[Federal Register Volume 86, Number 37 (Friday, February 26, 2021)]
[Rules and Regulations]
[Pages 11603-11618]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-03443]



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 Rules and Regulations
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains regulatory documents 
 having general applicability and legal effect, most of which are keyed 
 to and codified in the Code of Federal Regulations, which is published 
 under 50 titles pursuant to 44 U.S.C. 1510.
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  Federal Register / Vol. 86, No. 37 / Friday, February 26, 2021 / 
Rules and Regulations  

[[Page 11603]]



DEPARTMENT OF AGRICULTURE

Rural Utilities Service

7 CFR 1740

[RUS-20-Telecom-0023]
RIN 0572-AC51


Rural eConnectivity Program

AGENCY: Rural Utilities Service, USDA.

ACTION: Final rule; request for comments.

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

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'', is issuing a final rule to 
establish the Rural eConnectivity Program. The Rural eConnectivity 
Program provides loans, grants, and loan/grant combinations to 
facilitate broadband deployment in rural areas. This rule describes the 
eligibility requirements, the application process, the criteria that 
will be used by RUS to assess applicants' creditworthiness and outlines 
the application process. In addition, the Agency is seeking comments on 
the final rule.

DATES: 
    Effective date: This final rule is effective April 27, 2021.
    Comment date: Comments due on or before April 27, 2021.

ADDRESSES: You may submit comments, identified by docket number RUS-20-
Telecom-0023 and Regulatory Information Number (RIN) number 0572-AC51 
through https://www.regulations.gov.
    Instructions: All submissions received must include the Agency name 
and docket number or RIN for this rulemaking. All comments received 
will be posted without change to https://www.regulations.gov, including 
any personal information provided.
    Docket: For access to the docket to read background documents or 
comments received, go to https://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: For general inquiries, contact Laurel 
Leverrier, Acting Assistant Administrator Telecommunications Program, 
Rural Utilities Service, U.S. Department of Agriculture (USDA), email: 
[email protected], telephone: (202) 720-9556.

SUPPLEMENTARY INFORMATION:

Background

    The Agency improves the quality of life in rural America by 
providing investment capital for deployment of rural telecommunications 
infrastructure. To achieve the goal of increasing economic opportunity 
in rural America, the Agency finances infrastructure that enables 
access to a seamless, nationwide telecommunications network. With 
access to the same advanced telecommunications networks as its urban 
counterparts--especially those designed to accommodate distance 
learning, telework, and telemedicine--rural America will eventually see 
improving educational opportunities, health care, economies, safety and 
security, and ultimately higher employment.
    On March 23, 2018, Congress passed the Consolidated Appropriations 
Act, 2018 (Pub. L. 115,141) (the 2018 Appropriations Act), which 
established a new broadband loan and grant pilot program, that was 
named the Rural eConnectivity Pilot Program. The 2018 Appropriations 
Act originally appropriated budget authority of $600 million to be used 
on an expedited basis. For fiscal year (FY) 2019, Congress funded an 
additional $550 million for the pilot through the Consolidated 
Appropriations Act, 2019 (Pub. L. 116-6). Once again, on December 20, 
2019, Congress appropriated (Consolidated Appropriations Act, 2020 
(Pub. L. 116-94)) $555 million to continue the program. In addition, 
the Coronavirus Aid, Relief, and Economic Security Act provided another 
$100 million in grant funding for the program.
    The Rural eConnectivity Program provides loans, grants, and loan/
grant combinations to facilitate broadband deployment in rural areas. 
In facilitating the expansion of broadband services and infrastructure, 
the program will fuel long-term rural economic development and 
opportunities in rural America. One of those opportunities is precision 
agriculture. The use of this technology requires a robust broadband 
connection. The awards made under this program will bring high-speed 
broadband to the farms, which will allow them to increase productivity.
    Since its establishment under the 2018 Act, RUS has implemented the 
Rural eConnectivity Program by issuing Funding Opportunity 
Announcements (FOAs). The round one FOA was published December 14, 2018 
(83 FR 64315). The round two FOA was published December 12, 2019 (84 FR 
67913), and included a request for comments under USDA's Regulatory 
Reform Notice published on July 17, 2017 (82 FR 32649).
    The Agency received comments from six respondents on the round two 
FOA through USDA's Regulatory Reform Federal Register Docket ID: USDA-
2017-0002-0001. The respondents included one company, three internet/
television associations, one state board and one individual. RUS has 
reviewed and analyzed each response. Multiple respondents included 
several comments. The following is a summary of the key comments from 
each respondent and the Agency's responses:

Respondent One

    For Round 3, Respondent recommends that RUS consider redefining 
``sufficient access to broadband'' to mean any rural area in which 
households have fixed terrestrial broadband service delivering at least 
25 mpbs/3 mbps with a limited exception as detailed in comment 3. 
Presumably, round 3 would not take place until at least 2021, and those 
networks funded by a 3rd round would not be built out until several 
years after. This would mean areas that fall between 10/1 mbps and 25/3 
mbps would have to wait several years for meaningful upgrades.
    Agency response: To accommodate this request the regulation 
implements procedures that allow the definition of sufficient access to 
be updated any time an application window is opened through a notice in 
the Federal Register.
    The Rural eConnectivity Program funded networks should not 
overbuild existing networks or federally supported planned networks. 
General Field Representatives (GFR) did a good job of surveying 
existing networks. Contractors hired by USDA did not

[[Page 11604]]

fulfill their responsibilities which resulted in RUS not adhering to 
the requirements to not fund networks where at least 10/1 mbps service 
exists. The comment lists two specific scenarios. Respondent recommends 
that RUS avoid using contractors, but if they must be used, better 
training is needed. Agency GFRs should work more closely with 
contractors to ensure that they fulfill their duties to accurately 
verify whether service exists.
    Agency response: Starting with Round 2, GFRs now have the lead role 
in completing field reviews to determine if sufficient access to 
broadband exists in an area.
    RUS should make any area where the Federal Communication Commission 
(FCC) is, at the time of application consideration, committing funding 
to build a terrestrial network ineligible for Rural eConnectivity 
Program Awards. This should include funding from ACAM, CAF-BLS, Alaska 
Plan, CAF II Auction, and RDOF USF High Cost Program funding streams. 
The one exception is areas funded by the Universal Service Fund (USF) 
high cost program where most of the area has 25/3 mpbs which some have 
less. The Agency should allow USF recipients to apply for funding to 
bring higher speeds that the FCC has mandated to the areas they already 
serve.
    Agency response: The proposed regulation allows the Agency to 
establish what areas are to be protected when new application windows 
are opened through a notice in the Federal Register. The Agency 
continues to work with the FCC to identify areas where they are 
providing funds and where RUS is providing funds.
    Respondent recommends that RUS allow applicants, working with 
Tribal entities, to certify fisheries in the same way the Rural 
eConnectivity Program allows farms to be certified. In some parts of 
the country, fisheries are key to economic development and broadband is 
just as important at sea for both safety and efficiency of production 
as it is on land. Placing fishing on equal footing with farming will 
provide additional geographical diversity to the applicant pool and 
ensure economically important coastal areas get the broadband they 
need.
    Agency response: The proposed regulation allows for scoring 
criteria to be established each time an application window is opened. 
If farms are used for scoring criteria in future application windows, 
we will consider counting fisheries as farms.

Respondent Two

    The following comments apply to the application process:
    Limit required data submissions to the corporate entity applying 
and the geographic area and/or project affected.
    Agency response: The information requested in the application is 
the minimal amount that is needed to determine if the company can 
adequately address the needs of the proposed project and remain a 
viable operation.
    Limit information requests to reduce the amount of data sought from 
the applicant's parents and affiliates that is not critical to 
determining whether an award should be made and to information about 
the affected geographical area.
    Agency response: Each application is unique. RUS only requests 
information about parents and affiliates that is needed in order to 
make a sound financial decision about the project.
    Clarify that an applicant need only submit information about non-
funded service areas (NFSA) that are related to the proposed funded 
service area (PFSA), rather than all of the applications NFSAs.
    Agency response: The purpose of the NFSA is to provide sufficient 
information to evaluate the viability of an operation. Publicly traded 
companies with a sufficient bond rating have publicly demonstrated this 
and there is no need for the NFSA. The proposed regulation does allow 
publicly traded companies an option where they do not have to submit 
their NFSAs. However, all other applicants will need to submit all of 
the service areas in the NFSAs and PFSAs.
    Permit subleasing rights so that an applicant is not required to 
own the facilities used to provide broadband, so long as the entity 
owning the facilities is an affiliated entity that gives RUS sufficient 
financial security.
    Agency response: To ensure that the project is completed, the 
entity applying for the award must own the facilities. Additionally, so 
that the agency retains its security in the collateral, legal documents 
must be entered into with entity that controls such assets. However, 
the agency has been amenable to entering into co-awardee agreements 
where assets must be held by an affiliate.
    Publicly traded companies cannot share the forward-looking data RUS 
requires.
    Agency response: The proposed regulation has options that publicly 
traded companies can elect, where they would not have to submit 
forward-looking projections.
    Allow providers alternate ways to establish their project 
capabilities, such as demonstrating financial viability through 
publicly available Securities and Exchange Commission filings, 
replacing the first lien on assets requirement with alternatives for 
security options, and implementing a budgeting methodology that is more 
flexible than the Capital Investment Workbook.
    Agency response: The Agency will consider substitute collateral 
options; however, any solution must take into consideration that 
deviating from the agency's standard security arrangements will require 
significant time and legal resources, which may not be available. The 
capital investment workbook is set up to ensure that adequate funds are 
considered to ensure the project is properly funded.
    Defer network design and environmental showings until later in the 
RUS funding process and allow in-house engineers to certify projects.
    Agency response: Network designs must be completed in order to 
identify all resources that are needed for the project.
    Enable the widest possible participation by eliminating the ban on 
applications from broadband providers organized as partnerships or 
joint ventures.
    Agency response: The proposed regulation now includes language to 
clarify specifically what types of partnerships are eligible and which 
types are still considered ineligible. Partnerships that do not involve 
individuals are now eligible entities.
    The following comments apply to the award process:
    Take stronger steps to ensure that funded areas are truly unserved, 
including: (i) Undertaking better coordination of maps and data with 
the FCC to avoid granting duplicative funding to the same area; (ii) 
considering an area to be ``served'' once a provider has built a 
broadband network there, regardless of whether it has yet secured 
customers in that area; and (iii) considering an area to be ``served'' 
if federal or state broadband funding has been committed to that area, 
or a provider has a binding commitment to build a broadband network 
there, regardless of whether those networks are yet built out (as long 
as the provider is meeting applicable build-out deadlines).
    Agency response: We continue to work with the FCC to ensure that 
their program and RUS' programs are complementary of each other. The 
proposed regulation allows the Agency to establish what areas are 
eligible for

