[Federal Register Volume 87, Number 229 (Wednesday, November 30, 2022)]
[Rules and Regulations]
[Pages 73443-73446]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-25856]


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DEPARTMENT OF AGRICULTURE

Rural Utilities Service

7 CFR Parts 1738 and 1739

[Docket No. RUS-19-Telecom-0003]
RIN 0572-AC46


Rural Broadband Loans, Loan/Grant Combinations, and Loan 
Guarantees

AGENCY: Rural Utilities, USDA.

ACTION: Final rule; confirmation and response to comments.

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SUMMARY: The Rural Utilities Service (RUS or Agency), an agency in the 
United States Department of Agriculture (USDA) Rural Development 
Mission area, published an interim rule with comment in the Federal 
Register on March 12, 2020, to amend its regulation for the Rural 
Broadband Program, previously referred to as the Rural Broadband Access 
Loan and Loan Guarantee Program, to implement the Agricultural Act of 
2018 (the 2018 Farm Bill). Through this action, RUS is adopting the 
interim rule as it was published and providing responses to the public 
comments received.

DATES: Effective November 30, 2022.

FOR FURTHER INFORMATION CONTACT: Laurel Leverrier, Assistant 
Administrator; Telecommunication Program; Rural Development; U.S. 
Department of Agriculture; 1400 Independence Avenue SW; Room 4121-S; 
Washington, DC 20250; telephone 202-720-3416, email 
[email protected]. Persons with disabilities or who require 
alternative means for communication should contact the USDA Target 
Center at 202-720-2600.

SUPPLEMENTARY INFORMATION: On December 20, 2018, under the Agricultural 
Improvement Act of 2018, Public Law 115-334 (2018 Farm Bill), Congress 
made significant improvements to the program, most notably by 
furnishing grant assistance to reach the most underserved rural areas 
lacking broadband access. The Agency published an interim rule with 
comment on March 12, 2020 (85 FR 14393), to implement those required 
statutory changes.
    The 60-day comment period ended on May 11, 2020. Comments were 
received from 16 respondents. Respondents included a funding 
institution, telecommunications and satellite associations and 
providers, businesses, and a private citizen. Four of the 16 
respondents did not offer comments that were responsive or conducive to 
improving the interim rulemaking. Below are the comments received from

[[Page 73444]]

