[Federal Register Volume 78, Number 86 (Friday, May 3, 2013)]
[Rules and Regulations]
[Pages 25787-25795]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-10502]



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 Rules and Regulations
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  Federal Register / Vol. 78, No. 86 / Friday, May 3, 2013 / Rules and 
Regulations  

[[Page 25787]]



DEPARTMENT OF AGRICULTURE

Rural Utilities Service

7 CFR Part 1739

RIN 0572-AC30


Community Connect Broadband Grant Program

AGENCY: Rural Utilities Service, USDA.

ACTION: Final rule.

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

SUMMARY: The Rural Utilities Service (RUS), a Rural Development agency 
of the United States Department of Agriculture (USDA), hereinafter 
referred to as RUS or the Agency, amends its regulations for the 
Community-Oriented Connectivity Broadband Grant Program (Community 
Connect Grant Program). The purpose of this regulatory change is to 
provide the Agency the ability to target limited resources to 
geographical as well as technological areas of need. This rule is not 
applicable to Community Connect grant applications filed for funding 
prior to the publication of a Notice of Funds Availability (NOFA) under 
this regulation.

DATES: This rule is effective June 3, 2013.

FOR FURTHER INFORMATION CONTACT: Kenneth Kuchno, Director, Broadband 
Division, USDA Rural Utilities Service, STOP 1599, 1400 Independence 
Avenue SW., Washington, DC 20250-1599, Telephone (202) 690-4673, 
Facsimile (202) 690-4389. Email address: [email protected].

SUPPLEMENTARY INFORMATION: 

Executive Order 12866

    This 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 the Internet at http://www.cfda.gov.

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 rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. The Agency has determined that this rule meets the 
applicable standards provided in section 3 of the Executive Order. In 
addition, all state and local laws and regulations that are in conflict 
with this rule will be preempted. No retroactive 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, must be exhausted before an action 
against the Department or its agencies may be initiated.

Executive Order 13132, Federalism

    The policies contained in this 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 
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 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 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 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.

Environmental Impact Statement

    This rule has been examined under Agency environmental regulations 
at 7 CFR part 1794. The 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.

Paperwork Reduction Act of 1995

    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).

E-Government Act Compliance

    Rural Development is committed to the E-Government Act, which 
requires Government agencies in general to provide the public the 
option of submitting information or transacting business electronically 
to the maximum extent possible.

Executive Order 13175

    Executive Order 13175 imposes requirements on Rural Development in 
the development of regulatory policies that have tribal implications or 
preempt tribal laws. Rural Development determined that this rule may 
have a substantial direct effect on one or more Indian tribe(s) or on 
either the relationship or the distribution of powers and 
responsibilities between the Federal Government and Indian tribes. 
Therefore, on January 16, 2013, Rural Development highlighted the 
Community Connect Grant Program (along with the Distance Learning and 
Telemedicine Grant Program) during its quarterly Tribal Consultation 
webinar and teleconference. Forty eight individuals participated in the 
event, of which 24 represented Tribes or Tribal

[[Page 25788]]

Telecommunication companies. Many comments received during the event 
were positive comments regarding the new Proposed Funded Service 
Territory process, Broadband Service and Broadband Grant Speeds being 
determined and updated through the NOFA process and the ability to use 
operating funds as match. It was asked that further consideration be 
given to carefully determine what services existing providers might be 
providing across Tribal lands and that Tribal sovereignty be factored 
in to the application process and scoring criteria. The teleconference 
was recorded and the recording and the transcript have become part of 
USDA Rural Development's Tribal Consultation record. Please contact 
Rural Development's Native American Coordinator at (720) 544-2911 or 
[email protected] for more information regarding this Tribal 
Consultation or USDA Rural Development's Tribal Consultation process in 
general.

Background/Overview

    The Rural Utilities Service, a Rural Development agency of the 
United States Department of Agriculture (the Agency) works to improve 
the quality of life in rural America by providing investment capital, 
in the form of loans and grants, for the deployment of rural 
telecommunications, broadband, electric, water and environmental 
infrastructure. Financial assistance is provided to rural utilities; 
municipalities; commercial corporations; limited liability companies; 
public utility districts; Indian tribes; and cooperative, nonprofit, 
limited-dividend, or mutual associations. In order to achieve the goal 
of increasing economic opportunity in rural America, the Agency 
finances infrastructure that enables access to seamless, nation-wide 
telecommunications and broadband networks. With access to the same 
advanced telecommunications networks of its urban counterparts, 
especially broadband networks designed to accommodate distance 
learning, telework, e-government and telemedicine, rural America will 
see improving educational opportunities, health care, economies, safety 
and security, and ultimately higher employment. Of particular concern 
to the Agency are communities where broadband service is not available 
and where population densities are such that the cost of deployment to 
them is so high that build-out of infrastructure is unlikely. The 
Agency is committed to helping rural communities gain access to 
affordable, reliable, advanced communications services, comparable to 
those available throughout the rest of the United States, to provide a 
healthy, safe and prosperous place to live and work.
    The Community Connect Grant Program was started as a Pilot Program. 
After administering the program as a pilot program for two years, the 
Agency proposed rules for the program and on July 28, 2004, the program 
was formally implemented. The regulations were amended to clarify, 
among other things, which rural communities are eligible under the 
program. The main purpose of this grant program is the construction of 
broadband facilities in areas where no broadband exists today with a 
secondary benefit of providing for a community center that provides 
free broadband service to all critical community facilities in the 
proposed funded service area for a two year period.

