This section of the FEDERAL REGISTER

contains notices to the public of the proposed

issuance of rules and regulations. The

purpose of these notices is to give interested

persons an opportunity to participate in the

rule making prior to the adoption of the final

rules.

Proposed Rules Federal Register

26742 

Vol. 72, No. 91 

Friday, May 11, 2007 

DEPARTMENT OF AGRICULTURE 

Rural Utilities Service 

7 CFR Part 1738 

RIN 0572–AC06 

Rural Broadband Access Loans and 

Loan Guarantees 

AGENCY: Rural Utilities Service, USDA. 

ACTION: Proposed rule. 

SUMMARY: The Rural Utilities Service, an 

agency delivering the United States 

Department of Agriculture’s (USDA) 

Rural Development Utilities Programs, 

hereinafter referred to as Rural 

Development, proposes to amend its 

regulation for the Rural Broadband 

Access Loan and Loan Guarantee 

Program (Broadband Loan Program). 

Since the Broadband Loan Program’s 

inception, the Agency has faced and 

continues to face significant challenges 

in administering the program, including 

the fierce competitive nature of the 

broadband market, the fact that many 

companies proposing to offer broadband 

service are start-up organizations with 

limited resources, continually evolving 

technology, and economic factors such 

as the higher cost of serving rural 

communities. Because of these 

challenges, the Agency has been 

reviewing the characteristics of the 

Broadband Loan Program and has 

determined that modifications are 

required to accelerate the deployment of 

broadband service to the rural areas of 

the country. Therefore, this rulemaking 

proposes to implement changes on the 

following subject matter: funding in 

competitive markets and new eligibility 

requirements; new equity and market 

survey requirements; and new legal 

notice requirements to increase 

transparency. 

DATES: Comments must be submitted on 

or before July 10, 2007. 

ADDRESSES: Submit comments by either 

of the following methods: 

• Federal eRulemaking Portal: Go to 

http://www.regulations.gov and, in the 

lower ‘‘Search Regulations and Federal 

Actions’’ box, select ‘‘Rural Utilities 

Service’’ from the agency drop-down 

menu, then click on ‘‘Submit.’’ In the 

Docket ID column, select RUS–06– 

Agency–0052 to submit or view public 

comments and to view supporting and 

related materials available 

electronically. Information on using 

Regulations.gov, including instructions 

for accessing documents, submitting 

comments, and viewing the docket after 

the close of the comment period, is 

available through the site’s ‘‘User Tips’’ 

link. 

• Postal Mail/Commercial Delivery: 

Please send your comment addressed to 

Michele Brooks, Acting Director, 

Program Development and Regulatory 

Analysis, USDA Rural Development, 

1400 Independence Avenue, STOP 

1522, Room 5159, Washington, DC 

20250–1522. Please state that your 

comment refers to Docket No. RUS–06– 

Agency–0052. 

Other Information: Additional 

information about Rural Development 

and its programs is available on the 

Internet at http://www.rurdev.usda.gov/ 

index.html. 

FOR FURTHER INFORMATION CONTACT: 

Jonathan Claffey, Deputy Assistant 

Administrator, Telecommunications 

Program, Rural Development, U.S. 

Department of Agriculture, 1400 

Independence Avenue, SW., STOP 

1590, Room 4056, Washington, DC 

20250–1590. Telephone number (202) 

720–9554, Facsimile (202) 720–0810. 

SUPPLEMENTARY INFORMATION: 

Executive Order 12866 

This proposed rule has been 

determined to be significant for 

purposes of Executive Order 12866 and, 

therefore, has been reviewed by the 

Office of Management and Budget 

(OMB). In accordance with Executive 

Order 12866, an Economic Impact 

Analysis was completed, outlining the 

costs and benefits of implementing this 

program in rural America. The complete 

analysis is available from Rural 

Development upon request. 

Executive Order 12988 

This proposed rule has been reviewed 

under Executive Order 12988, Civil 

Justice Reform. Rural Development has 

determined that this rule meets the 

applicable standards provided in 

section 3 of that Executive Order. In 

addition, all State and local laws and 

regulations that are in conflict with this 

rule will be preempted. No retroactive 

effect will be given to the rule and, in 

accordance with section 212(e) of the 

Department of Agriculture 

Reorganization Act of 1994 (7 U.S.C. 

6912(e)), administrative appeal 

procedures must be exhausted before an 

action against the Department or its 

agencies may be initiated. 

Regulatory Flexibility Act Certification 

The Regulatory Flexibility Act (5 

U.S.C. 601 et seq.) is not applicable to 

this proposed rule because the Agency 

is not required by 5 U.S.C. 553 or any 

other law to publish a notice of 

proposed rulemaking for the subject 

matter of this rule. 

Paperwork Reduction Act and 

E-Government Act 

In accordance with the Paperwork 

Reduction Act of 1995 (44 U.S.C. 

Chapter 35, as amended), Rural 

Development invites comments on this 

information collection for which 

approval from the Office of Management 

and Budget (OMB) will be requested. 

Comments on this notice must be 

received by July 10, 2007. 

Comments are invited on: (a) Whether 

the collection of information is 

necessary for the proper performance of 

the functions of the agency, including 

whether the information will have 

practical utility; (b) the accuracy of the 

agency’s estimate of burden including 

the validity of the methodology and 

assumption used; (c) ways to enhance 

the quality, utility and clarity of the 

information to be collected; and (d) 

ways to minimize the burden of the 

collection of information on those who 

are to respond, including through the 

use of appropriate automated, 

electronic, mechanical, or other 

technological collection techniques on 

other forms of information technology. 

Comments may be sent to Michele 

Brooks, Acting Director, Program 

Development and Regulatory Analysis, 

Rural Development, U.S. Department of 

Agriculture, 1400 Independence Ave., 

SW., Stop 1522, Room 5159 South 

Building, Washington, DC 20250–1522. 

Title: 7 CFR Part 1738, Rural 

Broadband Access Loans and Loan 

Guarantees. 

OMB Control Number: 0572–0130. 


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Type of Request: Revision of a 

currently approved information 

collection package. 

Abstract: Rural Development is 

authorized by Title VI, Rural Broadband 

Access, of the Rural Electrification Act 

of 1936, as amended (RE Act), to 

provide loans and loan guarantees to 

fund the cost of construction, 

improvement, or acquisition of facilities 

and equipment for the provision of 

broadband service in eligible rural 

communities in States and Territories of 

the United States. Title VI of the RE Act 

requires that Rural Development make 

or guarantee a loan only if there is 

reasonable assurance that the loan, 

together with all outstanding loans and 

obligations of the borrower will be 

repaid in full within the time agreed. 

The items covered by this collection 

include forms and related 

documentation to support a loan 

application, including Form 532 and 

supporting documentation. 

Revisions to the information 

collection include: (1) Funding in 

competitive markets and new eligibility 

requirements (revisions will affect the 

details of an application, but not the 

difficulty of preparation or quantity of 

information provided; accordingly, the 

paperwork burden associated with these 

changes is not expected to be 

appreciably more or less than under the 

existing rule); (2) new equity 

requirements (revisions will affect the 

details of an application, but not the 

difficulty of preparation or quantity of 

information provided; accordingly, the 

paperwork burden associated with these 

changes is not expected to be 

appreciably more or less than under the 

existing rule); (3) new market survey 

requirements (the associated paperwork 

burden will be reduced by a small 

amount for some applicants as the 

requirement will be eliminated in 

certain instances); and (4) new legal 

notice requirements to increase 

transparency (the additional 

information required by the proposed 

modification of legal notice requirement 

will increase the paperwork burden of 

each application by a small amount). 

Estimate of Burden: Public reporting 

for this collection of information is 

estimated to average 225 hours per 

response. 

Respondents: Businesses and not-forprofit institutions. 