the 12 remaining respondents and the Agency's responses:
    Respondent 1: ``The respondent is a longtime supporter of 
government programs that bring better broadband access to all 
Americans. Our members support closing the digital divide through 
reduced regulatory barriers and opening additional government funding 
opportunities for companies to invest in wireless and wireline 
deployments of broadband infrastructure. Therefore, the respondent 
encourages RUS to consider all forms of broadband deployment (both 
wireless and wireline) when evaluating applications for the Rural 
Broadband Program funding. By expanding the scope of RUS's program 
funding it will allow for the economy to continue to grow, provide a 
technology neutral environment to identify the best solutions to have 
broadband access to rural communities, and follow Congressional intent 
to expand the RUS program to utilize technology that incorporates 
television white spaces (TVWS). Therefore, it is important that RUS 
activate TVWS in addition to wireline broadband for the United States 
to support the present and future of Internet of Things (IoT) 
services.''
    Agency response: We appreciate your concern. The broadband program 
is a technology neutral program and wireless technology along with 
wireline technology is eligible for funding consideration as long as 
the overall application meets the eligibility requirements of the 
program.
    Respondent 2: The interim rule should be modified to clarify that 
the ``associated loan'' component of the grant could be provided by a 
private funding source. Regardless of whether the loan portion of the 
grant/loan combination comes from RUS or a private lender, RUS should 
consider adding alternative forms of credit support. Since the 
statutory and regulatory framework allows RUS the discretion to 
determine appropriate security arrangements, respondent believes that a 
letter of credit alternative should be permitted for those systems that 
have repaid and no longer borrow from the Government (``Non-Government 
Borrowers''). The published interim final rule does not explain how RUS 
would calculate the fees, and respondent encourages the agency to 
elaborate on the expected method of calculating the fees in the final 
rule.
    Agency response: The requirement to apply for an RUS loan in order 
to receive associated grant funding is a statutory requirement and 
cannot be modified at this time. Concerning the security arrangements 
for an RUS loan, applicants may propose alternate forms of collateral 
but should be prepared to enter into security arrangements as detailed 
in the regulation.
    Respondent 3: ``Please do not forget the micro deserts. Broadband 
is available two houses from me but they will not extend to me on my 
farm. I rely on a hotspot that doesn't always work, and never gets more 
then about 4m BPS download and less than one upload and that's with an 
expensive booster. I have to go to town to update my computer. Our cell 
signal is not good.''
    Agency response: The Agency understands your situation. Applicants 
determine the service areas that they are requesting financing for and 
the Agency requires that all premises in the proposed funded service 
must be capable of receiving the proposed broadband service.
    Respondent 4: Programs can only reach their highest potential if 
they adhere to the principles for which the respondent has consistently 
advocated: a focus on dedicating funding to bring broadband to truly 
unserved areas in the most cost-effective way possible, and a 
commitment to ensuring a fully transparent process so that all 
providers can ensure that scarce funding is not allocated to already 
served areas.
    Agency response: The Agency will analyze industry trends and set 
the broadband eligibility speeds accordingly to ensure that areas with 
inadequate broadband service can receive improved broadband service 
comparable to broadband service that is being provided in non-rural 
areas.
    Respondent 5: ``Significantly reduce the environmental reporting 
requirements in the application. Remove location and network specifics 
regarding Non-funded Service Areas (NFSA) and Unadvanced Prior Loan 
Fund (UPLF) areas. Allow non-contiguous boundaries for NFSAs. Points 
associated with schools and libraries should be handled differently. 
The requirement that 100% of location in PFSA [proposed funded service 
area] be unserved should be relaxed when applying for 100% grants. 
Requiring a blanket first lien on all assets (when a loan component was 
included) eliminated many potential applicants who use other lending 
sources. Do not require applicant to provide subscriber penetrations 
per serving area. Calculation of depreciation expense on grant funded 
assets should be eliminated or should have the ability to be manually 
adjusted. Environmental questionnaire (EQ) should be similar to EQ for 
RUS Infrastructure loans. Allow adequate time for application 
preparation. Definition of Unserved should match the FCC [Federal 
Communications Commission] definition. Eliminate requirement to list 
fiber sizing on network diagrams. There are also several enhancements 
we would like to see with the application portal.''
    Agency response: The application process and system have been 
designed to ensure that all regulatory/statutory requirements are met 
and that the proposed system is both financially and technically 
feasible. The information requested is essential in making these 
determinations.
    Respondent 6: ``Consistent with the intent of the 2018 Farm Bill, 
section 1738.101(a)(1) should make it clear that applicants are 
eligible for grant funding if they are pairing the grant with a loan 
from a third-party, not just a loan from RUS. Similarly, the discussion 
of grants for development costs in section 1738.101(d) should include 
broadband loans from third parties, not just RUS broadband loans.
     The definition and discussion of the ``Broadband lending 
speed'' should be modified to clarify that the initial Broadband 
lending speed under these programs is ``25/3 Mbps fixed terrestrial'' 
and clarify the discussion of eligible service area to make it clear 
that initially any area with anything less than ``25/3 Mbps fixed 
terrestrial'' is eligible while prioritizing areas that lack access to 
at least 10/1.
     RUS should emphasize that mobile and satellite service 
will not be considered in determining eligibility, that RUS funding 
will not be provided to mobile service, but rather for high-capacity 
backbone to connect households and premises, and also to support 
wireless sites.
     RUS should clarify that, if there are applications for low 
density areas, RUS will exercise its discretion in determining the mix 
of grants and loans by using more of the designated funds in the form 
of grants and targeting such grant funding to lower density areas.
     The standards set forth in section 1738.101(b) for 
determining density should be based upon household density, not 
population density.
     RUS should allow matching funding, whether in the form of 
cash or loan funds, to be spread over the built-out period, rather than 
fully expended upfront before grant funding can be used. And loan/grant 
combo awardees should be allowed to draw equally from loan and grant 
funds rather that expend loan funds before accessing grant funds.
     For these programs, RUS should continue with the 
competitive market analysis used in ReConnect program,

[[Page 73445]]

