This section of the FEDERAL REGISTER

contains regulatory documents having general

applicability and legal effect, most of which

are keyed to and codified in the Code of

Federal Regulations, which is published under

50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by

the Superintendent of Documents.

Rules and Regulations Federal Register

11603 

Vol. 86, No. 37 

Friday, February 26, 2021 

DEPARTMENT OF AGRICULTURE 

Rural Utilities Service 

7 CFR 1740 

[RUS–20–Telecom–0023] 

RIN 0572–AC51 

Rural eConnectivity Program 

AGENCY: Rural Utilities Service, USDA. 

ACTION: Final rule; request for 

comments. 

SUMMARY: The Rural Utilities Service 

(RUS), a Rural Development agency of 

the United States Department of 

Agriculture (USDA), hereinafter referred 

to as ‘‘RUS’’ or ‘‘the Agency’’, is issuing 

a final rule to establish the Rural 

eConnectivity Program. The Rural 

eConnectivity Program provides loans, 

grants, and loan/grant combinations to 

facilitate broadband deployment in rural 

areas. This rule describes the eligibility 

requirements, the application process, 

the criteria that will be used by RUS to 

assess applicants’ creditworthiness and 

outlines the application process. In 

addition, the Agency is seeking 

comments on the final rule. 

DATES: 

Effective date: This final rule is 

effective April 27, 2021. 

Comment date: Comments due on or 

before April 27, 2021. 

ADDRESSES: You may submit comments, 

identified by docket number RUS–20– 

Telecom–0023 and Regulatory 

Information Number (RIN) number 

0572–AC51 through https://

www.regulations.gov. 

Instructions: All submissions received 

must include the Agency name and 

docket number or RIN for this 

rulemaking. All comments received will 

be posted without change to https://

www.regulations.gov, including any 

personal information provided. 

Docket: For access to the docket to 

read background documents or 

comments received, go to https://

www.regulations.gov. 

FOR FURTHER INFORMATION CONTACT: For 

general inquiries, contact Laurel 

Leverrier, Acting Assistant 

Administrator Telecommunications 

Program, Rural Utilities Service, U.S. 

Department of Agriculture (USDA), 

email: laurel.leverrier@usda.gov, 

telephone: (202) 720–9556. 

SUPPLEMENTARY INFORMATION: 

Background 

The Agency improves the quality of 

life in rural America by providing 

investment capital for deployment of 

rural telecommunications infrastructure. 

To achieve the goal of increasing 

economic opportunity in rural America, 

the Agency finances infrastructure that 

enables access to a seamless, nationwide 

telecommunications network. With 

access to the same advanced 

telecommunications networks as its 

urban counterparts—especially those 

designed to accommodate distance 

learning, telework, and telemedicine— 

rural America will eventually see 

improving educational opportunities, 

health care, economies, safety and 

security, and ultimately higher 

employment. 

On March 23, 2018, Congress passed 

the Consolidated Appropriations Act, 

2018 (Pub. L. 115,141) (the 2018 

Appropriations Act), which established 

a new broadband loan and grant pilot 

program, that was named the Rural 

eConnectivity Pilot Program. The 2018 

Appropriations Act originally 

appropriated budget authority of $600 

million to be used on an expedited 

basis. For fiscal year (FY) 2019, 

Congress funded an additional $550 

million for the pilot through the 

Consolidated Appropriations Act, 2019 

(Pub. L. 116–6). Once again, on 

December 20, 2019, Congress 

appropriated (Consolidated 

Appropriations Act, 2020 (Pub. L. 116– 

94)) $555 million to continue the 

program. In addition, the Coronavirus 

Aid, Relief, and Economic Security Act 

provided another $100 million in grant 

funding for the program. 

The Rural eConnectivity Program 

provides loans, grants, and loan/grant 

combinations to facilitate broadband 

deployment in rural areas. In facilitating 

the expansion of broadband services 

and infrastructure, the program will fuel 

long-term rural economic development 

and opportunities in rural America. One 

of those opportunities is precision 

agriculture. The use of this technology 

requires a robust broadband connection. 

The awards made under this program 

will bring high-speed broadband to the 

farms, which will allow them to 

increase productivity. 

Since its establishment under the 

2018 Act, RUS has implemented the 

Rural eConnectivity Program by issuing 

Funding Opportunity Announcements 

(FOAs). The round one FOA was 

published December 14, 2018 (83 FR 

64315). The round two FOA was 

published December 12, 2019 (84 FR 

67913), and included a request for 

comments under USDA’s Regulatory 

Reform Notice published on July 17, 

2017 (82 FR 32649). 

The Agency received comments from 

six respondents on the round two FOA 

through USDA’s Regulatory Reform 

Federal Register Docket ID: USDA– 

2017–0002–0001. The respondents 

included one company, three internet/ 

television associations, one state board 

and one individual. RUS has reviewed 

and analyzed each response. Multiple 

respondents included several 

comments. The following is a summary 

of the key comments from each 

respondent and the Agency’s responses: 

Respondent One 

For Round 3, Respondent 

recommends that RUS consider 

redefining ‘‘sufficient access to 

broadband’’ to mean any rural area in 

which households have fixed terrestrial 

broadband service delivering at least 25 

mpbs/3 mbps with a limited exception 

as detailed in comment 3. Presumably, 

round 3 would not take place until at 

least 2021, and those networks funded 

by a 3rd round would not be built out 

until several years after. This would 

mean areas that fall between 10/1 mbps 

and 25/3 mbps would have to wait 

several years for meaningful upgrades. 

Agency response: To accommodate 

this request the regulation implements 

procedures that allow the definition of 

sufficient access to be updated any time 

an application window is opened 

through a notice in the Federal Register. 

The Rural eConnectivity Program 

funded networks should not overbuild 

existing networks or federally supported 

planned networks. General Field 

Representatives (GFR) did a good job of 

surveying existing networks. 

Contractors hired by USDA did not 


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fulfill their responsibilities which 

resulted in RUS not adhering to the 

requirements to not fund networks 

where at least 10/1 mbps service exists. 

The comment lists two specific 

scenarios. Respondent recommends that 

RUS avoid using contractors, but if they 

must be used, better training is needed. 

Agency GFRs should work more closely 

with contractors to ensure that they 

fulfill their duties to accurately verify 

whether service exists. 

Agency response: Starting with Round 

2, GFRs now have the lead role in 

completing field reviews to determine if 

sufficient access to broadband exists in 

an area. 

RUS should make any area where the 

Federal Communication Commission 

(FCC) is, at the time of application 

consideration, committing funding to 

build a terrestrial network ineligible for 

Rural eConnectivity Program Awards. 

This should include funding from 

ACAM, CAF–BLS, Alaska Plan, CAF II 

Auction, and RDOF USF High Cost 

Program funding streams. The one 

exception is areas funded by the 

Universal Service Fund (USF) high cost 

program where most of the area has 25/ 

3 mpbs which some have less. The 

Agency should allow USF recipients to 

apply for funding to bring higher speeds 

that the FCC has mandated to the areas 

they already serve. 

Agency response: The proposed 

regulation allows the Agency to 

establish what areas are to be protected 

when new application windows are 

opened through a notice in the Federal 

Register. The Agency continues to work 

with the FCC to identify areas where 

they are providing funds and where 

RUS is providing funds. 

Respondent recommends that RUS 

allow applicants, working with Tribal 

entities, to certify fisheries in the same 

way the Rural eConnectivity Program 

allows farms to be certified. In some 

parts of the country, fisheries are key to 

economic development and broadband 

is just as important at sea for both safety 

and efficiency of production as it is on 

land. Placing fishing on equal footing 

with farming will provide additional 

geographical diversity to the applicant 

pool and ensure economically important 

coastal areas get the broadband they 

need. 

Agency response: The proposed 

regulation allows for scoring criteria to 

be established each time an application 

window is opened. If farms are used for 

scoring criteria in future application 

windows, we will consider counting 

fisheries as farms. 

Respondent Two 

The following comments apply to the 

application process: 

Limit required data submissions to 

the corporate entity applying and the 

geographic area and/or project affected. 

Agency response: The information 

requested in the application is the 

minimal amount that is needed to 

determine if the company can 

adequately address the needs of the 

proposed project and remain a viable 

operation. 

Limit information requests to reduce 

the amount of data sought from the 

applicant’s parents and affiliates that is 

not critical to determining whether an 

award should be made and to 

information about the affected 

geographical area. 

Agency response: Each application is 

unique. RUS only requests information 

about parents and affiliates that is 

needed in order to make a sound 

financial decision about the project. 

Clarify that an applicant need only 

submit information about non-funded 

service areas (NFSA) that are related to 

the proposed funded service area 

(PFSA), rather than all of the 

applications NFSAs. 

Agency response: The purpose of the 

NFSA is to provide sufficient 

information to evaluate the viability of 

an operation. Publicly traded companies 

with a sufficient bond rating have 

publicly demonstrated this and there is 

no need for the NFSA. The proposed 

regulation does allow publicly traded 

companies an option where they do not 

have to submit their NFSAs. However, 

all other applicants will need to submit 

all of the service areas in the NFSAs and 

PFSAs. 

Permit subleasing rights so that an 

applicant is not required to own the 

facilities used to provide broadband, so 

long as the entity owning the facilities 

is an affiliated entity that gives RUS 

sufficient financial security. 

Agency response: To ensure that the 

project is completed, the entity applying 

for the award must own the facilities. 

Additionally, so that the agency retains 

its security in the collateral, legal 

documents must be entered into with 

entity that controls such assets. 

However, the agency has been amenable 

to entering into co-awardee agreements 

where assets must be held by an 

affiliate. 

Publicly traded companies cannot 

share the forward-looking data RUS 

requires. 

Agency response: The proposed 

regulation has options that publicly 

traded companies can elect, where they 

would not have to submit forwardlooking projections. 

Allow providers alternate ways to 

establish their project capabilities, such 

as demonstrating financial viability 

through publicly available Securities 

and Exchange Commission filings, 

replacing the first lien on assets 

requirement with alternatives for 

security options, and implementing a 

budgeting methodology that is more 

flexible than the Capital Investment 

Workbook. 

Agency response: The Agency will 

consider substitute collateral options; 

however, any solution must take into 

consideration that deviating from the 

agency’s standard security arrangements 

will require significant time and legal 

resources, which may not be available. 

The capital investment workbook is set 

up to ensure that adequate funds are 

considered to ensure the project is 

properly funded. 

Defer network design and 

environmental showings until later in 

the RUS funding process and allow inhouse engineers to certify projects. 

Agency response: Network designs 

must be completed in order to identify 

all resources that are needed for the 

project. 

Enable the widest possible 

participation by eliminating the ban on 

applications from broadband providers 

organized as partnerships or joint 

ventures. 

Agency response: The proposed 

regulation now includes language to 

clarify specifically what types of 

partnerships are eligible and which 

types are still considered ineligible. 

Partnerships that do not involve 

individuals are now eligible entities. 

The following comments apply to the 

award process: 

Take stronger steps to ensure that 

funded areas are truly unserved, 

including: (i) Undertaking better 

coordination of maps and data with the 

FCC to avoid granting duplicative 

funding to the same area; (ii) 

considering an area to be ‘‘served’’ once 

a provider has built a broadband 

network there, regardless of whether it 

has yet secured customers in that area; 

and (iii) considering an area to be 

‘‘served’’ if federal or state broadband 

funding has been committed to that 

area, or a provider has a binding 

commitment to build a broadband 

network there, regardless of whether 

those networks are yet built out (as long 

as the provider is meeting applicable 

build-out deadlines). 

Agency response: We continue to 

work with the FCC to ensure that their 

program and RUS’ programs are 

complementary of each other. The 

proposed regulation allows the Agency 

to establish what areas are eligible for 


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funding at the time an application 

window is opened. 

Adopt provisions to ensure a more 

technology-neutral scoring process, 

including eliminating any bonus points 

for networks that offer symmetrical 

speeds or providers in states who have 

authorized electric cooperatives to offer 

broadband service. 

Agency response: The agency will 

consider eliminating preferential 

scoring for high-speed symmetrical 

systems in the next funding window. 

Allow automated certification for 

businesses served. 

Agency response: The agency 

continues to explore options for 

publicly available data that could be 

used to count businesses. However, note 

that RUS may or may not use businesses 

as a scoring criteria in future rounds of 

funding. 

