Order Code RL33816
CRS Report for Congress
Received through the CRS Web
Broadband Loan and Grant Programs in the
USDA’s Rural Utilities Service
Updated April 27June 22, 2007
Lennard G. Kruger
Specialist in Science and Technology
Resources, Science, and Industry Division
Congressional Research Service ˜ The Library of Congress
Broadband Loan and Grant Programs in the USDA’s
Rural Utilities Service
Summary
Given the large potential impact broadband access to the Internet may have on
the economic development of rural America, concern has been raised over a “digital
divide” between rural and urban or suburban areas with respect to broadband
deployment. While there are many examples of rural communities with state of the
art telecommunications facilities, recent surveys and studies have indicated that, in
general, rural areas tend to lag behind urban and suburban areas in broadband
deployment.
Citing the lagging deployment of broadband in many rural areas, Congress and
the Administration acted in 2001 and 2002 to initiate pilot broadband loan and grant
programs within the Rural Utilities Service (RUS) at the U.S. Department of
Agriculture (USDA). Subsequently, Section 6103 of the Farm Security and Rural
Investment Act of 2002 (P.L. 107-171) amended the Rural Electrification Act of
1936 to authorize a loan and loan guarantee program to provide funds for the costs
of the construction, improvement, and acquisition of facilities and equipment for
broadband service in eligible rural communities. Currently, RUS/USDA houses the
only two federal assistance programs exclusively dedicated to financing broadband
deployment: the Rural Broadband Access Loan and Loan Guarantee Program and
the Community Connect Grant Program.
RUS broadband loan and grant programs have been awarding funds to entities
serving rural communities since FY2001. A number of criticisms of the RUS
broadband loan and grant programs have emerged, including criticisms related to
loan approval and the application process, eligibility criteria, and loans to
communities with existing providers.
The current authorization for the Rural Broadband Access Loan and Loan
Guarantee Program expires on September 30, 2007. It is expected that the 110th
Congress will consider reauthorization of the program as part of the farm bill.
Meanwhile, H.R. 2035, a bill “to tailor the rural broadband program to better serve
those living in rural areas,” was introduced on April 25, 2007 to address some of the
reauthorization issues related to the RUS broadband loan program. The 110th Congress is
considering reauthorization and modification of the program as part of the farm bill
(H.R. 2419). On June 6, 2007, the House Subcommittee on Specialty Crops, Rural
Development and Foreign Agriculture marked up the rural development section of
H.R. 2419. Additionally, H.R. 2035, H.R. 2174, H.R. 2569, S. 541, S. 1032, and S.
1439 have been introduced to address some of the reauthorization issues related to
the RUS broadband loan program. On May 11, 2007, RUS released a Proposed Rule
seeking to revise the broadband loan program rules and regulations. Some key issues
pertinent to a consideration of the RUS broadband programs include restrictions on
applicant eligibility, how “rural” is defined with respect to eligible rural
communities, how to address assistance to areas with pre-existing broadband service,
technological neutrality, funding levels and mechanisms, and the appropriateness of
federal assistance. Ultimately, any modification of rules, regulations, or criteria
associated with the RUS broadband program will likely result in “winners and losers”
in terms of which companies, communities, regions of the country, and technologies
are eligible or more likely to receive broadband loans and grants.
This report will be updated as events warrant.
Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Background: Broadband and Rural America . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Pilot Broadband Loan and Grant Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Rural Broadband Access Loan and Loan Guarantee Program . . . . . . . . . . . . . . . . 5
Community Connect Broadband Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Other Broadband Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Criticisms of RUS Broadband Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . 11. . . . 12
Loan Approval and Application Process . . . . . . . . . . . . . . . . . . . . . . . . . . . 1211
Eligibility Criteria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1413
Loans to Communities With Existing Providers . . . . . . . . . . . . . . . . . . . . . 1413
Issues for Reauthorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1614
Restricting Applicant Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1615
Definition of “Rural Community” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1715
Pre-existing Broadband Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16. . . . 18
Technological Neutrality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16. . . . 19
Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17. . . . 20
Appropriateness of Federal Assistance . . . . . . . . . . . . . . . . . . . . . . . . 18. . . . 21
Activities in the 110th Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18. . . . 21
Legislation in the 110th Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
List of Tables
Table 1. Funding for the Rural Broadband Access Loan and Loan Guarantee
Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Table 2. Appropriations for the Community Connect Broadband Grants,
FY2002-FY2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Table 3. Number of Customers Receiving New or Improved Telecommunication
Telecommunication Services (Broadband) Through USDA
Financing of Telecommunications
Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1011
Broadband Loan and Grant Programs in the
USDA’s Rural Utilities Service
Introduction
The Rural Utilities Service (RUS) within the U.S. Department of Agriculture
(USDA) houses the only two federal assistance programs exclusively dedicated to
financing deployment of broadband Internet access in rural America. These are: the
Rural Broadband Access Loan and Loan Guarantee Program and the Community
Connect Grant Program. The two programs initially appeared as pilot programs in
2001 and 2002. The broadband loan program was authorized by the 2002 farm bill
(P.L. 107-171); this authorization expires on September 30, 2007.
The 110th Congress is expected to consider the RUS broadband program as part
of the reauthorization of the farm bill in 2007. Given concerns over the lagging
status of broadband deployment in many rural areas, Congress is likely to examine
how the RUS broadband programs might be positioned to most effectively address
rural broadband development. This report provides detailed background information
on the RUS broadband loan and grant programs, outlines criticisms of how the RUS
broadband program has been implemented thus far, and discusses issues that
Congress may be asked to consider during the reauthorization process.
Background: Broadband and Rural America
The broadband loan and grant programs at RUS are intended to accelerate the
deployment of broadband services in rural America. “Broadband” refers to highspeed Internet access for private homes, commercial establishments, schools, and
public institutions. Currently in the United States, broadband is primarily provided
via cable modem (from the local provider of cable television service) or over the
telephone line (digital subscriber line or “DSL”). Other broadband technologies
include fiber optic cable, fixed wireless, satellite, and broadband over power lines
(BPL).
Broadband access enables a number of beneficial applications to individual
users and to communities. These include e-commerce, telecommuting, voice service
(voice over the Internet protocol or “VOIP”), distance learning, telemedicine, public
safety, and others. It is becoming generally accepted that broadband access in a
community can play an important role in economic development. A February 2006
study by the Massachusetts Institute of Technology for the Department of
Commerce’s Economic Development Administration marked the first attempt to
measure the impact of broadband on economic growth. The study found that
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“between 1998 and 2002, communities in which mass-market broadband was
available by December 1999 experienced more rapid growth in employment, the
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number of businesses overall, and businesses in IT-intensive sectors, relative to
comparable communities without broadband at that time.”1
Access to affordable high-speed Internet service is viewed as particularly
important for the economic development of rural areas because it enables individuals
and businesses to participate fully in the online economy regardless of geographical
location. For example, aside from enabling existing businesses to remain in their
rural locations, broadband access could attract new business enterprises drawn by
lower costs and a more desirable lifestyle. Essentially, broadband potentially allows
businesses and individuals in rural America to live locally while competing globally
in an online environment.
Given the large potential impact broadband may have on the economic
development of rural America, concern has been raised over a “digital divide”
between rural and urban or suburban areas with respect to broadband deployment.
While there are many examples of rural communities with state of the art
telecommunications facilities,2 recent surveys and studies have indicated that, in
general, rural areas tend to lag behind urban and suburban areas in broadband
deployment. For example:
!
A September 2004 Department of Commerce report, A Nation
Online: Entering the Broadband Age, found that a lower percentage
of Internet households have broadband in rural areas (24.7%) than
in urban areas (40.4%), and that “while broadband usage has grown
significantly in all areas since the previous survey, the rural-urban
differential continues.”3 The report also found that broadband
penetration rates are higher in the West and Northeast than in the
South and Midwest.4
!
December 2005 data from the Pew Internet & American Life
Project indicated that while broadband adoption is growing in urban,
suburban, and rural areas, broadband users make up larger
percentages of urban and suburban users than rural users. Pew
found that the percentage of all U.S. adults with broadband at home
1
Gillett, Sharon E., Massachusetts Institute of Technology, Measuring Broadband’s
Economic Impact, report prepared for the Economic Development Administration, U.S.
Department of Commerce, February 28, 2006, p. 4. Available at [http://www.eda
.gov/ImageCache/EDAPublic/documents/pdfdocs2006/mitcmubbimpactreport_2epdf/v1/
mitcmubbimpactreport.pdf].
2
See for example: National Exchange Carrier Association (NECA), Trends 2006: Making
Progress With Broadband, 2006, 26 p. Available at
[http://www.neca.org/media/
trends_brochure_website.pdf].
3
U.S. Department of Commerce, Economics and Statistics Administration, National
Telecommunications and Information Administration, A Nation Online: Entering the
Broadband Age, September 2004, pp. 12-13.
4
Ibid., p. 12.
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is 38% for urban areas, 40% for suburban areas, and 24% for rural
areas.5
!
A May 2006 report released by the Government Accountability
Office (GAO) found that 17% of rural households subscribe to
broadband, as opposed to 28% of suburban and 29% of urban
households.6 GAO also found that lower broadband subscription
rates in rural areas are related to availability, not to a lesser tendency
of rural households to purchase broadband service.7
!