Estimated Number of Respondents: 

40. 

Estimated Number of Responses per 

Respondent: 2. 

Estimated Total Annual Burden on 

Respondents: 13,480 hours. 

Copies of this information collection 

can be obtained from Michele Brooks, 

Program Development and Regulatory 

Analysis, at (202) 690–1078. 

All responses to this information 

collection and recordkeeping notice will 

be summarized and included in the 

request for OMB approval. All 

comments will also become a matter of 

public record. Rural Development is 

committed to the E-Government Act, 

which requires Government agencies in 

general to provide the public the option 

of submitting information or transacting 

business electronically to the maximum 

extent possible. 

Catalog of Federal Domestic Assistance 

The program described by this 

proposed rule is listed in the Catalog of 

Federal Domestic Assistance Programs 

under No. 10.886, Rural Broadband 

Access Loans and Loan Guarantees. 

This catalog is available on a 

subscription basis from the 

Superintendent of Documents, the 

United States Government Printing 

Office, Washington, DC 20402. 

Telephone: (202) 512–1800 or at 

http://www.cfda.gov. 

Executive Order 12372 

This proposed rule is excluded from 

the scope of Executive Order 12372, 

Intergovernmental Consultation, which 

may require 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). 

Unfunded Mandates 

This proposed rule contains no 

Federal mandates (under the regulatory 

provision of Title II of the Unfunded 

Mandate Reform Act of 1995) for State, 

local, and tribal governments or the 

private sector. Thus, this rule is not 

subject to the requirements of sections 

202 and 205 of the Unfunded Mandate 

Reform Act of 1995. 

National Environmental Policy Act 

Certification 

Rural Development has determined 

that this proposed rule will not 

significantly affect the quality of the 

human environment as defined by the 

National Environmental Policy Act of 

1969 (42 U.S.C. 4321 et seq.). Therefore, 

this action does not require an 

environmental impact statement or 

assessment. 

Background 

Contents 

A. Introduction 

B. Regulatory History 

C. Program Results 

D. Program Improvements 

E. Review of Rules and Processes 

F. Proposed Rule Changes 

A. Introduction: The Utilities 

Programs (the Agency) of USDA Rural 

Development improve the quality of life 

in rural America by providing 

investment capital for deployment of 

rural telecommunications infrastructure. 

Financial assistance is provided to rural 

utilities; municipalities; commercial 

corporations; limited liability 

companies; public utility districts; 

Indian tribes; and cooperative, 

nonprofit, limited-dividend, or mutual 

associations. In order to achieve the goal 

of increasing economic opportunity in 

rural America, USDA Rural 

Development finances infrastructure 

that enables access to a seamless, 

nation-wide telecommunications 

network. With access to the same 

advanced telecommunications networks 

as its urban counterparts, especially 

broadband networks 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. The 

Agency shares the assessment of 

Congress, State and local officials, 

industry representatives, and rural 

residents that broadband service is a 

critical component to the future of rural 

America. The Agency is committed to 

ensuring that rural America will have 

access to affordable, reliable, broadband 

services, and to provide a healthy, safe 

and prosperous place to live and work. 

B. Regulatory History: On May 13, 

2002, the Farm Security and Rural 

Investment Act of 2002, Public Law 

107–171 ‘‘Farm Bill’’ was signed into 

law. The Farm Bill amended the Rural 

Electrification Act of 1936 to include 

Title VI, the Rural Broadband Access 

Loan and Loan Guarantee Program 

(Broadband Loan Program), to be 

administered by the Agency. Title VI 

authorized the Agency to approve loans 

and loan guarantees for the costs of 

construction, improvement, and 

acquisition of facilities and equipment 

for broadband service in eligible rural 

communities. Under the Farm Bill, the 

Agency was directed to promulgate 

regulations without public comment 

within 120 days from passage. 

Implementing the program required a 

different lending approach for the 

Agency than it employed in its earlier 

telephone program because of the 

unregulated, highly competitive, and 

technologically diverse nature of the 

broadband market. The current 

regulations were published on January 

30, 2003. 


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C. Program Results: Despite the 

challenges in implementing this new 

program, significant progress has been 

made in facilitating rural broadband 

deployment. As of March 15, 2007, the 

Agency approved 68 loans totaling $1.2 

billion for broadband deployment 

projects headquartered in 36 states. 

Eight of those projects are completed in 

Kansas, Louisiana, Michigan, North 

Dakota, Nebraska, South Dakota, Texas 

and Washington. The remainder of the 

projects are in various stages of 

construction or planning. Through these 

loans, more than half a million 

households in more than 1,000 rural 

communities will receive broadband 

service. Approximately 40 percent of 

these communities had no broadband 

service at the time the loan was 

approved, and an additional 20 percent 

had limited access to broadband 

services. 

As mandated by Congress, the 

program is to be administered in a 

technology neutral manner. As the 

results show below, the Agency has 

achieved that mandate by financing the 

deployment of a wide array of 

technologies capable of meeting the 

needs of rural communities: 

Technology 

Number of 

loans approved * 

Broadband over Powerline ....... 1 

Digital Subscriber Line ............. 15 

Wireless .................................... 18 

Hybrid Fiber Coax .................... 12 

Optical Fiber ............................. 27 

* Applications deploying multiple technologies counted in each category. 

In addition to the various types of 

technology deployments, loans have 

been made to a very diverse set of 

organizations using various business 

models. Nearly 90 percent of loans 

approved were made to private 

companies, 7 percent were made to 

cooperatives, 3 percent were made to 

municipalities and 1 loan was awarded 

to a tribal authority. 

D. Program Improvements: Since the 

Broadband Program’s inception, many 

modifications have been made to 

improve the administration of the 

program. Specifically, the Agency has 

created a standardized loan application; 

a Broadband Credit Committee to 

evaluate risks in the program; a 

financial assessment model to measure 

loan feasibility; and new standardized 

loan documents to cover the unique 

attributes of the industry, as well as 

accommodate private lending from 

financial markets which were not 

traditional Agency lending partners. 

Moreover, the Agency now 

encourages applicants to work with 

Agency local field representatives prior 

to submitting applications to increase 

loan processing efficiency. Program 

outreach efforts have been well received 

and are in high demand today. To date, 

the Agency has conducted nearly two 

dozen awareness sessions with 1,488 

attendees nation-wide. 

As a result of its efforts, the Agency 

has seen dramatic improvements in its 

application processing. The average 

processing time in 2006 was almost half 

of what it was in 2003. In addition, to 

increase program awareness and 

transparency, modifications have been 

made to the Agency’s Web site to ensure 

that information is available to potential 

applicants, potential competitors, and 

the public. 

E. Review of Rules and Processes: 

While the Agency is proud of the results 

achieved thus far, it is also aware that 

improvements to the Broadband 

Program are necessary. Over the course 

of the last four years, the Broadband 

Program has encountered challenges in 

administering the program and learned 

from them. The challenges include the 

competitive nature of the broadband 

communications industry, the fact that 

many applicants are start-up 

organizations with limited resources to 

meet equity requirements, the rapid 

pace of technology advancement and 

increases in demand for bandwidth, and 

the need for increased transparency in 

providing communities and incumbent 

providers with information on new 

market entrants. Program participants 

and industry members have since raised 

concerns with the implementation of 

the program. The Agency’s experience, 

coupled with input from industry 

representatives, state and regional 

associations, and other interested 

parties, has prompted the Agency to 

propose amendments to its regulations 

to address these challenges and other 

critical issues affecting the deployment 

of broadband service in rural America. 

The Agency is, however, still committed 

to Title VI’s direction to give priority to 

eligible rural communities where 

broadband service is not available. 

Further, the Agency is seeking comment 

on the proposals, which as noted above, 

will be the first formal opportunity for 

public comment on the rules associated 

with the Broadband Program. 