Discussion of Changes

    The new rule addresses several areas to streamline and improve the 
program for applicants and the Agency, with the goal of bringing 
broadband to unserved communities. The new rules provide flexibility to 
address the dynamic broadband needs of rural Americans and enhance the 
Agency's ability to target funds to areas where they are needed the 
most. The new rules also seek to make the application process easier 
for applicants and evaluators. For example, a single concise project 
summary and map can be used to inform USDA Rural Development State 
Directors of pending applications within their states as well as the 
general public. Major changes include:
    1. Proposed Funded Service Territory. Since its inception, the 
Community Connect Grant Program only permitted applicants to use grant 
funds to serve a single community which included a place recognized by 
the census or the Rand McNallyTM Atlas. This approach, while 
administratively simple did not accommodate some of the most rural 
communities which are not census designated places or recognized by a 
commercial Atlas. It also precluded applicants from developing new 
service territories in a logical and cost effective manner to maximize 
the benefit of the grant. The new rule will allow applicants to define 
their proposed funded service area by utilizing the web based RUS 
mapping tool. By allowing an applicant the ability to define the exact 
service area, it is important to note that all premises in the service 
area must be offered service at the Broadband Grant Speed. The NOFA 
will set the minimum and maximum dollar amounts per application.
    2. Matching Fund Simplification. The current program requires 
applicants to provide a match equal to 15 percent of the requested 
funding to be used only for eligible grant purposes. The new rule 
maintains the current program's 15 percent matching requirement but 
clarifies that the match must be in cash and can also be used to fund 
operations of the project. This change gives applicants new flexibility 
on the use of matching funds and is administratively simpler for 
applicants, reviewers and the Agency. Clarifying that the match must be 
in cash available at closing, the new rule removes uncertainty related 
to valuing and qualifying in-kind contributions. Notwithstanding the 15 
percent match, all applicants must be able to demonstrate that they 
have sufficient resources to construct, manage and sustain the project 
through and beyond completion.
    3. Scoring Simplification. The current program scores and ranks 
applications on three criteria: (a) Rurality; (b) economic need; and 
(c) benefits. The metrics used for economic need (Median Household 
Income) and rurality (census and Rand McNallyTM) at times 
did not fully accommodate situations where there was a high need for 
assistance. The criteria may not have adequately measured need, for 
example, in a small community with substantial unemployment and a high 
cost of living, or in a community that was so small, rural and remote 
that the community was not recognized as a census designated place; or 
a community which is small and with very low-income, but in a county 
which as a whole has a high median household income. The new criteria 
focuses on ranking completed applications based on the community 
connectivity benefits of the project to the proposed funded service 
area. In making a final selection among and between applications with 
comparable rankings, the Administrator will take into consideration: 
(a) Service provided to communities in persistent poverty counties; (b) 
service provided to communities in out-migration communities; (c) the 
rurality of the proposed funded service area; (d) the speed of service 
provided by the project; (e) service to substantially underserved trust 
areas; (f) services provided to persons with disabilities; and (g) any 
other socio-economic factors that may be described in the NOFA to 
differentiate and rank applications.

Summary of Comments

    In its Proposed Rule, published in the Federal Register on November 
16, 2012,

[[Page 25789]]

(77 FR 68705), the agency requested comments regarding proposed changes 
to the Community Connect Grant Program. The agency received eighteen 
sets of comments from the following organization/individuals:

 North-central Alabama Regional Council of Governments
 National Telecommunications Cooperative Association
 County of Nelson
 Hospital Sisters Health System
 National Association of Telecommunications Officers and 
Advisors
 Camino Fiber Network Cooperative, Inc.
 Plumas-Sierra Rural Electric Cooperative
 Palau National Communications Corporation
 jean public
 Puerto Rico Broadband Task Force
 Rural Wisconsin Health Cooperative
 W. Metts Engineering Company, Inc.
 Telecommunications Board of Puerto Rico
 Wireless Internet Service Providers Association
 Mescalero Apache Telecom, Inc.
 BEK Communications Cooperative
 Gila River Indian Community and Gila River Telecommunications, 
Inc.
 Associated Communications and Research Services
    These comments have been summarized and are addressed below:

Matching Funds

    Comment: Several respondents took issue with eliminating the 
ability to use in-kind items to satisfy the matching requirement and 
requiring that the 15 percent match be satisfied by having cash on hand 
at the closing of the award. In addition, several respondents requested 
the elimination of the matching requirement. Some respondents asserted 
that by eliminating the use of in-kind items many potential applicants 
would not be able to raise the cash requirement and therefore would 
become ineligible for the program. Others commented that under certain 
circumstances the matching requirement should be waived all together.
    Response: It should be noted that although in-kind items to satisfy 
the matching requirement will no longer be accepted, the purposes of 
the match have been expanded to allow the matching funds to be used for 
operating expenses as well as for funding eligible purposes. By 
allowing the matching funds to be used for operating expenses, the 
Agency is recognizing that applicants need to fund the expenses of day 
to day operations and this change in the program will give them credit 
for funds that are expended in this way. It must be recognized that for 
projects to succeed, a certain amount of cash reserves must be 
available to cover expenses and by requiring a cash match, these 
expenses can be covered while satisfying the matching requirements.