Finally, and most recently, in the latest Federal Communications
Commission (FCC) data on the deployment of high-speed Internet
connections (released January 2007), high-speed subscribers were
reported in 99% of the most densely populated zip codes, as opposed
to 89% of zip codes with the lowest population densities.8
The comparatively lower population density of rural areas is likely the major
reason why broadband is less deployed than in more highly populated suburban and
urban areas. Particularly for wireline broadband technologies — such as cable
modem and DSL — the greater the geographical distances among customers, the
larger the cost to serve those customers. For example, in providing
telecommunications services, investment per subscriber in rural systems averages
$2,921 compared to $1,920 for urban.9 Thus, there is often less incentive for
companies to invest in broadband in rural areas than, for example, in an urban area
where there is more demand (more customers with perhaps higher incomes) and less
cost to wire the market area.
The terrain of rural areas can also be a hindrance, in that it is more expensive
to deploy broadband technologies in a mountainous or heavily forested area. An
additional added cost factor for remote areas can be the expense of “backhaul” (e.g.,
the “middle mile”) which refers to the installation of a dedicated line which transmits
a signal to and from an Internet backbone which is typically located in or near an
urban area.
5
Horrigan, John B., Pew Internet & American Life Project, Rural Broadband Internet Use,
February 2006,. Available at [http://www.pewinternet.org/pdfs/PIP_Rural_Broadband.pdf].
6
U.S. Government Accountability Office, Broadband Deployment is Extensive throughout
the United States, but It Is Difficult to Assess the Extent of Deployment Gaps in Rural Areas,
GAO-06-426, May 2006, p. 12. Available at [http://www.gao.gov/new.items/d06426.pdf].
7
Ibid., p. 5.
8
FCC, High-Speed Services for Internet Access: Status as of June 30, 2006, January 2007,
p. 4. Available at
[http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-270128A1.pdf].
9
Office of Management and Budget, Program Assessment Rating Tool (PART), “Detailed
Information on the Rural Telecommunications Loan Programs Assessment,” assessment
year 2004, available at [http://www.whitehouse.gov/omb/expectmore
//
detail.10001017.2005.html]
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Cable modem and DSL currently comprise about 80% of broadband deployment
nationwide.10 However, because of the challenges of deploying these technologies
in low population density areas, other broadband technologies have been identified
as perhaps offering potential in rural areas. These include mobile wireless (cellular),
fixed wireless (WIMAX, wi-fi), satellite, and broadband over powerlines (BPL).
Pilot Broadband Loan and Grant Programs
Given the lagging deployment of broadband in rural areas, Congress and the
Administration acted to initiate pilot broadband loan and grant programs within the
Rural Utilities Service of the U.S. Department of Agriculture. While RUS had long
maintained telecommunications loan and grant programs (Rural Telephone Loans
and Loan Guarantees, Rural Telephone Bank, and more recently, the Distance
Learning and Telemedicine Loans and Grants) none were exclusively dedicated to
financing rural broadband deployment. Title III of the FY2001 agriculture
appropriations bill (P.L. 106-387) directed USDA/RUS to conduct a “pilot program
to finance broadband transmission and local dial-up Internet service in areas that
meet the definition of ‘rural area’ used for the Distance Learning and Telemedicine
Program.”
Subsequently, on December 5, 2000, RUS announced the availability of $100
million in loan funding through a one-year pilot program “to finance the construction
and installation of broadband telecommunications services in rural America.”11 The
broadband pilot loan program was authorized under the authority of the Distance
Learning and Telemedicine Program (7 U.S.C. 950aaa), and was available to “legally
organized entities” not located within the boundaries of a city or town having a
population in excess of 20,000.
The FY2001 pilot broadband loan program received applications requesting a
total of $350 million. RUS approved funding for 12 applications totaling $100
million. The FY2002 agriculture appropriations bill (P.L. 107-76) designated a loan
level of $80 million for broadband loans, and on January 23, 2002, RUS announced
that the pilot program would be extended into FY2002, with $80 million in loans
made available to fund many of the applications that did not receive funding during
the previous year.12
Meanwhile, the FY2002 agriculture appropriations bill (P.L. 107-76) allocated
$20 million for a pilot broadband grant program, also authorized under the Distance
Learning and Telemedicine Program. On July 8, 2002, RUS announced the
availability of $20 million for a pilot grant program for the provision of broadband
service in rural America. The program was specifically targeted to economically
10
High-Speed Services for Internet Access: Status as of June 30, 2006, Chart 2.
11
Rural Utilities Service, USDA, “Construction and Installation of Broadband
Telecommunications Services in Rural America; Availability of Loan Funds,” Federal
Register, Vol. 65, No. 234, December 5, 2000, p. 75920.
12
Rural Utilities Service, USDA, “Broadband Pilot Loan Program,” Federal Register, Vol.
67, No. 15, January 23, 2002, p. 3140.
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service in rural America. The program was specifically targeted to economically
challenged rural communities with no existing broadband service. Grants were
made available to entities providing “community-oriented connectivity” which the
RUS defined as those entities “who will connect the critical community facilities
including the local schools, libraries, hospitals, police, fire and rescue services and
who will operate a community center that provides free and open access to
residents.”13
In response to the July 8, 2002, Notice of Funds Availability, RUS received
more than 300 applications totaling more than $185 million in requested grant
funding. RUS approved 40 grants totaling $20 million. The pilot program was
extended into FY2003, as the Consolidated Appropriations Resolution of 2003 (P.L.
108-7) allocated $10 million for broadband grants. On September 24, 2003, 34
grants were awarded to eligible applicants who did not receive funding during the
previous year.
Rural Broadband Access Loan and Loan Guarantee
Program
Building on the pilot broadband loan program at RUS, Section 6103 of the Farm
Security and Rural Investment Act of 2002 (P.L. 107-171) amended the Rural
Electrification Act of 1936 to authorize a loan and loan guarantee program to provide
funds for the costs of the construction, improvement, and acquisition of facilities and
equipment for broadband service in eligible rural communities.14 Section 6103 made
available, from the funds of the Commodity Credit Corporation (CCC), a total of
$100 million through FY2007 ($20 million for each of fiscal years 2002 through
2005, and $10 million for each of fiscal years 2006 and 2007). P.L. 107-171 also
authorized any other funds appropriated for the broadband loan program.
Beginning in FY2004, Congress has annually blocked mandatory funding from
the CCC. Thus — starting in FY2004 — the program has been funded as part of
annual appropriations in the Distance Learning and Telemedicine account within the
Department of Agriculture appropriations bill. Every fiscal year, Congress has
approved an appropriation for the loan program which is used to subsidize a specific
loan level (the total amount of lending authority). Table 1 shows — for the life of
the program to date — loan subsidies, loan levels (lending authority), and actual
funds announced by RUS yearly for loan applications. Announced available funding
typically exceeds yearly loan levels because large balances of unobligated money
have been carried over from year to year. However, Section 1401 of the Deficit
Reduction Act of 2005 (P.L. 109-171) cancelled unobligated funds remaining as of
October 1, 2006.
13
Rural Utilities Service, USDA, “Broadband Pilot Grant Program,” Federal Register, Vol.
67, No. 130, July 8, 2002, p. 45080.
14
Title VI of the Rural Electrification Act of 1936 (7 U.S.C. 950bb).
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For FY2007, the Administration requested a $10.8 million subsidy which would
support a loan level of about $357 million ($297 million in Treasury rate loans, $30
million in 4% loans, and $30 million in loan guarantees). The FY2007 House
Agriculture Appropriations bill, passed by the House on May 23, 2006 (H.R. 5384;
H.Rept. 109-463), would provide $10.8 million (supporting a loan level of $503
13
Rural Utilities Service, USDA, “Broadband Pilot Grant Program,” Federal Register, Vol.
67, No. 130, July 8, 2002, p. 45080.
14
Title VI of the Rural Electrification Act of 1936 (7 U.S.C. 950bb).
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million) for the cost of broadband treasury rate loans. On June 22, 2006, the Senate
Appropriations Committee approved $10.75 million (S.Rept. 109-266) supporting
a Treasury rate loan level of $500 million.
H.J. Res 20 (P.L. 110-5), which provides continuing appropriations for the
remainder of FY2007, sets the FY2007 appropriation at the FY2006 level of $10.75
million for the cost of broadband loans, supporting a loan level of $500 million.
The President’s FY2008 budget proposal was released on February 5, 2007.
The Administration requests a $6.45 million (subsidy) to support a loan level of $300
million.
Table 1. Funding for the Rural Broadband Access Loan and
Loan Guarantee Program
Budget Authority
(subsidy level)
Loan Level
(lending
authority)
Announced
Available Funding
for Loans and Loan
Guaranteesa
FY2003
$40 millionb
$1.455 billion
$1.455 billionc
FY2004
$13.1 million
$602 million
$2.211 billiond
FY2005
$11.715 million
$550 million
$2.157 billione
FY2006
$10.75 million
$500 million
$1.085 billionf
FY2007
$10.75 million
$500 million
not yet announced
FY2008
(request)
$6.45 million
$300 million
--—
a. Because all available funds were not awarded, unobligated balances were carried over from year
to year.
b. Composed of $20 million from FY2002 plus $20 million for FY2003 of mandatory funding from
the Commodity Credit Corporation, as directed by P.L. 107-171. In the FY2004, FY2005, and
FY2006 appropriations bills, mandatory funding from the CCC was canceled.
c. Rural Utilities Service, USDA, “Rural Broadband Access Loans and Loan Guarantees Program,”
Federal Register, Vol. 68, No. 20, January 30, 2003, pp. 4753-4755.
d. Rural Utilities Service, USDA, “Rural Broadband Access Loans and Loan Guarantees Program,”
Federal Register, Vol. 69, No. 60, March 29, 2004, pp. 16231-16232.
e. Rural Utilities Service, USDA, “Rural Broadband Access Loans and Loan Guarantees Program,”
Federal Register, Vol. 70, No. 42, March 4, 2005, pp. 10595-10596.
f. USDA, Rural Utilities Service, “Rural Broadband Access Loan Program,” powerpoint presentation,
October 19, 2006.
