# Presentation: 764283

## FEDERAL RURAL WIRELESS OUTREACH INITIATIVERUS TELECOMMUNICATIONS PROGRAM

- Ken B. Chandler
- Director, Southwest Area, Telecommunications
- USDA-RUS, Room 2808-S
- STOP 1597
- 1400 Independence Ave.
- Washington, DC  20250-1597
- Phone: 202-720-0800
- FAX: 202-205-2921
- _[kchandle@rus.usda.gov](mailto:kchandle@rus.usda.gov)_
- WEB SITE: _[www.usda.gov/rus/telecom/](http://www.usda.gov/rus/telecom/)_

## FEDERAL RURAL WIRELESS OUTREACH INITIATIVERUS TELECOMMUNICATIONS PROGRAM

- RUS REQUIREMENTS AND OPERATIONAL SOPHISTICATION

## FEDERAL RURAL WIRELESS OUTREACH INITIATIVERUS TELECOMMUNICATIONS PROGRAM

- FINANCIAL REQUIREMENTS
- RUS REVIEW OF APPLICATIONS
- ELIGIBILITY
- ENGINEERING
- FEASIBILITY

**Notes:**
Eligibility varies by program and depends on statute.

## FEDERAL RURAL WIRELESS OUTREACH INITIATIVERUS TELECOMMUNICATIONS PROGRAM

- FINANCIAL REQUIREMENTS
- RUS FEASIBILITY STUDIES
- PROJECTED REVENUES AND EXPENSES
- PROFORMA FINANCIAL PROJECTIONS
- ABILITY TO MEET DEBT SERVICE:  TIER

**Notes:**
We project out 2 – 5 years.  For existing borrowers, we use historical financial data as a basis for projections.
For some programs and for initial applicants, we can use proforma financial projections.
According to statute, we use TIER as the main feasibility factor.

## FEDERAL RURAL WIRELESS OUTREACH INITIATIVERUS TELECOMMUNICATIONS PROGRAM

- FINANCIAL INDICATORS
- TIER – TIMES INTEREST EARNED RATIO
- RATIO OF NET INCOME (AFTER TAXES) PLUS INTEREST EXPENSE DIVIDED BY INTEREST EXPENSE
- MUST BE AT LEAST 1.0
- NET PLANT TO DEBT RATIO
- GREATER THAN 1.2

**Notes:**
TIER is specified in Loan Contract – must be maintained for loan security.
Net plant to debt ratio is used to qualify for accelerated loan program and as a basis for monitoring loan security.

## FEDERAL RURAL WIRELESS OUTREACH INITIATIVERUS TELECOMMUNICATIONS PROGRAM

- FINANCIAL INDICATORS
- EQUITY OR NET WORTH
- DETERMINED ON CASE-BY-CASE BASIS
- USED AS QUALIFIER IN SOME CASES
- OPERATING FUNDS
- FOR START-UPS, RUS RECOMMENDS CASH EQUAL TO 2 YEARS OF OPERATIONS
- BROADBAND PROGRAM REQUIRES 1 YEAR

**Notes:**
We don’t have a standard equity requirement like some other lending institutions.  Some require 20 percent equity.
Net Worth is also used to qualify for accelerated loan program.

## FEDERAL RURAL WIRELESS OUTREACH INITIATIVERUS TELECOMMUNICATIONS PROGRAM

- TECHNICAL REQUIREMENTS
- RUS PRIMARILY FINANCES TELECOMMUNICATIONS _PLANT_
- CAN ALSO COVER REFINANCING AND ACQUISITIONS (WITH CERTAIN RESTRICTIONS)
- WE ARE “END USER” ORIENTED
- WE ARE “TECHNOLOGY NEUTRAL”

## FEDERAL RURAL WIRELESS OUTREACH INITIATIVERUS TELECOMMUNICATIONS PROGRAM

- TECHNICAL REQUIREMENTS
- MOST COMMON DESIGN IS FIBER-IN-THE-LOOP WITH ELECTRONIC SERVING AREAS FEEDING COPPER BURIED CABLES
- INCREASING NUMBER OF FIBER-TO-THE-HOME SYSTEMS
- WIRELESS SYSTEMS USING UNLICENSED SPECTRUM ARE POPULAR FOR SMALL BROADBAND SYSTEMS

## FEDERAL RURAL WIRELESS OUTREACH INITIATIVERUS TELECOMMUNICATIONS PROGRAM

- OPERATIONAL SOPHISTICATION
- KNOW WHAT YOU’RE GETTING INTO
- DETERMINE YOUR MARKET, SERVICES, ETC.
- IS THERE COMPETITION?
- WHAT IS THE REGULATORY ENVIRONMENT?

**Notes:**
For startups, cash flow in the beginning will be a problem, until you hook up subscribers and start getting revenues.
If there is to be competition, a good market survey is a must.  Is the market big enough to support two entities?  You may have to tailor your services to effectively compete.
Who will regulate your service.  In most states, the PUC may regulate telecommunications services.  Native American Indian Reservations, which are sovereign and not subject to PUC regulation, need to decide who will regulate the services.

## FEDERAL RURAL WIRELESS OUTREACH INITIATIVERUS TELECOMMUNICATIONS PROGRAM

- OPERATIONAL SOPHISTICATION
- WHAT’S YOUR EXPERIENCE LEVEL?
- NEED EXPERIENCED MANAGEMENT
- WILL NEED CONSULTANTS
- SYSTEM DESIGN, ENGINEERING, OVERSIGHT
- COST CONSULTANT
- CPA
- LEGAL

## FEDERAL RURAL WIRELESS OUTREACH INITIATIVERUS TELECOMMUNICATIONS PROGRAM

- OPERATIONAL SOPHISTICATION
- WAYS TO GAIN EXPERIENCE
- ON STAFF OR LOCAL
- HIRE NEW PEOPLE
- PARTNER WITH EXPERIENCED COMPANIES
- DEVELOP GOOD LONG-RANGE PLAN AND KEEP IT UPDATED!