[[Page 11605]]

funding at the time an application window is opened.
    Adopt provisions to ensure a more technology-neutral scoring 
process, including eliminating any bonus points for networks that offer 
symmetrical speeds or providers in states who have authorized electric 
cooperatives to offer broadband service.
    Agency response: The agency will consider eliminating preferential 
scoring for high-speed symmetrical systems in the next funding window.
    Allow automated certification for businesses served.
    Agency response: The agency continues to explore options for 
publicly available data that could be used to count businesses. 
However, note that RUS may or may not use businesses as a scoring 
criteria in future rounds of funding.
    Do not deny entire applications when one area proposed to be served 
is ineligible, instead modifying the application to exclude the 
ineligible area.
    Agency response: Under this regulation, the Agency has the ability 
to revise applications by excluding ineligible areas. Notwithstanding 
that ability, for grant applications subject to scoring and 
competition, the Agency can only do this when eliminating the 
ineligible area would not modify the application or require that the 
applicant revise the application.
    Require that awardees comply with the FCC's pole attachment rules 
and fee restrictions.
    Agency response: Awardees that are subject to the FCC are already 
required to follow these requirements. For other entities not subject 
to the FCC, the Agency cannot impose these requirements without 
authority.
    The following comments apply to the challenge process:
    Increase transparency in the challenge process by making maps 
available of eligible areas and keeping them updated.
    Agency response: The Agency continually updates its mapping with 
any new information it receives. However, it is impossible to update 
mapping with information that the Agency is not aware of. That is why 
the Agency can only make a final determination by sending staff to the 
area to complete a field analysis.
    Publicly post written decisions on challenges explaining RUS's 
reasons for granting or denying the challenge prior to an award being 
issued for the challenged area.
    Agency response: For Round 2, public notice response respondents 
are already being notified if their challenge was successful or not. 
Unfortunately, RUS cannot make public its responses to challenges 
because the information submitted by respondents is protected from 
release by law.
    Allow for appeals of decisions on challenges prior to announcing an 
award--Update the map of eligible areas following the final resolution 
of each challenge and award and before applications are submitted for 
the next round of funding.
    Agency response: The Agency will take this recommendation under 
consideration for future rounds. With respect to the latter request, 
that is already being done.

Respondent Three

    RUS should consider allowing subsidiaries to use facilities and 
assets of affiliates to satisfy application and program requirements.
    Agency response: There are procedures currently in place that allow 
for this scenario. In the future, the Agency will continue to consider 
the possibility of allowing co-applicants.
    The following comments apply to the application process:
    Refine option for a company to apply for Rural eConnectivity 
Program funds using a dedicated subsidiary:
    Agency response: If the subsidiary can meet the requirements of the 
program, they are eligible to apply. Additionally, in order that the 
security arrangements are maintained, the agency has been amendable to 
entering into co-awardee agreements where assets must be held by a 
subsidiary.
    Consider reforms that would make it easier for companies to apply 
directly at the parent or operating company level.
    Agency response: The proposed regulation has made allowances for 
publicly traded companies that provide them with more options on 
applying.
    Simplify the means by which an applicant's technical capabilities 
and financial viability can be confirmed such as using public 
information filed with the Securities and Exchange Commissions for 
financial viability or narrative or aggregated information about 
existing experience in the marketplace for technical viability.
    Agency response: The proposed regulation now contains options for 
publicly traded companies not to have to submit forward looking 
financial projections.
    Consider eliminating or substantially reducing application 
requirements relating to NFSAs. Submission of detailed information 
regarding NFSAs is more administratively burdensome for larger 
applicants.
    Agency response: The proposed regulation permits publicly traded 
companies not to submit NFSAs if they meet certain requirements.
    Submitting detailed information and projections regarding services, 
investments and customers within NFSAs raises significant competitive 
concerns that outweigh any limited benefit.
    Agency response: With respect to the submission of information that 
may be competitive, the Agency protects the release of business 
proprietary information to the full extent under the law. In order to 
understand the entire financial picture of an applicant, the Agency 
must review the operations of NFSAs. However, the proposed regulation 
now reduces that burden for publicly traded companies, by permitting 
them not to submit NFSAs if they meet certain requirements.
    Requiring applicants to submit forward-looking projections for 
NFSAs creates risks for publicly traded companies. Limit projections 
just to PFSAs--Simplify submissions for NFSAs.
    Agency response: Per the proposed regulation, publicly traded 
companies do not have to submit NFSAs if they meet certain 
requirements.
    Instead of submission of geospatial data through the mapping tool, 
should consider allowing applicants to submit a more general 
description of their existing footprints.
    Agency response: In order to stop overlapping funding, a copy of 
the PFSA is necessary. This shapefile will also be required to be 
submitted as part of the statutory reporting requirements and will have 
to be updated annually.
    Consider de-coupling the requirement to submit mapping information 
for an applicant's NFSAs from the submission of other information such 
as customer count, service offerings and further business projections.
    Agency response: The agency is committed to assisting the federal 
government in mapping out broadband availability in rural areas as much 
as it can. The agency understands that this may be an onerous 
undertaking for publicly traded companies, and so the agency has 
created a carve-out for these entities if they meet certain 
requirements.
    Rather than require applicants to identify competitive offerings 
from other providers within each NFSA, consider allowing applicants to 
provide narrative information describing the competition they face from 
other providers.
    Agency response: Competitive information is extremely important to

[[Page 11606]]

the financial feasibility of the award, and detailed information about 
the competitive pressures on an applicant within its entire service 
area is extremely important in making a financial decision on an award.
    The following two comments apply to clarifying and narrowing the 
requirement to submit network diagrams to facilities involved in the 
proposed project:
    Narrow the requirement to submit a network diagram only to the 
project(s) set forth in the application and any existing network 
elements that would be leveraged to support such new network 
facilities.
    Agency response: Complete network diagrams are required to ensure 
the capabilities of the entire system.
    Clarify that applicants may provide a general narrative description 
in lieu of a diagram with respect to the remainder of their network.
    Agency response: Complete network diagrams are required to ensure 
the capabilities of the entire system.
    Consider allowing providers to propose budgets rather than using 
RUS's online capital investment workbook.
    Agency response: The capital investment workbook was developed to 
ensure consistency in comparing all applications and that all necessary 
information is submitted to demonstrate that all requirements can be 
satisfied.
    Consider securities filings and other publicly available 
information to confirm applicant's financial viability.
    Agency response: The proposed regulation now has options for 
publicly traded companies.
    The following two comments apply to simplifying changes to the 
application and evaluation criteria.
    Remove discrepancy between fiber to the home (FTTH) and hybrid 
coaxial fiber (HFC) network designs--awarding points for symmetrical 
speeds affords significant advantages to FTTH versus HFC and it is 
inconsistent with ``technology neutral.''
    Agency response: There are no discrepancies between using these 
types of technologies. Under the proposed regulation, scoring criteria 
will now be established prior to opening an application window. Points 
for bandwidth capability may or may not be used.
    Allow applications to be supported by in-house engineers on the 
same terms as it permits program awardees to support particular 
construction projects with in-house engineering staff. Requiring use of 
an external, certified engineer adds unnecessary cost and complexity.
    Agency response: There are currently procedures in place that allow 
awardees to use in-house engineering services.
    The following comments apply to terms and conditions:
    Consider modifying the financial restrictions on grant recipients. 
The financial restrictions that the grant and security agreement impose 
impede the ability of financially stable providers to engage in 
commonplace transactions necessary for their business if they 
participate in the program at the parent level.
    Agency response: The Agency has been using the current award 
documents for a number of years, and these agreements ensure that 
program requirements will be satisfied. However, that said, the Agency 
is unaware of any provisions in the grant agreement that would impede 
participants from conducting normal business transactions. This concern 
has not been raised to the Agency before.
    Consider narrowing the ``Right of Inspection'' to documents 
relating to the RUS-Funded project.
    Agency Response: The Agency's right to inspect documents is already 
limited to the RUS project and any agreements or documents that are 
directly related to the project.
    The following comments apply to allowing greater flexibility in 
contracting and vendor selection:
    Offer awardees the option to proceed with their regular contracting 
and construction processes without requiring RUS approval for each 
process.
    Agency response: In order to ensure that federal law is being 
followed with respect to environmental law and the uniform federal 
grant requirements at 2 CFR 200, especially with respect to bidding, 
the Agency must impose certain contracting and construction procedures.
    Consider capping contributions to a given project, which would 
cause the grantee to bear the risk of running over budget.
    Agency response: Given the large amount of federal investment in 
these projects, and the need for broadband facilities in rural America, 
awardees must covenant that the project will be finished with their own 
funds if necessary, otherwise the federal investment will have been 
wasted.
    Narrow the current construction procedures requirement that 
applicants obtain RUS approval before contracting with an affiliate.
    Agency response: The Agency's approval to contract with affiliates 
ensures that an awardee is not paying more than necessary.

Respondent Four

    For the current and future rounds, we strongly recommend that state 
and county fairgrounds be included within the definition of essential 
community facilities. In California, fairgrounds continue to be 
essential in supporting the safety, health and well-being of 
residents--serving as evacuation centers and shelters during fires and 
floods. Of California's 77 fairgrounds, 36 (47 percent of all fairs in 
the state) have been activated as evacuation centers, fire camps, and 
animal shelters providing direct emergency response and public safety 
activities. Sufficient access to broadband connectivity at these 
locations is critical to provide individuals and families impacted by 
emergencies essential access to communication, banking and other 
services. Allowing state and county fairground eligibility as essential 
community facilities is a priority for our state to extend overall 
broadband connectivity and better prepares for future emergencies. A 
list of their fairgrounds with the addresses and coordinates was 
provided.
    Agency response: The Agency will take this under consideration. The 
proposed regulation allows scoring criteria to be established at the 
time an application window is opened. Essential community facilities 
may or may not be used in future funding rounds.

Respondent Five

    Over many years, RUS, which administers programs that provide 
infrastructure or infrastructure improvements to rural communities, has 
served with distinction through oversight from the USDA. Providing 
economic incentives to allow for broadband deployment in rural areas 
through the Rural eConnectivity program seems to be an appropriate use 
of federal funds.
    Agriculture plays an important part in the American economy. Today, 
production and consumption occur practically simultaneously so a lack 
of good broadband service quickly turns to no service whatsoever. This 
program, which relies on an interplay of effort, may help to bring 
stable, permanent and dependable service and give an opportunity to aid 
in molding and directing a public enticement that recognizes the 
importance of farming; including small business enterprises to every 
branch of industry and commerce in the country.
    This grant program, if implemented with checks and balances for 
compliance, has an advantage in that it affords an added means of 
raising funds

[[Page 11607]]

that meet the great and increasing demand for capital expenditures for 
the extension and improvement of modern broadband systems. The taxpayer 
return on investment here is fair and justified so that small customers 
will get the benefit of it.
    The RUS program should be reviewed periodically and continued as it 
serves the interest of Americans as a whole.
    Agency response: Respondent five's response was more feedback 
versus requests for change. The Agency appreciates the positive 
feedback.