Specifically, this proposed rule will 

address: (1) Funding in competitive 

markets and new eligibility 

requirements; (2) New equity and 

market survey requirements; and (3) 

New legal notice requirements to 

increase transparency. Further, the 

program proposes reordering the present 

rules to make them more user-friendly, 

and rewording certain rules, without 

substantively changing them, to clarify 

their meaning. In addition, the proposed 

changes codify processes and 

procedures currently published in 

Agency guides (i.e., application 

submission procedures, competitive 

analysis, reporting requirements, etc.). 

In order to easily identify which 

sections have been modified, added, 

removed, or re-ordered, the following 

table summarizes the proposed changes: 

BROADBAND LOAN AND LOAN GUARANTEE PROGRAM RULES—SUMMARY OF PROPOSED CHANGES

Existing section Proposed new location Action taken Proposed content change 

Subpart A— ......................... 1738.1 ................................ Modified ............................. Revised 1738.1(c) to state that ‘‘RUS will not assess 

fees for any loan made under this part’’. 

General: 

§ 1738.1 General 

statement.

............................................ ............................................ Added reference to agency’s web site in paragraph 

(b). 

§ 1738.2 Definitions .... 1738.2 ................................ New and modified definition and additional language at 1738.2(b).Current text designated (a) and new (b) added. 

Modified Definitions—In most cases, definitions were 

modified for clarification purposes. 

Acquisition. 

Eligible Rural Community. 

Financial Feasibility. 

Forecast Period. 

Interim Construction. 

Interim Financing. 

Release of Funds. 


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BROADBAND LOAN AND LOAN GUARANTEE PROGRAM RULES—SUMMARY OF PROPOSED CHANGES—Continued 

Existing section Proposed new location Action taken Proposed content change 

Deleted Definitions. 

Broadband pilot. 

Mortgage. 

Private Loan Guarantee. 

RUS Telecommunications borrower. 

New Definitions—The Agency has added definitions to 

clarify existing regulation and support proposed rule 

modifications. 

Advance of Funds. 

Agency. 

Arm’s Length Transaction. 

Broadband Loan. 

Census block. 

Census block group. 

Derivative. 

Eligible Entity. 

Equity or Net Worth. 

Existing Broadband Service Provider. 

Guaranteed Amount Debt Derivative. 

Guaranteed Amount Equity Derivative. 

Guaranteed Amount Equivalent. 

Guaranteed Loan Amount. 

Guaranteed Loan Note. 

Guaranteed Loan Portion. 

Guaranteed Loan Portion Amount. 

Guaranteed Loan Portion Note. 

Incumbent Service Provider. 

Indefeasible Right to Use Agreement (IRU). 

Loan Guarantee. 

Loan Guarantee Documents. 

Pre-Loan Expenses. 

Security Documents. 

Telecommunications Loan. 

Urban Area. 

Un-guaranteed Amount Equivalent. 

Un-guaranteed Loan Amount and Un-guaranteed 

Loan Portion Amount. 

Subpart B—Loan Purposes 

and Basic Policies: 

§ 1738.10 General ...... 1738.1(a) ...........................

1738.2(a) ...........................

Modified/relocated .............

............................................

Refinancing language in (b) was moved to 1738.22(e). 

Moved and modified text related to economic composite life to 1738.2(a). 

§ 1738.11 Availability 

of broadband service.

1738.33 ..............................

1738.61 ..............................

Modified/relocated .............

............................................

Legal notice language moved to 1738.33. 

(a) and (b) (1) through (3) included in new 

prioritization scheme in 1738.61. 

§ 1738.12 Location of 

facilities.

1738.22(a) ......................... Modified ............................. Clarify eligible items for financing. 

§ 1738.13 Allocation of 

funds.

1738.62 .............................. Modified ............................. Condensed original language by citing the RE Act as 

the guidance for allocating funds. 

§ 1738.14 One-time 

priority for unfunded 

applications from the 

broadband pilot program.

Deleted .............................. Deleted .............................. No longer relevant. 

§ 1738.15 Priorities .... 1738.61 .............................. Modified ............................. Added new language regarding prioritization of applications in the following order: 

(1) Applications that include only households that have 

no broadband access or only one Existing 

Broadband Service Provider. 

(2) Applications that include only areas where at least 

40 percent of households have no access to 

Broadband service or access to only one Existing 

Service provider; 

(3) All other applications. 

1738.62 .............................. ............................................ Relocated language regarding State and National reserves to 1738.62. Text is reworded to reference 

the Act. 

§ 1738.16 Eligible entities.1738.2 ................................ Relocated/modified ............ Moved language regarding the types of entities eligible 

for loans to 1738.2(a). 

1738.20 ..............................

1738.21 

............................................ Moved language regarding eligible entities (existing 

1738.16(a) and (b)) to 1738.2(a). 


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BROADBAND LOAN AND LOAN GUARANTEE PROGRAM RULES—SUMMARY OF PROPOSED CHANGES—Continued 

Existing section Proposed new location Action taken Proposed content change 

Added new section, 1738.21, to detail requirements to 

serve areas with little or no service: 

—Start-up operations and new entrants—40% of proposed households in a proposed service area must 

have access to no or only one existing broadband 

provider. 

—Incumbent Service Providers proposing to extend 

service beyond their existing footprint—40% of proposed households in extended service areas must 

have access to no or only one existing broadband 

provider. 

—Incumbent Service Providers submitting applications 

solely for the purpose of upgrading existing facilities 

within Eligible Rural Communities must offer 

Broadband Service with enhanced features. 

§ 1738.17 Civil rights .. 1738.64 .............................. Relocated/unmodified ........ Redesignated as 1738.64 but text is unchanged. 

§ 1738.18 Minimum 

and maximum loan 

amount.

1738.12 .............................. Relocated/modified ............ Removed reference to plant costs. 

Moved language from 1738.30(b)(2) regarding annual 

publication of max/min to this section. 

Removed language ‘‘maximum loan amounts apply 

only to an applicant for a direct 4-percent 

broadband loan’’ and made a general statement that 

the maximum will be set in the NOFA published annually in the FEDERAL REGISTER. This allows the 

Agency the flexibility to set the maximum level 

based on current funding levels and portfolio concentration. 

§ 1738.19 Facilities financed.1738.19 .............................. Modified/clarified ................ General reorganization to more clearly define for applicants what is and is not eligible for funding by dividing the two topics into separate sections. 

Old 1738.19(h) is now in 1738.19(b) and renamed ineligible areas. 

1738.22 .............................. ............................................ 1738.22 Items Eligible to be financed. 

1738.22(a)—new language regarding start-up and 

overhead costs is a further clarification that these 

costs are eligible for financing. Although not specified in the earlier rules, these costs were considered 

part of the construction costs and therefore have 

been routinely funding in the loan program. 

1738.22(b)—new language regarding pre-loan expenses. 

1738.22(c)—new language (replacing old 1738–19(b)) 

limiting the cost of the capital lease for the first 5 

years of the loan amortization period. This language 

was added because the standard period for advancing all funds set in all RUS loan documents is 5 

years. Any lease extending beyond that period 

should not have funds available at that time. 

1738.22(d)—new language clarifies the definition of 

‘‘necessary and incidental’’ that currently exists in 

1738.21(c). The common practice of the agency is 

to interpret this clause as 50%. We have made this 

standard known in public workshops for several 

years. 

1738.23 .............................. Modified/clarified ................ 1738.23(d)—clarification that funds cannot be used to 

purchase or acquire the equipment of an affiliate. 

1738.23(e)—modified language regarding financing of 

CPE equipment; applicants often sell the CPE rather than lease it to the end-user. The original intent 

was that this equipment would be used as collateral; 

however, because CPE is often physically out of the 

control of the applicant and because the value of 

end-user equipment depreciates quickly, we have 

determined that other arrangements offer the Agency a similar level of security, while offering the applicant more flexibility under our rules. 