Do not deny entire applications when 

one area proposed to be served is 

ineligible, instead modifying the 

application to exclude the ineligible 

area. 

Agency response: Under this 

regulation, the Agency has the ability to 

revise applications by excluding 

ineligible areas. Notwithstanding that 

ability, for grant applications subject to 

scoring and competition, the Agency 

can only do this when eliminating the 

ineligible area would not modify the 

application or require that the applicant 

revise the application. 

Require that awardees comply with 

the FCC’s pole attachment rules and fee 

restrictions. 

Agency response: Awardees that are 

subject to the FCC are already required 

to follow these requirements. For other 

entities not subject to the FCC, the 

Agency cannot impose these 

requirements without authority. 

The following comments apply to the 

challenge process: 

Increase transparency in the challenge 

process by making maps available of 

eligible areas and keeping them 

updated. 

Agency response: The Agency 

continually updates its mapping with 

any new information it receives. 

However, it is impossible to update 

mapping with information that the 

Agency is not aware of. That is why the 

Agency can only make a final 

determination by sending staff to the 

area to complete a field analysis. 

Publicly post written decisions on 

challenges explaining RUS’s reasons for 

granting or denying the challenge prior 

to an award being issued for the 

challenged area. 

Agency response: For Round 2, public 

notice response respondents are already 

being notified if their challenge was 

successful or not. Unfortunately, RUS 

cannot make public its responses to 

challenges because the information 

submitted by respondents is protected 

from release by law. 

Allow for appeals of decisions on 

challenges prior to announcing an 

award—Update the map of eligible areas 

following the final resolution of each 

challenge and award and before 

applications are submitted for the next 

round of funding. 

Agency response: The Agency will 

take this recommendation under 

consideration for future rounds. With 

respect to the latter request, that is 

already being done. 

Respondent Three 

RUS should consider allowing 

subsidiaries to use facilities and assets 

of affiliates to satisfy application and 

program requirements. 

Agency response: There are 

procedures currently in place that allow 

for this scenario. In the future, the 

Agency will continue to consider the 

possibility of allowing co-applicants. 

The following comments apply to the 

application process: 

Refine option for a company to apply 

for Rural eConnectivity Program funds 

using a dedicated subsidiary: 

Agency response: If the subsidiary can 

meet the requirements of the program, 

they are eligible to apply. Additionally, 

in order that the security arrangements 

are maintained, the agency has been 

amendable to entering into co-awardee 

agreements where assets must be held 

by a subsidiary. 

Consider reforms that would make it 

easier for companies to apply directly at 

the parent or operating company level. 

Agency response: The proposed 

regulation has made allowances for 

publicly traded companies that provide 

them with more options on applying. 

Simplify the means by which an 

applicant’s technical capabilities and 

financial viability can be confirmed 

such as using public information filed 

with the Securities and Exchange 

Commissions for financial viability or 

narrative or aggregated information 

about existing experience in the 

marketplace for technical viability. 

Agency response: The proposed 

regulation now contains options for 

publicly traded companies not to have 

to submit forward looking financial 

projections. 

Consider eliminating or substantially 

reducing application requirements 

relating to NFSAs. Submission of 

detailed information regarding NFSAs is 

more administratively burdensome for 

larger applicants. 

Agency response: The proposed 

regulation permits publicly traded 

companies not to submit NFSAs if they 

meet certain requirements. 

Submitting detailed information and 

projections regarding services, 

investments and customers within 

NFSAs raises significant competitive 

concerns that outweigh any limited 

benefit. 

Agency response: With respect to the 

submission of information that may be 

competitive, the Agency protects the 

release of business proprietary 

information to the full extent under the 

law. In order to understand the entire 

financial picture of an applicant, the 

Agency must review the operations of 

NFSAs. However, the proposed 

regulation now reduces that burden for 

publicly traded companies, by 

permitting them not to submit NFSAs if 

they meet certain requirements. 

Requiring applicants to submit 

forward-looking projections for NFSAs 

creates risks for publicly traded 

companies. Limit projections just to 

PFSAs—Simplify submissions for 

NFSAs. 

Agency response: Per the proposed 

regulation, publicly traded companies 

do not have to submit NFSAs if they 

meet certain requirements. 

Instead of submission of geospatial 

data through the mapping tool, should 

consider allowing applicants to submit 

a more general description of their 

existing footprints. 

Agency response: In order to stop 

overlapping funding, a copy of the 

PFSA is necessary. This shapefile will 

also be required to be submitted as part 

of the statutory reporting requirements 

and will have to be updated annually. 

Consider de-coupling the requirement 

to submit mapping information for an 

applicant’s NFSAs from the submission 

of other information such as customer 

count, service offerings and further 

business projections. 

Agency response: The agency is 

committed to assisting the federal 

government in mapping out broadband 

availability in rural areas as much as it 

can. The agency understands that this 

may be an onerous undertaking for 

publicly traded companies, and so the 

agency has created a carve-out for these 

entities if they meet certain 

requirements. 

Rather than require applicants to 

identify competitive offerings from 

other providers within each NFSA, 

consider allowing applicants to provide 

narrative information describing the 

competition they face from other 

providers. 

Agency response: Competitive 

information is extremely important to 


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the financial feasibility of the award, 

and detailed information about the 

competitive pressures on an applicant 

within its entire service area is 

extremely important in making a 

financial decision on an award. 

The following two comments apply to 

clarifying and narrowing the 

requirement to submit network 

diagrams to facilities involved in the 

proposed project: 

Narrow the requirement to submit a 

network diagram only to the project(s) 

set forth in the application and any 

existing network elements that would be 

leveraged to support such new network 

facilities. 

Agency response: Complete network 

diagrams are required to ensure the 

capabilities of the entire system. 

Clarify that applicants may provide a 

general narrative description in lieu of 

a diagram with respect to the remainder 

of their network. 

Agency response: Complete network 

diagrams are required to ensure the 

capabilities of the entire system. 

Consider allowing providers to 

propose budgets rather than using RUS’s 

online capital investment workbook. 

Agency response: The capital 

investment workbook was developed to 

ensure consistency in comparing all 

applications and that all necessary 

information is submitted to demonstrate 

that all requirements can be satisfied. 

Consider securities filings and other 

publicly available information to 

confirm applicant’s financial viability. 

Agency response: The proposed 

regulation now has options for publicly 

traded companies. 

The following two comments apply to 

simplifying changes to the application 

and evaluation criteria. 

Remove discrepancy between fiber to 

the home (FTTH) and hybrid coaxial 

fiber (HFC) network designs—awarding 

points for symmetrical speeds affords 

significant advantages to FTTH versus 

HFC and it is inconsistent with 

‘‘technology neutral.’’ 

Agency response: There are no 

discrepancies between using these types 

of technologies. Under the proposed 

regulation, scoring criteria will now be 

established prior to opening an 

application window. Points for 

bandwidth capability may or may not be 

used. 

Allow applications to be supported by 

in-house engineers on the same terms as 

it permits program awardees to support 

particular construction projects with inhouse engineering staff. Requiring use of 

an external, certified engineer adds 

unnecessary cost and complexity. 

Agency response: There are currently 

procedures in place that allow awardees 

to use in-house engineering services. 

The following comments apply to 

terms and conditions: 

Consider modifying the financial 

restrictions on grant recipients. The 

financial restrictions that the grant and 

security agreement impose impede the 

ability of financially stable providers to 

engage in commonplace transactions 

necessary for their business if they 

participate in the program at the parent 

level. 

Agency response: The Agency has 

been using the current award 

documents for a number of years, and 

these agreements ensure that program 

requirements will be satisfied. However, 

that said, the Agency is unaware of any 

provisions in the grant agreement that 

would impede participants from 

conducting normal business 

transactions. This concern has not been 

raised to the Agency before. 

Consider narrowing the ‘‘Right of 

Inspection’’ to documents relating to the 

RUS-Funded project. 

Agency Response: The Agency’s right 

to inspect documents is already limited 

to the RUS project and any agreements 

or documents that are directly related to 

the project. 

The following comments apply to 

allowing greater flexibility in 

contracting and vendor selection: 

Offer awardees the option to proceed 

with their regular contracting and 

construction processes without 

requiring RUS approval for each 

process. 

Agency response: In order to ensure 

that federal law is being followed with 

respect to environmental law and the 

uniform federal grant requirements at 2 

CFR 200, especially with respect to 

bidding, the Agency must impose 

certain contracting and construction 

procedures. 

Consider capping contributions to a 

given project, which would cause the 

grantee to bear the risk of running over 

budget. 

Agency response: Given the large 

amount of federal investment in these 

projects, and the need for broadband 

facilities in rural America, awardees 

must covenant that the project will be 

finished with their own funds if 

necessary, otherwise the federal 

investment will have been wasted. 

Narrow the current construction 

procedures requirement that applicants 

obtain RUS approval before contracting 

with an affiliate. 

Agency response: The Agency’s 

approval to contract with affiliates 

ensures that an awardee is not paying 

more than necessary. 

Respondent Four 

For the current and future rounds, we 

strongly recommend that state and 

county fairgrounds be included within 

the definition of essential community 

facilities. In California, fairgrounds 

continue to be essential in supporting 

the safety, health and well-being of 

residents—serving as evacuation centers 

and shelters during fires and floods. Of 

California’s 77 fairgrounds, 36 (47 

percent of all fairs in the state) have 

been activated as evacuation centers, 

fire camps, and animal shelters 

providing direct emergency response 

and public safety activities. Sufficient 

access to broadband connectivity at 

these locations is critical to provide 

individuals and families impacted by 

emergencies essential access to 

communication, banking and other 

services. Allowing state and county 

fairground eligibility as essential 

community facilities is a priority for our 

state to extend overall broadband 

connectivity and better prepares for 

future emergencies. A list of their 

fairgrounds with the addresses and 

coordinates was provided. 

Agency response: The Agency will 

take this under consideration. The 

proposed regulation allows scoring 

criteria to be established at the time an 

application window is opened. Essential 

community facilities may or may not be 

used in future funding rounds. 

Respondent Five 

Over many years, RUS, which 

administers programs that provide 

infrastructure or infrastructure 

improvements to rural communities, has 

served with distinction through 

oversight from the USDA. Providing 

economic incentives to allow for 

broadband deployment in rural areas 

through the Rural eConnectivity 

program seems to be an appropriate use 

of federal funds. 

Agriculture plays an important part in 

the American economy. Today, 

production and consumption occur 

practically simultaneously so a lack of 

good broadband service quickly turns to 

no service whatsoever. This program, 

which relies on an interplay of effort, 

may help to bring stable, permanent and 

dependable service and give an 

opportunity to aid in molding and 

directing a public enticement that 

recognizes the importance of farming; 

including small business enterprises to 

every branch of industry and commerce 

in the country. 

This grant program, if implemented 

with checks and balances for 

compliance, has an advantage in that it 

affords an added means of raising funds 


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that meet the great and increasing 

demand for capital expenditures for the 

extension and improvement of modern 

broadband systems. The taxpayer return 

on investment here is fair and justified 

so that small customers will get the 

benefit of it. 

The RUS program should be reviewed 

periodically and continued as it serves 

the interest of Americans as a whole. 

Agency response: Respondent five’s 

response was more feedback versus 

requests for change. The Agency 

appreciates the positive feedback. 

Respondent Six 

Respondent wholeheartedly agrees 

that the FCC and RUS will need to work 

together to avoid any result that would 

squander available funds, and that the 

agencies should establish, prior to 

initiating these new rounds of funding, 

which areas should be prioritized and 

ensure that duplicative support is not 

assigned to different providers for 

delivery of overlapping services. Such a 

negative result would upset the 

legitimate expectations of those 

submitting bids for funding that they 

would be the only recipients of federal 

support directed to deploying new 

service. Only through coordination of 

efforts can the two agencies maximize 

the benefit of the federal funds allocated 

and optimize the delivery of new or 

improved broadband capability to rural 

areas to close the digital divide. 

Agency response: The Agency 

continues to work with the FCC to 

identify areas where they are providing 

funds and where RUS is providing 

funds. 

In addition to the comments received 

under the round two FOA, the Agency 

collected stakeholder feedback utilizing 

various methods including, conducting 

phone and in-person interviews, hosting 

webinars, and hosting workshops across 

the country. Through these venues, the 

Agency regularly heard the following: 

• Financial requirements were 

burdensome and could be streamlined 

to better serve rural communities. 

