[Federal Register Volume 69, Number 144 (Wednesday, July 28, 2004)]
[Rules and Regulations]
[Pages 44896-44903]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-17105]


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DEPARTMENT OF AGRICULTURE

Rural Utilities Service

7 CFR Part 1739

RIN 0572-AB94


Broadband Grant Program

AGENCY: Rural Utilities Service, USDA.

ACTION: Final rule.

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SUMMARY: The Rural Utilities Service (RUS) is publishing regulations to 
administer the Community Connect Grant Program for the provision of 
broadband transmission service in rural America. This final rule is 
intended to establish eligibility and application requirements, the 
review and approval process, and grant administration procedures for 
the Community Connect Grant Program.

EFFECTIVE DATE: July 28, 2004.

FOR FURTHER INFORMATION CONTACT: Roberta D. Purcell, Assistant 
Administrator, Telecommunications Program, Rural Utilities Service, 
STOP 1590, 1400 Independence Avenue SW., Washington, DC 20250-1590, 
Telephone (202) 720-9554, Facsimile (202) 720-0810. Email address: 
[email protected].

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This final rule has been determined to be not significant for 
purposes of Executive Order 12866, and therefore has not been reviewed 
by the Office of Management and Budget (OMB).

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance (CFDA) Program number 
assigned to the Community Connect Grant Program is 10.863. The Catalog 
is available on a subscription basis from the Superintendent of 
Documents, the Unites States Government Printing Office, Washington, DC 
20402-9325, telephone number (202) 512-1800.

Executive Order 12372

    This program is not subject to the requirements of Executive Order 
12372, ``Intergovernmental Review of Federal Programs,'' as implemented 
under USDA's regulations at 7 CFR part 3015.

Executive Order 12988

    This final rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. RUS has determined that this final rule meets the 
applicable standards provided in section 3 of the Executive Order. In 
addition, all state and local laws and regulations that are in conflict 
with this rule will be preempted, no retroactive effect will be given 
to this rule, and, in accordance with Section 212(e) of the Department 
of Agriculture Reorganization Act of 1994 (7 U.S.C. 6912(e)), 
administrative appeal procedures, if any, must be exhausted before an 
action against the Department or its agencies may be initiated.

Executive Order 13132, Federalism

    The policies contained in this final rule do not have any 
substantial direct effect on states, on the relationship between the 
national government and the states, or on the distribution of power and 
responsibilities among the various levels of government. Nor does this 
final rule impose substantial direct compliance costs on state and 
local governments. Therefore, consultation with states is not required.

Regulatory Flexibility Certification

    Pursuant to 5 U.S.C. 553(a)(2), this final rule related to grants 
is exempt from the rulemaking requirements of the Administrative 
Procedure Act (5 U.S.C. 551 et seq.), including the requirement to 
provide prior notice and an opportunity for public comment. Because 
this final rule is not subject to a requirement to provide prior notice 
and an opportunity for public comment pursuant to 5 U.S.C. 553, or any 
other law, the analytical requirements of the Regulatory Flexibility 
Act (5 U.S.C. 601 et seq.) are inapplicable.

Unfunded Mandates

    This final rule contains no Federal mandates (under the regulatory 
provision of Title II of the Unfunded Mandates Reform Act of 1995) for 
State, local, and tribal governments or the private sector. Therefore, 
this final rule is not subject to the requirements of sections 202 and 
205 of the Unfunded Mandates Reform Act of 1995.

[[Page 44897]]

Environmental Impact Statement

    This final rule has been examined under RUS environmental 
regulations at 7 CFR part 1794. The RUS Administrator has determined 
that this action is not a major Federal action significantly affecting 
the environment. Therefore, in accordance with the National 
Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.), an 
Environmental Impact Statement or Assessment is not required.

Information Collection and Recordkeeping Requirements

    This rule contains no new reporting or recordkeeping burdens under 
OMB control number 0572-0127 that would require approval under the 
Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35).