Eliminated old 1738.19(g)—This rule specifically addressed actions the Agency would take prior to October 2004. This rule is outdated and no longer 

valid. 


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BROADBAND LOAN AND LOAN GUARANTEE PROGRAM RULES—SUMMARY OF PROPOSED CHANGES—Continued 

Existing section Proposed new location Action taken Proposed content change 

§ 1738.20 Credit support requirement.1738.31 .............................. Modified ............................. Now called Equity Requirement and Additional cash 

requirement. 

1738.32 .............................. ............................................ Added incentive to serve areas with little or no 

broadband service: reduced initial equity requirement to 10% for applications filing pursuant to 

1738.31(a) or (b); 20% equity requirement remains 

for all other applications. 

Added clarification on the use of letters of credit and 

bonds to meet equity requirements. 

Added language to reserve the Administrator’s right to 

modify or waive the requirements of this section as 

long as those modifications do not result in a projected negative cash position in any quarter 

throughout the forecast period and the modifications 

are required to provide Broadband Service in areas 

that are not capable of receiving Broadband Service 

or can receive Broadband Service from only one 

Existing Broadband Service Provider. 

Modified cash requirement language so that cash requirements are considered at time of feasibility determination rather than for eligibility. 

§ 1738.21 Interim financing.1738.60 .............................. Relocated/modified ............ Revised for clarification. No substantive change. 

§ 1738.22 Loan security.1738.41(b) (c) & (d) ............ Modified ............................. 1738.41(b), (c) and (d)—requirement unchanged, reworded to provide further clarity. 

1738.37(e) ......................... ............................................ Old 1738.22(e) language regarding TIER was moved

to financial analysis section—1738.37(e). 

Subpart C—Types of Loans: 

§ 1738.30 Rural 

broadband access 

loans and loan guarantees.

1738.11 .............................. Relocated/modified ............ Modified original language in 1738(b)(1)(i)(A) to increase the populations test for a 4% loan from 

2,500 to 5,000. 

1738.43 .............................. ............................................ Modified original language in 1738.30(b)(1)(i)(B) to be 

consistent with proposed rules. Language located in 

1738.11b(1)(ii) now reads ‘‘is not capable of receiving broadband service or can receive service from 

only one existing broadband service provider. 

Deleting original language in 1738.30(b)(1)(ii)—This 

language was intended to promote service to outlying rural areas because these areas had less access to broadband service. The new proposed regulations will achieve this same goal by requiring most 

applicants to include a significant portion of service 

areas with little or no broadband service. 

Deleting original language in 1738.30(b)(1)(i)(C)—Our 

experience has demonstrated that this rule was too 

restrictive and prevented most applicants from qualifying for the 4% funding. The proposed regulations 

will require most applicants to include service to 

areas with little or no broadband service. These 

areas are likely to have lower population density 

and higher deployment costs. Removing the original 

restriction in 1738.30(b)(1)(i)(C) will better support 

deployment to these areas by allowing applicants 

access to lower cost financing. 

1738.11 ..............................

1738.43 ..............................

Relocated/modified ............

............................................

Current 1738.30(b)(2) has been relocated to 1738.12. 

Current rules specific to loan guarantees have been 

moved to 1738.43 

§ 1738.31 Full faith 

and credit.

1738.43(f) .......................... Relocated/unmodified ........ Moved to 1738.43(f) without substantial changes. 

Subpart D—Terms of Loans: 

§ 1738.40 General ...... 1738.40(a) ......................... Relocated/modified ............ Current text designated as paragraph (a) and revised 

to clarify for applicants. 

§ 1738.41 Payments 

on Loans.

1738.42 .............................. Relocated/modified ............ Added language regarding the Administrator’s ability 

to modify requirements on a case-by-case basis for 

areas that are not capable of receiving or can only 

receive from one existing broadband provider. 


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BROADBAND LOAN AND LOAN GUARANTEE PROGRAM RULES—SUMMARY OF PROPOSED CHANGES

Proposed new sections Subject matter Proposed content 

Subpart D—Loan Application Requirements: 

1738.34 .................. Market Survey ............ The rules proposed in this section codify existing requirements published in Bulletin 1738–1. 

Modification of Market Survey Requirement: 1738.34(b) now eliminates the requirement for 

a market survey if an applicant is projecting less than a 15 percent penetration of the 

households passed, by the end of the Forecast Period. A detailed competitive analysis is 

still required for all applications. We are proposing this modification in response to applicants’ concerns that the cost of conducting a market survey is a barrier to filing. The 

Agency has relied more heavily on the competitive analysis and financial and risk analysis 

to determine project feasibility, and will continue to do so under the new proposal. 

Added language reserving the Administrator’s right to waive the requirements on a case-bycase basis. 

1738.35 .................. Competitive analysis ... The rules proposed in this section codify existing requirements published in Bulletin 1738–1. 

Applicants are aware of the requirements and currently comply with them. 

1738.36 .................. Business plan ............. The rules proposed in this section codify existing requirements published in Bulletin 1738–1. 

Applicants are aware of the requirements and currently comply with them. 

1738.37 .................. Financial information .. The rules proposed in this section codify existing requirements published in Bulletin 1738–1. 

Applicants are aware of the requirements and currently comply with them. 

The proposed rule also allows cash-flow from operations to be used in determination of the 

cash requirement. 

1738.38 .................. System design ............ The rules proposed in this section codify existing requirements published in Bulletin 1738–1. 

Applicants are aware of the requirements and currently comply with them. 

New language reserving the Administrator’s right to waive the requirements on a case-bycase basis. 

1738.39 .................. Submission of application.New section that clarifies that applicants are encouraged to submit applications through the 

General Field Representative in their state for review prior to final submission. Applications will still be accepted at the National Office. 

Subpart F—Post Application Procedures: 

1738.50 .................. Notification of completeness.This new section codifies currently existing internal processes and is designed to help applicants understand the post-application process. We believe this demonstrates the Agency’s commitment to a standardized and more transparent process. 

1738.51 .................. Determination of feasibility.This new section codifies currently existing internal processes and is designed to help applicants understand the post-application process. We believe this demonstrates the Agency’s commitment to a standardized and more transparent process. 

1738.52 .................. Notice to applicant of 

decision.

This new section codifies currently existing internal processes and is designed to help applicants understand the post-application process. We believe this demonstrates the Agency’s commitment to a standardized and more transparent process. 

Subpart G—Miscellaneous Requirements 

and Information: 

1738.63 .................. Annual audit and reporting requirements.Codifies standard requirements currently existing in broadband loan closing documents. 

Added language to 1738.63(a) to allow the Administrator to waive the requirement that an 

audit be performed in the year in which the loan is approved if operations of the applicant 

have not yet started. 

1738.65 .................. Applicable laws ........... Codifies standard requirements existing in all broadband loan documents. 

F. Proposed Rule Changes: The 

following proposals seek to implement 

changes to the Broadband Program’s 

regulations regarding: (1) Funding in 

competitive markets and new eligibility 

requirements; (2) New equity and 

market survey requirements; and (3) 

New legal notice requirements to 

increase transparency. Through this 

Notice, the Agency seeks comments on 

all of these proposed changes from any 

and all interested parties. 

(1) Funding in competitive markets 

and new eligibility requirements: The 

most intractable problem the Broadband 

Program has encountered is finding 

feasible loan applications which 

propose to serve only rural areas which 

do not have broadband service. The cost 

of building out a broadband system 

coupled with low rural population 

density in unserved areas has 

consistently yielded loan proposals 

which cannot be supported by project 

revenues. Consequently, in the history 

of the program, the Agency has certified 

as complete only one application to 

serve a rural area completely without 

broadband service. Uniquely, that 

application was for an Indian 

reservation with a very different 

competitive environment. 