Available at [http://www.mnart.org/powerpoint/AnnualMtg
//
Dominic.ppt#734,13,BroadbandLoan Program:FY2006 Budget].
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The Rural Broadband Access Loan and Loan Guarantee Program is codified as
7 U.S.C. 950bb. Specifically, Treasury rate loans, 4% loans, and loan guarantees are
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authorized for entities providing broadband service for “eligible rural communities,”
defined as any area of the United States that is not contained in an incorporated city
or town with a population in excess of 20,000 inhabitants.15 RUS is required to be
technologically neutral in determining whether or not to make a loan, and is
instructed to give priority to rural communities with no existing residential
broadband service. Loans are used for financing new or improved existing
broadband provider facilities. Loans cannot be used to finance installations or
equipment at customers’ premises.
On January 30, 2003, the RUS published in the Federal Register the regulation
(7 CFRC.F.R. part 1738) establishing the Rural Broadband Access Loan and Loan
Guarantee Program, as authorized by P.L. 107-171.16 According to the regulation,
entities eligible to receive loans include corporations, limited liability companies,
cooperative or mutual organizations, Indian tribes, and public bodies. Specifically
not eligible are individuals, partnerships, and any entity serving 2% or more of the
telephone subscriber lines in the United States. All applicants are required to
demonstrate adequate credit support — a minimum of 20% of requested loan
amount, including cash on hand equivalent to one full year of operating expense.17
To be eligible for 4% loans, applicants must be proposing to serve a community
with no existing broadband service, a population of 2,500 or less, and a service area
with population density of no more than 20 persons per square mile. Additionally,
the community must be located in a county with a per capita income of less than or
equal to 65% of the national per capita income.
As of September 30, 2006, the broadband loan program received 185
applications, requesting a total of $3.546 billion in loans. As of September 30, 63
15
Section 772 of the FY2004 Consolidated Appropriations Act (P.L. 108-199) changed the
definition of an “eligible rural community” to be defined as “any area of the United States
that is not contained in an incorporated city or town with a population in excess of 20,000
inhabitants.” Accordingly, the March 29, 2004 Notice of Funds Availability for the Rural
Broadband Access Loans and Loan Guarantee Program defined “Eligible Rural Community”
as follows:
The definition of eligible rural community in Section 601(b)(2) of the Rural
Electrification Act (7 U.S.C. 950bb)(b)(2), qualifying for financial assistance
under the Rural Broadband Access Loan and Loan Guaranty Program, has been
amended by provisions in the Consolidated Appropriations Act, 2004, to mean
any area of the United States that is not contained in an incorporated city or town
with a population in excess of 20,000 inhabitants. Therefore, an applicant no
longer must demonstrate that it is not located in an area designated as a standard
metropolitan statistical area. This change supersedes and nullifies contrary
provisions in regulations implementing the broadband program found at 7 CFR
part 1738.
16
Rural Utilities Service, USDA, “Rural Broadband Access Loans and Loan Guarantees,”
Federal Register, Vol. 68, No. 20, January 30, 2003, pp. 4684-4692.
17
The cash-on-hand requirement is waived for companies with two previous years of
positive cash flow.
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As of May 1, 2007, the broadband loan program received 198 applications,
requesting a total of $4.3 billion in loans. Of these, 69 applications were approved
applications were approved (totaling $1.121 billion), 2021 were in review (totaling $930
950 million), and 102108 had been
returned (totaling $1.516 billion).182.14 billion). RUS anticipates another $400 million in
applications during 2007.18 RUS estimates that more than half a million households
in more than 1,000 rural communities will receive broadband service as a result of
approved loans. Nearly 90% of loans approved were made to private companies, 7%
to cooperatives, 3% to municipalities, and one loan was awarded to a tribal
authority.19
Applications for the Rural Broadband Access Loan and Loan Guarantee
program are accepted at any time. The maximum loan amount for 4% loans is $7.5
million. There is no maximum for treasury rate loans, and the minimum level for all
loans is $100 thousand. In 2003, the average loan was $11.2 million, while in 2006,
the average loan was $44 million.20 Loans are made for the term equal to the
expected service
life of financed facilities. Further information, including application
materials and
guidelines, is available at [http://www.usda.gov/rus/
telecom/broadband.htm].
Community Connect Broadband Grants
The Consolidated Appropriations Act of 2004 (P.L. 108-199) appropriated $9
million “for a grant program to finance broadband transmission in rural areas eligible
for Distance Learning and Telemedicine Program benefits authorized by 7 U.S.C.
950aaa.” On July 28, 2004, RUS published its final rule on the broadband grant
program, called the Community Connect Grant Program (7 CFRC.F.R. part 1739, subpart
A).1921 Essentially operating the same as the pilot broadband grants, the program
provides grant money to applicants proposing to provide broadband on a
“community-oriented connectivity” basis to currently unserved rural areas for the
purpose of fostering economic growth and delivering enhanced health care,
education, and public safety services.
Funding for the broadband grant program is provided through annual
appropriations in the Distance Learning and Telemedicine account within the
18
Testimony of James Andrew, Administrator, Rural Utilities Service, U.S. Department of
Agriculture, before the Subcommittee on Specialty Crops, Rural Development, and Foreign
Agriculture, House Committee on Agriculture, May 1, 2007.
Available at
[http://agriculture.house.gov/testimony/110/h70501b/Andrew.doc]. A listing of approved
and pending broadband loan applications is available at [http://www.usda.gov/rus/telecom/
broadband.htm].
19
Rural Utilities Service, Department of Agriculture, “Rural Broadband Access Loans and
Loan Guarantees,” Proposed Rule, Federal Register, Vol. 72, No. 91, May 11, 2007, p.
26744.
20
21
Ibid.
Rural Utilities Service, USDA, “Broadband Grant Program,” 7 C.F.R. part 1739, Federal
Register, Vol. 69, No. 144, July 28, 2004, pp. 44896-44903.
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Department of Agriculture appropriations bill. Table 2 shows a history of
appropriations for the Community Connect Broadband Grants (including the pilot
grants of FY2002 and FY2003).
For FY2007, the Administration requested zero funding for broadband grants.
The FY2007 House Agriculture Appropriations bill, passed by the House on May
23,
2006 (H.R. 5384; H.Rept. 109-463), would provide $8.9 million for broadband
grants. On June 22, 2006, the Senate Appropriations Committee approved $10
million for broadband grants (S.Rept. 109-266).
H.J. Res 20 (P.L. 110-5), which provides continuing appropriations for the
remainder of FY2007, sets the FY2007 appropriation at the FY2006 level of $9
million.
The President’s FY2008 budget proposal was released on February 5, 2007.
The FY2008 budget proposal requests no funding for the Community Connect
Broadband Grant program.
18
A listing of approved and pending
[http://www.usda.gov/rus/telecom/broadband.htm].
19
applications
is
available
at
Rural Utilities Service, USDA, “Broadband Grant Program,” 7 CFR part 1739, Federal
Register, Vol. 69, No. 144, July 28, 2004, pp. 44896-44903.
CRS-9
Table 2. Appropriations for the Community Connect Broadband
Grants, FY2002-FY2008
Fiscal Year
Appropriation
FY2002
$20 million
FY2003
$10 million
FY2004
$9 million
FY2005
$9 million
FY2006
$9 million
FY2007
$9 million
FY2008 (request)
0
Source: Compiled by CRS from appropriations bills.
Eligible applicants for broadband grants include incorporated organizations,
Indian tribes or tribal organizations, state or local units of government, cooperatives,
private corporations, and limited liability companies organized on a for profit or notfor-profit basis. Individuals or partnerships are not eligible.
Funded projects must: serve a rural area of 20,000 population or less20less22 where
broadband service does not exist, serve one and only one single community, deploy
22
A rural area is defined as “any area of the United States not included within the
boundaries of any incorporated or unincorporated city, village, or borough having a
population in excess of 20,000 inhabitants.” (7 C.F.R. 1739.3)
CRS-10
free basic broadband service (defined as 200 kbps in both directions) for at least two
years to all community facilities, offer basic broadband to residential and business
customers, and provide a community center with at least ten computer access points
within the proposed service area while making broadband available for two years at
no charge to users within that community center.
Since the inception of the RUS broadband grant program, $57.78 million in grant
money has been awarded to 129 awardees. Awardees must contribute a matching
contribution equal to 15% of the requested grant amount.
RUS typically publishes an annual Notice of Funding Availability (NOFA) in
the Federal Register, which specifies the deadline for applications, the total amount
of funding available, and the maximum and minimum amount of funding available
for each grant. Further information, including application materials and guidelines,
is available at [http://www.usda.gov/rus/telecom/commconnect.htm].
20
A rural area is defined as “any area of the United States not included within the
boundaries of any incorporated or unincorporated city, village, or borough having a
population in excess of 20,000 inhabitants.” (7 CFR 1739.3)
CRS-10
Other Broadband Programs
The Rural Broadband Access Loan and Loan Guarantee Program and the
Community Connect Broadband Grants are currently the only federal programs
exclusively dedicated to deploying broadband infrastructure. However, there exist
other federal programs that provide financial assistance for various aspects of
telecommunications development.2123 Though not explicitly or exclusively devoted to
broadband, many of those programs are used to help deploy broadband technologies
in rural areas. For example, since 1995, the RUS Rural Telephone Loan and Loan
Guarantee program — which has traditionally financed telephone voice service in
rural areas under 5,000 inhabitants — has required that all telephone facilities
receiving financing must be capable of providing DSL broadband service at a rate of
at least 1 megabyte per second.2224 The RUS Distance Learning and Telemedicine
grants program is used to support deployment of broadband technologies specifically
for telemedicine and distance learning applications. Table 3 shows the number of
customers receiving broadband due to USDA financing of telecommunications
facilities.