Community Center

    Comment: One respondent stated that the requirement to provide free 
service at the Broadband Grant Speed for two years at the community 
center was not clearly defined. Another respondent had concerns with 
where the community center would be located under the new rules and 
suggested keeping the Census Designated Place or Rand McNally community 
a service area requirement.
    Response: Although the Agency believes that the requirement for 
free service at the community center is well defined in the regulation, 
we will provide a more detailed description of the requirement in the 
Community Connect Application Guide that will be made available to all 
applicants when the next grant window is opened for accepting 
applications. In the early days of the Community Connect Program, the 
proposed service area could only consist of a single Census Designated 
Place. Unfortunately, this left many rural areas unable to qualify for 
a grant and the Agency implemented the ability of an applicant to use a 
community that was designated in a Rand McNally Atlas. Although using 
the Atlas made many more rural communities eligible for the grant, it 
still did not solve the problem. With the revised regulation, an 
applicant now has the ability to designate any eligible area as their 
proposed service area with the requirement that the community center 
must be located in the proposed service area. A community center is an 
important part of the Program and although its physical location is 
left up to the applicant as long as it stays in the proposed service 
area, the intent is that the applicant will place the center in the 
most easily accessible location to benefit as many residents as 
possible.

Area Eligibility

    Comment: One respondent was concerned that if middle mile 
facilities exist in a certain area and are providing service to anchor 
institutions that the area in question may be ineligible for the grant 
funds. Another respondent commented that because broadband service can 
vary from resident to resident in an area as well as within a community 
that the requirement that the proposed service area have no broadband 
service be eliminated. Other respondents commented that using a census 
designated place or Rand McNally community makes places like Puerto 
Rico or Palau ineligible.
    Response: If an area only has middle mile facilities available and 
service is not provided to residents and businesses in this area, the 
area is still eligible for grant funds. This also is the case if a 
business in an area has a T1 line from the local exchange carrier. For 
an area to be ineligible for consideration, businesses and residents in 
that area must have the ability to receive broadband service. Although 
the Agency realizes that an existing service provider for reasons of 
their own may not provide ubiquitous coverage in an area, if broadband 
service is available in an area, then that area is ineligible. The 
Community Connect Grant Program was implemented to get broadband 
service to areas without any type of broadband service and once this is 
accomplished we can then concentrate on filling in the holes that may 
exist in certain cases. Under the new regulation it is no longer a 
requirement that the proposed service area be a census designated place 
or a Rand McNally community. The new requirement is to identify the 
proposed service on the RUS mapping tool and places like Puerto Rico 
and Palau should no longer experience the issues they had in the past.

Application Requirements

    Comment: Several respondents stated that the requirements for 
completing a grant application were too onerous and that this would 
deter potential applicants from submitting an application.
    Response: The application process is intended to be a business plan 
that an applicant will follow if awarded a grant. To ensure that the 
requested amount of the grant is not too much or too little, we require 
that a detailed project budget be developed. To ensure that the project 
is sustainable, we require that projected financial statements along 
with an engineering design be submitted. The Agency recognizes that the 
application process takes some effort but for successful projects to be 
funded this is the minimum amount of information that must be 
submitted.

Service to Hospitals and Clinics

    Comment: A couple of the respondents indicated that rural hospitals 
and clinics should receive the same two years of free service at the 
Broadband Grant Speed that the community center receives.
    Response: As long as the rural hospital or clinic is open to the 
public, then these facilities are considered

[[Page 25790]]

Critical Community Facilities and all Critical Community Facilities in 
the proposed service area must be offered free service at the Broadband 
Grant Speed for two years.

Medically Underserved Areas

    Comment: A number of respondents encouraged the use of other 
federal designations such as Medically Underserved Areas/Populations 
(MUA/P) and Health Professional Shortage Areas (HPSA) as eligibility 
criteria stating that these designations indicate the rural areas with 
the greatest health care needs and that broadband service helps 
alleviate these shortages.
    Response: Although the Agency recognizes that a number of rural 
areas lack the necessary medical care and is directly addressing these 
issues with the Distance Learning and Telemedicine Grant Program, the 
Community Connect Grant Program was designed to bring broadband service 
to any area that is not currently receiving it. There are many 
different types of needs in rural areas and the Community Connect Grant 
Program was designed to place all applicants on a level playing field.