rather than the heightened requirements contained in the IFR [interim 
final rule].
     RUS should modify the treatment of challenges to 
applications by providing the applicant with access to the challenge 
and given a chance to respond within 30 days.
     In cases where issues raised in a challenge can be 
addressed by minor modifications to the application, RUS should allow 
applicants to do so.
     We encourage RUS to clearly state in the Application what 
the applicant must report and provide regarding its structure to 
increase its flexibility regarding partnerships (for example, not 
requiring one partner to be designated ``lead applicant'').
     Regarding fidelity bond coverage of 15% of the loan or 
loan/grant amount, RUS should permit a letter of credit in lieu of a 
fidelity bond and should allow either mechanism to be reduced as the 
awardee meets or exceeds build-out milestones or obligations.
     We also ask RUS to clarify the effective date of IFR and 
clarify that the RUS letter to the applicant on fund availability is 
the event that marks the beginning of the five-year build-out period.
     Finally, we ask RUS to explain how lender fees for loan 
guarantees would be calculated and how RUS would use the proceeds from 
those fees.''
    Agency response: Pairing grant funding with an RUS loan is a 
statutory requirement and cannot be modified at this time.
    The broadband lending speed is designed to change with the ever-
increasing bandwidth requirements that the public requires. The Agency 
will evaluate the broadband lending spend each time that a funding 
announcement is published and set this requirement accordingly.
    The broadband program is technology neutral and any technology that 
can meet the broadband lending speed is eligible for consideration.
    The amount of grant funds and the associated density calculations 
that can be applied for are statutory requirements and cannot be 
changed at this time.
    The agency will consider the recommendation to spread out matching 
requirements over the construction period but at this time, the 
requirement will remain that matching funds be expended first.
    Through the Public Notice Response process, the Agency will conduct 
on-site review of the proposed service area to determine if adequate 
broadband exists. If an area of the proposed funded service area is 
found to be ineligible, the Agency will work with applicants to modify 
the proposed service area accordingly.
    Once an offer of an award is extended to an applicant, the 5-year 
construction period starts once all closing conditions are satisfied 
and funds become available to the awardee.
    At this time, the Agency has not determined how fees associated 
with a loan guarantee will be calculated. Once this process has been 
fully determined, the Agency will conduct outreach explaining the 
process.
    Respondent 7: As demonstrated by respondent's successful 
deployments in rural America and around the world, excluding satellite 
from the definition of broadband is arbitrary and would unjustly 
penalize operators that use satellite in whole or in part to provide 
the same services as exclusively terrestrial operators, with no 
perceivable difference in customers' experiences. In contrast, enabling 
the inclusion of satellite connectivity in RUS's rural broadband 
funding programs would empower applicants to bring service to the most 
rural areas of the United States using a combination of satellite and 
terrestrial deployments. Respondent urges RUS to adopt technology-
neutral standards without an arbitrary definition of broadband to 
ensure that applicants for RUS funding have the option to integrate 
cost-effective and high-performance satellite broadband technologies 
into their networks. At the very least, RUS should clarify that its 
definition of broadband only applies to last mile connectivity and does 
not seek to limit other non-terrestrial network components used to 
reach remote rural areas.
    Agency response: To ensure that all rural areas have sufficient 
bandwidth, the Agency will evaluate the eligibility and construction 
requirements every time a funding announcement is published. The 
bandwidth for both eligibility and construction will be set to ensure 
that all rural Americans have access to sufficient bandwidth. 
Applicants must ensure that all households in the proposed funded 
service area can receive the minimum bandwidth requirements at the same 
time.
    Respondent 8: The rule proposed by RUS excludes satellite Broadband 
from aspects of its grant programs, while the 2018 Farm Bill did not 
exclude satellite operators who otherwise meet the requirements of RUS' 
assistance programs from participating in these programs. Satellite 
broadband services should not be excluded from the determination of 
whether proposed project areas are already served. Accordingly, RUS 
should clarify that satellite providers are eligible to participate in 
these important programs and adopt technology neutral criteria. Wrongly 
excluding satellite--or even failing to remove this ambiguity--will 
greatly undermine RUS's ability to achieve its goals of increasing 
economic opportunity in rural America by supporting broadband 
infrastructure deployments that will provide affordable, high-quality 
connectivity to rural communities.
    Agency response: To ensure that that all rural areas have 
sufficient bandwidth, the Agency will evaluate the eligibility and 
construction requirements every time a funding announcement is 
published. The bandwidth for both eligibility and construction will be 
set to ensure that all rural Americans have access to sufficient 
bandwidth. Applicants must ensure that all households in the proposed 
funded service area can receive the minimum bandwidth requirements at 
the same time.
    Respondent 9: With its Starlink satellite system, respondent seeks 
to provide high-speed broadband worldwide, and specifically to remote 
and rural areas that are the most unserved. Although respondent has 
made no decision to participate in any program administered by RUS or 
any other Federal or state broadband program, respondent opposes any 
proposals that would arbitrarily exclude next-generation satellite 
systems from the definition of broadband. Broadband should be defined 
by the quality of service provided, not by the mechanism which provides 
it.
    Agency response: The Agency will continue to monitor the 
developments in satellite technology and may consider modifying the 
restrictions on satellite provided broadband for future funding rounds.
    Respondent 10: Respondent unequivocally supports the position 
stated in respondent 7's letter against the proposed rule changing the 
definition of broadband to exclude satellite. In a state where zero 
school districts have the FCC recommended 1 Mbps per student capacity 
and 20% of Alaska residents have no broadband access other than 
satellite, Alaska would be irreparably harmed if the Department were to 
adopt the proposed rules that exclude satellite.
    Agency response: To ensure that that all rural areas have 
sufficient bandwidth, the Agency will evaluate the eligibility and 
construction requirements every time a funding announcement is 
published. The bandwidth for both eligibility and construction will be 
set to ensure that