23
See CRS Report RL30719, Broadband Internet Access and the Digital Divide: Federal
Assistance Programs, by Lennard G. Kruger and Angele A. Gilroy.
24
In the Rural Electrification Loan Restructuring Act (P.L. 103-129, the 1993 farm bill),
Congress amended the Rural Electrification Act to require that facilities financed under this
program be capable of providing broadband service at the rate of 1 megabyte per second (7
U.S.C. 935(d)(3)(B)(iv)(I)(cc).
CRS-11
Table 3. Number of Customers Receiving New or Improved
Telecommunication Services (Broadband) Through USDA
Financing of Telecommunications Facilities
(millions)
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
0.315
0.31
0.38
0.37
0.24
0.30
0.25
0.24
Sources: U.S. Dept. of Agriculture, 2006 Performance and Accountability Report,
November 2006,
p. 82; U.S. Dept. of Agriculture, FY2008 Budget Summary and
Performance Plan, p. 44.
Note: Customers are defined as access lines financed by the programs.
The other major vehicle for funding telecommunications development in rural
areas is the Universal Service Fund (USF).2325 Subsidies provided by USF’s Schools
and Libraries Program and Rural Health Care Program are used for a variety of
telecommunications services, including broadband access. While the USF’s High
Cost Program does not explicitly fund broadband infrastructure, subsidies are used,
21
See CRS Report RL30719, Broadband Internet Access and the Digital Divide: Federal
Assistance Programs, by Lennard G. Kruger and Angele A. Gilroy.
22
In the Rural Electrification Loan Restructuring Act (the 1993 farm bill), Congress
amended the Rural Electrification Act to require that facilities financed under this program
be capable of providing broadband service at the rate of 1 megabyte per second.
23
For more information on the Universal Service Fund, see CRS Report RL30719,
Broadband Internet Access and the Digital Divide: Federal Assistance Programs, by
Lennard G. Kruger and Angele A. Gilroy.
CRS-11
in many cases, to upgrade existing telephone networks. Regarding the USF High
Cost Program, the Congressional Budget Office has found that “current policy
implicitly provides funds for broadband in rural areas,” adding that:
Whether such upgrades are motivated by the intention to provide broadband or
better conventional telephone service is not immediately clear. However, the fact
that wireline carriers as a whole have been losing subscribers and long-distance
revenue over the past half decade suggests that at least part of the new
investment in local loops has been made with the expectation of generating
revenue from broadband subscriptions.24
In addition to federal support for broadband deployment, there are programs and
activities ongoing at the state and local level. Surveys, assessments, and reports from
the American Electronics Association,25 Technet,26 the Alliance for Public
Technology,27 the California Public Utilities Commission,28 and the AEI-Brookings
Joint Center29 have explored state and local broadband programs. A related issue is
the emergence of municipal broadband networks (primarily wireless and fiber based)
and the debate over whether such networks constitute unfair competition with the
26
In the 110th Congress, legislation to reform universal service — which could
have a significant impact on the amount of financial assistance available for
broadband deployment in rural and underserved areas — has been introduced (H.R.
42, H.R. 2054, S. 101, S. 711). For more information on universal service, see CRS
Report RL33979, Universal Service Fund: Background and Options for Reform, by
Angele A. Gilroy.
In addition to federal support for broadband deployment, there are programs and
activities ongoing at the state and local level. Surveys, assessments, and reports from
25
For more information on the Universal Service Fund, see CRS Report RL30719,
Broadband Internet Access and the Digital Divide: Federal Assistance Programs, by
Lennard G. Kruger and Angele A. Gilroy.
26
Congressional Budget Office, Factors That May Increase Future Spending from the
Universal Service Fund, CBO Paper, June 2006, p. 25. Available at
[http://www.cbo.gov/ftpdocs/72xx/doc7291/06-16-UniversalService.pdf].
CRS-12
the American Electronics Association,27 Technet,28 the Alliance for Public
Technology,29 the California Public Utilities Commission,30 the AEI-Brookings Joint
Center,31 and the National Conference of State Legislatures32 have explored state and
local broadband programs. A related issue is the emergence of municipal broadband
networks (primarily wireless and fiber based) and the debate over whether such
networks constitute unfair competition with the private sector.
Criticisms of RUS Broadband Programs
Broadband loan and grant programs have been awarding funds to entities
serving rural communities since FY2001. Since their inception, a number of
criticisms of the RUS broadband loan and grant programs have emerged.
Loan Approval and Application Process.
Perhaps the major criticism
of the broadband loan program is that not enough
loans are approved, thereby making
it difficult for rural communities to take full
advantage of the program. As of
September 30, 2006 May 1, 2007, the broadband loan program had
received 185 applications,
24
Congressional Budget Office, Factors That May Increase Future Spending from the
Universal Service Fund, CBO Paper, June 2006, p. 25. Available at
[http://www.cbo.gov/ftpdocs/72xx/doc7291/06-16-UniversalService.pdf].
25198 applications, requesting a total of $4.3 billion in loans. Of these, 69
applications were approved (totaling $1.21 billion), 21 were in review (totaling $950
million), and 108 had been returned (totaling $2.14 billion).33 According to RUS
27
American Electronics Association, Broadband in the States 2003: A State-by-State
Overview of Broadband Deployment, May 22, 2003. Available at
[http://www.aeanet.org/publications/idet_broadbandstates03.asp].
26
28
TechNet, The State Broadband Index: An Assessment of State Policies Impacting
Broadband Deployment and Demand, July 17, 2003, 48 p. Available at [http://www
.michigan.gov/documents/State_Broadband_Index_71282_7.pdf].
2729
Alliance for Public Technology, A Nation of Laboratories: Broadband Policy
Experiments in the States, March 5, 2004, 48 p.
Available at [http://www
.apt.org/publications/reports-studies/broadbandreport_final.pdf].
2830
California Public Utilities Commission, Broadband Deployment in California, May 5,
2005, 83 p. Available at [http://www.cpuc.ca.gov/static/telco/reports/broadbandreport.htm].
29PUBLISHED/REPORT/45539.htm].
31
Wallsten, Scott, AEI-Brookings Joint Center for Regulatory Studies, Broadband
Penetration: An Empirical Analysis of State and Federal Policies, Working Paper 05-12,
J uneJune 2005, 29 p.
Avai l abl e at [ ht t pAvailable at [http://aei-brookings.org/ admin
admin/authorpdfs
/page.php?id=1161].
32
For a summary of selected state broadband bills, see [http://www.ncsl.org/programs
/telecom/broadband0906.htm]
33
Testimony of James Andrew, Administrator, Rural Utilities Service, U.S. Department of
Agriculture, before the Subcommittee on Specialty Crops, Rural Development, and Foreign
Agriculture, House Committee on Agriculture, May 1, 2007. Available at
[http://agriculture.house.gov/testimony/110/h70501b/Andrew.doc]. A listing of approved
and pending broadband loan applications is available at [http://www.usda.gov
/rus/telecom/broadband.htm].
CRS-13
officials, 28% of available /page.php?id=1161].
CRS-12
totaling $3.546 billion in requested loans. Of those applications, 63 have been
approved, totaling $1.1 billion; 20 are in review, totaling $930 million, and 102 have
been returned, totaling $1.5 billion.30 According to RUS officials, 28% of available
loan money was awarded in 2004, and only 5% of
available loan money was awarded
in 2005.3134
The loan application process has been criticized as being overly complex and
burdensome, requiring applicants to spend months preparing costly market research
and engineering assessments. Many applications are rejected because the applicant’s
business plan is deemed insufficient to support a commercially viable business. The
biggest reason for applications being returned is insufficient credit support, whereby
applicants do not have sufficient cash-on-hand (one year’s worth is required in most
cases). The requirement for cash-on-hand is viewed as particularly onerous for small
start up companies, many of whom lack sufficient capital to qualify for the loan.
Such companies, critics assert, may be those entities most in need of financial
assistance.
In report language to the FY2006 Department of Agriculture Appropriations Act
(P.L. 109-97), the Senate Appropriations Committee (S.Rept. 109-92) directed the
RUS “to reduce the burdensome application process and make the program
requirements more reasonable, particularly in regard to cash-on-hand requirements.”
The Committee also directed USDA to hire more full-time employees to remedy
delays in application processing times.
At a May 17, 2006 hearing held by the Senate Committee on Agriculture,
Nutrition, and Forestry, the Administrator of the RUS stated that RUS is working to
make the program more user friendly, while at the same time protecting taxpayer
investment:
As good stewards of the taxpayers’ money, we must make loans that are likely to
to be repaid. One of the challenges in determining whether a proposed project
has a
reasonable chance of success is validating the market analysis of the proposed
proposed service territory and ensuring that sufficient resources are available to cover
cover operating expenses throughout the construction period until such a time
that cash
flow from operations become sufficient. The loan application process
that we have
developed ensures that the applicant addresses these areas and that appropriate
appropriate resources are available for maintaining a viable operation.3235
According to RUS, the loan program was initially overwhelmed by applications
(particularly during a two week period in August 2003), and as the program matures,
30
U.S. Department of Agriculture, Rural Development, “Telecommunications Funding
Opportunities,” powerpoint presentation, 2006.
31
application review times have dropped.36 On May 11, 2007, RUS released a
Proposed Rule which seeks to revise regulations for the broadband loan program. In
34
GAO, Broadband Deployment is Extensive throughout the United States, but It Is Difficult
to Assess the Extent of Deployment Gaps in Rural Areas, p. 33.