Respondent Six

    Respondent wholeheartedly agrees that the FCC and RUS will need to 
work together to avoid any result that would squander available funds, 
and that the agencies should establish, prior to initiating these new 
rounds of funding, which areas should be prioritized and ensure that 
duplicative support is not assigned to different providers for delivery 
of overlapping services. Such a negative result would upset the 
legitimate expectations of those submitting bids for funding that they 
would be the only recipients of federal support directed to deploying 
new service. Only through coordination of efforts can the two agencies 
maximize the benefit of the federal funds allocated and optimize the 
delivery of new or improved broadband capability to rural areas to 
close the digital divide.
    Agency response: The Agency continues to work with the FCC to 
identify areas where they are providing funds and where RUS is 
providing funds.
    In addition to the comments received under the round two FOA, the 
Agency collected stakeholder feedback utilizing various methods 
including, conducting phone and in-person interviews, hosting webinars, 
and hosting workshops across the country. Through these venues, the 
Agency regularly heard the following:
     Financial requirements were burdensome and could be 
streamlined to better serve rural communities.
     Specific required documents should be made optional due to 
their minimal impact on the viability of the applying entity and the 
proposed project.
     The Agency should consider higher minimum speed 
requirements in order to ensure systems do not become obsolete before 
the end of its composite economic life.
     The scoring criteria should remain flexible and 
continually be updated to include the most up-to-date, accurate, and 
available data.
     The public notice response period should be extended to 
longer than 30 days.
    The Agency utilized the submitted comments, stakeholder feedback 
and experience gained from rounds one and two to develop this final 
rule, which will codify policies and procedures for administering the 
program. Changes that will be codified in the regulation include, but 
are not limited to, the following:
     The requirement for two years of unqualified, comparative, 
audited financial statements has been changed to unqualified, 
comparative, audited financial statements for the previous fiscal year 
of the applicant from the date the application has been submitted.
     The requirement that applicants must submit certifications 
from the appropriate state or tribal broadband office has been changed 
to a voluntary request.
     Under certain conditions, a subsidiary can use the 
unqualified, comparative, audited statements of their parent to meet 
certain eligibility requirements.
     The first two rounds of funding had restrictions 
associated with the Federal Communication Commission's (FCC) funding of 
the CAF II-903 areas. The Agency has elected to remove these 
restrictions as the FCC buildout requirements are implemented and these 
areas become ineligible. The Agency will continue to work with the FCC 
to maximize the funding that both the FCC and RUS make available to 
rural America.
     Additional sections, including the scoring criteria, 
eligible service area threshold, eligible award costs, and public 
notice response period were also adjusted since round one. These 
requirements will be determined on an annual basis and published in the 
Federal Register in order for the Agency to remain responsive to 
stakeholder needs. Based on the prior feedback received, the Agency is 
issuing this rulemaking as a Final Rule with comment. The Agency 
specifically requests public comment on the speed used to determine 
eligibility.
    Based on the prior feedback received, the Agency is issuing this 
rulemaking as a Final Rule with comment. The Agency specifically 
requests public comment on the speed used to determine eligibility. 
Based on the speed requirements implementing the statutory requirements 
of the program of the Round 1 and Round 2 FOAs, the Agency required a 
minimum of 10/1 Mbps service in order to qualify for eligibility. For 
future rounds, the Agency would take into account comments received 
under this rulemaking to establish future speed requirements, which 
will be announced in the Federal Register in the funding opportunity 
announcements.

Executive Order 12866, Regulatory Impact Analysis

    This rule has been determined to be significant and was reviewed by 
the Office of Management and Budget under Executive Order 12866. In 
accordance with Executive Order 12866, a Regulatory Impact Analysis was 
completed, outlining the costs and benefits of implementing this 
program in rural America. The complete analysis is available in Docket 
RUS-20-Telecom-0023 on Regulations.gov. The following is a summary 
discussion of the Analysis:
    The final rule will codify statutory language from the 2018 
Consolidated Appropriations Act that established the Rural 
eConnectivity Program and the 2018 Farm Bill with respect to public 
notice and reporting requirements, as well as general policies and 
procedures for the program. The result will be consistent, predictable 
program delivery that allows the Agency to deploy reliable, high-speed 
broadband into unserved areas and fuel long-term economic development 
and opportunities in rural America.
    The Agency estimates up to 500 organizations may be interested in 
applying for the Rural eConnectivity Program and approximately 200 
awards will be made each funding round. The Agency estimates the total 
cost to applicants to be $19,426 per applicant respondent and $6,837 
per award recipient respondent. The administrative cost to the Federal 
Government to administer the program is estimated to be $5,495,802.
    On October 21, 2017, United States Department of Agriculture (USDA) 
Secretary Sonny Perdue released the ``Report to the President of the 
United States from the Task Force on Agriculture and Rural 
Prosperity.'' The report was a product of the Interagency Task Force on 
Agriculture and Rural Prosperity, which was formed to identify 
legislative, regulatory, and policy changes to promote agriculture, 
economic development, job growth, infrastructure improvements, 
technological innovation, energy security, and quality of life in rural 
America per Executive Order 13790 (82 FR 20237). In partnership with 
local, state, and tribal leaders, and dozens of federal agencies, the 
report identified eConnectivity as one of five key catalysts to 
achieving prosperity in rural America.
    In conclusion, the Agency notes that reliable, affordable high-
speed internet is essential in today's global economy.

[[Page 11608]]

A robust broadband connection allows students greater access to 
educational opportunities, patients greater access to health care 
professionals, businesses access to customers around the world, and 
farmers the ability to increase productivity and profitability. The 
awards made under the Rural eConnectivity Program will provide 
increased opportunity and bring much-needed critical infrastructure to 
rural America.

Congressional Review Act

    Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), 
the Office of Information and Regulatory Affairs designated this rule 
as a major rule, as defined by 5 U.S.C. 804(2).

Executive Order 12988, Civil Justice Reform

    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 conflict with 
this rule will be preempted. No retroactive effect will be given to 
this rule.

Executive Order 12372, Intergovernmental Consultation

    This rule is excluded from the scope of Executive Order 12372, 
Intergovernmental Consultation, which may require a consultation with 
State and local officials. See the final rule related notice entitled, 
``Department Programs and Activities Excluded from Executive Order 
12372'' (50 FR 47034) advising that RUS loans and loan guarantees were 
not covered by Executive Order 12372.

Regulatory Flexibility Act Certification

    RUS certifies that this rule will not have a significant economic 
impact on a substantial number of small entities, as defined in the 
Regulatory Flexibility Act (5 U.S.C. 601 et seq.). The RUS 
telecommunications program provides loans to borrowers at interest 
rates and on terms that are more favorable than those generally 
available from the private sector. RUS borrowers, as a result of 
obtaining federal financing, receive economic benefits that exceed any 
direct economic costs associated with complying with RUS regulations 
and requirements.

Environmental Impact Statement

    This final rule has been reviewed in accordance with 7 CFR part 
1970 (``Environmental Policies and Procedures''). The Agency has 
determined that (i) this action meets the criteria established in 7 CFR 
1970.53(f); (ii) no extraordinary circumstances exist; and (iii) the 
action is not ``connected'' to other actions with potentially 
significant impacts, is not considered a ``cumulative action'' and is 
not precluded by 40 CFR 1506.1. Therefore, the Agency has determined 
that the action does not have a significant effect on the human 
environment, and therefore neither an Environmental Assessment nor an 
Environmental Impact Statement is required.

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance (CFDA) number assigned 
to the Rural e-Connectivity Pilot Program is 10.752. The Catalog is 
available on the internet at https://beta.sam.gov/. The Government 
Publishing Office (GPO) prints and sells the CFDA to interested buyers. 
For information about purchasing the Catalog of Federal Domestic 
Assistance from GPO, call the Superintendent of Documents at (202) 512-
1800 or toll free at (866) 512-1800, or access GPO's online bookstore 
at https://bookstore.gpo.gov.

Unfunded Mandates

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

E-Government Act Compliance

    RUS 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 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 the states is not required.

Executive Order 13175, Consultation and Coordination With Indian Tribal 
Governments

    This rule has been reviewed in accordance with the requirements of 
Executive Order 13175, ``Consultation and Coordination with Indian 
Tribal Governments.'' Executive Order 13175 requires federal agencies 
to consult and coordinate with tribes on a government-to-government 
basis on policies that have tribal implications, including regulations, 
legislative comments or proposed legislation, and other policy 
statements or actions that have substantial direct effects on one or 
more Indian tribes, on the relationship between the Federal Government 
and Indian tribes or on the distribution of power and responsibilities 
between the Federal Government and Indian tribes.
    Rural Development has assessed the impact of this rule on Indian 
tribes and determined that this rule does not, to our knowledge, have 
tribal implications that require tribal consultation under Executive 
Order 13175. If a Tribe requests government-to-government consultation, 
Rural Development will work with the Office of Tribal Relations to 
ensure meaningful consultation is provided where changes, additions, 
and modifications identified herein are not expressly mandated by 
Congress. If a tribe would like to engage in government-to-government 
consultation with Rural Development on this rule, please contact Rural 
Development's Native American Coordinator at (720) 544-2911 or 
[email protected].
    Additionally, Rural Development recognizes the challenges of 
deploying broadband in tribal communities. The Agency further notes 
that this regulation sets the framework for the administration of the 
Rural eConnectivity Program but does not set the priority point scale 
or content that will be used for scoring in upcoming application 
windows. The specific scoring scale for each round will be set and 
published in future funding announcements. In past instances, Rural 
Development has sought comment on the contents of the funding 
announcement. To ensure that Native American Tribes have a meaningful 
opportunity to provide input to the next upcoming funding notice, Rural 
Development will coordinate with USDA's Office of Tribal Relations to 
conduct at least one listening session to collect recommendations from 
tribes on how Rural Development's broadband programs can be improved to 
better meet the broadband challenges that tribes face, identify 
opportunities to leverage and coordinate assistance from