Background

    On July 8, 2002, RUS published a Notice of Funds Availability 
(``NOFA'') in the Federal Register (67 FR 45079) announcing its 
Community Connect pilot grant program for the provision of broadband 
transmission service in extremely rural, lower-income American 
communities. Initially, twenty million dollars in grant authority was 
made available to promote ``community-oriented connectivity,'' which 
would stimulate economic development and enhance educational and health 
care opportunities in rural areas through theretofore unavailable 
broadband transmission service. See Agriculture, Rural Development, 
Food and Drug Administration, and Related Agencies Act of 2002, Public 
Law 107-76, Title III, Distance Learning and Telemedicine Program 
(2001). In addition, a community center that would provide such service 
free to area residents for two years was required.
    In response to the July 8, 2002, NOFA, RUS received more than 300 
applications totaling more than $185 million in funding requests. As 
part of a national competition, RUS reviewed the applications for 
eligibility and scored the applications according to the rurality of 
the project, the economic need of the project service area, and the 
``community-oriented-connectivity'' benefits to be derived from the 
proposed service. On May 16, 2003, Secretary of Agriculture, Ann 
Veneman, announced the 40 highest scoring grants totaling $20,184,642. 
This announcement fully utilized RUS' 2002 appropriation.
    Due to the overwhelming response to that NOFA, RUS had eligible 
applications on hand totaling more than the $10 million appropriation 
received for Fiscal Year 2003. See Consolidated Appropriations 
Resolution of 2003, Public Law 108-7, 117 Stat. 11, Title III, Distance 
Learning and Telemedicine Program (2003). To eliminate the need for 
fully eligible applicants to resubmit applications during Fiscal Year 
2003, RUS utilized its 2003 appropriation by funding eligible projects 
submitted in accordance with the July 8, 2002, NOFA. The 2003 grant 
announcements were made September 24, 2003.
    For Fiscal Year 2004, $9 million in grants will be made available 
through a national competition to applicants providing broadband 
transmission service on a ``community-oriented connectivity'' basis. 
See Consolidated Appropriations Act of 2004, Public Law 108-199, 118 
Stat. 3, Title III, Distance Learning and Telemedicine Program (2004).
    To encourage ``community-oriented connectivity,'' RUS will provide 
grants to eligible applicants who will deploy broadband transmission 
service in rural communities where such service does not currently 
exist; who will connect all critical community facilities such as local 
schools, education centers, libraries, hospitals, health care 
providers, law enforcement agencies, public safety organizations, fire, 
and rescue services, as well as residents and businesses; and who will 
operate a community center which provides free and open access to area 
residents. Grants will be made available, on a competitive basis, for 
the deployment of broadband transmission services to critical community 
facilities, rural residents, and rural businesses and for the 
construction, acquisition, expansion, and/or operation of a community 
center which would provide free access to broadband transmission 
services to community residents for at least two years. Funding is also 
available for end-user equipment, software, and installation costs. A 
state-of-the-art community center will not only provide improved access 
but will aid rural residents in developing on-line businesses and will 
allow them to reap the benefits of Internet-based advanced placement 
courses and continuing adult education. Applications are limited to one 
project, as defined in this regulation. Applicants wishing to serve 
multiple projects must submit an application for each project.
    On May 14, 2004, RUS published a proposed rule in the Federal 
Register (69 FR 26777) and received the following comments addressed 
below. RUS now is issuing the following final regulation to administer 
the program for Fiscal Year 2004.
    The effective date for this regulation is based on two factors. 
First, the program will essentially operate as it has been since the 
pilot phase. No significant changes have been made with the 
implementation of this regulation. Second, in an effort to expedite the 
application process this year, RUS believes that an ``immediate'' 
effective date is necessary in order to proceed with opening the 
application window to enable application processing and approval of 
grants during this fiscal year.

Comments

    Comment: Funding should be limited to only non-profit entities. The 
commenter stated that funding for profit companies subsidizes 
businesses that do not need funding.
    Response: RUS believes that limiting funding to only non-profit 
organizations would inhibit the facilitation of broadband services in 
many small, rural communities. Where a qualified, for profit 
organization already exists, it would be burdensome to require a new 
non-profit organization to be established in order to seek financial 
assistance. All applicants must compete for funding on a national 
basis; the scoring criteria is designed to measure the needs and 
characteristics of the community and residents being served (income 
levels, population, and need for services), regardless of the type of 
entity proposing to provide them. In many rural areas, the existing 
telecommunications company may be the only viable option for promoting 
service in the most rural and economically challenged areas. Excluding 
these companies would therefore prohibit the expansion of broadband 
service to many isolated, rural communities where the utilization of 
debt financing is economically prohibitive.
    Comment: The definition of broadband service (200 Kb/s in both 
directions) should be raised to 10Mb/s.
    Response: RUS uses the Federal Communications Commission's current 
definition of high-speed advanced services, which is 200 Kb/s upstream 
and down stream. RUS annually reviews this definition to determine if 
changes are necessary. Nothing would prohibit an applicant from 
offering higher speeds.
    Comment: Clarification was requested on the definition of ``Service 
Area''; the commenter was unsure if two towns separated by only a few 
miles could be combined into one service area.
    Response: RUS believes that the definition is clear. It states: 
Service Area means a single [emphasis added]

[[Page 44898]]