In order for broadband loans to be 

feasible, it is necessary for applicants to 

serve low cost, more densely populated 

areas, as well as low density high cost 

areas. Although it is necessary to serve 

high density areas which are likely to 

have broadband service, the Agency 

proposes to place limitations on service 

to such areas. The Agency proposes 

changes in eligibility that would 

prohibit funding within urban areas, 

regardless of population, and areas 

where a significant share of the market 

is already served by incumbent 

providers. To accomplish this, the 

Agency is adding or modifying three 

definitions, Existing Broadband Service 

Provider, Eligible Rural Community, 

and Urban Area, which will identify 

communities that will be ineligible for 

funding by establishing that sufficient 

service is already being provided. 

(a) Existing Broadband Service 

Provider. The Agency initially proposes 

the definition of an existing broadband 

service provider to identify existing 

competition. As a basis, the Agency will 

use the current definition of 


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‘‘broadband’’ established by the Federal 

Communications Commission (FCC) to 

determine Incumbent Service Providers 

that are providing broadband service to 

the households in the applicant’s 

proposed communities. To be 

recognized as an Existing Broadband 

Service Provider, the Incumbent Service 

Provider must provide evidence and 

certify to the Agency that 10 percent of 

the households passed by their facilities 

are purchasing their broadband service. 

Using this new definition, funding for 

any community where there are four or 

more Existing Broadband Service 

Provider will be prohibited. 

In establishing the benchmark of ‘‘10 

percent of households,’’ the Agency 

sought to establish a threshold 

penetration of the broadband market in 

any particular community in order to 

separate broadband service providers 

who are actively and successfully 

selling their services from those who are 

only marginally engaged with a 

community. The Agency believes that 

the threshold should differentiate 

providers who only market to a limited 

segment of the community (e.g. to 

businesses, densely populated areas, 

apartment buildings, etc.) so that a 

community is not treated as having 

service available from a provider who 

does not, in fact, serve all types of 

customers, throughout its service 

territory. 

Nationwide, slightly more than 40 

percent of households are subscribing to 

broadband service. This number was 

determined by using the FCC’s report 

entitled ‘‘High-Speed Services for 

Internet Access: Status as of June 30, 

2006’’ and comparing the number of 

residential Advanced Services Lines 

(45.9 million) with the number of 

households in the country. The FCC 

report indicates that the two major 

technologies providing broadband 

service are cable modem (59.9%) and 

DSL (36.0%). In most rural 

communities, these two types of service 

are offered by two providers, the 

incumbent local cable company and the 

incumbent local exchange carrier 

(ILEC). For example, assuming that a 

particular community meets the 

national average penetration percentage 

of 40.9 percent and further assuming 

that there are only two providers 

supplying these services in the same 

proportions as the national data reflect, 

the percentage of households served by 

these two providers would be 24.5 

percent and 14.7 percent for the cable 

company and the ILEC, respectively. 

This example reflects an idealized 

estimate. Nonetheless, looking to the 

idealized case for guidance indicates 

that setting a threshold at 20 percent of 

the households in a market (roughly half 

of the average penetration) might well 

eliminate all but one provider in a 

market. Even a 15 percent threshold 

seems high, since nationwide, DSL does 

not yet reach that penetration. 

Therefore, we propose a threshold of 10 

percent of the households in a market. 

A company offering broadband service 

will need to have a customer base of at 

least 10 percent of the households in a 

community in order to be considered an 

Existing Broadband Service Provider for 

the purposes of this proposed rule 

(b) Urban Area. In addition to 

identifying competition, the Agency 

proposes limiting eligibility of those 

communities that qualify under the 

regulations as rural in population, but 

are located within the boundaries of an 

Urban Area. The Agency believes that 

using the pre-established definition of 

Urban Area will clarify exactly which 

communities are eligible and reduce the 

number of ‘‘urban-like’’ communities 

that technically qualify in population 

size but are not representative of rural 

in most other characteristics. 

(c) Eligible Rural Community. Tying 

together the preceding two concepts, 

then, the Agency proposes that an 

Eligible Rural Community mean a 

community which contains less than 

four Existing Broadband Service 

Providers and is not located in an Urban 

Area. This modification recognizes that, 

where there are four or more existing 

providers, the market is sufficiently 

served and does not warrant an 

additional market entrant subsidized 

through Federal funding. 

In addition, the Agency continues to 

prioritize deployment of Broadband 

Service to households with no or 

limited broadband access while 

ensuring the financial feasibility of 

loans. To accomplish this, the Agency 

will require applications from new 

market entrants, start-ups or incumbent 

providers that are expanding their 

service area, to enter areas where 40 

percent of households either have no or 

limited access to Broadband Service. 

This requirement addresses the need to 

reach unserved or underserved areas 

while also permitting service to more 

lucrative areas, which may be served by 

up to three Existing Service Providers, 

in order to attract feasible loan 

proposals which are supportable from 

project revenues. Permitting service in 

areas with up to three Existing Service 

Providers addresses the need for 

applicants to leverage revenues from 

lower-cost users (typically those in more 

densely populated areas within a city or 

town) in order to provide service to 

rural households in higher cost areas, 

while excluding areas with higher levels 

of competition where loan feasibility is 

unlikely. 

Lastly, the Agency’s proposed rule 

includes loans to incumbent providers 

to upgrade existing facilities without 

requiring service to additional 

customers as long as the upgrades 

enhance existing Broadband Service. 

For purposes of determining whether 

the proposed service area has ‘‘four or 

more’’ Existing Service Providers, 

thereby disqualifying the area from 

lending consideration, the applicant 

will not be considered as an Existing 

Broadband Service Provider. Therefore, 

a facility upgrade loan may be made to 

an applicant operating in an area which 

has three other Existing Broadband 

Service Providers. 

The Agency believes that this 

approach will benefit rural residents by 

allowing incumbents to keep pace with 

the changing needs of their customers 

through continued advancement in 

technologies and services 

(2) New equity and market survey 

requirements: Two requirements of the 

Broadband Program have significantly 

precluded applicants from being eligible 

for a Broadband loan, the equity 

requirement and the market survey 

requirement. In response, the Agency is 

modifying both requirements so as to 

provide incentives for serving markets 

with limited or no broadband service 

and to reduce the costs to applicants 

under certain circumstances. 

(a) § 1738.31 Equity requirement: 

Under the current rules, to be eligible 

for a loan, applicants must have a 20 

percent (of the requested loan amount) 

credit support contribution and in some 

instances, cash equal to the first full 

year’s operations. The concept of credit 

support was unique to the Agency and 

has been a source of confusion for many 

applicants. In an effort to better clarify 

its requirements, the Agency is 

proposing to replace the credit support 

methodology with a straight forward 

equity requirement, mirroring private 

industry. 

With this proposed rule modification, 

the Agency is also addressing our 

applicants’ challenges in obtaining 

private investment capital to provide 

service in less lucrative, rural markets, 

particularly those with no broadband 

service or service from only one 

provider. A significant number of 

applicants, many of whom are start-ups, 

have noted that private financing for 

these areas is limited and difficult to 

obtain. Further, applicants assert that 

the current equity requirement proves 

too burdensome and serves as a barrier 

to entities seeking to serve these 

markets. The Agency’s records generally 

support this assertion. Of the 106 


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applications returned since the 

Program’s inception, more than half 

were returned for lack of credit support. 

Therefore, the Agency is proposing to 

reduce its equity requirement from 20 

percent to 10 percent of the requested 

loan amount for applicants proposing to 

serve an area wherein at least 40 percent 

of the households have no broadband 

access or service from only one 

provider. The Agency proposes that all 

other applicants be required to 

demonstrate a minimum equity position 

equal to 20 percent of the requested loan 

amount at the time the application is 

submitted. 