3235
Testimony of Jim Andrew, Administrator, Rural Utilities Service, U.S. Department of
Agriculture, “Broadband Program Administered by USDA’s Rural Utilities Service,” full
committee hearing before the Senate Committee on Agriculture, Nutrition, and Forestry,
109th Congress, May 17, 2006.
CRS-13
application review times have dropped. As of January 2007, there were 21 applications
pending requesting a total of $357.165 million.33
Eligibility Criteria.
36
Rural Utilities Service, private communication, January 18, 2007.
CRS-14
the background material accompanying the Proposed Rule, RUS stated that the
average application processing time in 2006 was almost half of what it was in 2003.37
Eligibility Criteria
Since the inception of the broadband grant and loan
programs, the criteria for
applicant eligibility has been criticized both for being too
broad and for being too
narrow. An audit report released by USDA’s Office of
Inspector General (IG) found
that the “programs’ focus has shifted away from those
rural communities that would
not, without Government assistance, have access to
broadband technologies.”34 38
Specifically the IG report found that the RUS definition
of rural area has been “too
broad to distinguish usefully between suburban and rural
communities,”3539 with the
result that, as of March 10, 2005, $103.4 million in loans and
grants (nearly 12% of
total funding awarded) had been awarded to 64 communities
located near large cities.
The report cited examples of affluent suburban subdivisions
qualifying as rural areas
under the program guidelines and receiving broadband loans.3640
On the other hand, eligibility requirements have also been criticized as too
narrow.
For example, the limitation of assistance only to communities of 20,000 or
less in
population excludes small rural towns that may exceed this limit, and also excludes
excludes many municipalities seeking to deploy their own networks.3741 Similarly, per capita
capita income requirements can preclude higher income communities with higher
costs of
living (e.g. rural Alaska), and the limitation of grant programs only to underserved
underserved areas excludes rural communities with existing but very limited
broadband access.38
42
Loans to Communities With Existing Providers.
The USDA Rural
Broadband Access statute (7 U.S.C. 950bb) specifies that the
program “shall give
priority to eligible rural communities in which broadband service
is not available to
residential customers.” The IG report found that RUS too often
has given loans to
communities with existing broadband service. The IG report
found that “RUS has not
ensured that communities without broadband service receive first priority for loans,”
and that although RUS has a system in place to prioritize loans to unserved
communities, the system “lacks a cutoff date and functions as a rolling selection
process — priorities are decided based on the applicants who happen to be in the pool
at any given moment.”39 The result is that a significant number of communities with
some level of preexisting broadband service have received loans. According to the IG
33
Rural Utilities Service, private communication, January 18, 2007.
34 ensured that communities without broadband service
37
Rural Utilities Service, Department of Agriculture, “Rural Broadband Access Loans and
Loan Guarantees,” Proposed Rule, Federal Register, Vol. 72, No. 91, May 11, 2007, p.
26744.
38
U.S. Department of Agriculture, Office of Inspector General, Southwest Region, Audit
Report: Rural Utilities Service Broadband Grant and Loan Programs, Audit Report 096014-Te, September 2005, p. I.
Available at
[http://www.usda.gov/oig/webdocs/
09601-04-TE.pdf].
3539
Ibid., p. 6.
3640
Ibid., p. 8.
3741
Martinez, Michael, “Broadband: Loan Fund’s Strict Rules Foil Small Municipalities,”
National Journal’s Technology Daily, August 23, 2005.
38
42
GAO, Broadband Deployment is Extensive throughout the United States, but It Is Difficult
to Assess the Extent of Deployment Gaps in Rural Areas, p. 33-34.
39
Ibid., p. 13.
CRS-14
report, of 11 loans awarded in 2004, 66% of the associated communities served by
those loans had existing service. According to RUS, 31% of communities served by
all loans (during the period 2003 through early 2005) had preexisting competitive
service (not including loans used to upgrade or expand existing service).40 In some
cases, according to the IG report, “loans were issued to companies in highly
competitive business environments where multiple providers competed for relatively
few customers.”41
CRS-15
receive first priority for loans,” and that although RUS has a system in place to
prioritize loans to unserved communities, the system “lacks a cutoff date and
functions as a rolling selection process — priorities are decided based on the
applicants who happen to be in the pool at any given moment.”43 The result is that
a significant number of communities with some level of preexisting broadband
service have received loans. According to the IG report, of 11 loans awarded in
2004, 66% of the associated communities served by those loans had existing service.
According to RUS, 31% of communities served by all loans (during the period 2003
through early 2005) had preexisting competitive service (not including loans used to
upgrade or expand existing service).44 In some cases, according to the IG report,
“loans were issued to companies in highly competitive business environments where
multiple providers competed for relatively few customers.”45 At the May 1, 2007
hearing before the House Subcommittee on Specialty Crops, Rural Development, and
Foreign Agriculture, RUS Administrator James Andrews testified that of the 69
broadband loans awarded since the program’s inception, 40% of the communities
approved for funding were unserved at the time of loan approval, and an additional
15% had only one broadband provider.46
Awarding loans to entities in communities with preexisting competitive service
has raised criticism from competitors who already offer broadband to those
communities. According to the National Cable and Telecommunications Association
(NCTA), “RUS loans are being used to unfairly subsidize second and third broadband
broadband providers in communities where private risk capital already has been
invested to
provide broadband service.”4247 Critics argue that providing loans in areas with
with preexisting competitive broadband service creates an uneven playing field and
discourages further private investment in rural broadband.4348 In response, RUS stated
in the IG report that its policies are in accordance with the statute, and that they address
address “the need for competition to increase the quality of services and reduce the
cost of
those services to the consumer.”4449 RUS argues that the presence of a
competitor does
not necessarily mean that an area is adequately served, and
additionally, that in order
for some borrowers to maintain a viable business in an unserved area, it may be
necessary for that company to also be serving more densely populated rural areas where
some level of competition already exists.45
43
Ibid., p. 13.
44
Ibid., p. 14.
45
Ibid., p. 15
46
Testimony of James Andrew, Administrator, Rural Utilities Service, U.S. Department of
Agriculture, before the Subcommittee on Specialty Crops, Rural Development, and Foreign
Agriculture, House Committee on Agriculture, May 1, 2007.
47
Letter from Kyle McSlarrow, President and CEO, National Cable & Telecommunications
Association to the Honorable Mike Johanns, Secretary of the U.S. Department of
Agriculture, May 16, 2006.
48
Testimony of Tom Simmons, Vice President for Public Policy, Midcontinent
Communications, before Senate Committee on Agriculture, Nutrition, and Forestry, May
17, 2006.
49
Audit Report: Rural Utilities Service Broadband Grant and Loan Programs, p. 17.
CRS-16
unserved area, it may be necessary for that company to also be serving more densely
populated rural areas where some level of competition already exists.50
Issues for Reauthorization
The current authorization for the Rural Broadband Access Loan and Loan
Guarantee program expires on September 30, 2007. It is expected that the 110th
Congress will consider reauthorization of the program as part of a possible 2007 farm
bill. Any modification of rules, regulations, or criteria associated with the RUS
broadband program will likely result in “winners and losers” in terms of which
companies, communities, regions of the country, and technologies are eligible or more
likely to receive broadband loans and grants. The following are some key issues
pertinent to a consideration of the RUS broadband programs.
40
Ibid., p. 14.
41
Ibid., p. 15
42
Letter from Kyle McSlarrow, President and CEO, National Cable & Telecommunications
Association to the Honorable Mike Johanns, Secretary of the U.S. Department of
Agriculture, May 16, 2006.
43
Testimony of Tom Simmons, Vice President for Public Policy, Midcontinent
Communications, before Senate Committee on Agriculture, Nutrition, and Forestry, May
17, 2006.
44
Audit Report: Rural Utilities Service Broadband Grant and Loan Programs, p. 17.
45
Rural Utilities Service, private communication, January 18, 2007.
CRS-15
Restricting Applicant Eligibility. The RUS broadband program has been
criticized for excluding too many applicants due to stringent financial requirements
(e.g. the requirement that an applicant have a year’s worth of cash-on-hand) and an
application process — requiring detailed business plans and market surveys — that
some view as overly expensive and burdensome to complete. During the
reauthorization process, Congress may wish to consider whether the criteria for loan
eligibility should be modified, and whether a more appropriate balance can be found
between the need to make the program more accessible to unserved and often lowerincome rural areas, and the need to protect taxpayers against bad loans.
Definition of “Rural Community”. The definition of which communities
qualify as “rural” has been changed twice by statute since the broadband loan program
was initiated. Under the pilot program, funds were authorized under the Distance
Learning and Telemedicine Program, which defines “exceptionally rural areas” (under
5,000 inhabitants), “rural areas” (between 5,000 and 10,000) and “mid-rural areas”
(between 10,000 and 20,000). RUS determined that communities of 20,000 or less
would be eligible for broadband loans in cases where broadband services did not
more likely to receive broadband loans and grants.
On May 11, 2007, RUS released a Proposed Rule which seeks to revise
regulations for the broadband loan program and address many of the criticisms of the
program. Specifically, the Proposed Rule addresses: (1) funding in competitive
markets and new eligibility requirements; (2) new equity and market survey
requirements; and (3) new legal notice requirements to increase transparency.51
Congress will likely consider approaches in the Proposed Rule as part of
formulating the RUS broadband program reauthorization. The following are some
key issues pertinent to a consideration of the RUS broadband programs.