Community * * *. The definition of Community states: Community means 
any incorporated or unincorporated town, village, or borough recognized 
in the U.S. Census in a Rural Area. Therefore, only one Census 
recognized community (town, village, etc.) is eligible per application. 
Two or more Census recognized communities, regardless of their 
proximity to one another cannot be combined. However, unincorporated 
areas or locally recognized communities, NOT recognized in the Census, 
that are contiguous to the eligible Census community can be included.
    Comment: Concern was expressed over the exclusion of funding for 
facilities that would duplicate existing services; the commenter stated 
this provision would protect incumbent telecommunications companies and 
prohibit another entity from providing service. The commenter believes 
that this is contrary to the intent of the program.
    Response: The purpose of the program is clearly stated in Sec.  
1739.1: ``RUS will give priority to rural areas that it believes have 
the greatest need for broadband transmission services.'' Those areas 
would be areas without broadband service. If an incumbent local 
exchange carrier (ILEC) is currently providing service that meets the 
definition of broadband, there is no need to finance a competing entity 
using grant funds; RUS has other loan programs that offer financing for 
competitive local exchange carrier (CLEC) purposes. Grant funding is a 
very scarce, limited Federal resource. Grant funds in this program are 
specifically targeted to areas where no broadband service exists. In a 
community where an ILEC is not providing broadband, grant funding is 
available; however, the grantee may not duplicate the ILEC's voice 
service.
    Comment: When calculating the ``rurality'' of the project, 
differing demographics such as population dispersion and proximity to 
other towns should be considered.
    Response: In order to fairly score an application, objective 
scoring criteria should be based on verifiable, widely available data. 
The legislation authorizing this program defines the eligible 
population area as being 20,000 or less. Therefore, we have to consider 
population data. There are other ways to approximate the rurality of an 
area, but they all have inequities and some are difficult to 
consistently and fairly measure. By allowing the applicant to define 
their own limits of the ``service area,'' RUS believes it has provided 
flexibility to design broadband systems that can serve the widest 
practical number of rural residents, yet still be a sustainable 
project.
    Comment: Awards should be based on the needs of the communities.
    Response: RUS agrees. Community need is one of the scoring criteria 
on which awards are made. In addition, the other two scoring criteria 
are a reflection of the community itself (size measured in ``rurality'' 
and economic need measured by the community's per capita personal 
income).
    Comment: Too much emphasis is being placed on required 
documentation of local community support for the proposed broadband 
services (such as town meetings, market surveys, etc.).
    Response: Local community support is a key component of this 
program. This is a unique approach designed to engage an entire 
community in its implementation and provide a holistic methodology for 
the deployment of broadband services. As such, applicants must provide 
documentation that ensures that the proposed services are desired and 
will be utilized in ways which best meet the community's needs. In 
addition, experience has proven that the higher the level of 
involvement from the local community, the more successful and 
sustainable the project tends to be. That is why it is important for 
applicants to adequately document their community's involvement in the 
project.
    Comment: Grant size to any one applicant should be limited.
    Response: Individual community infrastructure needs vary greatly 
from one community to the next. For that reason, RUS chose not to limit 
the size of the grant to any applicant, since the applicant is required 
to provide service to the entire community. In addition, RUS reserves 
the right to review and adjust all project costs and expenditures if 
necessary to ensure that funds are utilized prudently.
    Comment: There was concern expressed over the requirement for an 
engineering design to be submitted with the application; the commenter 
believes that RUS is requiring a design to be prepared by an 
engineering firm or consultant and suggested that the engineering 
design for the project not be required with the application.
    Response: An engineering design is a critical component of the 
application. It provides RUS with assurance that the applicant has the 
ability to construct the system as proposed and deliver the proposed 
services. The engineering design must be satisfactory to RUS but does 
not have to be prepared by an outside engineering firm; the design can 
be prepared internally.
    Comment: Recommendation to adjust the maximum number of computers 
required for the community center to less than one percent of the 
population of the community; the commenter supported a minimum of ten 
computers per center.
    Response: There is no ``minimum percentage;'' applicants are only 
required to have a minimum of ten Computer Access Points in the 
community center.
    Comment: Applicants should be allowed to bundle local exchange 
telecommunications service with broadband service to help subsidize 
cost of broadband service.
    Response: In order to most efficiently utilize scare grant 
resources, the grant funds are specifically targeted to provide 
facilities for the delivery of broadband services where such services 
do not currently exist; they are not intended to be utilized to replace 
existing services, such as voice access. This non-duplication policy 
ensures that funding will be utilized in the most effective manner.
    Comment: Recommendation that RUS require proof from the companies 
that claim to provide broadband service in a proposed area; the 
commenter is concerned about inaccurate claims on the availability of 
broadband service.
    Response: In the grant program, the applicant must certify that 
broadband service does not currently exist in the proposed service 
area. This should eliminate inaccurate claims from existing service 
providers. In addition, before awarding funds, RUS will verify the 
certification of the applicant through site visits to ensure that 
broadband service does not exist.
    Comment: Recommendation to increase the population eligibility 
level from 20,000 to 50,000 inhabitants.
    Response: The program is statutorily required to limit funding to 
communities of 20,000 inhabitants or fewer by the appropriations bill 
which authorized the funding under the Distance Learning and 
Telemedicine program.
    Comment: Consideration should be given for the state of Alaska's 
unique geographic and demographic circumstances, regarding populations 
and remoteness, with regard to the definition of community; the scoring 
criteria for need; the types of services covered; and provision of 
``free'' service to critical community facilities.
    Response: When implementing a nationally competitive grant program, 
standards must be set that attempt to treat every applicant as equally 
as possible. In establishing the scoring criteria and weights for each 
criterion,

[[Page 44899]]