• Specific required documents should 

be made optional due to their minimal 

impact on the viability of the applying 

entity and the proposed project. 

• The Agency should consider higher 

minimum speed requirements in order 

to ensure systems do not become 

obsolete before the end of its composite 

economic life. 

• The scoring criteria should remain 

flexible and continually be updated to 

include the most up-to-date, accurate, 

and available data. 

• The public notice response period 

should be extended to longer than 30 

days. 

The Agency utilized the submitted 

comments, stakeholder feedback and 

experience gained from rounds one and 

two to develop this final rule, which 

will codify policies and procedures for 

administering the program. Changes that 

will be codified in the regulation 

include, but are not limited to, the 

following: 

• The requirement for two years of 

unqualified, comparative, audited 

financial statements has been changed 

to unqualified, comparative, audited 

financial statements for the previous 

fiscal year of the applicant from the date 

the application has been submitted. 

• The requirement that applicants 

must submit certifications from the 

appropriate state or tribal broadband 

office has been changed to a voluntary 

request. 

• Under certain conditions, a 

subsidiary can use the unqualified, 

comparative, audited statements of their 

parent to meet certain eligibility 

requirements. 

• The first two rounds of funding had 

restrictions associated with the Federal 

Communication Commission’s (FCC) 

funding of the CAF II–903 areas. The 

Agency has elected to remove these 

restrictions as the FCC buildout 

requirements are implemented and 

these areas become ineligible. The 

Agency will continue to work with the 

FCC to maximize the funding that both 

the FCC and RUS make available to 

rural America. 

• Additional sections, including the 

scoring criteria, eligible service area 

threshold, eligible award costs, and 

public notice response period were also 

adjusted since round one. These 

requirements will be determined on an 

annual basis and published in the 

Federal Register in order for the Agency 

to remain responsive to stakeholder 

needs. Based on the prior feedback 

received, the Agency is issuing this 

rulemaking as a Final Rule with 

comment. The Agency specifically 

requests public comment on the speed 

used to determine eligibility. 

Based on the prior feedback received, 

the Agency is issuing this rulemaking as 

a Final Rule with comment. The Agency 

specifically requests public comment on 

the speed used to determine eligibility. 

Based on the speed requirements 

implementing the statutory 

requirements of the program of the 

Round 1 and Round 2 FOAs, the Agency 

required a minimum of 10/1 Mbps 

service in order to qualify for eligibility. 

For future rounds, the Agency would 

take into account comments received 

under this rulemaking to establish 

future speed requirements, which will 

be announced in the Federal Register in 

the funding opportunity 

announcements. 

Executive Order 12866, Regulatory 

Impact Analysis 

This rule has been determined to be 

significant and was reviewed by the 

Office of Management and Budget under 

Executive Order 12866. In accordance 

with Executive Order 12866, a 

Regulatory Impact Analysis was 

completed, outlining the costs and 

benefits of implementing this program 

in rural America. The complete analysis 

is available in Docket RUS–20– 

Telecom–0023 on Regulations.gov. The 

following is a summary discussion of 

the Analysis: 

The final rule will codify statutory 

language from the 2018 Consolidated 

Appropriations Act that established the 

Rural eConnectivity Program and the 

2018 Farm Bill with respect to public 

notice and reporting requirements, as 

well as general policies and procedures 

for the program. The result will be 

consistent, predictable program delivery 

that allows the Agency to deploy 

reliable, high-speed broadband into 

unserved areas and fuel long-term 

economic development and 

opportunities in rural America. 

The Agency estimates up to 500 

organizations may be interested in 

applying for the Rural eConnectivity 

Program and approximately 200 awards 

will be made each funding round. The 

Agency estimates the total cost to 

applicants to be $19,426 per applicant 

respondent and $6,837 per award 

recipient respondent. The 

administrative cost to the Federal 

Government to administer the program 

is estimated to be $5,495,802. 

On October 21, 2017, United States 

Department of Agriculture (USDA) 

Secretary Sonny Perdue released the 

‘‘Report to the President of the United 

States from the Task Force on 

Agriculture and Rural Prosperity.’’ The 

report was a product of the Interagency 

Task Force on Agriculture and Rural 

Prosperity, which was formed to 

identify legislative, regulatory, and 

policy changes to promote agriculture, 

economic development, job growth, 

infrastructure improvements, 

technological innovation, energy 

security, and quality of life in rural 

America per Executive Order 13790 (82 

FR 20237). In partnership with local, 

state, and tribal leaders, and dozens of 

federal agencies, the report identified 

eConnectivity as one of five key 

catalysts to achieving prosperity in rural 

America. 

In conclusion, the Agency notes that 

reliable, affordable high-speed internet 

is essential in today’s global economy. 


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A robust broadband connection allows 

students greater access to educational 

opportunities, patients greater access to 

health care professionals, businesses 

access to customers around the world, 

and farmers the ability to increase 

productivity and profitability. The 

awards made under the Rural 

eConnectivity Program will provide 

increased opportunity and bring muchneeded critical infrastructure to rural 

America. 

Congressional Review Act 

Pursuant to the Congressional Review 

Act (5 U.S.C. 801 et seq.), the Office of 

Information and Regulatory Affairs 

designated this rule as a major rule, as 

defined by 5 U.S.C. 804(2). 

Executive Order 12988, Civil Justice 

Reform 

This rule has been reviewed under 

Executive Order 12988, Civil Justice 

Reform. The Agency has determined 

that this rule meets the applicable 

standards provided in section 3 of the 

Executive Order. In addition, all state 

and local laws and regulations that 

conflict with this rule will be 

preempted. No retroactive effect will be 

given to this rule. 

Executive Order 12372, 

Intergovernmental Consultation 

This rule is excluded from the scope 

of Executive Order 12372, 

Intergovernmental Consultation, which 

may require a consultation with State 

and local officials. See the final rule 

related notice entitled, ‘‘Department 

Programs and Activities Excluded from 

Executive Order 12372’’ (50 FR 47034) 

advising that RUS loans and loan 

guarantees were not covered by 

Executive Order 12372. 

Regulatory Flexibility Act Certification 

RUS certifies that this rule will not 

have a significant economic impact on 

a substantial number of small entities, 

as defined in the Regulatory Flexibility 

Act (5 U.S.C. 601 et seq.). The RUS 

telecommunications program provides 

loans to borrowers at interest rates and 

on terms that are more favorable than 

those generally available from the 

private sector. RUS borrowers, as a 

result of obtaining federal financing, 

receive economic benefits that exceed 

any direct economic costs associated 

with complying with RUS regulations 

and requirements. 

Environmental Impact Statement 

This final rule has been reviewed in 

accordance with 7 CFR part 1970 

(‘‘Environmental Policies and 

Procedures’’). The Agency has 

determined that (i) this action meets the 

criteria established in 7 CFR 1970.53(f); 

(ii) no extraordinary circumstances 

exist; and (iii) the action is not 

‘‘connected’’ to other actions with 

potentially significant impacts, is not 

considered a ‘‘cumulative action’’ and is 

not precluded by 40 CFR 1506.1. 

Therefore, the Agency has determined 

that the action does not have a 

significant effect on the human 

environment, and therefore neither an 

Environmental Assessment nor an 

Environmental Impact Statement is 

required. 

Catalog of Federal Domestic Assistance 

The Catalog of Federal Domestic 

Assistance (CFDA) number assigned to 

the Rural e-Connectivity Pilot Program 

is 10.752. The Catalog is available on 

the internet at https://beta.sam.gov/. 

The Government Publishing Office 

(GPO) prints and sells the CFDA to 

interested buyers. For information about 

purchasing the Catalog of Federal 

Domestic Assistance from GPO, call the 

Superintendent of Documents at (202) 

512–1800 or toll free at (866) 512–1800, 

or access GPO’s online bookstore at 

https://bookstore.gpo.gov. 

Unfunded Mandates 

This rule contains no federal 

mandates (under the regulatory 

provisions of Title II of the Unfunded 

Mandates Reform Act of 1995) for state, 

local, and tribal governments or the 

private sector. Therefore, this rule is not 

subject to the requirements of § 202 and 

205 of the Unfunded Mandates Reform 

Act of 1995. 

E-Government Act Compliance 

RUS is committed to the EGovernment Act, which requires 

Government agencies in general to 

provide the public the option of 

submitting information or transacting 

business electronically to the maximum 

extent possible. 

Executive Order 13132, Federalism 

The policies contained in this rule do 

not have any substantial direct effect on 

states, on the relationship between the 

national government and the states, or 

on the distribution of power and 

responsibilities among the various 

levels of government. Nor does this rule 

impose substantial direct compliance 

costs on state and local governments. 

Therefore, consultation with the states 

is not required. 

Executive Order 13175, Consultation 

and Coordination With Indian Tribal 

Governments 

This rule has been reviewed in 

accordance with the requirements of 

Executive Order 13175, ‘‘Consultation 

and Coordination with Indian Tribal 

Governments.’’ Executive Order 13175 

requires federal agencies to consult and 

coordinate with tribes on a governmentto-government basis on policies that 

have tribal implications, including 

regulations, legislative comments or 

proposed legislation, and other policy 

statements or actions that have 

substantial direct effects on one or more 

Indian tribes, on the relationship 

between the Federal Government and 

Indian tribes or on the distribution of 

power and responsibilities between the 

Federal Government and Indian tribes. 

Rural Development has assessed the 

impact of this rule on Indian tribes and 

determined that this rule does not, to 

our knowledge, have tribal implications 

that require tribal consultation under 

Executive Order 13175. If a Tribe 

requests government-to-government 

consultation, Rural Development will 

work with the Office of Tribal Relations 

to ensure meaningful consultation is 

provided where changes, additions, and 

modifications identified herein are not 

expressly mandated by Congress. If a 

tribe would like to engage in 

government-to-government consultation 

with Rural Development on this rule, 

please contact Rural Development’s 

Native American Coordinator at (720) 

544–2911 or AIAN@usda.gov. 

Additionally, Rural Development 

recognizes the challenges of deploying 

broadband in tribal communities. The 

Agency further notes that this regulation 

sets the framework for the 

administration of the Rural 

eConnectivity Program but does not set 

the priority point scale or content that 

will be used for scoring in upcoming 

application windows. The specific 

scoring scale for each round will be set 

and published in future funding 

announcements. In past instances, Rural 

Development has sought comment on 

the contents of the funding 

announcement. To ensure that Native 

American Tribes have a meaningful 

opportunity to provide input to the next 

upcoming funding notice, Rural 

Development will coordinate with 

USDA’s Office of Tribal Relations to 

conduct at least one listening session to 

collect recommendations from tribes on 

how Rural Development’s broadband 

programs can be improved to better 

meet the broadband challenges that 

tribes face, identify opportunities to 

leverage and coordinate assistance from 


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other federal agencies and gain 

additional insight into the unique 

economic, geographical and political 

realities that continue to impair access 

to affordable broadband in many tribal 

communities. The listening session will 

be held prior to the release of the next 

Rural eConnectivity Program funding 

announcement, and tribal communities 

will be notified once this session has 

been scheduled. 

USDA Rural Development has 

participated in listening sessions and 

Farm Bill tribal consultations that have 

either specifically been focused on the 

Rural eConnectivity Program or have 

touched on the challenges with utilizing 

Rural Development’s programs to 

finance broadband infrastructure 

throughout Indian Country and Alaska. 

For instance, on June 4, 2018, USDA’s 

Senior Advisor for Rural Infrastructure, 

the Assistant Administrator for the 

Telecommunications Programs and 

Rural Development’s Native American 

Coordinator hosted a listening session 

on the legislation authorizing the Rural 

eConnectivity Pilot program during the 

National Congress of American Indians 

Midyear Conference in Kansas City, 

MO, prior to the release of the first 

funding announcement for the program. 

Additionally, in May and June of 2019, 

the Administrator of the Rural Utilities 

Service and Rural Development’s Native 

American Coordinator participated in 

USDA Farm Bill consultations hosted by 

USDA’s Office of Tribal Relations in 

Washington, DC and Reno, NV. 

Although the Rural eConnectivity 

Program was not the focus of these 

sessions, concerns from tribal leaders 

regarding broadband infrastructure and 

Rural Development’s programs were 

shared at both events. 