Restricting Applicant Eligibility
The RUS broadband program has been criticized for excluding too many
applicants due to stringent financial requirements (e.g. the requirement that an
applicant have a year’s worth of cash-on-hand) and an application process —
requiring detailed business plans and market surveys — that some view as overly
expensive and burdensome to complete. During the reauthorization process,
Congress may wish to consider whether the criteria for loan eligibility should be
modified, and whether a more appropriate balance can be found between the need to
make the program more accessible to unserved and often lower-income rural areas,
and the need to protect taxpayers against bad loans.
The Proposed Rule issued by RUS on May 11, 2007, would substantially modify
applicant eligibility restrictions. First, the Proposed Rule would eliminate the
requirement for a market survey for applicants proposing to serve 15% or less of a
community.52 Second, the existing “credit support requirement,” would be replaced
by an “equity requirement.” Under the Proposed Rule, the equity requirement would
be reduced from 20% to 10% for applicants proposing to serve areas where at least
50
Rural Utilities Service, private communication, January 18, 2007.
51
Rural Utilities Service, Department of Agriculture, “Rural Broadband Access Loans and
Loan Guarantees,” Proposed Rule, Federal Register, Vol. 72, No. 91, May 11, 2007, p.
26744.
52
Ibid., p. 26750.
CRS-17
40% of households have no broadband access or service from only one provider.
Additionally, the current requirement for a year’s worth of cash-on-hand would be
eliminated. Instead, once RUS has completed its review of the loan application, the
applicant would be notified if additional cash requirements are needed to support the
feasibility of the loan. This would be the case if RUS financial analysis indicates
that cash from operations and previous cash infusions cannot sustain a positive cash
position throughout the forecast period. Finally, the Proposed Rule seeks to give
RUS the authority to modify or waive the provisions of the equity requirement as
long as those modifications do not result in a projected negative cash position, and
if those modifications are required to provide broadband in areas with no service or
with only one existing broadband provider.53
Definition of “Rural Community”
The definition of which communities qualify as “rural” has been changed twice
by statute since the broadband loan program was initiated. Under the pilot program,
funds were authorized under the Distance Learning and Telemedicine Program,
which defines “exceptionally rural areas” (under 5,000 inhabitants), “rural areas”
(between 5,000 and 10,000) and “mid-rural areas” (between 10,000 and 20,000).
RUS determined that communities of 20,000 or less would be eligible for broadband
loans in cases where broadband services did not already exist.
In 2002, this definition was made narrower by the Farm Security and Rural
Investment Act (P.L. 107-171), which designated eligible communities as any
incorporated or unincorporated place with fewer than 20,000 inhabitants, and which
was outside any standard metropolitan statistical area (MSA). The requirement that
communities not be located within MSA’s effectively prohibited suburban
communities from receiving broadband loans. However, in 2004, the definition was
again changed by the FY2004 Consolidated Appropriations Act (P.L. 108-199). The
act broadened the definition, keeping the population limit at 20,000, but eliminating
the MSA prohibition, thereby permitting rural communities near large cities to receive
receive loans. Thus the current definition used for rural communities is the same as
what was
used for the broadband pilot program, except that loans can now be issued to
to communities with preexisting service.
The definition of what constitutes a “rural” community is always a difficult issue
issue for Congressional policymakers in determining how to target rural communities for
for broadband assistance. On the one hand, the narrower the definition the greater the
the possibility that deserving communities may be excluded. On the other hand, the
broader the definition used, the greater the possibility that communities not
traditionally considered “rural” or “underserved” may be eligible for financial
assistance.
The Proposed Rule released by RUS on May 11, 2007 would narrow the
definition of an Eligible Rural Community. In addition to excluding cities or towns
with populations over 20,000, the Proposed Rule would exclude communities located
within an Urban Area, as defined by the Bureau of the Census as all territory,
53
Ibid., p. 26754.
CRS-18
population, and housing units located within an urbanized area or an urban cluster.
Also excluded is any area that has four or more existing broadband service providers
(excluding the applicant).54
A related issue is the scope of coverage proposed by individual applications.
While many of the loan applications propose broadband projects offering service to
multiple rural communities, RUS sees a coming trend towards larger regional and
national proposals, covering hundreds or even more than a thousand communities.4655
The larger the scope of coverage, the greater the complexity of the loan application and
and the larger the possible benefits and risks to taxpayers.
46
Rural Utilities Service, private communication, January 18, 2007.
CRS-16
Pre-existing Broadband Service.
While the majority of broadband loans
(and all broadband grants) are awarded
to entities serving areas without pre-existing
broadband service, and while RUS is
directed by statute to “give priority to eligible
rural communities in which broadband
service is not available to residential
customers,” a significant number of Treasury-rateTreasuryrate loans have been awarded in areas
with pre-existing service. Loans to areas with
competitive pre-existing service — that
is, areas where existing companies already
provide some level of broadband — have
sparked controversy because loan
recipients are likely to compete with other companies
already providing broadband
service.
During reauthorization, Congress may be asked to more sharply define whether
and/or how loans should be given to companies serving rural areas with preexisting
competitive service.4756 On the one hand, one could argue that the federal government
should not be subsidizing competitors for broadband service, particularly in sparsely
populated rural markets which may be able only to support one provider.
Furthermore,
keeping communities with preexisting broadband service eligible may
divert assistance
from unserved areas that are most in need. On other hand, many
suburban and urban
areas currently receive the benefits of competition between
broadband providers —
competition which can potentially drive down prices while
improving service and
performance. It is therefore appropriate, it is argued, that rural
areas also receive the
benefits of competition, which in some areas may not be
possible without federal
financial assistance.
Technological Neutrality. The 2002 farm bill (P.L. 107-171) directed RUS
to use criteria that are “technologically neutral” in determining which projects to
approve for loans. In other words, RUS is prohibited from typically valuing one
broadband technology over another when assessing loan applications. As of September
2006, 30% of approved and funded projects employed fiber-to-the-home technology,
24% employed DSL, 22% wireless (unlicensed), 19% hybrid fiber-coaxial (cable), 3%
wireless (licensed), and 2% broadband over powerlines (BPL).48 No funding has been
provided for projects utilizing satellite broadband.49
47
The statute (7 U.S.C. 950bb) allows States and local governments to be eligible for loans
only if “no other eligible entity is already offering, or has committed to offer, broadband
services to the eligible rural community.”
48
USDA, Rural Utilities Service, “Rural Broadband Access Loan Program,” powerpoint
presentation, October 19, 2006.
49
According to the GAO, satellite companies state that RUS’s broadband loan program
requirements “are not readily compatible with their business model or technology,” and that
“because the agency requires collateral for loans, the program is more suited for situations
where the providers, rather than individual consumers, own the equipment being purchased
through the loan. Yet, when consumers purchase satellite broadband, it is common for them
to purchase the equipment needed to receive the satellite signal, such as the reception dish.”
Satellite companies argue that in some rural areas, satellite broadband might be the most
feasible and cost-effective solution. See GAO, Broadband Deployment is Extensive
throughout the United States, but It Is Difficult to Assess the Extent of Deployment Gaps in
Rural Areas, pp. 34-35.
CRS-17
While decisions on funded projects are required to be technologically neutral,
RUS (through the Secretary of Agriculture) does have the latitude to determine
minimum required data transmission rates for broadband projects eligible for funding.
According to the statute, “the Secretary shall, from time to time as advances in
technology warrant, review and recommend modifications of rate-of-data transmission
criteria for purposes of the identification of broadband service technologies.” To date,
RUS broadband loan and grant programs have required a minimum threshold of 200
kbps (kilobytes per second) in both directions (both uploading and downloading).
While the 200 kbps minimum matches the standard definition of broadband that is used
by the Federal Communications Commission (FCC), it is considered a low threshold
that captures almost all existing broadband technology.50 financial assistance. It is also argued that it may not be
economically feasible for borrowers to serve sparsely populated unserved
communities unless they are permitted to also serve more lucrative areas which may
already have existing providers.
The Proposed Rule released by RUS on May 11, 2007 would prohibit funding
for any community where there are four or more Existing Broadband Service
Providers. To be recognized as an Existing Broadband Service Provider, an
54
Ibid., p. 26751.
55
Rural Utilities Service, private communication, January 18, 2007.
56
The statute (7 U.S.C. 950bb) allows States and local governments to be eligible for loans
only if “no other eligible entity is already offering, or has committed to offer, broadband
services to the eligible rural community.”
CRS-19
incumbent service provider must provide evidence and certify to RUS that 10% of
the households passed by their facilities are purchasing their broadband service.57
Applicants would be required to prepare a legal notice stating the intent to offer
broadband service in a particular community. The legal notice would be published
on the RUS web page. Incumbent providers would then have 30 days to submit
information to RUS which would be used to determine if the incumbent is classified
as an Existing Broadband Service Provider.58
New market entrants and start-ups, as well as incumbent applicants seeking to
expand their service area, are required to enter areas where at least 40% of
households either have no broadband service or access to only one broadband service
provider. According to RUS:
This requirement addresses the need to reach unserved or underserved areas
while also permitting service to more lucrative areas, which may be served by up
to three Existing Service Providers, in order to attract feasible loan proposals
which are supportable from project revenues. Permitting service in areas with
up to three Existing Service Providers addresses the need for applicants to
leverage revenues from lower-cost users (typically those in more densely
populated areas within a city or town) in order to provide service to rural
households in higher cost areas, while excluding areas with higher levels of
competition where loan feasibility is unlikely.59
Additionally, the Proposed Rule states that loans to incumbent service providers
can be used to upgrade existing facilities without serving additional customers, as
long as the upgrades enhance existing broadband service, and as long as there are no
more than three other Existing Broadband Service providers in the area.60
Technological Neutrality
The 2002 farm bill (P.L. 107-171) directed RUS to use criteria that are
“technologically neutral” in determining which projects to approve for loans. In
other words, RUS is prohibited from typically valuing one broadband technology
over another when assessing loan applications. As of May 2007, 37% of approved
and funded projects employed fiber-to-the-home technology, 20% employed DSL,
24% wireless, 16% hybrid fiber-coaxial (cable), and 1% broadband over powerlines
(BPL).61 No funding has been provided for projects utilizing satellite broadband.62
57
Rural Utilities Service, Department of Agriculture, “Rural Broadband Access Loans and
Loan Guarantees,” Proposed Rule, Federal Register, Vol. 72, No. 91, May 11, 2007, p.