RUS took into consideration measures that it believes offers an equal 
chance to each applicant without regard to specific geographic 
location. While two of the measures are objective (rurality and income 
levels), the third measure is subjective (benefit and need). This 
subjective measure allows for applicant's to explain the unique issues 
they are facing and points are awarded based on the application's 
ability to address those issues and produce benefits.
    Comment: Recommendation to include, as eligible for financing, 
``extremely rural'' service areas that are not recognized by the Census 
even if the applicant is not proposing to serve one census recognized 
community.
    Response: In a competitive grant program, it is necessary to have 
consistent, well defined criteria that ensure that all applicants are 
treated equally. In doing so, RUS chose to define communities as those 
recognized by the Census. This enables RUS to verify the population and 
income levels for each applicant using a neutral, well defined source. 
This ensures competitive fairness among all applicants and eliminates 
inaccurate service territory information. RUS encourages the inclusion 
of non-Census recognized communities that are contiguous to the 
applicant's Census recognized service territory.
    Comment: In lieu of providing a community center with free access 
to services for two years, allow for a free computer and broadband 
service to residents' homes for at least two years.
    Response: This would undermine the community-oriented connectivity 
concept, which is key to the program's goal. The community center will 
facilitate broadband initiatives and provide the necessary training and 
computer skills to those residents that are seeking them. It will also 
provide a long-term, low cost means of access beyond two years to those 
residents that cannot afford service at home. In addition, free home 
access would strain an applicant's sustainability, since revenues from 
residential access would be used to support the system and its ability 
to provide free access to critical community facilities.

List of Subjects in 7 CFR 1739

    Broadband; Grant programs--Communications; Rural Areas; 
Telecommunications; and Telephone.

0
For reasons set forth in the preamble, RUS amends Chapter XVII of title 
7 of the Code of Federal Regulations by adding part 1739 as follows:

PART 1739--BROADBAND GRANT PROGRAM

Subpart A--Community Connect Grant Program

Sec.
1739.1 Purpose.
1739.2 Funding availability and application dates and addresses.
1739.3 Definitions.
1739.4-1739.9 [Reserved]
1739.10 Eligible applicant.
1739.11 Eligible project.
1739.12 Eligible grant purposes.
1739.13 Ineligible grant purposes.
1739.14 Matching contributions.
1739.15 Completed application.
1739.16 Review of grant applications.
1739.17 Scoring of applications.
1739.18 Grant documents.
1739.19 Reporting and oversight requirements.
1739.20 Audit requirements.
1739.21 OMB control number.
Subpart B [Reserved]

    Authority: Title III, Pub. L. 108-199, 118 Stat. 3.

Subpart A--Community Connect Grant Program


Sec.  1739.1  Purpose.

    (a) The provision of broadband transmission service is vital to the 
economic development, education, health, and safety of rural Americans. 
The purpose of the Community Connect Grant Program is to provide 
financial assistance in the form of grants to eligible applicants that 
will provide, on a ``community-oriented connectivity'' basis, broadband 
transmission service that fosters economic growth and delivers enhanced 
educational, health care, and public safety services. RUS will give 
priority to rural areas that it believes have the greatest need for 
broadband transmission services, based on the criteria contained in 
this subpart.
    (b) Grant authority will be used for the deployment of broadband 
transmission service to extremely rural, lower-income communities on a 
``community-oriented connectivity'' basis. The ``community-oriented 
connectivity'' concept will stimulate practical, everyday uses and 
applications of broadband by cultivating the deployment of new 
broadband transmission services that improve economic development and 
provide enhanced educational and health care opportunities in rural 
areas. Such an approach will also give rural communities the 
opportunity to benefit from the advanced technologies that are 
necessary to achieve these goals.


Sec.  1739.2  Funding availability and application dates and addresses.

    (a) RUS will publish, annually in the Federal Register, a Notice of 
Funds Availability (hereinafter ``NOFA'') that will set forth the total 
amount of funding available; the maximum and minimum funding for each 
grant; the application submission dates; and the appropriate addresses 
and agency contact information. The NOFA will also outline and explain 
the procedures for submission of applications, including electronic 
submissions. RUS may publish more than one NOFA should additional 
funding become available.
    (b) Notwithstanding paragraph (a) of this section, RUS may, in 
response to a surplus of qualified eligible applications which could 
not be funded from the previous fiscal year, decline to publish a NOFA 
for the following fiscal year and fund said applications without 
further public notice.


Sec.  1739.3  Definitions.

    As used in this subpart:
    Bandwidth means the capacity of the radio frequency band or 
physical facility needed to carry the Broadband Transmission Service.
    Basic Broadband Transmission Service means the broadband 
transmission service level provided by the applicant at the lowest rate 
or service package level for residential or business customers, as 
appropriate, provided that such service meets the requirements of this 
part.
    Broadband Transmission Service means providing an information-rate 
equivalent to at least 200 kilobits/second in the consumer's connection 
to the network, both from the provider to the consumer (downstream) and 
from the consumer to the provider (upstream).
    Community means any incorporated or unincorporated town, village, 
or borough recognized in the U.S. Census in a Rural Area.
    Community Center means a public building, or a section of a public 
building with at least ten (10) Computer Access Points, that is used 
for the purposes of providing free access to and/or instruction in the 
use of broadband Internet service, and is of the appropriate size to 
accommodate this purpose. The community center must be open and 
accessible to area residents before, during, and after normal working 
hours and on Saturday or Sunday. Examples of facilities that may be 
partially used for the described purposes include school, library, or 
city hall.