Over the last two years, Rural 

Development has targeted outreach to 

tribes during Round 1 and Round 2 of 

the Rural eConnectivity Program 

funding opportunities. For instance, in 

April of 2019, a tribal focused Rural 

eConnectivity Program technical 

assistance workshop was held on the 

Pascua Yaqui reservation just outside of 

Tucson, AZ. Subsequently, in January 

and February of 2020, Rural 

Development’s Native American 

Coordinator attended the Round 2 Rural 

eConnectivity Program technical 

assistance workshops in Seattle and 

Denver. He hosted a breakout session at 

both workshops on collaborating with 

tribes and was available to answer 

questions of potential tribal applicants. 

Rural Development’s State Directors, 

Telecom General Field Representatives, 

and additional Rural Development staff 

have met with tribes on a regular basis 

to discuss tribal broadband projects, 

tribal broadband challenges and Rural 

Development programs throughout this 

period as well. For instance, in August 

of 2019, USDA Rural Development— 

Colorado hosted a broadband workshop 

in Durango, CO. Tribes in the region 

were encouraged to participate and 

Rural Development leadership used the 

opportunity to visit two nearby tribes to 

discuss their current development 

priorities and challenges—including 

access to broadband infrastructure. 

Finally, Rural Development has 

looked to leverage interagency 

opportunities to provide outreach to 

tribes. For instance, Rural Development 

staff hosted 3 workshops at the 

inaugural National Tribal Broadband 

Summit hosted by the Department of 

Interior in September of 2019. The 

Administrator for the Rural Utilities 

Service also provided closing comments 

at the conclusion of the first day of the 

summit. More recently, on July 20, 

2020, Rural Development staff 

participated in a Community Broadband 

Funders Webinar hosted by FEMA 

Regions 9 and 10 and provided 

information on Rural Development’s 

telecommunications and broadband 

programs, including the Rural 

eConnectivity Program. Additional 

federal agencies that presented 

information during the webinar 

included Department of Commerce’s 

National Telecommunications 

Information Administration and the 

Economic Development Administration, 

the Federal Communications 

Commission, HUD’s Office of Native 

American Programs, Health and Human 

Services and FEMA. The webinar was 

not a tribal specific event, but tribes 

were encouraged to participate and 

some of the content was geared 

specifically to tribal participants. 

Ongoing outreach, interagency 

collaboration, and project meetings with 

tribes helps inform RD leadership of 

ongoing tribal challenges and 

opportunities regarding broadband 

financing and infrastructure 

deployment. These types of interactions 

led to tribal application priority points 

in the first Rural eConnectivity Program 

funding announcement and special 

consideration for tribal broadband plans 

and tribal critical facilities in the 

application scoring criteria during the 

first and second Rural eConnectivity 

Program funding opportunities. Moving 

forward, this type of tribal collaboration, 

along with the tribal listening session 

planned for this rule, will help inform 

Rural Development staff in the 

development of future Rural 

eConnectivity Program funding 

opportunity announcements. 

Civil Rights Impact Analysis 

Rural Development, a mission area for 

which RUS is an agency, has reviewed 

this rule in accordance with USDA 

Regulation 4300–4, Civil Rights Impact 

Analysis,’’ to identify any major civil 

rights impacts the rule might have on 

program participants on the basis of age, 

race, color, national origin, sex, or 

disability. After review and analysis of 

the rule and available data, it has been 

determined that based on the analysis of 

the program purpose, application 

submission and eligibility criteria, 

issuance of this Final Rule is not likely 

to adversely or disproportionately 

impact very low, low and moderateincome populations, minority 

populations, women, Indian tribes or 

persons with disability, by virtue of 

their race, color, national origin, sex, 

age, disability, or marital or familial 

status. No major civil rights impact is 

likely to result from this rule. 

Information Collection and 

Recordkeeping Requirements 

The Information Collection and 

Recordkeeping requirements contained 

in this rule have been submitted for 

approval under OMB Control Number 

0572–0152. 

List of Subjects in 7 CFR Part 1740 

Broadband, Community development, 

Grant programs—communications, Loan 

programs—communications, Rural 

areas, Telecommunications. 

■ Accordingly, for reasons set forth in 

the preamble, chapter XVII, title 7, the 

Code of Federal Regulations is amended 

by adding new part 1740 to read as 

follows: 

CHAPTER XVII—RURAL UTILITIES 

SERVICE, DEPARTMENT OF 

AGRICULTURE 

PART 1740—RURAL ECONNECTIVITY 

PROGRAM 

Sec. 

Subpart A—General 

1740.1 Overview. 

1740.2 Definitions. 

1740.3 Funding parameters. 

1740.4 Certifications. 

1740.5–1740.8 [Reserved] 

Subpart B—Eligibility Requirements 

1740.9 Eligible and ineligible entities. 

1740.10 Eligible projects. 

1740.11 Eligible and ineligible service 

areas. 

1740.12 Eligible and ineligible cost 

purposes. 

1740.13–1740.24 [Reserved] 

Subpart C—Award Requirements 

1740.25 Substantially Underserved Trust 

Areas. 


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1740.26 Public notice. 

1740.27 Environmental and related reviews. 

1740.28 Civil rights procedures and 

requirements. 

1740.29–1740.41 [Reserved] 

Subpart D—Award Terms 

1740.42 Interest rates. 

1740.43 Terms and conditions. 

1740.44 Security. 

1740.45 Advance of funds. 

1740.46 Buy American requirement 

1740.47–1740.58 [Reserved] 

Subpart E—Application Submission and 

Evaluation 

1740.59 Application submission. 

1740.60 Elements of a complete 

application. 

1740.61 Evaluation for technical and 

financial feasibility. 

1740.62 Evaluation of Awardee operations. 

1740.63 Financial information. 

1740.64 Network design. 

1740.65–1740.76 [Reserved] 

Subpart F—Closing, Servicing, and 

Reporting 

1740.77 Offer and closing. 

1740.78 Construction. 

1740.79 Servicing of grants, loan and loan/ 

grant combinations. 

1740.80 Accounting, reporting, and 

monitoring requirements. 

1740.81 Default and de-obligation. 

1740.82–1740.93 [Reserved] 

Subpart G—Other Information and Federal 

Requirements 

1740.94 Confidentiality of Applicant 

information 

1740.95 Compliance with applicable laws. 

1740.96–1740.99 [Reserved] 

1740.100 OMB control number. 

Authority: 7 U.S.C. 1981(b)(4), 7 U.S.C. 

901 et seq., 7 U.S.C. 950aaa et seq., and 7 

U.S.C. 950cc. 

Subpart A—General 

§ 1740.1 Overview. 

(a) The Rural eConnectivity Program, 

hereinafter referred to as Program, 

provides funding in the form of loans, 

grants, and loan/grant combinations for 

the costs of construction, improvement, 

or acquisition of facilities and 

equipment needed to facilitate 

broadband deployment in rural areas. 

One of the essential goals of the Program 

is to expand broadband service to rural 

areas that do not have sufficient access 

to broadband. This part sets forth the 

general policies, eligibility 

requirements, types and terms of loans, 

grants, and loan/grant combinations and 

program requirements. 

(b) Additional information and 

application materials regarding the 

Program can be found on the Rural 

Development website. 

§ 1740.2 Definitions. 

(a) The following definitions apply to 

this part: 

Administrator means the 

Administrator of the Rural Utilities 

Service, or the Administrator’s designee. 

Agency means the Rural Utilities 

Service (RUS). 

Applicant means an entity requesting 

funding under this part. 

Application means the Applicant’s 

request for federal funding, which may 

be approved in whole or in part by RUS. 

Award documents mean, as 

applicable, all associated grant 

agreements, loan agreements, or loan/ 

grant agreements. 

Award means a grant, loan, or loan/ 

grant combination made under this part. 

Awardee means a grantee, borrower, 

or borrower/grantee that has applied 

and been awarded federal assistance 

under this part. 

Broadband loan means, for purposes 

of this regulation, a loan that has been 

approved or is currently under review 

by RUS after the beginning of Fiscal 

Year 2000 in the Telecommunications 

Infrastructure Program, Farm Bill 

Broadband Program, Broadband 

Initiatives Program or this Program. 

Broadband loans that were rescinded 

or defaulted on, or the terms and 

conditions of which were not met, are 

not included in this definition, so long 

as the entity under consideration for an 

award under this part has not 

previously defaulted on, or failed to 

meet the terms and conditions of, an 

RUS loan or had an RUS loan rescinded. 

Broadband service means any fixed 

terrestrial technology, including fixed 

wireless, having the capacity to transmit 

data to enable a subscriber to the service 

to originate and receive high quality 

voice, data, graphics and video. 

CALEA means the Communications 

Assistance for Law Enforcement Act, 47 

U.S.C. 1001 et seq. 

Composite economic life means the 

weighted (by dollar amount of each 

class of facility) average economic life of 

all classes of facilities necessary to 

complete construction of the broadband 

facilities in the proposed funded service 

area. 

Current ratio means the current assets 

divided by the current liabilities. 

Debt Service Coverage Ratio (DSCR) 

means the ratio of the sum of the 

Awardee’s total net income or margins, 

depreciation and amortization expense, 

and interest expense, minus an 

allowance for funds used during 

construction and amortized grant 

revenue, all divided by the sum of 

interest on funded debt, other interest 

and principal payment on debt and 

capital leases. 

Economic life means the estimated 

useful service life of an asset as 

determined by RUS. 

Eligible service area means any 

contiguous proposed funded service 

area where 90 percent of the households 

to be served do not have sufficient 

access to broadband service. For 

eligibility purposes, if an applicant is 

applying for multiple proposed funded 

service areas, each service area will be 

evaluated on a stand-alone basis. 

Equity means total assets minus total 

liabilities as reflected on the Applicant’s 

balance sheet. 

Fixed wireless service means a 

wireless system between two fixed 

locations (e.g., fixed transmitting tower 

to fixed customer premise equipment). 

Forecast period means the five-year 

period of projections in an application, 

which shall be used by RUS to 

determine financial and technical 

feasibility of the application. 

GAAP means accounting principles 

generally accepted in the United States 

of America. 

Grant means any federal assistance in 

the form of a grant made under this part. 

Grant agreement means the grant 

contract and security agreement 

between RUS and the Awardee securing 

the Grant awarded under this part, 

including any amendments thereto, 

available for review on the Agency’s 

web page. 

Indefeasible Right to Use (IRU) means 

the long-term agreement of the rights to 

capacity, or a portion thereof specified 

in the terms of a certain amount of 

bandwidth or number of fibers. 

Loan means any federal assistance in 

the form of a loan made under this part. 

Loan agreement means the loan 

contract and security agreement 

between RUS and the Awardee securing 

the Loan, including all amendments 

thereto, available for review on the 

Agency’s web page. 

Loan/grant means any federal 

assistance in the form of a loan/grant 

combination made under this part. 

Loan/grant agreement means the 

loan/grant contract and security 

agreement between RUS and the 

Awardee securing the loan/grant, 

including all amendments thereto, 

available for review on the Agency’s 

web page. 

Non-funded service area (NFSA) 

means any area in which the applicant 

offers broadband service or intends to 

offer broadband service during the 

forecast period but is not a part of its 

proposed funded service area. 

Pre-application expenses means any 

reasonable expenses, as determined by 

RUS, incurred after the release of a 

Federal Register notice opening an 


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application window to prepare an 

Application or to respond to RUS 

inquiries about the Application. 

Premises means households, farms, 

and businesses. 

Project means all of the work to be 

performed to bring broadband service to 

all premises in the proposed funded 

service area under the Application, 

including construction, the purchase 

and installation of equipment, and 

professional services including 

engineering and accountant/consultant 

fees, whether funded by federal 

assistance, matching, or other funds. 

Proposed funded service area (PFSA) 

means the area (whether all or part of an 

existing or new service area) where the 

applicant is requesting funds to provide 

broadband service. Multiple service 

areas will be treated as separate 

standalone service areas for the purpose 

of determining how much of the PFSA 

does not have sufficient access to 

broadband. Each service area must meet 

the minimum requirements for the 

appropriate funding category to be an 

eligible area. 

RE Act means the ‘‘Rural 

Electrification Act of 1936,’’ as amended 

(7 U.S.C. 901 et seq.). 

