develop a 
proposed Modernization Plan and deliver it to RUS. RUS will review and 
consider for approval all PUC-developed Modernization Plans received by 
RUS within this one year period. The review and approval, if any, may 
occur after the one year period ends even though the PUC is no longer 
eligible to submit a proposed Modernization Plan.
    (b) The PUC must notify all Telecommunications Providers in the 
State and other interested parties of its intent to develop a proposed 
Modernization Plan. The PUC is encouraged to consider all 
Telecommunications Providers' and interested parties' views and 
incorporate these views into the Modernization Plan. In the event that 
the PUC does not intend to develop a proposed Modernization Plan, RUS 
requests that the PUC inform RUS of this decision as soon as possible.
    (c)(1) If the PUC is no longer eligible to develop a Modernization 
Plan or has informed RUS that it will not develop a Modernization Plan, 
as described in paragraphs (a) and (b) of this section, a majority of 
the Borrowers within the State may develop the Modernization Plan. If a 
majority of Borrowers develops the Modernization Plan, the following 
apply:
    (i) 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
    (ii) Borrowers developing a Modernization Plan are encouraged to 
solicit the views of other providers of telecommunications services and 
interested parties in the State.
    (2) There is no time limit placed on Borrowers to develop a 
Modernization Plan. Borrowers should be aware that certain types of 
loans may be restricted until a Modernization Plan is approved. See 
Sec. 1751.103. [[Page 8176]] 


Sec. 1751.103  Loan and loan advance requirements.

    (a) For information about loan eligibility requirements in relation 
to the Modernization Plan, see 7 CFR part 1735. In particular, 
beginning February 13, 1996, RUS will make RUS hardship loans, RUS 
cost-of-money loans, and RTB loans for facilities and other RE Act 
purposes in a State only if:
    (1) The State has an RUS approved Modernization Plan; and
    (2) The Borrower to whom the loan is to be made is participating in 
the Modernization Plan for the State. A Borrower is considered to be 
participating if, in RUS'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 RUS has determined that 
achieving the requirements is not technically or economically feasible.
    (b) With regard to the three types of loans discussed in paragraph 
(a), only loans approved after the date the State has an RUS approved 
Modernization Plan are subject to complying with the Modernization 
Plan.
    (c) For loans subject to complying with the Modernization Plan, 
advances will not be made if, in RUS's opinion, the advances are not 
consistent with achieving the requirements of the Modernization Plan.


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

    (a) To obtain RUS approval of a proposed Modernization Plan, the 
Plan Developer must submit the following to RUS:
    (1) A certified copy of the statute or PUC order, if the PUC is the 
Plan Developer, or a written request for RUS 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, RUS 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 RUS 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, RUS 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, RUS will invite the 
Plan Developer to submit a modified proposed Modernization Plan for RUS 
consideration. This process can continue until the Plan Developer gains 
approval of a proposed Modernization Plan unless the Plan Developer is 
a PUC whose eligibility has expired. If a PUC's eligibility has 
expired, RUS will return the proposed Modernization Plan unapproved. 
Because RUS does not have authority to extend the term of a PUC's 
eligibility, RUS recommends that the PUC submit a proposed 
Modernization Plan at least 90 days in advance of February 13, 1996 to 
allow time for this process.


Sec. 1751.105  Amending a Modernization Plan.

    (a) RUS understands that changes in standards, technology, 
regulation, and the economy could indicate that an RUS-approved 
Modernization Plan should be amended.
    (b) The Plan Developer of the Modernization Plan may amend the 
Modernization Plan if RUS 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 RUS has 
approved the proposed amended Modernization Plan.
    (e) RUS may from time to time revise these regulations to 
incorporate newer technological and economic standards that RUS 
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 RUS but shall be used by RUS 
to determine whether to approve amendments to Modernization Plans 
presented for RUS approval after March 15, 1995.


Sec. 1751.106  Modernization Plan; requirements.