(b) § 1738.33 Market survey: 

Currently, the Agency uses market 

surveys, competitive assessments and 

financial analyses as tools to validate 

subscriber projections and determine 

loan feasibility. Applicants have 

asserted that completing a market 

survey can prove to be onerous, 

unnecessary, and cost prohibitive, 

especially for those seeking to serve 

areas where no service exists. Based on 

our experience with the program, the 

Agency finds that most market surveys 

submitted support a 15 percent 

penetration rate. As a result, the Agency 

relies more heavily on other means, 

such as the detailed competitive and 

financial analyses, to determine 

feasibility for areas where 15 percent or 

less penetration is projected. Therefore, 

in communities where an applicant is 

proposing to serve less than 15 percent 

of the market, the Agency is proposing 

to eliminate the requirement for a 

market survey, but continue to require 

submission of competitive and financial 

analyses. 

(3) New legal notice requirements to 

increase transparency: The Agency is 

also proposing to modify the Legal 

Notice requirement of § 1738.32 to 

improve information to customers, 

existing service providers, and 

applicants. This requirement of the 

existing rule was designed to: (i) 

Identify areas with no existing 

Broadband Service for priority 

consideration, (ii) notify communities of 

the potential entrant of a new service 

provider, and (iii) provide incumbent 

service providers with an opportunity to 

describe their current service territory 

and service offerings, market share, etc. 

The concept of the legal notice is well 

intended and, the Agency believes, still 

necessary and useful to the Agency in 

making lending decisions. However, 

based on past experience, the current 

process needs to be modified. The 

Agency proposes further modifications 

to increase transparency, reach a 

broader range of interested parties, and 

provide more detailed information on 

the extent of broadband deployment by 

incumbent providers. To address 

concerns with timely access to legal 

notices, the Agency is proposing to 

establish a clearly defined window for 

posting of the notices. Specifically, the 

legal notice will be published on the 

Agency’s webpage after the application 

has been received in the Agency’s 

national office and will remain on the 

webpage for a period of 30 working 

days. The notice must set forth the 

applicant’s total proposed service area, 

including a service area map. An 

applicant will also need to indicate if it 

is proposing voice and video services, in 

addition to the present requirement of 

its intention to provide data services. 

This will increase the transparency of 

the new application to the incumbent 

provider, as well as alert customers to 

potential new service offerings. 

In response to the Legal Notice, 

incumbent providers will have new 

responsibilities as well. The Legal 

Notice will now request any Incumbent 

Service Provider to submit to the 

Agency the following information 

(within 30 days of notice posting) on the 

number of customers: (i) Capable of 

receiving Broadband Service in the 

applicant’s proposed service area; (ii) 

purchasing Broadband Service in the 

applicant’s proposed service area 

(including the rates of data transmission 

being offered, and the cost of each level 

of Broadband Service); and (iii) 

receiving other services that will be 

offered in the applicant’s proposed 

service area and the associated rates for 

these other services. An incumbent will 

also be requested to submit a map of its 

service territory. 

It is important that the Agency receive 

this information, as it will be used by 

the Agency to determine if the 

incumbent will be classified as an 

Existing Broadband Service Provider, 

and ultimately whether an Eligible 

Rural Community is eligible for funding. 

If, however, an incumbent does not 

submit a response to the legal notice 

within the applicable time period, it 

will not be considered an Existing 

Broadband Service Provider for the 

purpose of determining applicant 

eligibility. Nonetheless, the incumbent 

will still be considered in the lending 

decision as a competitor. All proprietary 

and confidential information submitted 

by the incumbent will not be released 

under the Freedom of Information Act. 

List of Subjects in 7 CFR Part 1738 

Broadband, Loan programscommunications, Rural areas, 

Telephone, Telecommunications. 

For reasons set out in the preamble, 

the Agency proposes to amend chapter 

XVII of title 7 of the Code of Federal 

Regulations by revising part 1738 to 

read as follows: 

PART 1738—RURAL BROADBAND 

ACCESS LOANS AND LOAN 

GUARANTEES 

Subpart —General 

Sec. 

1738.1 General. 

1738.2 Definitions. 

1738.3—1738.9 [Reserved] 

Subpart B—Types of Loans 

1738.10 General. 

1738.11 Broadband Loans and Loan 

Guarantees. 

1738.12 Minimum and maximum loan 

amounts. 

1738.13–1738.18 [Reserved] 

Subpart C— Ineligible Areas, Eligible 

Entities and Eligible/Not Eligible Items 

1738.19 Ineligible areas. 

1738.20 Eligible entities. 

1738.21 Service requirement for proposed 

projects. 

1738.22 Items eligible to be financed. 

1738.23 Items not eligible to be financed. 

1738.24–1738.29 [Reserved] 

Subpart D—Loan Application Requirements 

1738.30 General. 

1738.31 Equity requirement. 

1738.32 Additional cash requirements. 

1738.33 Legal notice. 

1738.34 Market survey. 

1738.35 Competitive analysis. 

1738.36 Business plan. 

1738.37 Financial information. 

1738.38 System design. 

1738.39 Submission of the application. 

Subpart E—Terms for Loans and Loan 

Guarantees 

1738.40 Direct 4 Percent and Cost of Money 

Loans. 

1738.41 Loan security. 

1738.42 Payments on loans. 

1738.43 Loan guarantees. 

1738.44–1738.49 [Reserved] 

Subpart F—Post-Application Procedures 

1738.50 Notification of completeness. 

1738.51 Determination of feasibility. 

1738.52 Notice to applicant on decision. 

1738.53–1738.59 [Reserved] 

Subpart G—Miscellaneous Requirements 

and Information 

1738.60 Interim financing and construction. 

1738.61 Priority for processing loan 

applications. 

1738.62 Allocation of funds. 

1738.63 Annual audit and reporting 

requirements. 

1738.64 Applicable laws. 

1738.65–1738.99 [Reserved] 

1738.100 OMB control number. 

Authority: Pub. L. 107–171, 7 U.S.C. 901 

et seq. 


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Subpart A—General 

§ 1738.1 General statement. 

(a) This part sets forth the general 

policies, types of loans and loan 

guarantees, and program requirements 

under the Rural Broadband Access Loan 

and Loan Guarantee Program to provide 

funds on a technology neutral basis for 

the costs of construction, improvement, 

and acquisition of facilities and 

equipment for broadband service in 

eligible rural communities. 

(b) Additional information regarding 

the Rural Broadband Access Loan and 

Loan Guarantee Program can be found 

in Bulletin 1738–1, ‘‘Rural Broadband 

Access Loan and Loan Guarantee 

Application Guide’’ and Bulletin 1738–

2, ‘‘Rural Broadband Access Loan and 

Loan Guarantee Advance and 

Construction Procedures Guide.’’ These 

bulletins are located on the Agency’s 

Web page: http://www.usda.gov/rus/ 

telecom/broadband.htm. or you can 

contact Kenneth Kuchno, Director, 

Broadband Division at the following 

address for copies: Stop 1599, South 

Agriculture Building, Room 2868, 

Washington , DC 20250.(c) No fees or 

charges will be assessed for any loan 

made under this part. 

§ 1738.2 Definitions. 

(a) As used in this part: 

Acquisition means the purchase of 

assets that will be used to provide 

Broadband Service, such as by acquiring 

facilities, equipment, operations, 

licenses, or majority stock interest of 

one or more organizations. Stock 

acquisitions must be arms-length 

transactions. 

Administrator means the 

Administrator of the Rural Utilities 

Service (RUS), or his or her designee. 

Advance of Funds means the transfer 

of loan funds from the Agency to the 

borrower. 