[[Page 11609]]

other federal agencies and gain additional insight into the unique 
economic, geographical and political realities that continue to impair 
access to affordable broadband in many tribal communities. The 
listening session will be held prior to the release of the next Rural 
eConnectivity Program funding announcement, and tribal communities will 
be notified once this session has been scheduled.
    USDA Rural Development has participated in listening sessions and 
Farm Bill tribal consultations that have either specifically been 
focused on the Rural eConnectivity Program or have touched on the 
challenges with utilizing Rural Development's programs to finance 
broadband infrastructure throughout Indian Country and Alaska. For 
instance, on June 4, 2018, USDA's Senior Advisor for Rural 
Infrastructure, the Assistant Administrator for the Telecommunications 
Programs and Rural Development's Native American Coordinator hosted a 
listening session on the legislation authorizing the Rural 
eConnectivity Pilot program during the National Congress of American 
Indians Midyear Conference in Kansas City, MO, prior to the release of 
the first funding announcement for the program. Additionally, in May 
and June of 2019, the Administrator of the Rural Utilities Service and 
Rural Development's Native American Coordinator participated in USDA 
Farm Bill consultations hosted by USDA's Office of Tribal Relations in 
Washington, DC and Reno, NV. Although the Rural eConnectivity Program 
was not the focus of these sessions, concerns from tribal leaders 
regarding broadband infrastructure and Rural Development's programs 
were shared at both events.
    Over the last two years, Rural Development has targeted outreach to 
tribes during Round 1 and Round 2 of the Rural eConnectivity Program 
funding opportunities. For instance, in April of 2019, a tribal focused 
Rural eConnectivity Program technical assistance workshop was held on 
the Pascua Yaqui reservation just outside of Tucson, AZ. Subsequently, 
in January and February of 2020, Rural Development's Native American 
Coordinator attended the Round 2 Rural eConnectivity Program technical 
assistance workshops in Seattle and Denver. He hosted a breakout 
session at both workshops on collaborating with tribes and was 
available to answer questions of potential tribal applicants.
    Rural Development's State Directors, Telecom General Field 
Representatives, and additional Rural Development staff have met with 
tribes on a regular basis to discuss tribal broadband projects, tribal 
broadband challenges and Rural Development programs throughout this 
period as well. For instance, in August of 2019, USDA Rural 
Development--Colorado hosted a broadband workshop in Durango, CO. 
Tribes in the region were encouraged to participate and Rural 
Development leadership used the opportunity to visit two nearby tribes 
to discuss their current development priorities and challenges--
including access to broadband infrastructure.
    Finally, Rural Development has looked to leverage interagency 
opportunities to provide outreach to tribes. For instance, Rural 
Development staff hosted 3 workshops at the inaugural National Tribal 
Broadband Summit hosted by the Department of Interior in September of 
2019. The Administrator for the Rural Utilities Service also provided 
closing comments at the conclusion of the first day of the summit. More 
recently, on July 20, 2020, Rural Development staff participated in a 
Community Broadband Funders Webinar hosted by FEMA Regions 9 and 10 and 
provided information on Rural Development's telecommunications and 
broadband programs, including the Rural eConnectivity Program. 
Additional federal agencies that presented information during the 
webinar included Department of Commerce's National Telecommunications 
Information Administration and the Economic Development Administration, 
the Federal Communications Commission, HUD's Office of Native American 
Programs, Health and Human Services and FEMA. The webinar was not a 
tribal specific event, but tribes were encouraged to participate and 
some of the content was geared specifically to tribal participants.
    Ongoing outreach, interagency collaboration, and project meetings 
with tribes helps inform RD leadership of ongoing tribal challenges and 
opportunities regarding broadband financing and infrastructure 
deployment. These types of interactions led to tribal application 
priority points in the first Rural eConnectivity Program funding 
announcement and special consideration for tribal broadband plans and 
tribal critical facilities in the application scoring criteria during 
the first and second Rural eConnectivity Program funding opportunities. 
Moving forward, this type of tribal collaboration, along with the 
tribal listening session planned for this rule, will help inform Rural 
Development staff in the development of future Rural eConnectivity 
Program funding opportunity announcements.

Civil Rights Impact Analysis

    Rural Development, a mission area for which RUS is an agency, has 
reviewed this rule in accordance with USDA Regulation 4300-4, Civil 
Rights Impact Analysis,'' to identify any major civil rights impacts 
the rule might have on program participants on the basis of age, race, 
color, national origin, sex, or disability. After review and analysis 
of the rule and available data, it has been determined that based on 
the analysis of the program purpose, application submission and 
eligibility criteria, issuance of this Final Rule is not likely to 
adversely or disproportionately impact very low, low and moderate-
income populations, minority populations, women, Indian tribes or 
persons with disability, by virtue of their race, color, national 
origin, sex, age, disability, or marital or familial status. No major 
civil rights impact is likely to result from this rule.

Information Collection and Recordkeeping Requirements

    The Information Collection and Recordkeeping requirements contained 
in this rule have been submitted for approval under OMB Control Number 
0572-0152.

List of Subjects in 7 CFR Part 1740

    Broadband, Community development, Grant programs--communications, 
Loan programs--communications, Rural areas, Telecommunications.


0
Accordingly, for reasons set forth in the preamble, chapter XVII, title 
7, the Code of Federal Regulations is amended by adding new part 1740 
to read as follows:

CHAPTER XVII--RURAL UTILITIES SERVICE, DEPARTMENT OF AGRICULTURE

PART 1740--RURAL ECONNECTIVITY PROGRAM

Sec.
Subpart A--General
1740.1 Overview.
1740.2 Definitions.
1740.3 Funding parameters.
1740.4 Certifications.
1740.5-1740.8 [Reserved]
Subpart B--Eligibility Requirements
1740.9 Eligible and ineligible entities.
1740.10 Eligible projects.
1740.11 Eligible and ineligible service areas.
1740.12 Eligible and ineligible cost purposes.
1740.13-1740.24 [Reserved]
Subpart C--Award Requirements
1740.25 Substantially Underserved Trust Areas.

[[Page 11610]]

1740.26 Public notice.
1740.27 Environmental and related reviews.
1740.28 Civil rights procedures and requirements.
1740.29-1740.41 [Reserved]
Subpart D--Award Terms
1740.42 Interest rates.
1740.43 Terms and conditions.
1740.44 Security.
1740.45 Advance of funds.
1740.46 Buy American requirement
1740.47-1740.58 [Reserved]
Subpart E--Application Submission and Evaluation
1740.59 Application submission.
1740.60 Elements of a complete application.
1740.61 Evaluation for technical and financial feasibility.
1740.62 Evaluation of Awardee operations.
1740.63 Financial information.
1740.64 Network design.
1740.65-1740.76 [Reserved]
Subpart F--Closing, Servicing, and Reporting
1740.77 Offer and closing.
1740.78 Construction.
1740.79 Servicing of grants, loan and loan/grant combinations.
1740.80 Accounting, reporting, and monitoring requirements.
1740.81 Default and de-obligation.
1740.82-1740.93 [Reserved]
Subpart G--Other Information and Federal Requirements
1740.94 Confidentiality of Applicant information
1740.95 Compliance with applicable laws.
1740.96-1740.99 [Reserved]
1740.100 OMB control number.

    Authority:  7 U.S.C. 1981(b)(4), 7 U.S.C. 901 et seq., 7 U.S.C. 
950aaa et seq., and 7 U.S.C. 950cc.

Subpart A--General


Sec.  1740.1  Overview.

    (a) The Rural eConnectivity Program, hereinafter referred to as 
Program, provides funding in the form of loans, grants, and loan/grant 
combinations for the costs of construction, improvement, or acquisition 
of facilities and equipment needed to facilitate broadband deployment 
in rural areas. One of the essential goals of the Program is to expand 
broadband service to rural areas that do not have sufficient access to 
broadband. This part sets forth the general policies, eligibility 
requirements, types and terms of loans, grants, and loan/grant 
combinations and program requirements.
    (b) Additional information and application materials regarding the 
Program can be found on the Rural Development website.


Sec.  1740.2  Definitions.

    (a) The following definitions apply to this part:
    Administrator means the Administrator of the Rural Utilities 
Service, or the Administrator's designee.
    Agency means the Rural Utilities Service (RUS).
    Applicant means an entity requesting funding under this part.
    Application means the Applicant's request for federal funding, 
which may be approved in whole or in part by RUS.
    Award documents mean, as applicable, all associated grant 
agreements, loan agreements, or loan/grant agreements.
    Award means a grant, loan, or loan/grant combination made under 
this part.
    Awardee means a grantee, borrower, or borrower/grantee that has 
applied and been awarded federal assistance under this part.
    Broadband loan means, for purposes of this regulation, a loan that 
has been approved or is currently under review by RUS after the 
beginning of Fiscal Year 2000 in the Telecommunications Infrastructure 
Program, Farm Bill Broadband Program, Broadband Initiatives Program or 
this Program.
    Broadband loans that were rescinded or defaulted on, or the terms 
and conditions of which were not met, are not included in this 
definition, so long as the entity under consideration for an award 
under this part has not previously defaulted on, or failed to meet the 
terms and conditions of, an RUS loan or had an RUS loan rescinded.
    Broadband service means any fixed terrestrial technology, including 
fixed wireless, having the capacity to transmit data to enable a 
subscriber to the service to originate and receive high quality voice, 
data, graphics and video.
    CALEA means the Communications Assistance for Law Enforcement Act, 
47 U.S.C. 1001 et seq.
    Composite economic life means the weighted (by dollar amount of 
each class of facility) average economic life of all classes of 
facilities necessary to complete construction of the broadband 
facilities in the proposed funded service area.
    Current ratio means the current assets divided by the current 
liabilities.
    Debt Service Coverage Ratio (DSCR) means the ratio of the sum of 
the Awardee's total net income or margins, depreciation and 
amortization expense, and interest expense, minus an allowance for 
funds used during construction and amortized grant revenue, all divided 
by the sum of interest on funded debt, other interest and principal 
payment on debt and capital leases.
    Economic life means the estimated useful service life of an asset 
as determined by RUS.
    Eligible service area means any contiguous proposed funded service 
area where 90 percent of the households to be served do not have 
sufficient access to broadband service. For eligibility purposes, if an 
applicant is applying for multiple proposed funded service areas, each 
service area will be evaluated on a stand-alone basis.
    Equity means total assets minus total liabilities as reflected on 
the Applicant's balance sheet.
    Fixed wireless service means a wireless system between two fixed 
locations (e.g., fixed transmitting tower to fixed customer premise 
equipment).
    Forecast period means the five-year period of projections in an 
application, which shall be used by RUS to determine financial and 
technical feasibility of the application.
    GAAP means accounting principles generally accepted in the United 
States of America.
    Grant means any federal assistance in the form of a grant made 
under this part.
    Grant agreement means the grant contract and security agreement 
between RUS and the Awardee securing the Grant awarded under this part, 
including any amendments thereto, available for review on the Agency's 
web page.
    Indefeasible Right to Use (IRU) means the long-term agreement of 
the rights to capacity, or a portion thereof specified in the terms of 
a certain amount of bandwidth or number of fibers.
    Loan means any federal assistance in the form of a loan made under 
this part.
    Loan agreement means the loan contract and security agreement 
between RUS and the Awardee securing the Loan, including all amendments 
thereto, available for review on the Agency's web page.
    Loan/grant means any federal assistance in the form of a loan/grant 
combination made under this part.
    Loan/grant agreement means the loan/grant contract and security 
agreement between RUS and the Awardee securing the loan/grant, 
including all amendments thereto, available for review on the Agency's 
web page.
    Non-funded service area (NFSA) means any area in which the 
applicant offers broadband service or intends to offer broadband 
service during the forecast period but is not a part of its proposed 
funded service area.
    Pre-application expenses means any reasonable expenses, as 
determined by RUS, incurred after the release of a Federal Register 
notice opening an