Eligible Grant Purposes

    Comment: One respondent requested that technical assistance for the 
retention of consultants and experts for economic research, 
engineering, business planning and community outreach be made an 
eligible purpose.
    Response: The Agency agrees that due diligence must be performed in 
completing the grant application/business plan but is looking for the 
applicant to fund this due diligence demonstrating a commitment to make 
the project successful. There are many different items that could be 
considered in providing funding to implement a broadband system and 
unfortunately funding is limited and certain items had to be eliminated 
from eligibility.

Scoring

    Comment: One respondent recommended that higher scores be given for 
applicants that received funding under the American Recovery and 
Reinvestment Act (ARRA). Another respondent commented that the scoring 
criteria for receiving points for past experience in managing a 
broadband system should be enhanced. In addition to the above comments, 
a number of respondents also commented that the scoring was too 
subjective and that additional credit should be given to applicants 
that exceed the minimum requirements for receiving a grant such as 
providing voice or video services.
    Response: Under the ARRA programs that provided funding for 
providing broadband service, thousands of applications were received. 
Due to the amount of funding that was made available; many of the ARRA 
applications could not be funded simply because there were not enough 
funds. To provide added scoring to a Community Connect applicant 
because they received an ARRA award would not be fair to the other ARRA 
applicants that did not receive an award. In addition, there are many 
existing companies that are providing services in rural areas that did 
not apply for ARRA funds and these companies should not be penalized 
for that decision. The scoring criteria for management experience 
adequately describes the requirements for receiving points. However, we 
agree that the criteria could be better explained and the associated 
application guide for the program will be enhanced to provide a clearer 
understanding of the evidence that needs to be submitted to receive 
points. Also, the scoring criteria was developed to allow the applicant 
and the Agency the most flexibility in determining the score the 
applications should receive and although we have used more objective 
scoring criteria in the past, we believe that the criteria now 
contained in the regulation captures the needs of the proposed service 
area. We also believe that the criteria will allow the best 
applications to be chosen. Although other services such as voice and 
video provide customers with additional choices, the purpose of the 
Community Connect Grant Program is to deliver broadband service to 
unserved areas and adding emphasis to providing other services will 
take away from this purpose.

Need for Program

    Comment: One respondent commented that the Community Connect 
Program should not be funded because it was unfair to provide funding 
to rural areas that have low populations instead of areas in cities 
that have much greater populations.
    Response: Although the Agency agrees that there are areas within 
large cities that do not have access to broadband, the requirements of 
the program limit the funding to rural areas. Without funding from the 
Community Connect Grant Program, some areas would have no chance of 
ever receiving broadband service.

Broadband Grant Speed

    Comment: One respondent recommended that the definitions for 
Broadband Service and for the Broadband Grant Speed be set at 3 
megabits per second downstream and 768 kilobits upstream while another 
respondent recommended that the Broadband Grant Speed be set 25 
megabits down and 5 megabits up. In addition, another respondent 
recommended keeping the definition of broadband service at the existing 
level of 200 kilobits in both the upstream/downstream directions.
    Response: As explained in the proposed regulation, the definitions 
for Broadband Service and the Broadband Grant Speed will be set in the 
Notice of Funds Availability (NOFA) that will be published annually. 
The Agency appreciates the recommendations submitted by the respondents 
and they will be taken into consideration when the NOFA is prepared. 
Although the 200/200 kilobit definition of broadband service has worked 
well for the program in the past and has identified areas that have no 
access to broadband service, this definition has become obsolete as 
technology has progressed. To ensure that rural areas have a level of 
broadband service that will promote economic development and provide 
residents and businesses with the speeds they need in today's world, 
the Agency developed the concept of the Broadband Grant Speed. The 
Broadband Grant Speed will be determined in a NOFA that announces the 
opening of the window for submitting applications and will be set at 
the level that is needed to ensure that rural America is not being left 
behind.

Native American Applicants

    Comment: One respondent requested that applications submitted by a 
Tribal entity not have to define their service and that funds be 
awarded to the Tribal leadership to use to provide broadband service 
anywhere on the respective reservation where broadband service does not 
exist.
    Response: The Proposed Funded Service Area process along with the 
web based RUS mapping tool will allow Tribes (and all applicants) to 
geographically establish the Proposed Funded Service Area. This could 
include an entire Reservation (if the entire Reservation is unserved or 
the portions of a Reservation that are unserved. As this is a nation-
wide, competitive grant program it is not practical for any applicant 
to not be required to define its service area.

Construction and Advance Procedures

    Comment: One respondent requested that formal construction and 
advance procedures be implemented for the Community Connect Grant 
Program.

[[Page 25791]]

    Response: Formal construction procedures can provide a level of 
guidance that could benefit the applicants. The Agency strongly 
recommends that standard procedures such as those required for other 
RUS programs be followed. The types of procedures required by our other 
programs which can result in awards in the tens of millions of dollars 
could be so overwhelming to some of the small operations that routinely 
apply for the grants that those entities would elect not to apply. 
These same entities go to some of the most remote unserved areas and 
the Agency does not want to deter them from applying for a grant by 
making the construction requirements too onerous. We will assist all 
awardees in construction of their systems and make available to them 
the construction procedures from our other programs. Although the 
advance of funds procedures differs from the other RUS programs, the 
advance procedures used for the Community Connect Grant Program are 
sufficient and there is no need to revise this process.