    (a) The requirements for a Modernization Plan as stated in RELRA 
are:
    (1) The plan must provide for the elimination of party line 
service.
    (2) The plan must provide for the availability of 
telecommunications services for improved business, educational, and 
medical services.
    (3) The plan must encourage and improve computer networks and 
information highways for subscribers in rural areas.
    (4) The 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 plan must provide for uniform deployment schedules to 
ensure that advanced services are deployed at the same time in rural 
and nonrural areas.
    (6) The plan must provide for such additional requirements for 
service standards as may be required by the Administrator.
    (b) To implement the requirements of the law described in paragraph 
(a) of this section, RUS has set minimum requirements as described in 
paragraphs (i) and (j) of this section. They are grouped into short-
term and medium-term requirements. RUS has also included long-term 
goals which are not requirements. The Modernization Plan must meet all 
of the statutory requirements of RELRA and shall provide that short- 
and medium-term requirements be implemented as set forth in this 
section of the regulation except that the PUC, if it is the Plan 
Developer, or RUS, if a majority of Borrowers is the Plan Developer, 
may approve extensions of time if the required investment is not 
economically feasible 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 generally 
shall not exceed a total of five years from the first such extension 
granted to the Telecommunications Provider.
    (c) Each State's Modernization Plan shall be a strategic 
development proposal for modernizing the telecommunications network of 
the Telecommunications Providers covered by the Modernization Plan. In 
addition to implementing the requirements described in paragraphs (a), 
(i), and (j) of this section, the Modernization Plan shall include a 
short engineering description of the characteristics of a future 
telecommunications structure that would enable all Telecommunications 
Providers to achieve the requirements and goals of the Modernization 
Plan. [[Page 8177]] 
    (d) Within the scope of Sec. 1751.101(d), if the Plan Developer is 
the PUC, the Modernization Plan shall name the Telecommunications 
Providers in the State, in addition to Borrowers, that are covered by 
the Modernization Plan.
    (e) The Modernization Plan must require that the design of the 
network provided by Telecommunications Providers allow for the 
expeditious deployment and integration of such emerging technologies as 
may from time to time become commercially feasible.
    (f) The Modernization Plan must provide guidelines to 
Telecommunications Providers for the development of affordable tariffs 
for medical links and distance learning services.
    (g) With regard to the uniform deployment requirement of the law 
restated 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.
    (h) The Modernization Plan must make provision for reliable 
powering of ordinary voice telephone service operating over those 
portions of the telecommunications network which are not network 
powered. In the event of electric utility power outages, an alternative 
source of power must be available to ensure reliable voice service.
    (i) Short-term requirements. (1) The ``short-term requirements 
start date'' is the date one year after the date RUS approves the 
Modernization Plan for the State.
    (2) All New Facilities providing Wireline Service 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.
    (ii) The New Facilities are suitable, as built or with additional 
equipment, to provide transmission and reception of data at a rate no 
lower than 1 Mb/sec.
    (3) All switching equipment installed by a Telecommunications 
Provider after the short-term requirements start date shall be capable 
of:
    (i) Providing custom calling features. At a minimum, custom calling 
features must include call waiting, call forwarding, abbreviated 
dialing, and three-way calling; and
    (ii) Providing E911 service for areas served by the 
Telecommunication Provider when requested by the government responsible 
for this service.
    (j) Medium-term requirements. (1) The ``medium-term requirements 
start date'' is the date six years after the date RUS approves the 
Modernization Plan for the State, or such earlier date as the 
Modernization Plan shall provide.
    (2) All New Facilities providing Wireline Service after the medium-
term requirements start date, even if the construction began before 
such date, shall be capable, as built or with additional equipment, of 
transmitting video to a subscriber. The video must be capable of 
depicting a reasonable representation of motion. The frame rate, 
resolution, and other measures of audio and video quality shall be 
determined by the Plan Developer.
    (3) No later than the medium-term requirements start date, all 
switching equipment of Telecommunications Providers covered by the 
Modernization Plan must be capable of providing E911 service when 
requested by the government responsible for this service.
    (4) No later than five years after the medium-term requirements 
start date, one-party service must be provided upon demand to any 
subscriber of a Telecommunications Provider covered by the 
Modernization Plan.
    (k) Long-term goals. RUS suggests, but does not require, that the 
provisions of each Modernization Plan be consistent with the 
accomplishment of the following:
     (1) The elimination of party line service.
    (2) For subscribers that desire the service, universal availability 
of:
    (i) digital voice and data service (56-164 kb/sec).
    (ii) service that provides transmission and reception of high bit 
rate (no less than 1 Mb/sec) data.
    (iii) service that provides reception of video as described in 
paragraph (j)(2) of this section.

    Dated: January 23, 1995.
Bob J. Nash,
Under Secretary, Rural Economic and Community Development.
[FR Doc. 95-3414 Filed 2-10-95; 8:45 am]
BILLING CODE 3410-15-P