Affiliate or Affiliated Company of any 

specified entity means any other entity 

directly or indirectly controlling of, 

controlled by, under direct or indirect 

common control with, or related to, 

such specified entity. For the purpose of 

this definition, ‘‘control’’ of any 

specified entity means the power to 

direct the management and policies of 

such specified entity, directly or 

indirectly, whether through the 

ownership of stock, by contract, or 

otherwise. 

Agency shall mean the Rural Utilities 

Service, which administers the United 

States Department of Agriculture’s 

(USDA) Rural Development Utilities 

Programs. 

Applicant means an eligible entity 

requesting approval of a loan or loan 

guarantee under this part. 

Arms-Length Transaction means a 

transaction between two related or 

affiliated parties that is conducted as if 

they were unrelated, so that there is no 

question of conflict of interest, or a 

transaction between two otherwise 

unrelated or unaffiliated parties. 

Borrower means any organization that 

has an outstanding Broadband or 

Telecommunications loan made or 

guaranteed by the Agency. 

Broadband Loan means any loan 

approved under Title VI of the Rural 

Electrification Act of 1936 (RE Act). 

Broadband Service means any 

technology identified by the 

administrator as having the capacity to 

transmit data to enable a subscriber to 

the service to originate and receive high 

quality voice, data, graphics and video. 

To qualify as broadband service, the 

project must offer data transmission 

services and may provide voice, 

graphics, video and other services. The 

Agency will publish a notice in the 

Federal Register defining the minimum 

rate-of-data transmission criteria to 

qualify as broadband service during that 

fiscal year’s funding period. 

Census block means an area normally 

bounded by visible features, such as 

streets, streams, and railroads, and by 

nonvisible features, such as the 

boundary of an incorporated place, 

minor civil division, county, or other 

tabulation entity as described in the 

latest decennial census. 

Census block group means a group of 

census blocks within a census tract 

whose numbers begin with the same 

digit; for example, BG 3 within a census 

tract includes all census blocks 

numbered from 3000 to 3999. 

Composite economic life means the 

weighted (by dollar amount of each 

class of facility in the loan) average 

economic life of all classes of facilities 

in the loan. 

Derivative means any right, interest, 

instrument or security issued or traded 

on the credit of the Guaranteed Loan or 

any Guaranteed Loan Portion, including 

but not limited to any participation 

share of, or undivided ownership or 

other equity interest in, the Guaranteed 

Loan or any Guaranteed Loan Portion; 

any note, bond or other debt instrument 

or obligation which is collateralized or 

otherwise secured by a pledge of, or 

security interest in, the Guaranteed 

Loan or any Guaranteed Loan Portion; 

or any such interest in such an interest 

or any such instrument secured by such 

an instrument. 

Economic life means the estimated 

useful service life of an asset as 

determined by the Agency. 

Eligible entity means a cooperative, 

nonprofit or for-profit corporation, 

limited dividend or mutual association, 

limited liability company, Indian tribe, 

tribal organization as defined in 25 

U.S.C. 450b (b) and (c), state or local 

government, including any agency, 

subdivision, or instrumentality thereof 

(including consortia thereof). In 

addition, the entity must have sufficient 

authority to enter into a contract with 

the Agency and to carry out the 

purposes of the proposed loan. 

Individuals, partnerships of individuals, 

and entities that serve more than 2 

percent of the telephone subscriber lines 

installed in the United States are not 

eligible entities. 

Eligible Rural Community means any 

area, as confirmed by the latest 

decennial census of the Bureau of the 

Census, which is not located within: 

(1) The boundaries of an Urban Area; 

(2) An incorporated city or town with 

a population of more than 20,000; or 

(3) An area that has four or more 

Existing Broadband Service Providers 

(excluding the applicant). 

Equity or Net Worth means Total 

Assets minus Total Liabilities. For 

example, the sum of the balances of the 

following accounts of the applicant: 

Capital Stock or Membership Units, 

Additional Paid-In-Capital, Treasury 

Stock, Other Capital, and Retained 

Earnings. 

Existing Broadband Service Provider 

means an Incumbent Service Provider 

that is providing Broadband Service, 

and is able to provide evidence and 

certify to the Agency that 10 percent of 

the households passed by their facilities 

are purchasing their Broadband Service. 

Resellers of Broadband Service who 

utilize the physical facilities of other 

service providers to deliver their 

products to the subscriber will not be 

considered as an Existing Broadband 

Service Provider. 

Feasibility study means the pro forma 

financial analysis prepared by the 

Agency, based on the financial 

projections supplied by the applicant 

and found acceptable by the Agency, to 

determine the financial feasibility of a 

loan. 

Financial feasibility means the ability 

of an applicant to generate sufficient 

revenues to cover its expenses and 

service its debt and meet the minimum 

TIER requirement of 1.25 by the end of 

the Forecast Period. 

Fiscal year means the fiscal year of 

the Federal Government (October 1 to 

September 30). 


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Forecast period means the time period 

used in the feasibility study to 

determine if an application is 

financially feasible. Financial feasibility 

of a loan application is usually based on 

5-year projections. 

Guaranteed-Amount Debt Derivative 

means any note, bond or other debt 

instrument or obligation which is 

collateralized or otherwise secured by a 

pledge of, or security interest in, the 

Guaranteed Loan Note or any 

Guaranteed Loan Portion Note or any 

Derivative, as the case may be, which 

has an exclusive or preferred claim to 

the Guaranteed Loan Amount or the 

respective Guaranteed Loan Portion 

Amount or the respective GuaranteedAmount Equivalent, as the case may be. 

Guaranteed-Amount Equity Derivative 

means any participation share of, or 

undivided ownership or other equity 

interest in, the Guaranteed Loan or any 

Guaranteed Loan Portion or any 

Derivative, as the case may be, which 

has an exclusive or preferred claim to 

the Guaranteed Loan Amount or the 

respective Guaranteed Loan Portion 

Amount or the respective GuaranteedAmount Equivalent, as the case may be. 

Guaranteed-Amount Equivalent 

means, with respect to any Derivative 

which is equal in principal amount to 

the Guaranteed Loan or any Guaranteed 

Loan Portion, that amount of payment 

on account of such Derivative which is 

equal to the Guaranteed Loan Amount 

or the respective Guaranteed Loan 

Portion Amount, as the case may be; or 

with respect to any Derivative which in 

the aggregate are equal in principal 

amount to the Guaranteed Loan or any 

Guaranteed Loan Portion, that amount 

of payment on account of such 

derivatives which is equal to the 

Guaranteed Loan Amount or the 

respective Guaranteed Loan Portion 

Amount, as the case may be. 

Guaranteed Loan Amount means that 

amount of payment on account of the 

Guaranteed Loan which is guaranteed 

under the terms of the Guarantee. 

Guaranteed Loan Note means, 

collectively, the note or notes executed 

and delivered by the Borrower to 

evidence the Guaranteed Loan. 

Guaranteed Loan Portion means any 

portion of the Guaranteed Loan. 

Guaranteed Loan Portion Amount 

means that amount of payment on 

account of any Guaranteed Loan Portion 

which is guaranteed under the terms of 

the Guarantee. 

Guaranteed Loan Portion Note means 

any note executed and delivered by the 

Borrower to evidence a Guaranteed 

Loan Portion. 

Incumbent service provider means an 

existing entity that is currently 

providing data, voice, video and/or 

graphic services in the applicant’s 

proposed service area. 

Indefeasible Right to Use Agreement 

(IRU) means the effective long-term 

lease of a portion of the capacity of a 

cable, specified in terms of a certain 

number of channels of a given 

bandwidth. 

Initial loan means the first loan made 

under the RE Act to a Borrower. 

Interim construction means the 

construction, improvement, or 

acquisition of facilities and equipment 

proposed to be funded by loan funds, 

which occurs after the application is 

deemed complete by the Agency. 