26749.
58
Ibid., p. 26755.
59
Ibid., p. 26749.
60
Ibid.
61
Ibid., p. 26744.
62
According to the GAO, satellite companies state that RUS’s broadband loan program
requirements “are not readily compatible with their business model or technology,” and that
(continued...)
CRS-20
While decisions on funded projects are required to be technologically neutral,
RUS (through the Secretary of Agriculture) does have the latitude to determine
minimum required data transmission rates for broadband projects eligible for
funding. According to the statute, “the Secretary shall, from time to time as advances
in technology warrant, review and recommend modifications of rate-of-data
transmission criteria for purposes of the identification of broadband service
technologies.” To date, RUS broadband loan and grant programs have required a
minimum threshold of 200 kbps (kilobytes per second) in both directions (both
uploading and downloading). While the 200 kbps minimum matches the standard
definition of broadband that is used by the Federal Communications Commission
(FCC), it is considered a low threshold that captures almost all existing broadband
technology.63
Some have argued that the minimum threshold of 200 kbps should be raised to
ensure that rural areas receive “next-generation” broadband technologies with faster
data rates capable of more varied and sophisticated applications. On the other hand,
significantly raising minimum data rates could exclude certain technologies — for
example typical data transmission rates for fiber and some wireless technologies
exceed what is offered by “current generation” technologies such as DSL and cable.
Proponents of keeping the minimum threshold at a low level could argue that
underserved rural areas are best served by any broadband technology that is
economically feasible to deploy, regardless of whether it is “next” or “current”
generation.
Funding.
Funding
Under the 2002 farm bill (P.L. 107-171), broadband loan subsidies
were funded
at a total of $100 million through FY2007 ($20 million for each of fiscal
years 2002
through 2005, and $10 million for each of fiscal years 2006 and 2007).
This $100
million was to be transferred from funds of the Commodity Credit
Corporation (CCC). However, beginning in FY2004, Congress has annually blocked
mandatory funding from the CCC, thus ensuring that the program was funded solely
through annual appropriations.
During reauthorization, the 110th Congress may wish to consider whether the
mandatory CCC funding mechanism provided in the 2002 farm bill should be retained,
eliminated, or modified. Also at issue is whether the current funding levels for the
RUS broadband programs are optimal. Given the relatively low utilization of the
broadband loan program, should funding remain at current levels or below, or
alternatively, if modifications are made to ensure fuller utilization, and given the need
to bridge the digital divide, should funding be increased? A related issue is whether
more money should be shifted from the broadband loan program to the Community
Connect broadband grant program, in order to better address the need for broadband
50
Critics of the FCC’s broadband definition of 200 kbps have pointed to higher download
and upload speeds typically offered in other countries. See Turner, Derek S., Free Press,
Broadband Reality Check II: The Truth Behind America’s Digital Divide, August 2006, pp
5-9. Available at [http://www.freepress.net/docs/bbrc2-final.pdf]. For further discussion
of international broadband speeds and prices, including the differences between advertised
and actual speeds, see Kende, Michael, Analysis Consulting Limited, Survey of
International Broadband Offerings, October 4, 2006, 12 p.
Available at
[http://www.analysys.com/pdfs/BroadbandPerformanceSurvey.pdf].
CRS-18
in lower income rural communities that may not be able to meet financial criteria
necessary to qualify for loans.
Appropriateness of Federal Assistance. Finally, there is the broader issue
of whether government intervention in the broadband marketplace is appropriate or
effective. Some argue that federal investment in broadband deployment could distort
private sector investment decisions in a dynamic and rapidly evolving marketplace,51
and question whether other strategies — such as deregulation, tax incentives, or
spectrum policy — may be more effective in fostering increased broadband
Corporation
(CCC). However, beginning in FY2004, Congress has annually blocked mandatory
62
(...continued)
“because the agency requires collateral for loans, the program is more suited for situations
where the providers, rather than individual consumers, own the equipment being purchased
through the loan. Yet, when consumers purchase satellite broadband, it is common for them
to purchase the equipment needed to receive the satellite signal, such as the reception dish.”
Satellite companies argue that in some rural areas, satellite broadband might be the most
feasible and cost-effective solution. See GAO, Broadband Deployment is Extensive
throughout the United States, but It Is Difficult to Assess the Extent of Deployment Gaps in
Rural Areas, pp. 34-35.
63
Critics of the FCC’s broadband definition of 200 kbps have pointed to higher download
and upload speeds typically offered in other countries. See Turner, Derek S., Free Press,
Broadband Reality Check II: The Truth Behind America’s Digital Divide, August 2006, pp
5-9. Available at [http://www.freepress.net/docs/bbrc2-final.pdf]. For further discussion
of international broadband speeds and prices, including the differences between advertised
and actual speeds, see Kende, Michael, Analysis Consulting Limited, Survey of
International Broadband Offerings, October 4, 2006, 12 p.
Available at
[http://www.analysys.com/pdfs/BroadbandPerformanceSurvey.pdf].
CRS-21
funding from the CCC, thus ensuring that the program was funded solely through
annual appropriations.
During reauthorization, the 110th Congress may wish to consider whether the
mandatory CCC funding mechanism provided in the 2002 farm bill should be
retained, eliminated, or modified. Also at issue is whether the current funding levels
for the RUS broadband programs are optimal. Given the relatively low utilization
of the broadband loan program, should funding remain at current levels or below, or
alternatively, if modifications are made to ensure fuller utilization, and given the
need to bridge the digital divide, should funding be increased? A related issue is
whether more money should be shifted from the broadband loan program to the
Community Connect broadband grant program, in order to better address the need for
broadband in lower income rural communities that may not be able to meet financial
criteria necessary to qualify for loans.
Appropriateness of Federal Assistance
Finally, there is the broader issue of whether government intervention in the
broadband marketplace is appropriate or effective. Some argue that federal
investment in broadband deployment could distort private sector investment
decisions in a dynamic and rapidly evolving marketplace,64 and question whether
other strategies — such as deregulation, tax incentives, or spectrum policy — may
be more effective in fostering increased broadband deployment.
On the other hand, proponents of financial assistance counter that the available
data show, in general, that the private sector will invest in areas where it expects the
greatest return — areas of high population density and income. Without some
governmental assistance in underserved areas, they argue, it is reasonable to conclude
that broadband deployment will lag behind in many rural and low income areas.5265
Activities in the 110th Congress
On January 31, 2007, Secretary of Agriculture Mike Johanns released the
Administration’s 2007 farm bill proposal. The Administration proposal would
reauthorize the Rural Broadband Access Loan and Loan Guarantee program and would
would allocate $500 million in mandatory spending to reduce the backlog in a
number of
Rural Development loan and grant programs, including the broadband loan program.
loan program.
64
See Leighton, Wayne A., Broadband Deployment and the Digital Divide: A Primer, a
Cato Institute Policy Analysis, No. 410, August 7, 2001, 34 pp. Available at
[http://www.cato.org/pubs/pas/pa410.pdf].
65
See for example: Cooper, Mark, Consumer Federation of America and Consumers Union,
Expanding the Digital Divide & Falling Behind on Broadband, October 2004, 33 pages.
Available at [http://www.consumersunion.org/pub/ddnewbook.pdf].
CRS-22
The President’s FY2008 budget proposal was released on February 5, 2007. The
The Administration requested a $6.45 million (subsidy) to support a loan level of
$300
million. Noting that this is a $200 million reduction from the FY2007 level,
the budget
documents stated that the “funding is sufficient to meet expected
demand,” and that:
Regulations are being changed to correct certain weaknesses that have become
apparent since the program was established a few years ago. The new regulations
regulations will ensure that program funds are focused on rural areas that are
lacking existing
providers, and that applicants meet high enough standards to
ensure long term
success.5366
The FY2008 budget proposal requested no funding for the Community Connect
Broadband Grant program.
As part of the farm bill reauthorization process, House and Senate Agriculture
Committees are currently considering how the RUS
broadband programs may be reauthorized. At the same time, Congressional
51
See Leighton, Wayne A., Broadband Deployment and the Digital Divide: A Primer, a
Cato Institute Policy Analysis, No. 410, August 7, 2001, 34 pp. Available at
[http://www.cato.org/pubs/pas/pa410.pdf].
52
See for example: Cooper, Mark, Consumer Federation of America and Consumers Union,
Expanding the Digital Divide & Falling Behind on Broadband, October 2004, 33 pages.
Available at [http://www.consumersunion.org/pub/ddnewbook.pdf].
53
U.S. Dept. of Agriculture, FY2008 Budget Summary and Performance Plan, p. 44.
CRS-19
policymakers are awaiting the release of new regulations for the RUS broadband loan
program.
Meanwhile, on April 25, 2007, H.R. 2035 ( a bill “to tailor the rural broadband
program to better serve those living in rural areas”) was introduced by Representative
Herseth Sandlin and referred to the Committee on Agriculture and the Committee on
Energy and Commerce. H.R. 2035 would narrow the definition of “eligible rural
community” in order that communities in suburban areas and near urban areas wouldl
no longer be eligible for broadband loans. Additionally, H.R. 2035 seeks to limit loans
awarded to applicants proposing to serve areas that already have a broadband provider.