Rural area means any area that is not 

located within: (1) A city, town, or 

incorporated area that has a population 

of greater than 20,000 inhabitants; or (2) 

an urbanized area contiguous and 

adjacent to a city or town that has a 

population of greater than 50,000 

inhabitants as defined in the Agency 

mapping tool. 

RUS Accounting Requirements shall 

mean compliance with GAAP, 

acceptable to RUS, the system of 

accounting prescribed by RUS Bulletin 

1770B–1 and the Uniform 

Administrative Requirements, Cost 

Principles, and Audit Requirements for 

Federal Awards, found at 2 CFR part 

200. For all Awardees the term ‘‘grant 

recipient’’ in 2 CFR 200 shall also be 

read to encompass ‘‘loan recipient’’ and 

‘‘loan/grant recipient’’, such that 2 CFR 

200 shall be applicable to all Awardees 

under this part. 

Sufficient access to broadband means 

a rural area in which households have 

broadband service at the minimum 

acceptable level of broadband, as set 

forth in the latest Federal Register 

notice announcing funding for the 

program. This definition will be used to 

determine the eligibility of a proposed 

service area and cannot be lower than 

10 megabit per second (Mbps) 

downstream and 1 Mbps upstream. 

Mobile/Cellular and satellite services, 

which include systems that use satellite 

backbone facilities to connect to the 

internet, will not be considered in 

making the determination of sufficient 

access to broadband. 

TIER means times interest earned 

ratio. TIER is the ratio of an Applicant’s 

net income (after taxes) plus interest 

expense, all divided by interest expense 

and with all financial terms defined by 

GAAP. 

(b) Unless otherwise provided in the 

award documents, all financial terms 

not defined herein shall have the 

meaning as defined by GAAP. 

§ 1740.3 Funding parameters. 

(a) For the purposes of this part: 

(1) Ninety (90) percent of the PFSA 

must not have sufficient access to 

broadband service; 

(2) Applicants must propose to build 

a network that is capable of providing 

broadband service to every premises 

located in the PFSA at the time the 

application is submitted at a speed 

defined in the latest Federal Register 

notice announcing funding for the 

Program; and 

(3) The Agency reserves the right to 

make funding offers or seek 

consultations to resolve partially 

overlapping applications. RUS may 

contact the applicant for additional 

information during the review process. 

If additional information is requested, 

the applicant will have up to 30 

calendar days to submit the information. 

If such information is not timely 

submitted, RUS may reject the 

application. 

(b) The amount and types of funds 

available for assistance, as well as the 

maximum and minimum award 

amounts will be published in the 

Federal Register. Applicants may apply 

for grants, loans and loan/grant 

combinations. 

§ 1740.4 Certifications. 

The Applicant must certify to the 

following within the online application 

system: 

(a) That it is authorized to submit the 

application on behalf of the eligible 

entity(ies) listed in the Application; 

(b) That the Applicant has examined 

the Application; 

(c) That all information in the 

Application, including certifications 

and forms submitted are, at the time 

furnished, true and correct in all 

material respects; 

(d) That the entity requesting funding 

will comply with the terms, conditions, 

purposes, and federal requirements of 

the program; 

(e) That a false, fictitious, or 

fraudulent statement or claim on the 

Application is grounds for denial or 

termination of an award, and/or 

possible punishment by a fine or 

imprisonment as provided in 18 U.S.C. 

1001 and civil violations of the False 

Claims Act (31 U.S.C. 3729 et seq.); 

(f) That the Applicant will comply 

with all applicable federal, tribal, state, 

and local laws, rules, regulations, 

ordinances, codes, orders, and 

programmatic rules and requirements 

relating to the project, and 

acknowledges that failure to do so may 

result in rejection or de-obligation of the 

award, as well as civil liability or 

criminal prosecution, if applicable, by 

the appropriate law enforcement 

authorities. 

§§ 1740.5–1740.8 [Reserved] 

Subpart B—Eligibility Requirements 

§ 1740.9 Eligible and ineligible entities. 

(a) To be eligible for funding, an 

Applicant may be either a nonprofit or 

for-profit organization, and must take 

one of the following forms: 

(1) Corporation; 

(2) Limited Liability Company and 

Limited Liability Partnership; 

(3) Cooperative or mutual 

organization; 

(4) States or local governments, 

including any agency, subdivision, 

instrumentality, or political subdivision 

thereof; 

(5) A territory or possession of the 

United States; or 

(6) An Indian tribe, as defined in 

section 4 of the Indian SelfDetermination and Education 

Assistance Act (25 U.S.C. 450b). 

(b) Individuals and legal general 

partnerships that are formed with 

individuals are not eligible entities. 

(c) Co-Applicants are not eligible 

entities. If two entities would like to 

partner with each other in delivering 

broadband to areas without sufficient 

access, then one entity must take the 

lead on submitting an application. Intercompany agreements can be used to 

account for revenues and expenses on 

the applicant’s financial projections. 

However, based on the existing financial 

and security arrangements, the Agency 

may require that both, or other entities, 

be parties to the award documents, or 

guarantee the award. 

§ 1740.10 Eligible projects. 

To be eligible for funding assistance 

under the part, the Applicant must: 

(a) Submit a complete application and 

provide all supporting documentation 

including unqualified, comparative, 

audited financial statements for the 

previous year from the date the 

application is submitted as detailed in 

§ 1740.63. 

(b) Demonstrate that the project can 

be completely built out within five years 


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from the date funds are first made 

available. 

(c) Demonstrate that the project is 

technically feasible as detailed in 

§ 1740.64. 

(d) Demonstrate that all project costs 

can be fully funded or accounted for as 

detailed in § 1740.63. 

(e) Submit documentation which 

enables RUS to determine that the 

project is financially feasible and 

sustainable as detailed in § 1740.61. 

(f) Demonstrate that the following 

service requirements will be met: 

(1) Facilities funded with grant funds 

will provide broadband service 

proposed in the application for the 

composite economic life of the facilities, 

as approved by RUS, or as provided in 

the Award Documents. 

(2) Facilities funded with loan funds 

must provide broadband service through 

the amortization period of the loan. 

§ 1740.11 Eligible and ineligible service 

areas. 

(a) Eligible service areas. (1) 

Applicants must propose to provide 

broadband service directly to all 

premises in the PFSA. 

(2) If any part of the applicant’s PFSA 

is ineligible, RUS, in its sole discretion, 

may request that an applicant modify its 

application, if RUS believes the 

modification is feasible. Otherwise, RUS 

will reject the application. 

(b) Ineligible service areas. (1) 

Overlapping service areas. RUS will not 

fund more than one project that serves 

any one given geographic area. 

Invariably, however, applicants will 

propose service areas that overlap, 

varying from small de minimis areas of 

the territory, but which may be 

significant with respect to households 

involved, to larger areas of the service 

territory, but which may contain few 

households or businesses, if any. As a 

result, devising a procedure that will 

cover every overlap circumstance is not 

practicable. Nevertheless, it is the 

agency’s intent to make as many eligible 

applications viable for consideration as 

possible. That may mean the agency 

may: 

(i) Determine the overlap to be so 

insignificant that no agency action is 

necessary; 

(ii) Request one or more applications 

to be revised to eliminate the 

overlapping territory; 

(iii) Choose one application over 

another given the amount of assistance 

requested, the number of awards already 

chosen in the area or State, or the need 

for the project in the specific area due 

to other factors; or 

(iv) Simply choose the project that 

scores higher or in the judgement of the 

agency is more financially feasible. 

(2) Prior funded service areas to 

include: (i) RUS Broadband loans. 

Service areas of borrowers that have 

RUS Broadband loans, as defined in this 

part, are ineligible for all other 

applicants, and can be found on the 

Agency web page for the program. 

However, RUS Broadband Borrowers 

that have built out their service areas 

consistent with their application and 

award documents, but were not required 

to provide, and are currently not 

providing, sufficient access to 

broadband pursuant to this regulation 

are eligible to apply for funding for 

these service areas; provided that they 

have not defaulted on, and have 

materially complied with, in the sole 

discretion of RUS, their prior Broadband 

loan award requirements. Current RUS 

Broadband Borrowers that have received 

funding to provide sufficient access to 

broadband but have not yet built out 

their system are ineligible to apply for 

funding for these service areas. 

(ii) RUS Community Connect Grants. 

Service areas that received grants under 

the RUS Community Connect Grant 

Program are eligible if they do not have 

sufficient access to broadband, except 

for those grants still under construction. 

Service areas still under construction 

can be found on the Agency’s web page. 

(iii) RUS BIP Grants. Service areas 

that received a 100 percent grant under 

the RUS Broadband Initiatives Program 

are eligible if they do not have sufficient 

access to broadband. 

(c) Service areas with other funding. 

(1) Applicants are encouraged to work 

with the Governor’s office for the states, 

and tribal governments for the tribal 

areas where they are proposing to 

provide broadband service and submit 

information detailing where state 

funding has been provided. 

(2) Service areas that have received 

federal grant funds, or funds from the 

Federal Communications Commission, 

to provide broadband service will be 

restricted from funding, if such funding 

is principally to construct facilities 

throughout the service area that provide 

broadband service at the threshold level 

of service. If additional service areas are 

restricted from funding, these areas will 

be identified in the funding opportunity 

announcement that opens an 

application window. 

§ 1740.12 Eligible and ineligible cost 

purposes. 

Award and any matching funds must 

be used to pay only eligible costs 

incurred post award, except for 

approved pre-application expenses. 

Eligible costs must be consistent with 

the cost principles identified in 2 CFR 

200, Subpart E, Cost Principles. In 

addition, costs must be reasonable, 

allocable, and necessary to the project. 

Any application that proposes to use 

any portion of the award or matching 

funds for any ineligible costs may be 

rejected. 

(a) Eligible award costs. Award funds 

under this part may be used to pay for 

the following costs: 

(1) To fund the construction or 

improvement of facilities, including 

buildings and land, required to provide 

fixed terrestrial broadband service, 

including fixed wireless service, and 

any other facilities required for 

providing other services over the same 

facilities, such as equipment required to 

comply with CALEA; 

(2) To fund reasonable preapplication 

expenses in an amount not to exceed 

five percent of the award. 

Preapplication expenses must be 

included in the first request for advance 

of award funds and will be funded with 

either grant or loan funds. If the funding 

category applied for has a grant 

component, then grant funds will be 

used for this purpose. If preapplication 

expenses are not included in the first 

request for advance of award funds, they 

will become an ineligible purpose; and 

(3) To fund the acquisition of an 

existing system that does not currently 

provide sufficient access to broadband 

for upgrading that system to meet the 

requirements of this regulation. The cost 

of the acquisition is limited to 40 

percent of the award amount requested. 

Acquisitions can be considered for 100 

percent loans. 

(b) Ineligible award costs. Award 

funds under this part may not be used 

for any of the following purposes: 

(1) To fund operating expenses of the 

Awardee; 

(2) To fund costs incurred prior to the 

date on which the application was 

submitted other than eligible 

preapplication expenses; 

(3) To fund an acquisition of an 

affiliate, or the purchase or acquisition 

of any facilities or equipment of an 

affiliate. Note that if affiliated 

transactions are contemplated in the 

application, approval of the application 

does not constitute approval to enter 

into affiliated transactions, nor 

acceptance of the affiliated 

arrangements that conflict with the 

obligations under the award documents; 

(4) To fund the acquisition of a system 

previously funded by RUS without prior 

written approval of RUS before an 

application is submitted; 

(5) To fund the purchase or lease of 

any vehicle other than those used 

primarily in construction or system 

improvements; 


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(6) To fund broadband facilities 

leased under the terms of an operating 

lease or an indefeasible right of use 

(IRU) agreement; 

(7) To fund the merger or 

consolidation of entities; 

(8) To fund costs incurred in 

acquiring spectrum as part of a Federal 

Communication Commission (FCC) 

auction or in a secondary market 

acquisition. Spectrum that is part of a 

system acquisition may be considered; 

(9) To fund facilities that provide 

mobile services; 

(10) To fund facilities that provide 

satellite service including satellite 

backbone services; 

(11) To fund the acquisition of a 

system that is providing sufficient 

access to broadband; or 

(12) To refinance outstanding debt. 

§§ 1740.13–1740.24 [Reserved] 

Subpart C—Award Requirements 

§ 1740.25 Substantially Underserved Trust 

Areas (SUTA). 