[[Page 44900]]

    Computer Access Point means a new computer terminal with access to 
Basic Broadband Transmission Service.
    Critical Community Facilities means every public school or 
education center, public library, public medical clinic, public 
hospital, community college, public university, or law enforcement, 
fire and ambulance stations in the proposed Service Area.
    Eligible Applicant shall have the meaning as set forth in Sec.  
1739.10.
    Eligible Grant Purposes shall have the meaning as set forth in 
Sec.  1739.12.
    End-User Equipment means computer hardware and software, audio or 
video equipment, computer network components, telecommunications 
terminal equipment, inside wiring, interactive video equipment, or 
other facilities required for the provision and use of Broadband 
Transmission Service.
    Matching Contribution means the applicant's qualified contribution 
to the Project, as outlined in Sec.  1739.14.
    Project means the applicant's proposed Basic Broadband Transmission 
Service financed by the grant and Matching Contribution for the 
proposed Service Area.
    Rural Area means any area of the United States not included within 
the boundaries of any incorporated or unincorporated city, village, or 
borough having a population in excess of 20,000 inhabitants.
    RUS means the Rural Utilities Service, an agency of the United 
States Department of Agriculture, which is part of the Rural 
Development Utilities Program.
    Service Area means a single Community, and may include the 
unincorporated areas or locally recognized communities, not recognized 
in the U.S. Census, located outside and contiguous to the Community's 
boundaries, in which the applicant proposes to provide Broadband 
Transmission Service.
    Spectrum means a defined band of frequencies that will accommodate 
the Broadband Transmission Service.
    Telecommunications Terminal Equipment means the assembly of 
telecommunications equipment at the end of a circuit or path of a 
signal, including but not limited to facilities that receive or 
transmit over-the-air broadcast, satellite, and microwave, normally 
located on the premises of the end user, that interfaces with 
telecommunications transmission facilities, and that is used to modify, 
convert, encode, or otherwise prepare signals to be transmitted via 
such telecommunications facilities, or that is used to modify, 
reconvert, or carry signals received from such facilities, the purpose 
of which is to accomplish the goal for which the circuit or signal was 
established.
    USDA means the United States Department of Agriculture.


Sec. Sec.  1739.4-1739.9  [Reserved]


Sec.  1739.10  Eligible applicant.

    To be eligible for a grant, the applicant must:
    (a) Be legally organized as an incorporated organization, an Indian 
tribe or tribal organization, as defined in 25 U.S.C. 450b(b) and (c), 
a state or local unit of government, or other legal entity, including 
cooperatives or private corporations or limited liability companies 
organized on a for-profit or not-for-profit basis.
    (b) Have the legal capacity and authority to own and operate the 
broadband facilities as proposed in its application, to enter into 
contracts and to otherwise comply with applicable federal statutes and 
regulations.


Sec.  1739.11  Eligible project.

    To be eligible for a grant, the Project must:
    (a) Serve a Rural Area where Broadband Transmission Service does 
not currently exist, to be verified by RUS prior to the award of the 
grant;
    (b) Serve one Community recognized in the latest U.S. Census. 
Additional communities located in the contiguous areas outside the 
Community's boundaries that are not recognized (due to size) in the 
U.S. Census, can be included in the applicant's proposed Service Area, 
but must be supported by documentation, acceptable to RUS, as to their 
existence;
    (c) Deploy Basic Broadband Transmission Service, free of all 
charges for at least 2 years, to all Critical Community Facilities 
located within the proposed Service Area;
    (d) Offer Basic Broadband Transmission Service to residential and 
business customers within the proposed Service Area; and
    (e) Provide a Community Center with at least ten (10) Computer 
Access Points within the proposed Service Area, and make Broadband 
Transmission Service available therein, free of all charges to users 
for at least 2 years.


Sec.  1739.12  Eligible grant purposes.

    Grant funds may be used to finance:
    (a) The construction, acquisition, or leasing of facilities, 
including spectrum, to deploy Broadband Transmission Service to all 
participating Critical Community Facilities and all required facilities 
needed to offer such service to residential and business customers 
located within the proposed Service Area;
    (b) The improvement, expansion, construction, or acquisition of a 
Community Center that furnishes free access to broadband Internet 
service, provided that the Community Center is open and accessible to 
area residents before, during, and after normal working hours and on 
Saturday or Sunday. Grant funds provided for such costs shall not 
exceed the greater of five percent (5%) of the grant amount requested 
or $100,000;
    (c) End-User Equipment needed to carry out the Project;
    (d) Operating expenses incurred in providing Broadband Transmission 
Service to Critical Community Facilities for the first 2 years of 
operation and in providing training and instruction. Salary and 
administrative expenses will be subject to review, and may be limited 
by RUS for reasonableness in relation to the scope of the Project; and
    (e) The purchase of land, buildings, or building construction 
needed to carry out the Project.


Sec.  1739.13  Ineligible grant purposes.

    (a) Grant funds may not be used to finance the duplication of any 
existing Broadband Transmission Service provided by another entity.
    (b) Facilities financed with grant funds cannot be utilized, in any 
way, to provide local exchange telecommunications service to any person 
or entity already receiving such service.


Sec.  1739.14  Matching contributions.