Under H.R. 2035, borrowers serving eligible communities that are at least 50% already
served would only be eligible for an RUS broadband loan equivalent to the portion of
households that remain unserved.
crsphpgw broadband programs may be
reauthorized and modified. H.R. 2035 (introduced by Representative Herseth
Sandlin) and S. 1439 (introduced by Senator Roberts) would provide for significant
modifications of the RUS broadband loan program (for details, see section below,
“Legislation in the 110th Congress”). On May 1, 2007, the House Subcommittee on
Specialty Crops, Rural Development and Foreign Agriculture held a hearing on the
RUS broadband programs. Testimony was heard from RUS Administrator James
Andrew and public witnesses.67
On June 6, 2007 the Subcommittee on Specialty Crops, Rural Development and
Foreign Agriculture, chaired by Representative McIntyre, approved proposals for
sections under its jurisdiction of H.R. 2419, the Farm Bill Extension Act of 2007.
Title VII (Rural Development) of the Subcommittee markup includes provisions on
the Rural Broadband Access Loan and Loan Guarantee Program and the Community
Connect Grant program. The following summarizes the subcommittee
recommendations which have been forwarded to the full House Agriculture
Committee:
66
67
!
Defines eligible rural community as any area of the United States
that is not (1) included within the boundaries of any city, town,
borough, or village, whether incorporated or unincorporated, with a
population of more than 20,000; or (2) included within the urbanized
area contiguous and adjacent to such a city or town.
!
Prohibits loans to any community in which there are three or more
incumbent service providers. Incumbent service providers are
defined as an entity providing service to at least 15% of the service
area proposed in the application.
U.S. Dept. of Agriculture, FY2008 Budget Summary and Performance Plan, p. 44.
Testimony is available at [http://agriculture.house.gov/hearings/statements.html].
CRS-23
!
Directs RUS to give priority, in the following order, to applications
from eligible rural communities that have (i) no incumbent service
provider; (ii) one incumbent service provider; or (iii) two incumbent
service providers, except that the communities served must compose
no more than 25% of the total area to be served.
!
Directs RUS to ensure that the type, amount and method of security
used to secure a loan or loan guarantee is commensurate to the risk
involved with the loan, particularly when the loan is issued to a
financially healthy, strong, and stable entity.
!
States that an entity is not eligible for a loan if it serves more than
10% of the telephone subscriber lines installed in the United States.
Not more than 25% of loans made in a single fiscal year may be
approved for entities that serve more than 2% of the telephone
subscriber lines in the United States.
!
Authorizes for appropriation such sums as necessary for each of
fiscal years 2008 through 2012. For each fiscal year, 10% of
funding shall be reserved for entities serving eligible tribal
communities. Amounts unobligated by June 30 of the fiscal year
shall be made available to eligible entities in any state.
!
Authorizes the Community Connect Grant Program through FY2012
at $25 million per year. Priority is given to grants that will enhance
community access to telemedicine and distance learning resources.
!
Requires detailed program reports from RUS to the House
Committee on Agriculture and the Senate Committee on
Agriculture, Nutrition, and Forestry.
!
Establishes a National Center for Rural Telecommunications
Assessment.
!
Requires USDA to submit a comprehensive rural broadband strategy
to the House Committee on Agriculture and the Senate Committee
on Agriculture, Nutrition, and Forestry (amendment introduced by
Representative Salazar, adopted by Subcommittee).
Meanwhile, in the May 11, 2007 issue of the Federal Register, RUS released
its Proposed Rule seeking to revise the broadband loan program rules and regulations
(7 C.F.R. Part 1738). RUS is accepting public comments on the Proposed Rule
through July 10, 2007. On June 5, 2007, Representative Graves introduced H.R.
2569, which seeks to codify certain RUS proposed rule changes governing eligibility
for the rural broadband loan program. Specifically, H.R. 2569 would relax the
market survey requirement and eliminate the credit support requirement, including
the cash-on-hand requirement.
CRS-24
Legislation in the 110th Congress
H.R. 2035 (Herseth Sandlin)
Rural Broadband Improvement Act. Narrows the definition of “eligible rural
community” in order that communities in suburban areas and near urban areas would
no longer be eligible for broadband loans. Specifically, an eligible rural community
would be defined as any area that is not included within a community of more than
15,000 inhabitants, that is not included within the boundaries of an urbanized area
or urban cluster, and that is not located within 10 miles of any such city, town,
village, or borough, or any urbanized area of urban cluster. Additionally, seeks to
limit loans awarded to applicants proposing to serve areas that already have a
broadband provider. Borrowers serving eligible communities that are at least 50%
already served would only be eligible for an RUS broadband loan equivalent to the
portion of households that remain unserved. Introduced April 25, 2007; referred to
the Committee on Agriculture and the Committee on Energy and Commerce.
H.R. 2174 (Salazar)
Rural Broadband Initiative Act of 2007. Establishes an Office of Rural
Broadband Initiatives within the Department of Agriculture which will administer all
rural broadband grant and loan programs previously administered by the Rural
Utilities Service. Also establishes a National Rural Broadband Innovation Fund
which would fund experimental and pilot rural broadband projects and applications.
Introduced May 3, 2007; referred to Committee on Agriculture and to Committee on
Energy and Commerce.
H.R. 2419 (Peterson)
Farm Bill Extension Act of 2007. Reauthorizes broadband program at the Rural
Utilities Service through FY2012. Introduced May 22, 2007; referred to Committee
on Agriculture, and in addition to Committee on Foreign Affairs. Subcommittee on
Specialty Crops, Rural Development, and Foreign Agriculture held markup of Title
VII (Rural Development) on June 6, 2007.
H.R. 2569 (Graves)
Rural Broadband Deployment Act. Codifies certain changes proposed by
USDA to the rules governing eligibility for the rural broadband access program.
Specifically, would relax market survey requirements and eliminate the credit support
requirement, including the cash-on-hand requirement. Introduced June 5, 2007;
referred to Committee on Agriculture, and in addition to the Committee on Energy
and Commerce.
H.R. 2720 (Kind)
FARM 21 Act of 2007. Amends the Farm Security and Rural Investment Act
of 2002 to direct that the Secretary of USDA shall make available funds of the
Commodity Credit Corporation to the rural broadband loan program as follows: $10
million for each of fiscal years 2008 through 2012. Also specifies criteria to be
applied by USDA in considering applications for all rural development projects.
Introduced June 14, 2007; referred to Committee on Agriculture, and in addition to
the Committees on Education and Labor, Foreign Affairs, and Ways and Means.
CRS-25
S. 541 (Feingold)
Rural Opportunities Act of 2007. Directs the FCC to collect more detailed
broadband deployment data and to periodically revise its definition of broadband
above 200 kbps. Directs the Secretary of Agriculture to report on the adoption or
planned adoption of the recommendations contained in the September 2005 audit
report by the Inspector General of the United States Department of Agriculture.
Introduced February 8, 2007; referred to Committee on Agriculture, Nutrition and
Forestry.
S. 1032 (Clinton)
Rural Broadband Initiative Act of 2007. Establishes an Office of Rural
Broadband Initiatives within the Department of Agriculture which will administer all
rural broadband grant and loan programs previously administered by the Rural
Utilities Service. Also establishes a National Rural Broadband Innovation Fund
which would fund experimental and pilot rural broadband projects and applications.
Introduced March 29, 2007; referred to Committee on Agriculture, Nutrition, and
Forestry.
S. 1439 (Roberts)
Rural Broadband Improvement Act of 2007 (Section 1). Section 2 reauthorizes
the RUS broadband program through 2012, and makes available from funds of the
Commodity Credit Corporation $20 million for fiscal years 2008 through 2010, and
$10 million for fiscal years 2011 and 2012. Section 3 clarifies an “eligible rural area”
as any area other than a city or town with a population greater than 20,000, the
urbanized area contiguous and adjacent to such a city or town, and an area
determined by the Secretary of Agriculture to be predominantly urban in character.
Additionally, loans are not allowed unless the Secretary determines that no
duplication of terrestrial lines, facilities, or systems would result. However, the
Secretary can waive the prohibition on duplication if at least 75% of end users served
by the proposed project are without broadband access, and if it is determined that
such duplication is necessary in order to furnish or improve broadband service in an
eligible rural area. Loan applicants must submit to RUS broadband deployment data
for each existing incumbent broadband service provider in the proposed project
service area. A 30-day public comment period will be initiated for each proposed
loan.
Section 4 accelerates the loan application process by requiring a 180-day
processing period while simplifying and/or eliminating certain loan application
requirements, and authorizes RUS to hire additional staff, if necessary, to process
loan applications. Section 5 eliminates the current statute’s prohibition on awarding
loans to any entity serving 2% or more of the telephone subscriber lines in the United
States. Section 6 establishes a $20 million per year grant program at RUS which
would be awarded to state-selected nonprofit organizations in order to help states
develop and implement initiatives to identify and track the availability and adoption
of broadband services within rural areas. Section 7 reduces the current 20% credit
support requirement to a 10% equity requirement for broadband loan applicants.
This requirement may be modified or waived if the applicant meets certain standards
of financial feasibility. Section 8 sets a maximum term of the loan at 35 years, and
Section 9 clarifies the technological neutrality standard as including DSL, fiber-optic
cable, coaxial cable, wireless technology, and satellite. Introduced May 21, 2007;
crsphpgw
referred to Committee on Agriculture, Nutrition, and Forestry.