Applicants seeking assistance may 

request consideration under the SUTA 

provisions in 7 U.S.C. 936f. 

(a) If the Administrator determines 

that a community within ‘‘trust land’’ 

(as defined in 38 U.S.C. 3765) has a high 

need for the benefits of the Program, the 

Administrator may designate the 

community as a ‘‘substantially 

underserved trust area’’ (as defined in 

section 306F of the RE Act). 

(b) To receive consideration under 

SUTA, the applicant must submit to the 

Agency a completed application that 

includes all information requested in 7 

CFR part 1700, subpart D. In addition, 

the application must identify the 

discretionary authorities within subpart 

D that it seeks to have applied to its 

application. Note, however, the 

following: 

(1) Given the prohibition on funding 

operating expenses in the Program, 

requests for waiver of the equity 

requirements cannot be considered; and 

(2) Due to the statutory requirements 

that established the Program, waiver of 

the nonduplication requirements cannot 

be considered. 

§ 1740.26 Public notice. 

(a) To ensure transparency for the 

Program, the Agency’s mapping tool 

will include the following information 

from each application, and be displayed 

for the public: 

(1) The identity of the applicant; 

(2) The areas to be served, including 

identification of the associated census 

blocks; 

(3) The type of funding requested; 

(4) The status of the application; and 

(5) The number of households 

without sufficient access to broadband. 

(b) The Agency will publish a public 

notice of each application requesting 

assistance under this part in accordance 

with the requirements of 7 U.S.C. 950cc. 

All applicants must provide the 

following information, which will be 

posted publicly on RUS’ fully 

searchable website, in addition to the 

status of the application: 

(1) A description of the proposed 

broadband project; 

(2) A map of the PFSA; 

(3) The amount and type of support 

requested by the applicant; 

(4) The estimated number and 

proportion of service points in the 

proposed service territory without fixed 

broadband service, whether terrestrial or 

wireless; and 

(5) Any other information required of 

the applicant in a funding notice. 

(c) The public notice referenced under 

paragraph (b) of this section will be 

published after application submission 

and will remain available for 45 

calendar days on the Agency’s web 

page. During this period, existing 

service providers are requested to 

submit the following information 

through the Agency’s mapping tool: 

(1) The number of residential and 

business customers within the 

applicant’s service area currently 

purchasing sufficient access to 

broadband, the rates of data 

transmission being offered, and the cost 

of each level of broadband service 

charged by the existing service provider; 

(2) The number of residential and 

business customers within the 

applicant’s service area receiving voice 

and video services and the associated 

rates for these other services; 

(3) A map showing where the existing 

service provider’s services coincide 

with the applicant’s service area using 

the Agency’s Mapping Tool; and 

(4) Test results for the service area in 

question for a minimum of at least the 

prior three months demonstrating that 

sufficient access to broadband is being 

provided. The test results shall be for 

different times of the day. 

(d) The Agency may contact service 

providers that respond under paragraph 

(b) of this section to validate their 

submission, and so responding service 

providers should be prepared to: 

(1) Provide additional information 

supporting that the area in question has 

sufficient access to broadband service; 

(2) Have a technician on site during 

the field validation by RUS staff; 

(3) Run on site tests with RUS 

personnel being present, if requested; 

and 

(4) Provide copies of any test results 

that have been conducted in the last six 

months and validate the information 

submitted in the public notice response 

months. 

(e) If no broadband service provider 

submits information pursuant to a 

pending application or if the existing 

provider does not provide the 

information requested under paragraphs 

(b) and (c) of this section, RUS will 

consider the number of providers and 

extent of broadband service using any 

other data available through reasonable 

efforts, including utilizing the National 

Telecommunications and Information 

Administration National Broadband 

Availability Map and FCC broadband 

availability map. That may include the 

agency conducting field validations so 

as to locate facilities in the PFSA and 

determine, to the extent possible, if 

those facilities can provide sufficient 

access to broadband. Notwithstanding, 

conclusive evidence as to the existence 

of sufficient access to broadband will be 

taken only through the public notice 

process. As a result, the Agency highly 

recommends that existing service 

providers in a proposed funded service 

territory submit responses to the public 

notice to ensure that their service is 

considered in the determination of 

eligibility on an application. 

(f) The Agency will notify 

respondents who are existing service 

providers whether their challenge was 

successful or not and allow for an 

opportunity to respond. 

(g) The information submitted by an 

existing service provider under 

paragraph (c) of this section will be 

treated as proprietary and confidential 

and not subject to disclosure, pursuant 

to 7 U.S.C. 950cc(b)(3). 

(h) For all applications that are 

approved, the following information 

will be made available to the public: 

(1) The information provided in 

paragraph (a) of this section; 

(2) Each annual report required under 

§ 1740.80(g) will be redacted to protect 

any proprietary information; and 

(3) Such other information as the 

Administrator of the RUS deems 

sufficient to allow the public to 

understand the assistance provided. 

§ 1740.27 Environmental and related 

reviews. 

(a) Federal Agencies are required to 

analyze the potential environmental 

impacts, as required by the National 

Environmental Policy Act (NEPA), for 

Applicant projects or proposals seeking 

funding. Please refer to 7 CFR part 1970 

for all of Rural Development’s 

environmental policies. All Applicants 

must follow the requirements in 7 CFR 

part 1970 and are required to complete 

an Environmental Questionnaire, to 


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provide a description of program 

activities, and to submit all other 

required environmental documentation 

as requested in the application system 

or by the Agency after the application is 

submitted. It is the Applicant’s 

responsibility to obtain all necessary 

federal, tribal, state, and local 

governmental permits and approvals 

necessary for the proposed work to be 

conducted. 

(b) Applications will be reviewed to 

ensure that they contain sufficient 

information to allow Agency staff to 

conduct a NEPA analysis so that 

appropriate NEPA documentation can 

be submitted to the appropriate federal 

and state agencies, along with the 

recommendation that the proposal is in 

compliance with applicable 

environmental and historic preservation 

laws. 

(c) Applicants proposing activities 

that cannot be covered by existing 

environmental compliance procedures 

will be informed whether NEPA 

requirements and other environmental 

requirements can otherwise be 

expeditiously met so that a project can 

proceed within the timeframes 

anticipated under the Program. 

(d) If additional information is 

required after an application is accepted 

for funding, funds can be withheld by 

the agency under a special award 

condition requiring the Awardee to 

submit additional environmental 

compliance information sufficient for 

the Agency to assess any impacts that a 

project may have on the environment. 

§ 1740.28 Civil rights procedures and 

requirements. 

(a) Equal opportunity and 

nondiscrimination. The agency will 

ensure that equal opportunity and 

nondiscriminatory requirements are met 

in accordance with the Equal Credit 

Opportunity Act and 7 CFR part 15. In 

accordance with federal civil rights law 

and USDA civil rights regulations and 

policies, the USDA, its agencies, offices, 

and employees, and institutions 

participating in or administering USDA 

programs are prohibited from 

discriminating based on race, color, 

national origin, religion, sex, gender 

identity (including gender expression), 

sexual orientation, disability, age, 

marital status, family/parental status, 

income derived from a public assistance 

program, political beliefs, or reprisal or 

retaliation for prior civil rights activity, 

in any program or activity conducted or 

funded by USDA (not all bases apply to 

all programs). 

(b) Civil rights compliance. Recipients 

of federal assistance under this part 

must comply with the Americans with 

Disabilities Act of 1990, Title VI of the 

Civil Rights Act of 1964, and Section 

504 of the Rehabilitation Act of 1973. In 

general, recipients should have 

available for the Agency, racial and 

ethnic data showing the extent to which 

members of minority groups are 

beneficiaries of federally assisted 

programs. The Agency will conduct 

compliance reviews in accordance with 

7 CFR part 15. Awardees will be 

required to complete RD 400–4, 

‘‘Assurance Agreement,’’ for each 

Federal Award received. 

(c) Discrimination complaints. 

Persons believing they have been 

subjected to discrimination prohibited 

by this section may file a complaint 

personally or by an authorized 

representative with USDA, Director, 

Office of Adjudication, 1400 

Independence Avenue SW, Washington, 

DC 20250. A complaint must be filed no 

later than 180 days from the date of the 

alleged discrimination, unless the time 

for filing is extended by the designated 

officials of USDA or the Agency. 

§§ 1740.29–1740.41 [Reserved] 

Subpart D—Award Terms 

§ 1740.42 Interest rates. 

Interest rates for the different funding 

options that will become available will 

be included in the Federal Register as 

part of the funding announcement 

opening a funding window. 

(a) Direct cost-of-money loans shall 

bear interest at a rate equal to the cost 

of borrowing to the Department of 

Treasury for obligations of comparable 

maturity. 

(b) The agency may offer 100 percent 

loans at a reduced interest rate, and in 

such cases, the applicable interest rate 

will be stated in the Federal Register or 

applicable funding opportunity notice. 

§ 1740.43 Terms and conditions. 

Terms and conditions of loans, grants, 

or loan/grant combinations are set forth 

in the non-negotiable standard loan, 

grant, or loan/grant agreements and the 

corresponding note, and/or mortgage, if 

applicable, which may be found on the 

Agency’s web page. 

(a) Unless the Applicant requests a 

shorter repayment period, loans must be 

repaid with interest within a period 

that, rounded to the nearest whole year, 

is equal to the expected Composite 

Economic Life of the project assets, as 

determined by RUS based upon 

acceptable depreciation rates, plus three 

years. Acceptable depreciation rates can 

be found in the Program Construction 

Procedures found on the Agency’s web 

page. 

(b) Interest begins accruing on the 

date of each loan advance. Any deferral 

period for loans will be set in the 

Federal Register notice opening a 

funding window. 

(c) All proposed construction 

(including construction with matching 

and other funds) and all advance of 

funds must be completed no later than 

five years from the time funds are made 

available. 

(d) No funds will be disbursed under 

this program until all other sources of 

funding have been obtained and any 

other pre-award conditions have been 

met. Failure to obtain one or more 

sources of funding committed to in the 

Application or to fulfill any other preaward condition within 90 days of 

award announcement may result in 

withdrawal of the award. The RUS may 

modify this requirement in the Federal 

Register or applicable funding 

opportunity notice. 

§ 1740.44 Security. 

(a) Loans and loan/grant 

combinations. The loan portion of the 

award must be adequately secured, as 

determined by RUS. 

(1) For Corporations and limited 

liability entities, the loan and loan/grant 

combinations must be secured by all 

assets of the Awardee. 

(i) RUS must be given an exclusive 

first lien, in form and substance 

satisfactory to RUS, on all assets of the 

Awardee, including all revenues. 

(ii) RUS may share its first lien 

position with one or more lenders on a 

pari passu basis, except with respect to 

grant funds, if security arrangements are 

acceptable to RUS. 

(iii) Applicants must submit a 

certification that their prior lender or 

lienholder on any Awardee assets has 

already agreed to sign the RUS’ standard 

intercreditor agreement or co-mortgage 

found on the Agency’s web page. 

(iv) RUS will not share a lien position 

on assets with any related party or 

affiliate of the Awardee. 

(2) For Tribal entities and 

municipalities, RUS will develop 

appropriate security arrangements. 

(3) Unless otherwise approved by 

RUS in writing, all property and 

facilities purchased with award funds 

must be owned by the Awardee. 

(b) Grant security. The grant portion 

of the award must also be adequately 

secured, as determined by RUS. 

(1) The government must be provided 

an exclusive first lien on all grant 

funded assets during the service 

obligation of the grant, and thereafter 

any sale or disposition of grant assets 

must comply with the Uniform 

Administrative Requirements, Cost 


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Federal Register / Vol. 86, No. 37 / Friday, February 26, 2021 / Rules and Regulations 11615 

Principles, and Audit Requirements for 

Federal Awards, codified in 2 CFR part 

200. Note that this part will apply to 

ALL grant funds of an Awardee, 

regardless of the entity status or type of 

organization. 

(2) All Awardees must repay the grant 

if the project is sold or transferred 

without receiving written approval from 

RUS during the service obligation of the 

grant. 