[[Page 11611]]

application window to prepare an Application or to respond to RUS 
inquiries about the Application.
    Premises means households, farms, and businesses.
    Project means all of the work to be performed to bring broadband 
service to all premises in the proposed funded service area under the 
Application, including construction, the purchase and installation of 
equipment, and professional services including engineering and 
accountant/consultant fees, whether funded by federal assistance, 
matching, or other funds.
    Proposed funded service area (PFSA) means the area (whether all or 
part of an existing or new service area) where the applicant is 
requesting funds to provide broadband service. Multiple service areas 
will be treated as separate standalone service areas for the purpose of 
determining how much of the PFSA does not have sufficient access to 
broadband. Each service area must meet the minimum requirements for the 
appropriate funding category to be an eligible area.
    RE Act means the ``Rural Electrification Act of 1936,'' as amended 
(7 U.S.C. 901 et seq.).
    Rural area means any area that 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 as 
defined in the Agency mapping tool.
    RUS Accounting Requirements shall mean compliance with GAAP, 
acceptable to RUS, the system of accounting prescribed by RUS Bulletin 
1770B-1 and the Uniform Administrative Requirements, Cost Principles, 
and Audit Requirements for Federal Awards, found at 2 CFR part 200. For 
all Awardees the term ``grant recipient'' in 2 CFR 200 shall also be 
read to encompass ``loan recipient'' and ``loan/grant recipient'', such 
that 2 CFR 200 shall be applicable to all Awardees under this part.
    Sufficient access to broadband means a rural area in which 
households have broadband service at the minimum acceptable level of 
broadband, as set forth in the latest Federal Register notice 
announcing funding for the program. This definition will be used to 
determine the eligibility of a proposed service area and cannot be 
lower than 10 megabit per second (Mbps) downstream and 1 Mbps upstream. 
Mobile/Cellular and satellite services, which include systems that use 
satellite backbone facilities to connect to the internet, will not be 
considered in making the determination of sufficient access to 
broadband.
    TIER means times interest earned ratio. TIER is the ratio of an 
Applicant's net income (after taxes) plus interest expense, all divided 
by interest expense and with all financial terms defined by GAAP.
    (b) Unless otherwise provided in the award documents, all financial 
terms not defined herein shall have the meaning as defined by GAAP.


Sec.  1740.3  Funding parameters.

    (a) For the purposes of this part:
    (1) Ninety (90) percent of the PFSA must not have sufficient access 
to broadband service;
    (2) Applicants must propose to build a network that is capable of 
providing broadband service to every premises located in the PFSA at 
the time the application is submitted at a speed defined in the latest 
Federal Register notice announcing funding for the Program; and
    (3) The Agency reserves the right to make funding offers or seek 
consultations to resolve partially overlapping applications. RUS may 
contact the applicant for additional information during the review 
process. If additional information is requested, the applicant will 
have up to 30 calendar days to submit the information. If such 
information is not timely submitted, RUS may reject the application.
    (b) The amount and types of funds available for assistance, as well 
as the maximum and minimum award amounts will be published in the 
Federal Register. Applicants may apply for grants, loans and loan/grant 
combinations.


Sec.  1740.4  Certifications.

    The Applicant must certify to the following within the online 
application system:
    (a) That it is authorized to submit the application on behalf of 
the eligible entity(ies) listed in the Application;
    (b) That the Applicant has examined the Application;
    (c) That all information in the Application, including 
certifications and forms submitted are, at the time furnished, true and 
correct in all material respects;
    (d) That the entity requesting funding will comply with the terms, 
conditions, purposes, and federal requirements of the program;
    (e) That a false, fictitious, or fraudulent statement or claim on 
the Application is grounds for denial or termination of an award, and/
or possible punishment by a fine or imprisonment as provided in 18 
U.S.C. 1001 and civil violations of the False Claims Act (31 U.S.C. 
3729 et seq.);
    (f) That the Applicant will comply with all applicable federal, 
tribal, state, and local laws, rules, regulations, ordinances, codes, 
orders, and programmatic rules and requirements relating to the 
project, and acknowledges that failure to do so may result in rejection 
or de-obligation of the award, as well as civil liability or criminal 
prosecution, if applicable, by the appropriate law enforcement 
authorities.


Sec. Sec.   1740.5-1740.8 [Reserved]

Subpart B--Eligibility Requirements


Sec.  1740.9  Eligible and ineligible entities.

    (a) To be eligible for funding, an Applicant may be either a 
nonprofit or for-profit organization, and must take one of the 
following forms:
    (1) Corporation;
    (2) Limited Liability Company and Limited Liability Partnership;
    (3) Cooperative or mutual organization;
    (4) States or local governments, including any agency, subdivision, 
instrumentality, or political subdivision thereof;
    (5) A territory or possession of the United States; or
    (6) An Indian tribe, as defined in section 4 of the Indian Self-
Determination and Education Assistance Act (25 U.S.C. 450b).
    (b) Individuals and legal general partnerships that are formed with 
individuals are not eligible entities.
    (c) Co-Applicants are not eligible entities. If two entities would 
like to partner with each other in delivering broadband to areas 
without sufficient access, then one entity must take the lead on 
submitting an application. Inter-company agreements can be used to 
account for revenues and expenses on the applicant's financial 
projections. However, based on the existing financial and security 
arrangements, the Agency may require that both, or other entities, be 
parties to the award documents, or guarantee the award.


Sec.  1740.10  Eligible projects.

    To be eligible for funding assistance under the part, the Applicant 
must:
    (a) Submit a complete application and provide all supporting 
documentation including unqualified, comparative, audited financial 
statements for the previous year from the date the application is 
submitted as detailed in Sec.  1740.63.
    (b) Demonstrate that the project can be completely built out within 
five years

[[Page 11612]]

from the date funds are first made available.
    (c) Demonstrate that the project is technically feasible as 
detailed in Sec.  1740.64.
    (d) Demonstrate that all project costs can be fully funded or 
accounted for as detailed in Sec.  1740.63.
    (e) Submit documentation which enables RUS to determine that the 
project is financially feasible and sustainable as detailed in Sec.  
1740.61.
    (f) Demonstrate that the following service requirements will be 
met:
    (1) Facilities funded with grant funds will provide broadband 
service proposed in the application for the composite economic life of 
the facilities, as approved by RUS, or as provided in the Award 
Documents.
    (2) Facilities funded with loan funds must provide broadband 
service through the amortization period of the loan.


Sec.  1740.11  Eligible and ineligible service areas.

    (a) Eligible service areas. (1) Applicants must propose to provide 
broadband service directly to all premises in the PFSA.
    (2) If any part of the applicant's PFSA is ineligible, RUS, in its 
sole discretion, may request that an applicant modify its application, 
if RUS believes the modification is feasible. Otherwise, RUS will 
reject the application.
    (b) Ineligible service areas. (1) Overlapping service areas. RUS 
will not fund more than one project that serves any one given 
geographic area. Invariably, however, applicants will propose service 
areas that overlap, varying from small de minimis areas of the 
territory, but which may be significant with respect to households 
involved, to larger areas of the service territory, but which may 
contain few households or businesses, if any. As a result, devising a 
procedure that will cover every overlap circumstance is not 
practicable. Nevertheless, it is the agency's intent to make as many 
eligible applications viable for consideration as possible. That may 
mean the agency may:
    (i) Determine the overlap to be so insignificant that no agency 
action is necessary;
    (ii) Request one or more applications to be revised to eliminate 
the overlapping territory;
    (iii) Choose one application over another given the amount of 
assistance requested, the number of awards already chosen in the area 
or State, or the need for the project in the specific area due to other 
factors; or
    (iv) Simply choose the project that scores higher or in the 
judgement of the agency is more financially feasible.
    (2) Prior funded service areas to include: (i) RUS Broadband loans. 
Service areas of borrowers that have RUS Broadband loans, as defined in 
this part, are ineligible for all other applicants, and can be found on 
the Agency web page for the program. However, RUS Broadband Borrowers 
that have built out their service areas consistent with their 
application and award documents, but were not required to provide, and 
are currently not providing, sufficient access to broadband pursuant to 
this regulation are eligible to apply for funding for these service 
areas; provided that they have not defaulted on, and have materially 
complied with, in the sole discretion of RUS, their prior Broadband 
loan award requirements. Current RUS Broadband Borrowers that have 
received funding to provide sufficient access to broadband but have not 
yet built out their system are ineligible to apply for funding for 
these service areas.
    (ii) RUS Community Connect Grants. Service areas that received 
grants under the RUS Community Connect Grant Program are eligible if 
they do not have sufficient access to broadband, except for those 
grants still under construction. Service areas still under construction 
can be found on the Agency's web page.
    (iii) RUS BIP Grants. Service areas that received a 100 percent 
grant under the RUS Broadband Initiatives Program are eligible if they 
do not have sufficient access to broadband.
    (c) Service areas with other funding. (1) Applicants are encouraged 
to work with the Governor's office for the states, and tribal 
governments for the tribal areas where they are proposing to provide 
broadband service and submit information detailing where state funding 
has been provided.
    (2) Service areas that have received federal grant funds, or funds 
from the Federal Communications Commission, to provide broadband 
service will be restricted from funding, if such funding is principally 
to construct facilities throughout the service area that provide 
broadband service at the threshold level of service. If additional 
service areas are restricted from funding, these areas will be 
identified in the funding opportunity announcement that opens an 
application window.


Sec.  1740.12  Eligible and ineligible cost purposes.

    Award and any matching funds must be used to pay only eligible 
costs incurred post award, except for approved pre-application 
expenses. Eligible costs must be consistent with the cost principles 
identified in 2 CFR 200, Subpart E, Cost Principles. In addition, costs 
must be reasonable, allocable, and necessary to the project. Any 
application that proposes to use any portion of the award or matching 
funds for any ineligible costs may be rejected.
    (a) Eligible award costs. Award funds under this part may be used 
to pay for the following costs:
    (1) To fund the construction or improvement of facilities, 
including buildings and land, required to provide fixed terrestrial 
broadband service, including fixed wireless service, and any other 
facilities required for providing other services over the same 
facilities, such as equipment required to comply with CALEA;
    (2) To fund reasonable preapplication expenses in an amount not to 
exceed five percent of the award. Preapplication expenses must be 
included in the first request for advance of award funds and will be 
funded with either grant or loan funds. If the funding category applied 
for has a grant component, then grant funds will be used for this 
purpose. If preapplication expenses are not included in the first 
request for advance of award funds, they will become an ineligible 
purpose; and
    (3) To fund the acquisition of an existing system that does not 
currently provide sufficient access to broadband for upgrading that 
system to meet the requirements of this regulation. The cost of the 
acquisition is limited to 40 percent of the award amount requested. 
Acquisitions can be considered for 100 percent loans.
    (b) Ineligible award costs. Award funds under this part may not be 
used for any of the following purposes:
    (1) To fund operating expenses of the Awardee;
    (2) To fund costs incurred prior to the date on which the 
application was submitted other than eligible preapplication expenses;
    (3) To fund an acquisition of an affiliate, or the purchase or 
acquisition of any facilities or equipment of an affiliate. Note that 
if affiliated transactions are contemplated in the application, 
approval of the application does not constitute approval to enter into 
affiliated transactions, nor acceptance of the affiliated arrangements 
that conflict with the obligations under the award documents;
    (4) To fund the acquisition of a system previously funded by RUS 
without prior written approval of RUS before an application is 
submitted;
    (5) To fund the purchase or lease of any vehicle other than those 
used primarily in construction or system improvements;

[[Page 11613]]

    (6) To fund broadband facilities leased under the terms of an 
operating lease or an indefeasible right of use (IRU) agreement;
    (7) To fund the merger or consolidation of entities;
    (8) To fund costs incurred in acquiring spectrum as part of a 
Federal Communication Commission (FCC) auction or in a secondary market 
acquisition. Spectrum that is part of a system acquisition may be 
considered;
    (9) To fund facilities that provide mobile services;
    (10) To fund facilities that provide satellite service including 
satellite backbone services;
    (11) To fund the acquisition of a system that is providing 
sufficient access to broadband; or
    (12) To refinance outstanding debt.