Mobile Broadband Service

    Comment: One respondent commented that the regulation was unclear 
if mobile carriers providing 3G or 4G met the definition of broadband 
service for service area eligibility and for providing service at the 
Broadband Grant Speed.
    Response: The regulation differentiates between fixed and mobile 
service. Annually, a NOFA (which announces the opening of an 
application window) may set the requirements for fixed and mobile 
broadband service at different speeds. This is a clear indication that 
mobile broadband service can meet both the definition for Broadband 
Service that is used for determining if an area is eligible to receive 
a grant and the definition for Broadband Grant Speed which is the 
required speed that an awardee of a grant must provide to all residents 
and businesses in the proposed service area.

List of Subjects in 7 CFR Part 1739

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


0
For reasons set forth in the preamble, the Rural Utilities Service 
amends Chapter XVII of title 7 of the Code of Federal Regulations by 
revising part 1739 to read as follows:

PART 1739--BROADBAND GRANT PROGRAM

Subpart A--Community Connect Grant Program
Secs.
1739.1 Purpose.
1739.2 Funding availability and application dates and submission.
1739.3 Definitions.
1739.4-1739.8 [Reserved]
1739.9 USDA Rural Development State Director notification.
1739.10 Eligible applicant.
1739.11 Eligible Community Connect Competetive Grant 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 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 
service that fosters economic growth and delivers enhanced educational, 
health care, and public safety benefits. The Agency will give priority 
to rural areas that have the greatest need for broadband services, 
based on the criteria contained herein and in the Notice of Funds 
Availability (hereinafter referred to as NOFA) published in the Federal 
Register.
    (b) Grant authority will be used for the deployment of service to 
all premises in eligible rural areas at the Broadband Grant Speed on a 
``community-oriented connectivity'' basis. In addition to providing 
service to all premises the ``community-oriented connectivity'' concept 
will stimulate practical, everyday uses and applications of broadband 
by cultivating the deployment of new broadband 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 
submission.

    (a) The Agency will periodically publish, (usually on an annual 
basis) in the Federal Register, a NOFA that will set forth the total 
amount of funding available; the maximum and minimum funding for each 
grant; funding priority; 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. The Agency may publish more than one 
NOFA should additional funding become available.
    (b) Notwithstanding paragraph (a) of this section, the Agency 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:
    Agency or RUS shall mean the Rural Utilities Service, which 
administers the United States Department of Agriculture (USDA) Rural 
Development Utilities Programs.
    Broadband Grant Speed means the minimum bandwidth described in the 
NOFA that an applicant must propose to deliver to every customer in the 
proposed funded service area in order for the Agency to approve a 
broadband grant. The Broadband Grant Speed may be different for fixed 
and mobile broadband services and from the minimum rate of data 
transmission required to determine the availability of broadband 
service when qualifying a service area.
    Broadband service means any terrestrial technology having the 
capacity to provide transmission facilities that enable subscribers of 
the service to originate and receive high-quality voice, data, 
graphics, and video at the minimum rate of data transmission described 
in the NOFA. The broadband service speed may be different from the 
broadband grant speed for the Community Connect program.
    Community Center means a building within the Proposed Funded 
Service Area that provides access to the public, or a section of a 
public building with at least two (2) Computer Access Points and 
wireless access, that is used for the

[[Page 25792]]

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 Saturdays or Sunday.
    Computer Access Point means a new computer terminal with access to 
service at the Broadband Grant Speed.
    Critical Community Facilities means the Community Center; any 
public school, public education center, public library, public medical 
clinic, public hospital, community college, public university; or law 
enforcement, fire or ambulance station in the Proposed Funded 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.
    Matching contribution means the applicant's qualified contribution 
to the Project, as outlined in Sec.  1739.14 of this part.
    Project means the delivery of service at the Broadband Grant Speed 
financed by the grant and Matching Contribution for the Proposed Funded 
Service Area.
    Proposed Funded Service Area (PFSA) means the contiguous geographic 
area within an eligible Rural Area or eligible Rural Areas, in which 
the applicant proposes to provide service at the Broadband Grant Speed.
    Rural area means any area, as confirmed by the latest decennial 
census of the Bureau of the Census, which is not located within:
    (1) A city, town, or incorporated area that has a population of 
greater than 20,000 inhabitants; or
    (2) An urbanized area contiguous and adjacent to a city or town 
that has a population of greater than 50,000 inhabitants. For purposes 
of the definition of rural area, an urbanized area means a densely 
populated territory as defined in the latest decennial census of the 
U.S. Census Bureau.


Sec. Sec.  1739.4-1739.8  [Reserved]


Sec.  1735.9  USDA Rural Development State Director notification.

    Applicants shall complete a notification form which will be a 
public document that the RUS provides to USDA Rural Development State 
Directors and others in the state(s) of the PFSA. The notification 
shall include a brief project description and the location of the PFSA.


Sec.  1739.10  Eligible applicant.