    (a) The grant applicant must contribute a Matching Contribution 
which is at least fifteen percent (15%) of the grant amount requested 
and shall be in the form of:
    (1) Cash for eligible grant purposes.
    (2) In-kind contributions for purposes that could have been 
financed with grant funds under this part. In-kind contributions must 
be new or non-depreciated assets with established monetary values. 
Manufacturers' or service providers' discounts shall not be considered 
as a Matching Contribution.
    (3) The rental value of space provided within an existing Community 
Center, provided that the space is provided free of charge to the 
applicant, for the first 2 years of operation.
    (4) Salary expenses incurred for the individual(s) operating the 
Community Center, for the first 2 years of operation.
    (5) Expenses incurred in operating the Community Center, for the 
first 2 years of operation.
    (b) Costs incurred by the applicant, or by others on behalf of the 
applicant, for

[[Page 44901]]

facilities, installed equipment, or other services rendered prior to 
submission of a completed application shall not be considered as an 
Eligible Grant Purpose or Matching Contribution.
    (c) Rental values of space provided must be substantiated by rental 
agreements documenting the cost of space of a similar size in a similar 
location.
    (d) Rental values, salaries, and other expenses incurred in 
operating the Community Center will be subject to review by RUS for 
reasonableness in relation to the scope of the Project.
    (e) Any financial assistance from federal sources shall not be 
considered as a Matching Contribution unless there is a federal 
statutory exception specifically authorizing the federal financial 
assistance to be considered as such.


Sec.  1739.15  Completed application.

    A completed application must include the following documentation, 
studies, reports and information in form satisfactory to RUS. 
Applications should be prepared in conformance with the provisions of 
this part and applicable USDA regulations including 7 CFR parts 3015, 
3016, and 3019. Applicants must use the RUS Application Guide for this 
program, found at http://www.usda.gov/rus/telecom/ containing 
instructions and all necessary forms, as well as other important 
information, in preparing their application. Completed applications 
must include the following:
    (a) An Application for Federal Assistance. A completed Standard 
Form 424.
    (b) An executive summary of the Project. The applicant must provide 
RUS with a general project overview that addresses the following 
categories:
    (1) A description of why the Project is needed;
    (2) A description of the applicant;
    (3) An explanation of the total Project cost;
    (4) A general overview of the broadband telecommunications system 
to be developed, including the types of equipment, technologies, and 
facilities to be used;
    (5) Documentation describing the procedures used to determine the 
unavailability of existing Broadband Transmission Service; and
    (6) A description of the participating Critical Community 
Facilities.
    (c) Scoring criteria documentation. Each grant applicant must 
address and provide documentation on how it meets each of the scoring 
criteria detailed in Sec.  1739.17.
    (d) System design. The applicant must submit a system design that 
contains the following, satisfactory to RUS:
    (1) A narrative discussing the proposed Community Center, all costs 
of the Project, all existing and proposed facilities that are a part of 
the Project, the services to be provided by the Project, and the 
proposed Service Area;
    (2) Engineering design studies providing an economical and 
practical engineering design of the Project, including a detailed 
description of the facilities to be funded, technical specifications, 
data rates, and costs; and
    (3) A map of the proposed Service Area reflecting the proposed 
location of the Community Center and all participating Critical 
Community Facilities.
    (e) Scope of work. The scope of work must include, at a minimum:
    (1) The specific activities and services to be performed under the 
Project;
    (2) Who will carry out the activities and services;
    (3) The time-frames for accomplishing the Project objectives and 
activities; and
    (4) A budget for all capital and administrative expenditures 
reflecting the line item costs for Eligible Grant Purposes, the 
Matching Contribution, and other sources of funds necessary to complete 
the Project.
    (f) Community-Oriented Connectivity Plan. The applicant must 
provide a Community-Oriented Connectivity Plan consisting of the 
following:
    (1) A listing of all participating Critical Community Facilities to 
be connected. For those Critical Community Facilities in the Service 
Area which will not be included in the Project, an explanation of why 
they are not being included should be provided. The applicant must also 
provide documentation that it has consulted with agents of all Critical 
Community Facilities in the Service Area, and must provide statements 
as to their willingness to participate, or not to participate, in the 
proposed Project;
    (2) A description of the services available to local residents 
through the use of the Community Center;
    (3) A listing of the proposed Telecommunications Terminal 
Equipment, telecommunications transmission facilities, data terminal 
equipment, interactive video equipment, computer hardware and software 
systems, and components that process data for transmission via 
telecommunications, computer network components, communication 
satellite ground station equipment, or any other elements of the 
Project designed to further the deployment and use of Broadband 
Transmission Service, that the applicant intends to build or fund using 
RUS grant funds and the Matching Contribution; and
    (4) If other telecommunications carriers (including interexchange 
carriers, cable television operators, enhanced service providers, 
providers of satellite services and telecommunications equipment 
manufacturers and distributors) are participating in the delivery of 
services, a description of the consultations and the anticipated role 
of such providers in the proposed Project.
    (g) Financial information and sustainability. The applicant must 
provide a narrative description demonstrating the sustainability of the 
Project during the first two years and after completion and the 
sufficiency of resources and expertise necessary to undertake and 
complete the Project. The following financial information is required:
    (1) Certified financial statements, if available; otherwise, the 
most current income statement and balance sheet for existing 
operations; and
    (2) Pro forma financial information for 5 years, evidencing the 
sustainability of the Project.
    (h) A statement of experience. Information on the owners' and 
principal employees' relevant work experience that would ensure the 
success of the Project. The applicant must provide a written narrative 
describing its demonstrated capability and experience, if any, in 
operating a broadband telecommunications system.
    (i) Evidence of legal authority and existence. The applicant must 
provide evidence of its legal existence and authority to enter into a 
grant agreement with RUS and to perform the activities proposed under 
the grant application.
    (j) Funding commitment from other sources. If the Project requires 
additional funding from other sources in addition to the RUS grant, the 
applicant must provide evidence that funding agreements have been 
obtained to ensure completion of the Project.
    (k) Compliance with other federal statutes. The applicant must 
provide evidence of compliance with other federal statutes and 
regulations, including, but not limited to the following:
    (1) 7 CFR part 15, subpart A--Nondiscrimination in Federally 
Assisted Programs of the Department of Agriculture--Effectuation of 
Title VI of the Civil Rights Act of 1964.
    (2) 7 CFR part 3015--Uniform Federal Assistance Regulations.
    (3) 7 CFR part 3017--Governmentwide Debarment and Suspension (Non-
procurement).
    (4) 7 CFR part 3018--New Restrictions on Lobbying.