Sec. Sec.  1740.13-1740.24  [Reserved]

Subpart C--Award Requirements


Sec.  1740.25  Substantially Underserved Trust Areas (SUTA).

    Applicants seeking assistance may request consideration under the 
SUTA provisions in 7 U.S.C. 936f.
    (a) If the Administrator determines that a community within ``trust 
land'' (as defined in 38 U.S.C. 3765) has a high need for the benefits 
of the Program, the Administrator may designate the community as a 
``substantially underserved trust area'' (as defined in section 306F of 
the RE Act).
    (b) To receive consideration under SUTA, the applicant must submit 
to the Agency a completed application that includes all information 
requested in 7 CFR part 1700, subpart D. In addition, the application 
must identify the discretionary authorities within subpart D that it 
seeks to have applied to its application. Note, however, the following:
    (1) Given the prohibition on funding operating expenses in the 
Program, requests for waiver of the equity requirements cannot be 
considered; and
    (2) Due to the statutory requirements that established the Program, 
waiver of the nonduplication requirements cannot be considered.


Sec.  1740.26  Public notice.

    (a) To ensure transparency for the Program, the Agency's mapping 
tool will include the following information from each application, and 
be displayed for the public:
    (1) The identity of the applicant;
    (2) The areas to be served, including identification of the 
associated census blocks;
    (3) The type of funding requested;
    (4) The status of the application; and
    (5) The number of households without sufficient access to 
broadband.
    (b) The Agency will publish a public notice of each application 
requesting assistance under this part in accordance with the 
requirements of 7 U.S.C. 950cc. All applicants must provide the 
following information, which will be posted publicly on RUS' fully 
searchable website, in addition to the status of the application:
    (1) A description of the proposed broadband project;
    (2) A map of the PFSA;
    (3) The amount and type of support requested by the applicant;
    (4) The estimated number and proportion of service points in the 
proposed service territory without fixed broadband service, whether 
terrestrial or wireless; and
    (5) Any other information required of the applicant in a funding 
notice.
    (c) The public notice referenced under paragraph (b) of this 
section will be published after application submission and will remain 
available for 45 calendar days on the Agency's web page. During this 
period, existing service providers are requested to submit the 
following information through the Agency's mapping tool:
    (1) The number of residential and business customers within the 
applicant's service area currently purchasing sufficient access to 
broadband, the rates of data transmission being offered, and the cost 
of each level of broadband service charged by the existing service 
provider;
    (2) The number of residential and business customers within the 
applicant's service area receiving voice and video services and the 
associated rates for these other services;
    (3) A map showing where the existing service provider's services 
coincide with the applicant's service area using the Agency's Mapping 
Tool; and
    (4) Test results for the service area in question for a minimum of 
at least the prior three months demonstrating that sufficient access to 
broadband is being provided. The test results shall be for different 
times of the day.
    (d) The Agency may contact service providers that respond under 
paragraph (b) of this section to validate their submission, and so 
responding service providers should be prepared to:
    (1) Provide additional information supporting that the area in 
question has sufficient access to broadband service;
    (2) Have a technician on site during the field validation by RUS 
staff;
    (3) Run on site tests with RUS personnel being present, if 
requested; and
    (4) Provide copies of any test results that have been conducted in 
the last six months and validate the information submitted in the 
public notice response months.
    (e) If no broadband service provider submits information pursuant 
to a pending application or if the existing provider does not provide 
the information requested under paragraphs (b) and (c) of this section, 
RUS will consider the number of providers and extent of broadband 
service using any other data available through reasonable efforts, 
including utilizing the National Telecommunications and Information 
Administration National Broadband Availability Map and FCC broadband 
availability map. That may include the agency conducting field 
validations so as to locate facilities in the PFSA and determine, to 
the extent possible, if those facilities can provide sufficient access 
to broadband. Notwithstanding, conclusive evidence as to the existence 
of sufficient access to broadband will be taken only through the public 
notice process. As a result, the Agency highly recommends that existing 
service providers in a proposed funded service territory submit 
responses to the public notice to ensure that their service is 
considered in the determination of eligibility on an application.
    (f) The Agency will notify respondents who are existing service 
providers whether their challenge was successful or not and allow for 
an opportunity to respond.
    (g) The information submitted by an existing service provider under 
paragraph (c) of this section will be treated as proprietary and 
confidential and not subject to disclosure, pursuant to 7 U.S.C. 
950cc(b)(3).
    (h) For all applications that are approved, the following 
information will be made available to the public:
    (1) The information provided in paragraph (a) of this section;
    (2) Each annual report required under Sec.  1740.80(g) will be 
redacted to protect any proprietary information; and
    (3) Such other information as the Administrator of the RUS deems 
sufficient to allow the public to understand the assistance provided.


Sec.  1740.27  Environmental and related reviews.

    (a) Federal Agencies are required to analyze the potential 
environmental impacts, as required by the National Environmental Policy 
Act (NEPA), for Applicant projects or proposals seeking funding. Please 
refer to 7 CFR part 1970 for all of Rural Development's environmental 
policies. All Applicants must follow the requirements in 7 CFR part 
1970 and are required to complete an Environmental Questionnaire, to

[[Page 11614]]

provide a description of program activities, and to submit all other 
required environmental documentation as requested in the application 
system or by the Agency after the application is submitted. It is the 
Applicant's responsibility to obtain all necessary federal, tribal, 
state, and local governmental permits and approvals necessary for the 
proposed work to be conducted.
    (b) Applications will be reviewed to ensure that they contain 
sufficient information to allow Agency staff to conduct a NEPA analysis 
so that appropriate NEPA documentation can be submitted to the 
appropriate federal and state agencies, along with the recommendation 
that the proposal is in compliance with applicable environmental and 
historic preservation laws.
    (c) Applicants proposing activities that cannot be covered by 
existing environmental compliance procedures will be informed whether 
NEPA requirements and other environmental requirements can otherwise be 
expeditiously met so that a project can proceed within the timeframes 
anticipated under the Program.
    (d) If additional information is required after an application is 
accepted for funding, funds can be withheld by the agency under a 
special award condition requiring the Awardee to submit additional 
environmental compliance information sufficient for the Agency to 
assess any impacts that a project may have on the environment.


Sec.  1740.28  Civil rights procedures and requirements.

    (a) Equal opportunity and nondiscrimination. The agency will ensure 
that equal opportunity and nondiscriminatory requirements are met in 
accordance with the Equal Credit Opportunity Act and 7 CFR part 15. In 
accordance with federal civil rights law and USDA civil rights 
regulations and policies, the USDA, its agencies, offices, and 
employees, and institutions participating in or administering USDA 
programs are prohibited from discriminating based on race, color, 
national origin, religion, sex, gender identity (including gender 
expression), sexual orientation, disability, age, marital status, 
family/parental status, income derived from a public assistance 
program, political beliefs, or reprisal or retaliation for prior civil 
rights activity, in any program or activity conducted or funded by USDA 
(not all bases apply to all programs).
    (b) Civil rights compliance. Recipients of federal assistance under 
this part must comply with the Americans with Disabilities Act of 1990, 
Title VI of the Civil Rights Act of 1964, and Section 504 of the 
Rehabilitation Act of 1973. In general, recipients should have 
available for the Agency, racial and ethnic data showing the extent to 
which members of minority groups are beneficiaries of federally 
assisted programs. The Agency will conduct compliance reviews in 
accordance with 7 CFR part 15. Awardees will be required to complete RD 
400-4, ``Assurance Agreement,'' for each Federal Award received.
    (c) Discrimination complaints. Persons believing they have been 
subjected to discrimination prohibited by this section may file a 
complaint personally or by an authorized representative with USDA, 
Director, Office of Adjudication, 1400 Independence Avenue SW, 
Washington, DC 20250. A complaint must be filed no later than 180 days 
from the date of the alleged discrimination, unless the time for filing 
is extended by the designated officials of USDA or the Agency.


Sec. Sec.  1740.29-1740.41  [Reserved]

Subpart D--Award Terms


Sec.  1740.42  Interest rates.

    Interest rates for the different funding options that will become 
available will be included in the Federal Register as part of the 
funding announcement opening a funding window.
    (a) Direct cost-of-money loans shall bear interest at a rate equal 
to the cost of borrowing to the Department of Treasury for obligations 
of comparable maturity.
    (b) The agency may offer 100 percent loans at a reduced interest 
rate, and in such cases, the applicable interest rate will be stated in 
the Federal Register or applicable funding opportunity notice.


Sec.  1740.43  Terms and conditions.

    Terms and conditions of loans, grants, or loan/grant combinations 
are set forth in the non-negotiable standard loan, grant, or loan/grant 
agreements and the corresponding note, and/or mortgage, if applicable, 
which may be found on the Agency's web page.
    (a) Unless the Applicant requests a shorter repayment period, loans 
must be repaid with interest within a period that, rounded to the 
nearest whole year, is equal to the expected Composite Economic Life of 
the project assets, as determined by RUS based upon acceptable 
depreciation rates, plus three years. Acceptable depreciation rates can 
be found in the Program Construction Procedures found on the Agency's 
web page.
    (b) Interest begins accruing on the date of each loan advance. Any 
deferral period for loans will be set in the Federal Register notice 
opening a funding window.
    (c) All proposed construction (including construction with matching 
and other funds) and all advance of funds must be completed no later 
than five years from the time funds are made available.
    (d) No funds will be disbursed under this program until all other 
sources of funding have been obtained and any other pre-award 
conditions have been met. Failure to obtain one or more sources of 
funding committed to in the Application or to fulfill any other pre-
award condition within 90 days of award announcement may result in 
withdrawal of the award. The RUS may modify this requirement in the 
Federal Register or applicable funding opportunity notice.


Sec.  1740.44  Security.