    To be eligible for a Community Connect competitive 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(e), 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.
    (c) As required by the Office of Management and Budget (OMB), all 
applicants for grants must supply a Dun and Bradstreet Data Universal 
Numbering System (DUNS) number when applying. The Standard Form 424 
(SF-424) contains a field for you to use when supplying your DUNS 
number. Obtaining a DUNS number costs nothing and requires a short 
telephone call to Dun and Bradstreet. Please see http://www.grants.gov/applicants/request_duns_number.jsp for more information on how to 
obtain a DUNS number or how to verify your organization's number.
    (d) Register in the System for Award Management (SAM) (formerly 
Central Contractor Registry (CCR)).
    (1) In accordance with 2 CFR part 25, applicants, whether applying 
electronically or by paper, must be registered in the SAM prior to 
submitting an application. Applicants may register for the SAM at 
https://www.sam.gov/.
    (2) The SAM registration must remain active, with current 
information, at all times during which an entity has an application 
under consideration by an agency or has an active Federal Award. To 
remain registered in the SAM database after the initial registration, 
the applicant is required to review and update, on an annual basis from 
the date of initial registration or subsequent updates, its information 
in the SAM database to ensure it is current, accurate and complete.


Sec.  1739.11  Eligible Community Connect Competitive Grant Project.

    To be eligible for a Community Connect competitive grant, the 
Project must:
    (a) Serve a PFSA in which Broadband Service does not currently 
exist;
    (b) Offer service at the Broadband Grant Speed to all residential 
and business customers within the PFSA ;
    (c) Offer free service at the Broadband Grant Speed to all Critical 
Community Facilities located within the PFSA for at least 2 years 
starting from the time service becomes available to each Critical 
Community Facility;
    (d) Provide a Community Center with at least two (2) Computer 
Access Points and wireless access at the Broadband Grant Speed, free of 
all charges to all users for at least 2 years; and
    (e) Not overlap with the service areas of current RUS borrowers and 
grantees.


Sec.  1739.12  Eligible grant purposes.

    Grant funds may be used to finance the following:
    (a) The construction, acquisition, or leasing of facilities, 
including spectrum, land or buildings, used to deploy service at the 
Broadband Grant Speed to all residential and business customers located 
within the PFSA and all participating Critical Community Facilities, 
including funding for up to ten Computer Access Points to be used in 
the Community Center. Buildings constructed with grants funds must 
reside on property owned by the awardee. Leasing costs will only be 
covered through the advance of funds period included in the award 
documents;
    (b) The improvement, expansion, construction, or acquisition of a 
Community Center and provision of Computer Access Points. Grant funds 
for the Community Center will be limited to ten percent of the 
requested grant amount. If a community center is constructed with grant 
funds, the center must reside on property owned by the awardee;
    (c) The cost of providing the necessary bandwidth for service free 
of charge to the Critical Community Facilities for 2 years.


Sec.  1739.13  Ineligible grant purposes.

    Operating expenses not specifically permitted in Sec.  1739.12.


Sec.  1739.14  Matching contributions.

    (a) At the time of closing of the award, the awardee must 
contribute or demonstrate available cash reserves in an account(s) of 
the awardee equal to at least 15% of the grant. Matching contributions 
must be used solely for the Project and shall not include any financial 
assistance from federal sources unless there is a federal statutory 
exception specifically authorizing the federal financial assistance to 
be considered as such. An applicant must provide evidence of its 
ability to comply with this requirement in its application.
    (b) At the end of every calendar quarter, the award must submit a

[[Page 25793]]

schedule to RUS that identifies how the match contribution was used to 
support the project until the total contribution is expended.


Sec.  1739.15  Completed application.