[[Page 73446]]

all rural Americans have access to sufficient bandwidth. Applicants 
must ensure that all households in the proposed funded service area can 
receive the minimum bandwidth requirements at the same time.
    Respondent 11: Respondent supports the interim funding rule and 
provides the following comments to improve upon the rules, as 
summarized below:
     Applicants should be allowed to pair their grants with 
loans from third parties, not just loans from RUS.
     ``Broadband lending speed'' should be modified to clarify 
that the initial broadband lending speed under these programs is ``25/3 
Mbps fixed terrestrial'' and clarify the discussion of ``eligible 
service area'' to make it clear that initially any area with anything 
less than ``25/3 Mbps fixed terrestrial'' is eligible while 
prioritizing areas that lack access to at least 10/1.
     Mobile and satellite services should not be considered for 
purposes of determining eligible areas, nor should mobile broadband be 
included for purposes of ``Broadband lending speeds'' that may receive 
RUS funding.
     RUS should allow matching funding, whether in the form of 
cash or loan funds, to spread over the built-out period, rather than 
fully expended upfront before grant funding can be used.
     RUS should not require applicants to provide a competitive 
analysis of the market, because such analysis is not provided within 
the statute nor is such analysis necessary for purposes of carrying out 
the other provisions in the statute.
     RUS should allow applicants an opportunity to respond to 
challenges from existing service providers claiming to serve areas 
within the applicants' proposed funded service area; and should permit 
applicants to modify their application to respond to challenges. In any 
event, RUS should not exempt from disclosure the information that is 
presented in support of an existing service provider's claim. This one-
way, opaque process invites abuse by existing service providers and 
prevents applicants from defending their proposals.
    Agency response: Pairing grant funding with an RUS loan is a 
statutory requirement and cannot be modified at this time.
    The broadband lending speed is designed to change with the ever-
increasing bandwidth requirements that the public requires. The Agency 
will evaluate the broadband lending speed each time that a funding 
announcement is published and set this requirement accordingly.
    The broadband program is technology neutral and any technology that 
can meet the broadband lending speed is eligible for consideration.
    The amount of grant funds and the associated density calculations 
that can be applied for are statutory requirements and cannot be 
changed at this time.
    The Agency will consider the recommendation to spread out matching 
requirements over the construction period but at this time, the 
requirement will remain that matching funds be expended first.
    Through the Public Notice Response process, the Agency will conduct 
on-site review of the proposed service area to determine if adequate 
broadband exists. If an area of the proposed funded service area is 
found to be ineligible, the Agency will work with applicants to modify 
the proposed service area accordingly.
    Once an offer of an award is extended to an applicant, the 5-year 
construction period starts once all closing conditions are satisfied 
and funds become available to the awardee.
    Respondent 12: ``Regardless of the specific needs of a locality, 
strong last-mile wireless broadband connectivity is a necessity for 
countless internet of things use cases the RUS seeks to advance, such 
as smart agriculture deployments, and should be prioritized in Rural 
Broadband Program awards. RUS Enabled by new rules adopted by the 
Federal Communications Commission, new wireless technology that 
utilizes television white spaces (TVWS) has the demonstrated ability to 
exceed Rural Broadband Program thresholds in RUS' interim final rule, 
providing extended last-mile wireless connectivity that supports higher 
throughput. We strongly encourage RUS to ensure that the updated Rural 
Broadband Program's rules support applications utilizing TVWS 
technology deployments that will increase and improve broadband access 
to rural communities, consistent with Congress' intent in the 
Agricultural Act of 2018.''
    Agency response: Fixed wireless broadband is an eligible technology 
as long as it can deliver the required broadband service to every 
household in the proposed service area at the same time.
    The Agency evaluated the responsive comments and based on analysis 
and response to comments, we are adopting the interim rule without 
change.

List of Subjects

7 CFR Part 1738

    Loan programs--communications, Rural areas, Telecommunications, 
Telephone.

7 CFR Part 1739

    Grant programs--communications, Rural areas, Telecommunications, 
Telephone.

PART 1738--RURAL BROADBAND LOANS, LOAN/GRANT COMBINATIONS, AND LOAN 
GUARANTEES

PART 1739--BROADBAND GRANT PROGRAM

0
Accordingly, the interim rule amending 7 CFR parts 1738 and 1739, which 
was published at 85 FR 14393 on March 12, 2020, is adopted as final 
without change.

Andrew Berke,
Administrator, Rural Utilities Service.
[FR Doc. 2022-25856 Filed 11-29-22; 8:45 am]
BILLING CODE 3410-15-P