    (a) Loans and loan/grant combinations. The loan portion of the 
award must be adequately secured, as determined by RUS.
    (1) For Corporations and limited liability entities, the loan and 
loan/grant combinations must be secured by all assets of the Awardee.
    (i) RUS must be given an exclusive first lien, in form and 
substance satisfactory to RUS, on all assets of the Awardee, including 
all revenues.
    (ii) RUS may share its first lien position with one or more lenders 
on a pari passu basis, except with respect to grant funds, if security 
arrangements are acceptable to RUS.
    (iii) Applicants must submit a certification that their prior 
lender or lienholder on any Awardee assets has already agreed to sign 
the RUS' standard intercreditor agreement or co-mortgage found on the 
Agency's web page.
    (iv) RUS will not share a lien position on assets with any related 
party or affiliate of the Awardee.
    (2) For Tribal entities and municipalities, RUS will develop 
appropriate security arrangements.
    (3) Unless otherwise approved by RUS in writing, all property and 
facilities purchased with award funds must be owned by the Awardee.
    (b) Grant security. The grant portion of the award must also be 
adequately secured, as determined by RUS.
    (1) The government must be provided an exclusive first lien on all 
grant funded assets during the service obligation of the grant, and 
thereafter any sale or disposition of grant assets must comply with the 
Uniform Administrative Requirements, Cost

[[Page 11615]]

Principles, and Audit Requirements for Federal Awards, codified in 2 
CFR part 200. Note that this part will apply to ALL grant funds of an 
Awardee, regardless of the entity status or type of organization.
    (2) All Awardees must repay the grant if the project is sold or 
transferred without receiving written approval from RUS during the 
service obligation of the grant.
    (c) Substitution of Collateral and Irrevocable Letter of Credit--
(1) Loans and combination loan and grant. The Agency's standard loan/
grant documents require that applicants pledge all assets and revenues 
of their operations as collateral. Applicants may propose other forms 
of collateral as long as the amount of the collateral is equal to the 
full amount of the loan. The collateral must be pledged to the Agency. 
Acceptable forms of substitute collateral are limited to following: 
Certificates of Deposit, with the Agency named as the beneficiary on 
the certificate, or Bonds with a AAA rating from an accredited rating 
agency. All other conditions of the standard loan documents will apply. 
A copy of the Substitution Documents can be found on the Agency's web 
page.
    (2) Grants. For grant-only applications, applicants may request 
that standard grant security arrangements be replaced with an 
Irrevocable Letter of Credit (ILOC), to ensure that the project is 
completed. The ILOC must be for the full amount of funding requested 
and must remain in place until project completion. If an ILOC is 
offered as security, applicants will not be required to provide 
financial projections, meet any financial ratios requirements as part 
of the application process, or submit the maps for their NFSAs. 
Although the ILOC will replace security for the grant security 
arrangements, all other requirements of the standard grant agreement 
will remain the same. A copy of the ILOC award documents can be found 
on the Agency's web page.


Sec.  1740.45  Advance of funds.

    RUS loan and grant advances are made at the request of the Awardee 
according to the procedures stipulated in the Award Documents. All non-
RUS funds, to include matching funds and cash provided in lieu of RUS 
loan funds, must be expended first, followed by loan funds and then 
grant funds, except for RUS-approved pre-application expenses. RUS may 
modify this requirement in the Federal Register or applicable funding 
opportunity notice. Grant funds, if any, will be used for eligible 
preapplication expenses only on the first advance request. Applications 
that do not account for such advance procedures in the pro forma five-
year forecast may be rejected.


Sec.  1740.46  Buy American requirement.

    Awardees shall use in connection with the expenditure of loan and 
grant funds only such unmanufactured articles, materials, and supplies, 
as have been mined or produced in the United States or in any eligible 
country, and only such manufactured articles, materials, and supplies 
as have been manufactured in the United States or in any eligible 
country, substantially all from articles, materials, or supplies mined, 
produced, or manufactured, as the case may be, in the United States or 
in any eligible country. For purposes of this section, an ``eligible 
country'' is any country that applies with respect to the United States 
an agreement ensuring reciprocal access for United States products and 
services and United States suppliers to the markets of that country, as 
determined by the United States Trade Representative. The Buy American 
regulations may be found at, and any requests for waiver must be 
submitted pursuant to, 7 CFR part 1787.


Sec. Sec.  1740.47-1740.58  [Reserved]

Subpart E--Application Submission and Evaluation


Sec.  1740.59  Application submission.

    (a) Applications must be submitted through the Agency's online 
application system.
    (b) The Agency may publish additional application submission 
requirements in a notice in the Federal Register.
    (c) Unless otherwise identified in the notice, applicants can only 
submit one application under any funding window.


Sec.  1740.60  Elements of a complete application.

    (a) Online application system. All applications under this 
regulation must be submitted through the RUS Online Application System 
located on the Agency's web page. Additional information can be found 
in the Application Guide found on the Agency's web page.
    (b) Dun and Bradstreet Universal Numbering System (DUNS) Number. 
All applicants must register for a DUNS number, or other Government 
non-proprietary identifier as part of the application process. The 
applicant can obtain the DUNS number free of charge by calling Dun and 
Bradstreet. Go to https://fedgov.dnb.com/webform for more information 
on assignment of a DUNS number or confirmation. DUNS numbers of parent 
or affiliated operations cannot be substituted for the applicant. If a 
DUNS number is not provided, the application cannot be considered for 
an award.
    (c) System for Award Management (SAM). Prior to submitting an 
application, the applicant must also register in SAM at https://www.sam.gov/SAM/ and supply a Commercial and Government Entity (CAGE) 
Code number as part of the application. SAM registration must be active 
with current data at all times, from the application review throughout 
the active Federal award funding period. To maintain active SAM 
registration, the applicant must review and update the information in 
the SAM database annually from the date of initial registration or from 
the date of the last update. The applicant must ensure that the 
information in the database is current, accurate, and complete. If the 
CAGE Code of the applicant is not included in the application, the 
application will not be considered for an award.
    (d) Contents of the application. A complete application will 
include the following information as requested in the RUS Online 
Application System and application guide:
    (1) General information on the applicant and the project including:
    (i) A description of the project, that will be made public, 
consistent with the requirements herein; and
    (ii) The estimated dollar amount of the funding request.
    (2) An executive summary that includes, but is not be limited to, a 
detailed description of existing operations, discussion about key 
management, description of the workforce, description of interactions 
between any parent, affiliated or subsidiary operation, a detailed 
description of the proposed project, and the source of the matching and 
other funds;
    (3) A description of the PFSA including the number of premises 
passed;
    (4) Subscriber projections including the number of subscribers for 
broadband, video and voice services and any other service that may be 
offered. A description of the proposed service offerings and the 
associated pricing plan that the applicant proposes to offer;
    (5) A map, utilizing the RUS mapping tool located on the Agency's 
web page, of the PFSAs identifying the areas without sufficient access 
to broadband and any NFSA of the applicant. If an applicant has 
multiple NFSAs, they can elect to submit each NFSA individually or they 
can submit them as a single file through the mapping tool;

[[Page 11616]]

    (6) A description of the advertised prices of service offerings by 
competitors in the same area;
    (7) A network design and all supporting information as detailed in 
Sec.  1740.64.
    (8) Resumes of key management personnel, a description of the 
organization's readiness to manage a broadband services network, and an 
organizational chart showing all parent organizations and/or holding 
companies (including parents of parents, etc.), and all subsidiaries 
and affiliates;
    (9) A legal opinion that:
    (i) Addresses the applicant's ability to enter into the award 
documents;
    (ii) Describes all material pending litigation matters;
    (iii) Addresses the applicant's ability to pledge security as 
required by the award documents; and
    (iv) Addresses the applicant's ability to provide broadband service 
under state or tribal law.
    (10) Summary and itemized budgets of the infrastructure costs of 
the proposed project, including if applicable, the ratio of loans to 
grants, and any other sources of outside funding. The summary must also 
detail the amount of matching and other funds and the source of these 
funds. If the matching and other funds are coming from a third party, a 
commitment letter and support that the funds are available must also be 
submitted. Matching and other funds must be deposited into the RUS 
Pledged Deposit Account at the closing of the award;
    (11) A detailed description of working capital requirements and the 
sources of those funds;
    (12) Unqualified, comparative audited financial statements for the 
previous calendar year from the date the application is submitted as 
detailed in Sec.  1740.63;
    (13) The historical and projected financial information required in 
Sec.  1740.63;
    (14) All information and attachments required in the RUS Online 
application system;
    (15) A scoring sheet, analyzing any scoring criteria set forth in 
the funding announcement opening the application window;
    (16) A list of all the applicant's outstanding and contingent 
obligations as required in Sec.  1740.63;
    (17) All environmental information as required by Sec.  1740.27;
    (18) Certification from the applicant that agreements with, or 
obligations to, investors do not breach the obligations to the 
government under the standard Award Documents located on the Agency's 
web page, especially distribution requirements, and that any such 
agreements will be amended so that such obligations are made contingent 
to compliance with the Award Documents. Such certification should also 
specifically identify which, if any, provisions would need to be 
amended;
    (19) If service is being proposed on tribal land, a certification 
from the proper tribal official that they are in support of the project 
and will allow construction to take place on tribal land. The 
certification must:
    (i) Include a description of the land proposed for use as part of 
the proposed project;
    (ii) Identify whether the land is owned, held in Trust, land held 
in fee simple by the Tribe, or land under a long-term lease by the 
Tribe;
    (iii) If owned, identify the landowner; and
    (iv) Provide a commitment in writing from the landowner authorizing 
the applicant's use of that land for the proposed project; and
    (20) Additional items that may be required by the Administrator 
through a notice in the Federal Register.
    (e) Material representations. The application, including 
certifications, and all forms submitted as part of the application will 
be treated as material representations upon which RUS will rely in 
awarding grants and loans.


Sec.  1740.61  Evaluation for technical and financial feasibility.

    (a) A project is financially feasible when the applicant 
demonstrates to the satisfaction of RUS that it will be able to 
generate sufficient revenues to cover expenses; will have sufficient 
cash flow to service all debts and obligations as they come due; will 
have a positive ending cash balance as reflected on the cash flow 
statement for each year of the forecast period; and, by the end of the 
forecast period, will meet at least two of the following requirements: 
A minimum TIER requirement of 1.2, a minimum DSCR requirement of 1.2, 
and a minimum current ratio of 1.2. In addition, applicants must 
demonstrate positive cash flow from operations at the end of the 
forecast period.
    (b) For any funding option that includes grant funds, evaluation 
criteria for scoring the application will be included in the Federal 
Register notice that opens an application window. Grant applications 
submitted for a certain category will be ranked and awarded based only 
on those applications included in that category.
    (c) The Agency will determine technical feasibility by evaluating 
the Applicant's network design and other relevant information in the 
application.


Sec.  1740.62  Evaluation of Awardee operations.

    (a) RUS may send a team to the awardee's facilities to complete a 
Management Analysis Profile (MAP) of the entire operation. MAPs are 
used by RUS as a means of evaluating an Awardee's strengths and 
weaknesses and ensuring that awardees are prepared to fulfil the terms 
of the award. Once an applicant accepts an award offer, RUS may 
schedule a site visit as soon as possible.
    (b) RUS reserves the right not to advance funds until the MAP has 
been completed. If the MAP identifies issues that can affect the 
operation and completion of the project, those issues must be addressed 
to the satisfaction of RUS before funds can be advanced. Funding may be 
rescinded if following a MAP, the agency determines that the awardee 
will be unable to meet the requirements of the award.


Sec.  1740.63  Financial information.