    Applications should be prepared in conformance with the provisions 
of this part and all applicable USDA regulations, including 7 CFR parts 
3015, 3016, and 3019. Applicants must also conform to the requirements 
of the individual NOFA to be published when funds are available for the 
program and are advised to use the Agency's Application Guide for this 
program, found at the Agency's Web site. Applicants must submit one 
paper copy and one electronic copy of the application. The application 
guide contains instructions and forms, as well as other important 
information needed to prepare an application and may be updated 
periodically. Paper copies of the application guide can be requested by 
contacting the, Director, Broadband Division at the following address: 
Stop 1599, South Agriculture Building, Room 2868, Washington, DC 20250. 
Completed applications must include the following documentation, 
studies, reports and information, in form and substance satisfactory to 
the Agency:
    (a) An Application for Federal Assistance. A completed Standard 
Form 424;
    (b) An executive summary of the Project. 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 costs;
    (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 Service; and
    (6) A list of the Critical Community Facilities that will take 
service from the Applicant at the Broadband Grant Speed, and evidence 
that any remaining Critical Community Facility located in the PFSA has 
rejected the offer;
    (c) Scoring Criteria Documentation. A narrative, with documentation 
where necessary, addressing the elements listed in the scoring criteria 
of Sec.  1739.17;
    (d) System design. A system design of the Project that is 
economical and practical, including a detailed description of the 
facilities to be funded, technical specifications, data rates, and 
costs. In addition, a network diagram detailing the proposed system 
must be provided. The system design must also address the environmental 
requirements specified in 7 CFR 1794;
    (e) Service Area Demographics. The following information about the 
PFSA:
    (1) A map, submitted electronically through RUS' web-based Mapping 
Tool, which identifies the Rural Area boundaries of the PFSA; and
    (2) The total population, number of households, and number of 
businesses located within the PFSA;
    (f) Scope of work. A description of the scope of work, which at a 
minimum must include:
    (1) The specific activities and services to be performed under the 
Project;
    (2) Who will carry out the activities and services;
    (3) A construction build-out schedule and project milestones, 
showing the time-frames for accomplishing the Project objectives and 
activities on a quarterly basis; and
    (4) A budget for all capital and administrative expenditures 
reflecting the line item costs for Eligible Grant Purposes and other 
sources of funds necessary to complete the Project;
    (g) Community-oriented connectivity plan. A community-oriented 
connectivity plan consisting of the following:
    (1) A listing of all participating Critical Community Facilities to 
be connected. The applicant must also provide documentation that it has 
consulted with the appropriate agent of every Critical Community 
Facility in the PFSA, and must provide statements from each one as to 
its willingness to participate, or not to participate, in the proposed 
Project;
    (2) A description of the services the applicant will make available 
to local residents and businesses; and
    (3) A list of any other telecommunications provider (including 
interexchange carriers, cable television operators, enhanced service 
providers, wireless service providers and providers of satellite 
services) that is participating in the delivery of services and a 
description of the consultations and the anticipated role of such 
provider in the Project;
    (h) Financial information and sustainability. A narrative 
description demonstrating the sustainability of the Project: from the 
commencement of construction to completion, and beyond the grant 
period; the sufficiency of resources; how and when the matching 
requirement is met; and the expertise necessary to undertake and 
complete the Project. The following financial information is required:
    (1) If the applicant is an existing company, it must provide 
complete copies of audited financial statements, if available, for the 
two fiscal years preceding the application submission. If audited 
statements are unavailable, the applicant must submit unaudited 
financial statements for those fiscal years. Applications from start-up 
entities must, at minimum, provide an opening balance sheet dated 
within 30 days of the application submission date; and
    (2) Annual financial projections in the form of balance sheets, 
income statements, and cash flow statements for a forecast period of 
five years, which prove the sustainability of the Project for that 
period and beyond. These projections must be inclusive of the 
applicant's existing operations and the Project, and must be supported 
by a detailed narrative that fully explains the methodology and 
assumptions used to develop the projections, including details on the 
number of subscribers projected to take the applicant's services. 
Applicants submitting multiple applications for funding must 
demonstrate that each Project is feasible and sustainable on its own, 
funds are available to cover each of the matching requirements and that 
all Projects for which funding is being requested are financially 
feasible as a whole;
    (i) Statement of experience. A statement of experience which 
includes information on the owners' and principal employees' relevant 
work experience that would ensure the success of the Project. The 
applicant must also provide a written narrative demonstrating its 
capability and experience, if any, in operating a broadband 
telecommunications system;
    (j) Legal authority. Evidence of the applicant's legal authority 
and existence, and its ability to enter into a grant agreement with the 
RUS, and to perform the activities proposed under the grant 
application;
    (k) Additional funding. Evidence that funding agreements have been 
attained, if the Project requires funding commitment(s) from sources 
other than the grant. An applicant submitting multiple applications for 
funding must demonstrate its financial wherewithal to support all 
applications, if accepted, and that it can simultaneously complete and 
operate all of the Projects under consideration. Additionally, 
commitments for outside funding must be explicit that they will be 
available if all applications are not funded;
    (l) Federal compliance. Evidence of compliance with other federal 
statutes and regulations including, but not limited to the following:

[[Page 25794]]

    (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) 2 CFR part 417--Nonprocurement Debarment and Suspension;
    (4) 7 CFR part 3018--New Restrictions on Lobbying;
    (5) 2 CFR part 421--Requirements for Drug-Free Workplace (Financial 
Assistance);
    (6) Certification regarding Architectural Barriers;
    (7) Certification regarding Flood Hazard Precautions;
    (8) An environmental report/questionare, in accordance with 7 CFR 
part 1794;
    (9) A certification that grant funds will not be used to duplicate 
lines, facilities, or systems providing Broadband Service;
    (10) Federal Obligation Certification on Delinquent Debt; and
    (11) Assurance Regarding Felony Conviction or Tax Delinquent Status 
for Corporate Applicants.


Sec.  1739.16  Review of grant applications.