(c) Substitution of Collateral and 

Irrevocable Letter of Credit—(1) Loans 

and combination loan and grant. The 

Agency’s standard loan/grant 

documents require that applicants 

pledge all assets and revenues of their 

operations as collateral. Applicants may 

propose other forms of collateral as long 

as the amount of the collateral is equal 

to the full amount of the loan. The 

collateral must be pledged to the 

Agency. Acceptable forms of substitute 

collateral are limited to following: 

Certificates of Deposit, with the Agency 

named as the beneficiary on the 

certificate, or Bonds with a AAA rating 

from an accredited rating agency. All 

other conditions of the standard loan 

documents will apply. A copy of the 

Substitution Documents can be found 

on the Agency’s web page. 

(2) Grants. For grant-only 

applications, applicants may request 

that standard grant security 

arrangements be replaced with an 

Irrevocable Letter of Credit (ILOC), to 

ensure that the project is completed. 

The ILOC must be for the full amount 

of funding requested and must remain 

in place until project completion. If an 

ILOC is offered as security, applicants 

will not be required to provide financial 

projections, meet any financial ratios 

requirements as part of the application 

process, or submit the maps for their 

NFSAs. Although the ILOC will replace 

security for the grant security 

arrangements, all other requirements of 

the standard grant agreement will 

remain the same. A copy of the ILOC 

award documents can be found on the 

Agency’s web page. 

§ 1740.45 Advance of funds. 

RUS loan and grant advances are 

made at the request of the Awardee 

according to the procedures stipulated 

in the Award Documents. All non-RUS 

funds, to include matching funds and 

cash provided in lieu of RUS loan 

funds, must be expended first, followed 

by loan funds and then grant funds, 

except for RUS-approved preapplication expenses. RUS may modify 

this requirement in the Federal Register 

or applicable funding opportunity 

notice. Grant funds, if any, will be used 

for eligible preapplication expenses 

only on the first advance request. 

Applications that do not account for 

such advance procedures in the pro 

forma five-year forecast may be rejected. 

§ 1740.46 Buy American requirement. 

Awardees shall use in connection 

with the expenditure of loan and grant 

funds only such unmanufactured 

articles, materials, and supplies, as have 

been mined or produced in the United 

States or in any eligible country, and 

only such manufactured articles, 

materials, and supplies as have been 

manufactured in the United States or in 

any eligible country, substantially all 

from articles, materials, or supplies 

mined, produced, or manufactured, as 

the case may be, in the United States or 

in any eligible country. For purposes of 

this section, an ‘‘eligible country’’ is any 

country that applies with respect to the 

United States an agreement ensuring 

reciprocal access for United States 

products and services and United States 

suppliers to the markets of that country, 

as determined by the United States 

Trade Representative. The Buy 

American regulations may be found at, 

and any requests for waiver must be 

submitted pursuant to, 7 CFR part 1787. 

§§ 1740.47–1740.58 [Reserved] 

Subpart E—Application Submission 

and Evaluation 

§ 1740.59 Application submission. 

(a) Applications must be submitted 

through the Agency’s online application 

system. 

(b) The Agency may publish 

additional application submission 

requirements in a notice in the Federal 

Register. 

(c) Unless otherwise identified in the 

notice, applicants can only submit one 

application under any funding window. 

§ 1740.60 Elements of a complete 

application. 

(a) Online application system. All 

applications under this regulation must 

be submitted through the RUS Online 

Application System located on the 

Agency’s web page. Additional 

information can be found in the 

Application Guide found on the 

Agency’s web page. 

(b) Dun and Bradstreet Universal 

Numbering System (DUNS) Number. All 

applicants must register for a DUNS 

number, or other Government nonproprietary identifier as part of the 

application process. The applicant can 

obtain the DUNS number free of charge 

by calling Dun and Bradstreet. Go to 

https://fedgov.dnb.com/webform for 

more information on assignment of a 

DUNS number or confirmation. DUNS 

numbers of parent or affiliated 

operations cannot be substituted for the 

applicant. If a DUNS number is not 

provided, the application cannot be 

considered for an award. 

(c) System for Award Management 

(SAM). Prior to submitting an 

application, the applicant must also 

register in SAM at https://www.sam.gov/ 

SAM/ and supply a Commercial and 

Government Entity (CAGE) Code 

number as part of the application. SAM 

registration must be active with current 

data at all times, from the application 

review throughout the active Federal 

award funding period. To maintain 

active SAM registration, the applicant 

must review and update the information 

in the SAM database annually from the 

date of initial registration or from the 

date of the last update. The applicant 

must ensure that the information in the 

database is current, accurate, and 

complete. If the CAGE Code of the 

applicant is not included in the 

application, the application will not be 

considered for an award. 

(d) Contents of the application. A 

complete application will include the 

following information as requested in 

the RUS Online Application System and 

application guide: 

(1) General information on the 

applicant and the project including: 

(i) A description of the project, that 

will be made public, consistent with the 

requirements herein; and 

(ii) The estimated dollar amount of 

the funding request. 

(2) An executive summary that 

includes, but is not be limited to, a 

detailed description of existing 

operations, discussion about key 

management, description of the 

workforce, description of interactions 

between any parent, affiliated or 

subsidiary operation, a detailed 

description of the proposed project, and 

the source of the matching and other 

funds; 

(3) A description of the PFSA 

including the number of premises 

passed; 

(4) Subscriber projections including 

the number of subscribers for 

broadband, video and voice services and 

any other service that may be offered. A 

description of the proposed service 

offerings and the associated pricing plan 

that the applicant proposes to offer; 

(5) A map, utilizing the RUS mapping 

tool located on the Agency’s web page, 

of the PFSAs identifying the areas 

without sufficient access to broadband 

and any NFSA of the applicant. If an 

applicant has multiple NFSAs, they can 

elect to submit each NFSA individually 

or they can submit them as a single file 

through the mapping tool; 


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(6) A description of the advertised 

prices of service offerings by 

competitors in the same area; 

(7) A network design and all 

supporting information as detailed in 

§ 1740.64. 

(8) Resumes of key management 

personnel, a description of the 

organization’s readiness to manage a 

broadband services network, and an 

organizational chart showing all parent 

organizations and/or holding companies 

(including parents of parents, etc.), and 

all subsidiaries and affiliates; 

(9) A legal opinion that: 

(i) Addresses the applicant’s ability to 

enter into the award documents; 

(ii) Describes all material pending 

litigation matters; 

(iii) Addresses the applicant’s ability 

to pledge security as required by the 

award documents; and 

(iv) Addresses the applicant’s ability 

to provide broadband service under 

state or tribal law. 

(10) Summary and itemized budgets 

of the infrastructure costs of the 

proposed project, including if 

applicable, the ratio of loans to grants, 

and any other sources of outside 

funding. The summary must also detail 

the amount of matching and other funds 

and the source of these funds. If the 

matching and other funds are coming 

from a third party, a commitment letter 

and support that the funds are available 

must also be submitted. Matching and 

other funds must be deposited into the 

RUS Pledged Deposit Account at the 

closing of the award; 

(11) A detailed description of working 

capital requirements and the sources of 

those funds; 

(12) Unqualified, comparative audited 

financial statements for the previous 

calendar year from the date the 

application is submitted as detailed in 

§ 1740.63; 

(13) The historical and projected 

financial information required in 

§ 1740.63; 

(14) All information and attachments 

required in the RUS Online application 

system; 

(15) A scoring sheet, analyzing any 

scoring criteria set forth in the funding 

announcement opening the application 

window; 

(16) A list of all the applicant’s 

outstanding and contingent obligations 

as required in § 1740.63; 

(17) All environmental information as 

required by § 1740.27; 

(18) Certification from the applicant 

that agreements with, or obligations to, 

investors do not breach the obligations 

to the government under the standard 

Award Documents located on the 

Agency’s web page, especially 

distribution requirements, and that any 

such agreements will be amended so 

that such obligations are made 

contingent to compliance with the 

Award Documents. Such certification 

should also specifically identify which, 

if any, provisions would need to be 

amended; 

(19) If service is being proposed on 

tribal land, a certification from the 

proper tribal official that they are in 

support of the project and will allow 

construction to take place on tribal land. 

The certification must: 

(i) Include a description of the land 

proposed for use as part of the proposed 

project; 

(ii) Identify whether the land is 

owned, held in Trust, land held in fee 

simple by the Tribe, or land under a 

long-term lease by the Tribe; 

(iii) If owned, identify the landowner; 

and 

(iv) Provide a commitment in writing 

from the landowner authorizing the 

applicant’s use of that land for the 

proposed project; and 

(20) Additional items that may be 

required by the Administrator through a 

notice in the Federal Register. 

(e) Material representations. The 

application, including certifications, 

and all forms submitted as part of the 

application will be treated as material 

representations upon which RUS will 

rely in awarding grants and loans. 

§ 1740.61 Evaluation for technical and 

financial feasibility. 

(a) A project is financially feasible 

when the applicant demonstrates to the 

satisfaction of RUS that it will be able 

to generate sufficient revenues to cover 

expenses; will have sufficient cash flow 

to service all debts and obligations as 

they come due; will have a positive 

ending cash balance as reflected on the 

cash flow statement for each year of the 

forecast period; and, by the end of the 

forecast period, will meet at least two of 

the following requirements: A minimum 

TIER requirement of 1.2, a minimum 

DSCR requirement of 1.2, and a 

minimum current ratio of 1.2. In 

addition, applicants must demonstrate 

positive cash flow from operations at 

the end of the forecast period. 

(b) For any funding option that 

includes grant funds, evaluation criteria 

for scoring the application will be 

included in the Federal Register notice 

that opens an application window. 

Grant applications submitted for a 

certain category will be ranked and 

awarded based only on those 

applications included in that category. 

(c) The Agency will determine 

technical feasibility by evaluating the 

Applicant’s network design and other 

relevant information in the application. 

§ 1740.62 Evaluation of Awardee 

operations. 

(a) RUS may send a team to the 

awardee’s facilities to complete a 

Management Analysis Profile (MAP) of 

the entire operation. MAPs are used by 

RUS as a means of evaluating an 

Awardee’s strengths and weaknesses 

and ensuring that awardees are prepared 

to fulfil the terms of the award. Once an 

applicant accepts an award offer, RUS 

may schedule a site visit as soon as 

possible. 

(b) RUS reserves the right not to 

advance funds until the MAP has been 

completed. If the MAP identifies issues 

that can affect the operation and 

completion of the project, those issues 

must be addressed to the satisfaction of 

RUS before funds can be advanced. 

Funding may be rescinded if following 

a MAP, the agency determines that the 

awardee will be unable to meet the 

requirements of the award. 

§ 1740.63 Financial information. 

(a) The Applicant must submit 

financial information acceptable to the 

Agency that demonstrates that the 

Applicant has the financial capacity to 

fulfill the grant, loan, and loan/grant 

combination requirements in this part 

and to successfully complete the 

proposed project. 

(1) Applicants must submit 

unqualified, comparative, audited 

financial statements for the previous 

year from the date the application is 

submitted. If an application is submitted 

and the most recent year-end audit has 

not been completed, the applicant can 

submit the previous unqualified audit 

that has been completed. If qualified 

audits containing a disclaimer or 

adverse opinion are submitted, the 

application will not be considered. 

(i) An applicant can use the 

consolidated audit of a parent as long as 

the parent fully guarantees the loan, or 

in the case of a grant, guarantees that 

construction will be completed as 

approved in the application or will 

repay the grant to RUS. 

(ii) If the applicant has more than one 

parent, then each parent’s audits must 

be submitted, and each parent must 

fully guarantee the award. 

(iii) For governmental entities, 

financial statements must be 

accompanied with certifications as to 

unrestricted cash that may be available 

on a yearly basis to the applicant. 

(2) Applicants must provide detailed 

information for all outstanding and 

contingent obligations. Copies of 

existing notes, loan and security 


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Federal Register / Vol. 86, No. 37 / Friday, February 26, 2021 / Rules and Regulations 11617 

agreements, guarantees, any existing 

management or service agreements, and 

any other agreements with parents, 

subsidiaries and affiliates, including but 

not limited to debt instruments that use 

the applicant’s assets, revenues or stock 

as collateral must be included in the 

application. 