[[Page 44902]]

    (5) 7 CFR part 3021--Governmentwide Requirements for Drug-Free 
Workplace (Financial Assistance).
    (6) Certification regarding Architectural Barriers.
    (7) Certification regarding Flood Hazard Precautions.
    (8) An environmental report, in accordance with 7 CFR part 1794.
    (9) Certification that grant funds will not be used to duplicate 
lines, facilities, or systems providing Broadband Transmission Service.
    (10) Federal Obligation Certification on Delinquent Debt.


Sec.  1739.16  Review of grant applications.

    (a) All applications for grants must be delivered to RUS at the 
address and by the date specified in the NOFA (see Sec.  1739.2) to be 
eligible for funding. RUS will review each application for conformance 
with the provisions of this part. RUS may contact the applicant for 
additional information or clarification.
    (b) Incomplete applications as of the deadline for submission will 
not be considered. If an application is determined to be incomplete, 
the applicant will be notified in writing and the application will be 
returned with no further action.
    (c) Applications conforming with this part will then be evaluated 
competitively by a panel of RUS employees selected by the Administrator 
of RUS, and will be awarded points as described in the scoring criteria 
in Sec.  1739.17. Applications will be ranked and grants awarded in 
rank order until all grant funds are expended.
    (d) Regardless of the score an application receives, if RUS 
determines that the Project is technically or financially infeasible, 
RUS will notify the applicant, in writing, and the application will be 
returned with no further action.


Sec.  1739.17  Scoring of applications.

    (a) All eligible applications will receive points for the following 
scoring criteria:
    (1) The rurality of the Project (up to 40 points);
    (2) The economic need of the Project's Service Area (up to 30 
points); and
    (3) The ``community-oriented connectivity'' benefits derived from 
the proposed service (up to 30 points).
    (b) Scoring criteria:
    (1) The rurality of the project--up to 40 points.
    (i) This criterion will be used to evaluate the rurality of the 
Community served by the Project, in accordance with the following 
method of scoring. Rurality shall be determined by the 2000 population 
data contained in the U.S. Bureau of the Census at http://factfinder.census.gov. The following categories are used in the 
evaluation of rurality:
    (A) Level 1 means any Community having a population of less than 
500 inhabitants.
    (B) Level 2 means any Community having a population of at least 500 
and not in excess of 1,000 inhabitants.
    (C) Level 3 means any Community having a population over 1,000 and 
not in excess of 2,000 inhabitants.
    (D) Level 4 means any Community having a population over 2,000 and 
not in excess of 3,000 inhabitants.
    (E) Level 5 means any Community having a population over 3,000 and 
not in excess of 4,000 inhabitants.
    (F) Level 6 means any Community having a population over 4,000 and 
not in excess of 5,000 inhabitants.
    (G) Level 7 means any Community having a population over 5,000 and 
not in excess of 10,000 inhabitants.
    (H) Level 8 means any Community having a population over 10,000 and 
not in excess of 20,000 inhabitants.
    (ii) Each application will receive points based on the location of 
the facilities financed using the definitions in paragraphs 
(b)(1)(i)(A) through (H) of this section.
    (A) For a Service Area that includes a Level 1 Community, it will 
receive 40 points.
    (B) For a Service Area that includes a Level 2 Community, it will 
receive 35 points.
    (C) For a Service Area that includes a Level 3 Community, it will 
receive 30 points.
    (D) For a Service Area that includes a Level 4 Community, it will 
receive 25 points.
    (E) For a Service Area that includes a Level 5 Community, it will 
receive 20 points.
    (F) For a Service Area that includes a Level 6 Community, it will 
receive 15 points.
    (G) For a Service Area that includes a Level 7 Community, it will 
receive 10 points.
    (H) For a Service Area that includes a Level 8 Community, it will 
receive 5 points.
    (2) The economic need of the Project Service Area--up to 30 points.
    (i) This criterion will be used to evaluate the economic need of 
the Service Area. Applicants must utilize the per capita personal 
income for the Community serviced, as determined by the U.S. Bureau of 
the Census at http://factfinder.census.gov. Applicants will be awarded 
points as outlined below for service provided in the Community where 
the per capita personal income (PCI) is less than 70 percent of the 
national average per capita personal income (NAPCI):
    (A) PCI is 75 percent or greater of NAPCI; 0 points;
    (B) PCI is less than 75 percent and greater than or equal to 70 
percent of NAPCI; 5 points;
    (C) PCI is less than 70 percent and greater than or equal to 65 
percent of NAPCI; 10 points;
    (D) PCI is less than 65 percent and greater than or equal to 60 
percent of NAPCI; 15 points;
    (E) PCI is less than 60 percent and greater than or equal to 55 
percent of NAPCI; 20 points;
    (F) PCI is less than 55 percent and greater than or equal to 50 
percent of NAPCI; 25 points;
    (G) PCPI is less than 50 percent of NAPCPI; 30 points;
    (ii) [Reserved]
    (3) The ``community-oriented connectivity'' benefits derived from 
the proposed service--up to 30 points.
    (i) This criterion will be used to score applications based on the 
documentation in support of the need for services, benefits derived 
from the services proposed by the Project, and local community 
involvement in planning and implementation of the Project. Applicants 
may receive up to 30 points for documenting the need for services and 
benefits derived from service as explained in this section.
    (ii) RUS will consider:
    (A) The extent of the applicant's documentation explaining the 
economic, education, health care, and public safety issues facing the 
community and the applicant's proposed plan to address these challenges 
on a community-wide basis;
    (B) The extent of the Project's planning, development, and support 
by local residents, institutions, and community facilities will be 
considered. This includes evidence of community-wide involvement, as 
exemplified in community meetings, public forums, and surveys. In 
addition, applicants should provide evidence of local residents' 
participation in the Project planning and development;
    (C) The extent to which the Community Center will be used for 
instructional purposes including Internet usage, Web-based curricula, 
and Web page development; and
    (D) Web-based community resources enabled or provided by the 
applicant, such as community bulletin boards, directories, and public 
web-hosting.