    (a) The Applicant must submit financial information acceptable to 
the Agency that demonstrates that the Applicant has the financial 
capacity to fulfill the grant, loan, and loan/grant combination 
requirements in this part and to successfully complete the proposed 
project.
    (1) Applicants must submit unqualified, comparative, audited 
financial statements for the previous year from the date the 
application is submitted. If an application is submitted and the most 
recent year-end audit has not been completed, the applicant can submit 
the previous unqualified audit that has been completed. If qualified 
audits containing a disclaimer or adverse opinion are submitted, the 
application will not be considered.
    (i) An applicant can use the consolidated audit of a parent as long 
as the parent fully guarantees the loan, or in the case of a grant, 
guarantees that construction will be completed as approved in the 
application or will repay the grant to RUS.
    (ii) If the applicant has more than one parent, then each parent's 
audits must be submitted, and each parent must fully guarantee the 
award.
    (iii) For governmental entities, financial statements must be 
accompanied with certifications as to unrestricted cash that may be 
available on a yearly basis to the applicant.
    (2) Applicants must provide detailed information for all 
outstanding and contingent obligations. Copies of existing notes, loan 
and security

[[Page 11617]]

agreements, guarantees, any existing management or service agreements, 
and any other agreements with parents, subsidiaries and affiliates, 
including but not limited to debt instruments that use the applicant's 
assets, revenues or stock as collateral must be included in the 
application.
    (3) Applicants must provide evidence of all funding, other than the 
RUS award, necessary to support the project, such as bank account 
statements, firm letters of commitment from equity participants, or 
outside loans, which must evidence the timely availability of funds. If 
outside loans are used to cover any matching requirement, they may only 
be secured by assets other than those used for collateral under this 
regulation. Equity partners that are not specifically identified by 
name will not be considered in the financial analysis of the 
application. If the application states that other funds are required 
for the broadband project in addition to the Program funding requested, 
evidence must be included in the application identifying the source of 
funds and when the funds will be available. If the additional funding 
is not clearly identified, the application may not be considered for an 
award. If the applicant is providing non-telecommunication services and 
is proposing expansion to those services and states that additional 
funds are required to support sustainability of the overall operation 
of the applicant, then evidence must be submitted supporting the 
availability of these funds or the application may not be considered 
for funding.
    (4) Historical financial statements for the last four years 
consisting of a balance sheet, income statement, and cash flow 
statement must be provided. If an entity has not been operating for 
four years, historical statements for the period of time the entity has 
been operating are acceptable.
    (5) Pro Forma financial analysis prepared in conformity with GAAP 
and the Agency's guidance on grant accounting can be found at https://www.rd.usda.gov/files/AccountingGuidance10.pdf. The Pro Forma should 
validate the sustainability of the project by including subscriber 
estimates related to all proposed service offerings; annual financial 
projections with balance sheets, income statements, and cash flow 
statements; supporting assumptions for a five-year forecast period and 
a depreciation schedule for existing facilities, those facilities 
funded with federal assistance, matching funds, and other funds. This 
pro forma should indicate the committed sources of capital funding and 
include a bridge year prior to the start of the forecast period. This 
bridge year shall be used as a buffer between the historical financial 
information and the forecast period and is the year in which the 
application is submitted.
    (i) The financial projections must demonstrate that by the end of 
the forecast period, the project will meet at least two of the 
requirements described in Sec.  1740.61(a).
    (ii) The financial projections must also demonstrate positive cash 
flow from operations at the end of the forecast period.
    (iii) Based on the financial evaluation, additional conditions may 
be added to the Award documents to ensure financial feasibility and 
security on the award.
    (b) Publicly traded companies that have a bond rating from Moody's, 
Standard and Poor's, or Fitch of Investment Grade at the time an 
application is submitted do not have to complete the pro forma 
financial projections. In addition, applicants with this classification 
that elect not to submit financial projections do not need to submit 
NFSAs.


Sec.  1740.64  Network design.

    (a) Only projects that RUS determines to be technically feasible 
will be eligible for an award.
    (b) The network design must include a description of the proposed 
technology used to deliver the broadband service, demonstrating that 
all premises in the PFSA can be offered broadband service; a network 
diagram, identifying cable routes, wireless access points, and any 
other equipment required to operate the network; a buildout timeline 
and milestones for implementation of the project; and a capital 
investment schedule showing that the system can be built within five 
years. All of these items must be certified by a professional engineer 
who is certified in at least one of the states where there is or will 
be project construction. The certification from the professional 
engineer must clearly state that the proposed network can deliver the 
broadband service to all premises in the PFSA at the minimum required 
service level. In addition, a list of all required licenses and 
regulatory approvals needed for the proposed project and how much the 
applicant will rely on contractors or vendors to deploy the network 
facilities must be submitted. Note that in preparing budget costs for 
equipment and materials, RUS' Buy American requirements apply, as 
referenced in Sec.  1740.46.


Sec. Sec.  1740.65-1740.76  [Reserved]

Subpart F--Closing, Servicing and Reporting


Sec.  1740.77  Offer and closing.

    Successful applicants will receive an offer letter and award 
documents from RUS following award notification. Applicants may view 
sample award documents on the Agency's web page.


Sec.  1740.78  Construction.

    (a) All project assets must comply with 7 CFR part 1788 and 7 CFR 
part 1970, the Program Construction Procedures located on the Agency's 
web page, any successor regulations found on the agency's website, and 
any other guidance from the Agency.
    (b) The build-out of the project must be completed within five 
years from the date funds are made available. Build-out is considered 
complete when the network design has been fully implemented, the 
service operations and management systems infrastructure is 
operational, and the awardee is ready to support the activation and 
commissioning of individual customers to the new system.


Sec.  1740.79  Servicing of grants, loans and loan/grant combinations.

    (a) Awardees must make payments on the loan as required in the note 
and Award Documents.
    (b) Awardees must comply with all terms, conditions, affirmative 
covenants, and negative covenants contained in the Award Documents.
    (c) The sale or lease of any portion of the Awardee's facilities 
must be approved in writing by RUS prior to initiating the sale or 
lease.


Sec.  1740.80  Accounting, monitoring, and reporting requirements.

    (a) Awardees must adopt a system of accounts for maintaining 
financial records acceptable to the Agency, as described in 7 CFR part 
1770, subpart B.
    (b) Awardees must submit annual comparable audited financial 
statements along with a report on compliance and on internal control 
over financial reporting, and management letter in accordance with the 
requirements of 7 CFR part 1773 using the RUS' on-line reporting 
system. The Certified Public Accountant (CPA) conducting the annual 
audit is selected by the borrower and must be satisfactory to RUS as 
set forth in 7 CFR 1773, subpart B, ``RUS Audit Requirements.''
    (c) Thirty (30) calendar days after the end of each calendar year 
quarter, Awardees must submit to RUS, balance sheets, income 
statements, statements of cash flow, rate package summaries, and

[[Page 11618]]

the number of customers taking broadband service on a per community 
basis utilizing RUS' on-line reporting system. These reports must be 
submitted throughout the loan amortization period or for the economic 
life of the facilities funded with a grant.
    (d) Awardees will be required to submit annually updated service 
area maps through the RUS mapping tool showing the areas where 
construction has been completed and premises are receiving service 
until the entire PFSA can receive the broadband service. At the end of 
the project, Awardees must submit a service area map indicating that 
all construction has been completed as proposed in the application. If 
parts of the PFSA have not been constructed, RUS may require a portion 
of the award to be rescinded or paid back.
    (e) Awardees must comply with all reasonable Agency requests to 
support ongoing monitoring efforts. The Awardee shall afford RUS, 
through its representatives, reasonable opportunity, at all times 
during business hours and upon prior notice, to have access to and the 
right to inspect: The Broadband System, any other property encumbered 
by the Award Documents, any and all books, records, accounts, invoices, 
contracts, leases, payrolls, timesheets, cancelled checks, statements, 
and other documents (electronic or paper, of every kind) belonging to 
or in the possession of the Awardee or in any way pertaining to its 
property or business, including its subsidiaries, if any, and to make 
copies or extracts thereof.
    (f) Awardee records shall be retained and preserved in accordance 
with the provisions of 7 CFR part 1770, subpart A.
    (g) Awardees receiving assistance under this part will be required 
to submit annual reports for three (3) years after the completion of 
construction. The reports must include the following information:
    (1) Existing network service improvements and facility upgrades, as 
well as new equipment and capacity enhancements that support high-speed 
broadband access for educational institutions, health care providers, 
and public safety service providers;
    (2) The estimated number of end users who are currently using or 
forecasted to use the new or upgraded infrastructure;
    (3) The progress towards fulfilling the objectives for which the 
assistance was granted;
    (4) The number and geospatial location of residences and businesses 
that will receive new broadband service;
    (5) The speed and price of the Awardee's broadband service 
offerings; and
    (6) The average price of broadband service in the Project's service 
area.


Sec.  1740.81  Default and de-obligation.

    RUS reserves the right to deobligate awards to Awardees under this 
part that demonstrate an insufficient level of performance, wasteful or 
fraudulent spending, or noncompliance with environmental and historic 
preservation requirements.


Sec. Sec.  1740.82-1740.93  [Reserved]

Subpart G--Other Information and Federal Requirements


Sec.  1740.94  Confidentiality of Applicant information.

    Applicants are encouraged to identify and label any confidential 
and proprietary information contained in their applications. The Agency 
will protect confidential and proprietary information from public 
disclosure to the fullest extent authorized by applicable law, 
including the Freedom of Information Act, as amended (5 U.S.C. 552), 
the Trade Secrets Act, as amended (18 U.S.C. 1905), the Economic 
Espionage Act of 1996 (18 U.S.C. 1831 et seq.), and CALEA (47 U.S.C. 
1001 et seq.). Applicants should be aware, however, that this program 
requires substantial transparency. For example, RUS is required to make 
publicly available on the internet a list of each entity that has 
applied for a loan or grant, a description of each application, the 
status of each application, the name of each entity receiving funds, 
and the purpose for which the entity is receiving the funds.


Sec.  1740.95  Compliance with applicable laws.

    Any recipient of funds under this regulation shall be required to 
comply with all applicable federal, tribal and state laws, including 
but not limited to:
    (a) The Architectural Barriers Act of 1968, as amended (42 U.S.C. 
4151 et seq.);
    (b) The Uniform Federal Accessibility Standards (UFAS) (Appendix A 
to 41 CFR subpart 101-19.6); and
    (c) All applicable federal, tribal and state communications laws 
and regulations, including, for example, the Communications Act of 
1934, as amended, (47 U.S.C. 151 et seq.) the Telecommunications Act of 
1996, as amended (Pub. L. 104-104, 110 Stat. 56 (1996), and CALEA. For 
further information, see http://www.fcc.gov.


Sec. Sec.  1740.96-1740.99  [Reserved]


Sec.  1740.100  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 0572-0152.

Christopher A. McLean,
Acting Administrator, Rural Utilities Service.
[FR Doc. 2021-03443 Filed 2-25-21; 8:45 am]
BILLING CODE 3410-15-P