(3) Applicants must provide evidence 

of all funding, other than the RUS 

award, necessary to support the project, 

such as bank account statements, firm 

letters of commitment from equity 

participants, or outside loans, which 

must evidence the timely availability of 

funds. If outside loans are used to cover 

any matching requirement, they may 

only be secured by assets other than 

those used for collateral under this 

regulation. Equity partners that are not 

specifically identified by name will not 

be considered in the financial analysis 

of the application. If the application 

states that other funds are required for 

the broadband project in addition to the 

Program funding requested, evidence 

must be included in the application 

identifying the source of funds and 

when the funds will be available. If the 

additional funding is not clearly 

identified, the application may not be 

considered for an award. If the applicant 

is providing non-telecommunication 

services and is proposing expansion to 

those services and states that additional 

funds are required to support 

sustainability of the overall operation of 

the applicant, then evidence must be 

submitted supporting the availability of 

these funds or the application may not 

be considered for funding. 

(4) Historical financial statements for 

the last four years consisting of a 

balance sheet, income statement, and 

cash flow statement must be provided. 

If an entity has not been operating for 

four years, historical statements for the 

period of time the entity has been 

operating are acceptable. 

(5) Pro Forma financial analysis 

prepared in conformity with GAAP and 

the Agency’s guidance on grant 

accounting can be found at https://

www.rd.usda.gov/files/ 

AccountingGuidance10.pdf. The Pro 

Forma should validate the sustainability 

of the project by including subscriber 

estimates related to all proposed service 

offerings; annual financial projections 

with balance sheets, income statements, 

and cash flow statements; supporting 

assumptions for a five-year forecast 

period and a depreciation schedule for 

existing facilities, those facilities funded 

with federal assistance, matching funds, 

and other funds. This pro forma should 

indicate the committed sources of 

capital funding and include a bridge 

year prior to the start of the forecast 

period. This bridge year shall be used as 

a buffer between the historical financial 

information and the forecast period and 

is the year in which the application is 

submitted. 

(i) The financial projections must 

demonstrate that by the end of the 

forecast period, the project will meet at 

least two of the requirements described 

in § 1740.61(a). 

(ii) The financial projections must 

also demonstrate positive cash flow 

from operations at the end of the 

forecast period. 

(iii) Based on the financial evaluation, 

additional conditions may be added to 

the Award documents to ensure 

financial feasibility and security on the 

award. 

(b) Publicly traded companies that 

have a bond rating from Moody’s, 

Standard and Poor’s, or Fitch of 

Investment Grade at the time an 

application is submitted do not have to 

complete the pro forma financial 

projections. In addition, applicants with 

this classification that elect not to 

submit financial projections do not need 

to submit NFSAs. 

§ 1740.64 Network design. 

(a) Only projects that RUS determines 

to be technically feasible will be eligible 

for an award. 

(b) The network design must include 

a description of the proposed 

technology used to deliver the 

broadband service, demonstrating that 

all premises in the PFSA can be offered 

broadband service; a network diagram, 

identifying cable routes, wireless access 

points, and any other equipment 

required to operate the network; a 

buildout timeline and milestones for 

implementation of the project; and a 

capital investment schedule showing 

that the system can be built within five 

years. All of these items must be 

certified by a professional engineer who 

is certified in at least one of the states 

where there is or will be project 

construction. The certification from the 

professional engineer must clearly state 

that the proposed network can deliver 

the broadband service to all premises in 

the PFSA at the minimum required 

service level. In addition, a list of all 

required licenses and regulatory 

approvals needed for the proposed 

project and how much the applicant 

will rely on contractors or vendors to 

deploy the network facilities must be 

submitted. Note that in preparing 

budget costs for equipment and 

materials, RUS’ Buy American 

requirements apply, as referenced in 

§ 1740.46. 

§§ 1740.65–1740.76 [Reserved] 

Subpart F—Closing, Servicing and 

Reporting 

§ 1740.77 Offer and closing. 

Successful applicants will receive an 

offer letter and award documents from 

RUS following award notification. 

Applicants may view sample award 

documents on the Agency’s web page. 

§ 1740.78 Construction. 

(a) All project assets must comply 

with 7 CFR part 1788 and 7 CFR part 

1970, the Program Construction 

Procedures located on the Agency’s web 

page, any successor regulations found 

on the agency’s website, and any other 

guidance from the Agency. 

(b) The build-out of the project must 

be completed within five years from the 

date funds are made available. Build-out 

is considered complete when the 

network design has been fully 

implemented, the service operations 

and management systems infrastructure 

is operational, and the awardee is ready 

to support the activation and 

commissioning of individual customers 

to the new system. 

§ 1740.79 Servicing of grants, loans and 

loan/grant combinations. 

(a) Awardees must make payments on 

the loan as required in the note and 

Award Documents. 

(b) Awardees must comply with all 

terms, conditions, affirmative 

covenants, and negative covenants 

contained in the Award Documents. 

(c) The sale or lease of any portion of 

the Awardee’s facilities must be 

approved in writing by RUS prior to 

initiating the sale or lease. 

§ 1740.80 Accounting, monitoring, and 

reporting requirements. 

(a) Awardees must adopt a system of 

accounts for maintaining financial 

records acceptable to the Agency, as 

described in 7 CFR part 1770, subpart B. 

(b) Awardees must submit annual 

comparable audited financial statements 

along with a report on compliance and 

on internal control over financial 

reporting, and management letter in 

accordance with the requirements of 7 

CFR part 1773 using the RUS’ on-line 

reporting system. The Certified Public 

Accountant (CPA) conducting the 

annual audit is selected by the borrower 

and must be satisfactory to RUS as set 

forth in 7 CFR 1773, subpart B, ‘‘RUS 

Audit Requirements.’’ 

(c) Thirty (30) calendar days after the 

end of each calendar year quarter, 

Awardees must submit to RUS, balance 

sheets, income statements, statements of 

cash flow, rate package summaries, and 


khammond on DSKJM1Z7X2PROD with RULES
11618 Federal Register / Vol. 86, No. 37 / Friday, February 26, 2021 / Rules and Regulations 

1Public Law 102–242; 105 Stat. 2236, 2372–3; 12 

U.S.C. 4401–4407. 

2FDICIA section 402(2) generally defines 

‘‘clearing organization’’ to include entities that 

provide clearing, netting, and settlement services to 

their members and in which all members of the 

entity are themselves financial institutions or 

clearing organizations. However, certain entities 

qualify as clearing organizations under FDICIA 

section 402(2)—and are therefore eligible for the 

multilateral netting protections under FDICIA 

section 404—without regard to whether all of their 

members qualify as financial institutions or clearing 

organizations. Specifically, an entity automatically 

qualifies as a clearing organization if it is (1) 

registered with the Securities and Exchange 

the number of customers taking 

broadband service on a per community 

basis utilizing RUS’ on-line reporting 

system. These reports must be 

submitted throughout the loan 

amortization period or for the economic 

life of the facilities funded with a grant. 

(d) Awardees will be required to 

submit annually updated service area 

maps through the RUS mapping tool 

showing the areas where construction 

has been completed and premises are 

receiving service until the entire PFSA 

can receive the broadband service. At 

the end of the project, Awardees must 

submit a service area map indicating 

that all construction has been completed 

as proposed in the application. If parts 

of the PFSA have not been constructed, 

RUS may require a portion of the award 

to be rescinded or paid back. 

(e) Awardees must comply with all 

reasonable Agency requests to support 

ongoing monitoring efforts. The 

Awardee shall afford RUS, through its 

representatives, reasonable opportunity, 

at all times during business hours and 

upon prior notice, to have access to and 

the right to inspect: The Broadband 

System, any other property encumbered 

by the Award Documents, any and all 

books, records, accounts, invoices, 

contracts, leases, payrolls, timesheets, 

cancelled checks, statements, and other 

documents (electronic or paper, of every 

kind) belonging to or in the possession 

of the Awardee or in any way pertaining 

to its property or business, including its 

subsidiaries, if any, and to make copies 

or extracts thereof. 

(f) Awardee records shall be retained 

and preserved in accordance with the 

provisions of 7 CFR part 1770, subpart 

A. 

(g) Awardees receiving assistance 

under this part will be required to 

submit annual reports for three (3) years 

after the completion of construction. 

The reports must include the following 

information: 

(1) Existing network service 

improvements and facility upgrades, as 

well as new equipment and capacity 

enhancements that support high-speed 

broadband access for educational 

institutions, health care providers, and 

public safety service providers; 

(2) The estimated number of end users 

who are currently using or forecasted to 

use the new or upgraded infrastructure; 

(3) The progress towards fulfilling the 

objectives for which the assistance was 

granted; 

(4) The number and geospatial 

location of residences and businesses 

that will receive new broadband service; 

(5) The speed and price of the 

Awardee’s broadband service offerings; 

and 

(6) The average price of broadband 

service in the Project’s service area. 

§ 1740.81 Default and de-obligation. 

RUS reserves the right to deobligate 

awards to Awardees under this part that 

demonstrate an insufficient level of 

performance, wasteful or fraudulent 

spending, or noncompliance with 

environmental and historic preservation 

requirements. 

§§ 1740.82–1740.93 [Reserved] 

Subpart G—Other Information and 

Federal Requirements 

§ 1740.94 Confidentiality of Applicant 

information. 

Applicants are encouraged to identify 

and label any confidential and 

proprietary information contained in 

their applications. The Agency will 

protect confidential and proprietary 

information from public disclosure to 

the fullest extent authorized by 

applicable law, including the Freedom 

of Information Act, as amended (5 

U.S.C. 552), the Trade Secrets Act, as 

amended (18 U.S.C. 1905), the 

Economic Espionage Act of 1996 (18 

U.S.C. 1831 et seq.), and CALEA (47 

U.S.C. 1001 et seq.). Applicants should 

be aware, however, that this program 

requires substantial transparency. For 

example, RUS is required to make 

publicly available on the internet a list 

of each entity that has applied for a loan 

or grant, a description of each 

application, the status of each 

application, the name of each entity 

receiving funds, and the purpose for 

which the entity is receiving the funds. 

§ 1740.95 Compliance with applicable 

laws. 

Any recipient of funds under this 

regulation shall be required to comply 

with all applicable federal, tribal and 

state laws, including but not limited to: 

(a) The Architectural Barriers Act of 

1968, as amended (42 U.S.C. 4151 et 

seq.); 

(b) The Uniform Federal Accessibility 

Standards (UFAS) (Appendix A to 41 

CFR subpart 101–19.6); and 

(c) All applicable federal, tribal and 

state communications laws and 

regulations, including, for example, the 

Communications Act of 1934, as 

amended, (47 U.S.C. 151 et seq.) the 

Telecommunications Act of 1996, as 

amended (Pub. L. 104–104, 110 Stat. 56 

(1996), and CALEA. For further 

information, see http://www.fcc.gov. 

§§ 1740.96–1740.99 [Reserved] 

§ 1740.100 OMB control number. 

The information collection 

requirements in this part are approved 

by the Office of Management and 

Budget (OMB) and assigned OMB 

control number 0572–0152. 

Christopher A. McLean, 

Acting Administrator, Rural Utilities Service. 

[FR Doc. 2021–03443 Filed 2–25–21; 8:45 am] 

BILLING CODE 3410–15–P 

FEDERAL RESERVE SYSTEM 

12 CFR Part 231 

[Regulation EE; Docket No. R–1661] 

RIN 7100–AF 48 

Netting Eligibility for Financial 

Institutions 

AGENCY: Board of Governors of the 

Federal Reserve System. 

ACTION: Final rule. 

SUMMARY: The Board of Governors 

(Board) is publishing a final rule that 

amends Regulation EE to include 

additional entities in the definition of 

‘‘financial institution’’ contained in 

section 402 of the Federal Deposit 

Insurance Corporation Improvement Act 

of 1991 (FDICIA) so that they are 

covered by FDICIA’s netting protections. 

The final rule also clarifies certain 

aspects of the existing activities-based 

test in Regulation EE. 

DATES: The final rule is effective March 

29, 2021. 

FOR FURTHER INFORMATION CONTACT: 

Evan Winerman, Senior Counsel (202– 

872–7578), Legal Division. Users of 

Telecommunication Device for Deaf 

(TDD) only, call (202) 263–4869. 

SUPPLEMENTARY INFORMATION: 

I. Background 

Sections 401–407 of FDICIA 1 provide 

certainty that netting contracts will be 

enforced, even in the event of the 

insolvency of one of the parties. These 

netting provisions apply to bilateral 

netting contracts between two financial 

institutions and multilateral netting 

contracts among members of a clearing 

organization.2 FDICIA defines ‘‘financial 


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