[[Page 44903]]

Sec.  1739.18  Grant documents.

    The terms and conditions of grants shall be set forth in grant 
documents prepared by RUS. The documents shall require the applicant to 
own all equipment and facilities financed by the grant. Among other 
matters, RUS may prescribe conditions to the advance of funds that 
address concerns regarding the Project feasibility and sustainability. 
RUS may also prescribe terms and conditions applicable to the 
construction and operation of the Project and the delivery of Broadband 
Transmission Service to Rural Areas, as well as other terms and 
conditions applicable to the individual Project.


Sec.  1739.19  Reporting and oversight requirements.

    (a) A project performance activity report will be required of all 
recipients on an annual basis until the Project is complete and the 
funds are expended by the applicant. Recipients are to submit an 
original and one copy of all project performance reports, including, 
but not limited to, the following:
    (1) A comparison of actual accomplishments to the objectives 
established for that period;
    (2) A description of any problems, delays, or adverse conditions 
which have occurred, or are anticipated, and which may affect the 
attainment of overall Project objectives, prevent the meeting of time 
schedules or objectives, or preclude the attainment of particular 
Project work elements during established time periods. This disclosure 
shall be accompanied by a statement of the action taken or planned to 
resolve the situation; and
    (3) Objectives and timetable established for the next reporting 
period.
    (b) A final project performance report must be provided by the 
recipient. It must provide an evaluation of the success of the Project 
in meeting the objectives of the program. The final report may serve as 
the last annual report.
    (c) RUS will monitor recipients, as it determines necessary, to 
assure that Projects are completed in accordance with the approved 
scope of work and that the grant is expended for Eligible Grant 
Purposes.
    (d) Recipients shall diligently monitor performance to ensure that 
time schedules are being met, projected work within designated time 
periods is being accomplished, and other performance objectives are 
being achieved.


Sec.  1739.20  Audit requirements.

    A grant recipient shall provide RUS with an audit for each year, 
beginning with the year in which a portion of the financial assistance 
is expended, in accordance with the following:
    (a) If the recipient is a for-profit entity, an existing 
Telecommunications or Electric Borrower with RUS, or any other entity 
not covered by the following paragraph, the recipient shall provide an 
independent audit report in accordance with 7 CFR part 1773, ``Policy 
on Audits of RUS Borrowers.''
    (b) If the recipient is a State or local government, or non-profit 
organization, the recipient shall provide an audit in accordance with 7 
CFR part 3052, ``Audits of States, Local Governments, and Non-Profit 
Organizations.''


Sec.  1739.21  OMB control number.

    The information collection requirements in this part are approved 
by the Office of Management and Budget (OMB) and assigned OMB control 
number 0572-0127.

Subpart B--[Reserved]

    Dated: July 16, 2004.
Hilda Gay Legg,
Administrator, Rural Utilities Service.
[FR Doc. 04-17105 Filed 7-27-04; 8:45 am]
BILLING CODE 3410-15-P