    (a) All applications for grants must be delivered to the Agency at 
the address and by the date specified in the NOFA (see Sec.  1739.2) to 
be eligible for funding. The Agency will review each application for 
conformance with the provisions of this part, and may contact the 
applicant for clarification of information in the application.
    (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) If the Agency determines that the Project is technically or 
financially infeasible or unsustainable, the Agency will notify the 
applicant, in writing, and the application will be returned with no 
further action.
    (d) Applications conforming with this part will be evaluated 
competitively by the Agency and will be ranked in accordance with Sec.  
1739.17. Applications will then be awarded generally in rank order 
until all grant funds are expended, subject to paragraphs (e) and (f) 
of this section.
    (e) In addition to scoring, the Agency may take geographic 
distribution into consideration when making final award determinations.
    (f) An award may be made out of rank order if a higher ranked 
application would require an award that exceeded available funding or 
would consume a disproportionate amount of funds available relative to 
its ranking.
    (g) The Agency reserves the right to offer an applicant a lower 
amount than proposed in the application.


Sec.  1739.17  Scoring of applications.

    The ranking of the ``community-oriented connectivity'' benefits of 
the Project will be based on documentation in support of the need for 
services, benefits derived from the proposed services, characteristics 
of the PFSA, local community involvement in planning and implementation 
of the Project, and the level of experience of the management team. In 
ranking applications the Agency will consider the following criteria 
based on a scale of 100 possible points:
    (a) An analysis of the challenges of the following criteria, laid 
out on a community-wide basis, and how the Project proposes to address 
these issues (up to 50 points):
    (1) The economic characteristics;
    (2) Educational challenges;
    (3) Health care needs; and
    (4) Public safety issues;
    (b) The extent of the Project's planning, development, and support 
by local residents, institutions, and Critical Community Facilities. 
Documentation must include evidence of community-wide involvement, as 
exemplified by community meetings, public forums, and surveys. In 
addition, applicants should provide evidence of local residents' 
participation in the Project planning and development (up to 40 
points).
    (c) The level of experience and past success of operating broadband 
systems for the management team. (up to 10 points)
    (d) In making a final selection among and between applications with 
comparable rankings and geographic distribution, the Administrator may 
take into consideration the characteristics of the PFSA. Only 
information provided in the application will be considered. Applicants 
should therefore specifically address each of the following criteria to 
differentiate their applications:
    (1) Persistent poverty counties that will be served within the 
PFSA;
    (2) Out-migration Communities that will be served within the PFSA;
    (3) The rurality of the PFSA;
    (4) The speed of service provided by the project;
    (5) Substantially underserved trust areas that will be served 
within the PFSA;
    (6) Community members with disabilities that will be served within 
the PFSA; and
    (7) Any other additional factors that may be outlined in the NOFA.


Sec.  1739.18  Grant documents.

    The terms and conditions of grants shall be set forth in grant 
documents prepared by the Agency. The documents shall require the 
applicant to own all equipment and facilities financed by the grant. 
Among other matters, the Agency may prescribe conditions to the advance 
of funds that address concerns regarding the Project feasibility and 
sustainability. The Agency may also prescribe terms and conditions 
applicable to the construction and operation of the Project and the 
delivery of service at the Broadband Grant Speed to eligible Rural 
Areas, as well as other terms and conditions applicable to the 
individual Project. Dividend distributions will not be allowed until 
all grant funds and matching contributions have been expended.


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. The reporting period will start 
with the calendar year the award is made and continue for every 
calendar year through the term of the award. The report must be 
submitted by January 31 of the following year of the reporting period. 
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) The Agency will monitor recipients, as it determines necessary, 
to assure that Projects are completed in

[[Page 25795]]

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.
    (e) The applicant must have the necessary processes and systems in 
place to comply with the reporting requirements for first-tier sub-
awards and executive compensation under the Federal Funding 
Accountability and Transparency Act of 2006 in the event the applicant 
receives funding unless such applicant is exempt from such reporting 
requirements pursuant to 2 CFR 170.110(b). The reporting requirements 
under the Transparency Act pursuant to 2 CFR part 170 are as follows:
    (1) First Tier Sub-Awards of $25,000 or more in non-Recovery Act 
funds (unless they are exempt under 2 CFR part 170) must be reported by 
the Recipient to http://www.fsrs.gov no later than the end of the month 
following the month the obligation was made.
    (2) The Total Compensation of the Recipient's Executives (5 most 
highly compensated executives) must be reported by the Recipient (if 
the Recipient meets the criteria under 2 CFR part 170) to http://www.sam.gov by the end of the month following the month in which the 
award was made.
    (3) The Total Compensation of the Subrecipient's Executives (5 most 
highly compensated executives) must be reported by the Subrecipient (if 
the Subrecipient meets the criteria under 2 CFR part 170) to the 
Recipient by the end of the month following the month in which the 
subaward was made.


Sec.  1739.20  Audit requirements.

    A grant recipient shall provide the Agency with an audit for each 
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 the Agency, 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 the Agency's Borrowers.'' Please note that the 
first audit submitted to the Agency and all subsequent audits must be 
comparative audits as described in 7 CFR part 1773.
    (b) If the recipient is a Tribal, State or local government, or 
non-profit organization, the recipient shall provide an audit in 
accordance with OMB Circular A-133, ``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: April 8, 2013.
John Charles Padalino,
Acting Administrator, Rural Utilities Service.
[FR Doc. 2013-10502 Filed 5-2-13; 8:45 am]
BILLING CODE P