Interim financing means funding for 

the Interim construction. 

Loan means any loan made or 

guaranteed under this part by the 

Agency, unless otherwise noted. 

Loan contract means the loan 

agreement between the Agency and the 

borrower, including all amendments 

thereto. 

Loan documents mean the loan 

contract, note, and security instrument 

between the borrower and the Agency 

and any associated documents 

pertaining to a loan once the loan is 

approved for financing. 

Loan funds mean funds provided 

pursuant to a loan made or guaranteed 

under this part by the Agency. 

Loan guarantee means a loan made by 

another lender and guaranteed by the 

Agency. 

Loan guarantee documents mean the 

guarantee agreement, the loan contract 

between the guaranteed lender and the 

Borrower, the loan note guarantee, the 

Guaranteed Loan Note, and the Security 

Documents. 

Pre-loan expenses means the 

expenses associated with the 

preparation of a loan application. These 

expenses include costs associated with 

the legal notice, market survey, 

competitive analysis, financial analysis, 

environmental report, engineering 

design, and required legal opinions. Preloan expenses must be fully supported 

and acceptable to the Agency if they are 

to be considered for funding. 

RE Act means the Rural Electrification 

Act of 1936, as amended (7 U.S.C. 901 

et seq.). 

Release of funds means the 

availability of loan funds to be advanced 

for approved purposes. 

RUS means the Rural Utilities 

Service, an agency of the United States 

Department of Agriculture, and 

successor to the Rural Electrification 

Administration. 

Security Documents mean any 

mortgage, security agreement, and/or 

financing statement, or other documents 

which grants to the Agency a security 

interest, including any amendments and 

supplements thereto. 

Service area means the geographical 

area within which the applicant 

proposes to make Broadband Service 

available with a loan provided under 

this part. 

Telecommunications means the 

transmission and reception of voice, 

data, sounds, signals, pictures, writings, 

or signs of all kinds, by wire, fiber, 

radio, light, or other visual or 

electromagnetic means. 

Telecommunications loan means any 

telecommunication loan made under 

Title II, III, IV or VI of the RE Act. 

TIER means Times Interest Earned 

Ratio. TIER is the ratio of an applicant’s 

net income (after taxes) plus (adding 

back) interest expense, all divided by 

interest expense. 

Total Assets means the sum of the 

balances of the following accounts of 

the applicant: Current Assets, Non 

Current-Assets, and Total Plant, minus 

the following accounts of the applicant: 

Accumulated Depreciation and 

Accumulated Amortization. 

Unguaranteed-amount equivalent 

means all amounts of payment on 

account of any Derivative other than the 

respective Guaranteed-Amount 

Equivalent. 

Unguaranteed loan amount means all 

amounts of payment on account of the 

Guaranteed Loan other than the 

Guaranteed Amount. 

Unguaranteed loan portion amount 

means all amounts of payment on 

account of any Guaranteed Loan Portion 

other than the respective Guaranteed 

Loan Portion Amount. 

Urban Area means, as defined by the 

Bureau of the Census, all territory, 

population, and housing units located 

within an urbanized area (UA) or an 

urban cluster (UC). 

(b) Accounting terms not otherwise 

defined in this part shall have the 

definition ascribed to them under 

generally accepted accounting 

principles (GAAP). 

§§ 1738.3–1738.9 [Reserved] 

Subpart B—Types of Loans 

§ 1738.10 General. 

Financial assistance under the Rural 

Broadband Access Loan and Loan 

Guarantee Program shall be in the form 

of a Direct Cost-of-Money loan, a Direct 

4 Percent Loan, and/or a Loan 

Guarantee to provide Broadband Service 

in Eligible Rural Communities. 


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§ 1738.11 Broadband Loans and Loan 

Guarantees. 

Broadband Loans and Loan 

Guarantees shall consist of one or more 

of the following three types of financial 

assistance: 

(a) Direct Cost-of-Money, which shall 

bear interest at a rate (the ‘‘Cost-ofMoney Interest Rate’’) equal to the cost 

of borrowing to the Department of 

Treasury for obligations of comparable 

maturity. The Cost-of-Money Interest 

Rate will be supplied by the Agency 

each time funds are actually advanced 

to the Borrower. 

(b) Direct 4 Percent, which shall bear 

an interest rate of 4 percent on any 

advance to the Borrower. 

(1) To be eligible for a direct loan 

bearing an interest rate of 4 percent, the 

applicant must propose serving an 

Eligible Rural Community that: 

(i) Has a population of less than 5,000 

inhabitants; and 

(ii) Is not currently capable of 

receiving Broadband Service or can 

receive Broadband Service from only 

one Existing Broadband Service 

Provider. 

(iii) Is located in a county with per 

capita personal income that is less than 

or equal to that percent of the national 

per capita personal income which the 

Agency will publish in the Federal 

Register at the beginning of each fiscal 

year. County per capita income is 

published by the Bureau of Economic 

Analysis, U.S. Department of 

Commerce, at http://www.bea.doc.gov/ 

bea/regional/reis/. The Agency will use 

the most recent statistics published on 

October 1 of the fiscal year in which the 

application is deemed complete by the 

Agency. 

(2) When an approved application 

exceeds the maximum amount of 4 

percent financing that may be available 

to the Borrower, a direct loan made at 

4 percent may be made simultaneously 

with a Cost-of-Money Interest Rate loan. 

(3) A 4 percent loan may be made 

simultaneously with a Cost-of-Money 

Interest Rate loan or a private loan 

guarantee. 

(c) Loan Guarantee, which shall bear 

interest at a rate, set by the guaranteed 

lender that must be consistent with the 

then applicable market rate for loans of 

comparable amounts and maturities. 

§ 1738.12 Minimum and maximum loan 

amounts. 

Applications for loans or loan 

guarantees of less than $100,000 will 

not be considered. The maximum of any 

single type of loan or loan combination 

will be published in the Federal 

Register at the beginning of each fiscal 

year. 

§§ 1738.13–1738.18 [Reserved] 

Subpart C—Ineligible Areas, Eligible 

Entities and Eligible/Ineligible Items 

§ 1738.19 Ineligible areas. 

The Agency will not approve the use 

of a broadband loan: 

(a) To more than one applicant to 

provide Broadband Service within the 

same Eligible Rural Community; or 

(b) To an applicant proposing to 

provide Broadband Service in an 

Eligible Rural Community where an 

existing Borrower is already providing 

Broadband Service. 

§ 1738.20 Eligible entities. 

Only Eligible Entities which propose 

providing Broadband Services in 

Eligible Rural Communities shall be 

eligible for a Broadband Loan. 

§ 1738.21 Service requirements for 

proposed projects. 

(a) A project in an area not currently 

served by the applicant must: 

(1) Be in an Eligible Rural 

Community. 

(2) Contain at least 40 percent of 

households with no access to 

Broadband Service or access to only one 

Existing Broadband Service Provider. 

(For example, if a start-up company or 

new entrant submits a loan application 

to provide Broadband Service to 1000 

households, 400 (1000 × 40%) of the 

households must have no broadband 

access or have access to only one 

Existing Broadband Service Provider. 

Likewise, if an Incumbent Service 

Provider submits a loan application to 

provide Broadband Service to 2000 

households in its existing service 

territory and 1000 households outside of 

its existing territory, 400 (1000 × 40%) 

of the households outside its existing 

service territory must have no 

broadband access or have access to only 

one Existing Broadband Service 

Provider.) 

(b) Applications submitted by 

Incumbent Service Providers solely for 

the purpose of upgrading existing 

facilities in Eligible Rural Communities 

must enhance existing service by 

providing or improving Broadband 

Service and other services related 

thereto. 

(c) Areas that are being acquired from 

an Incumbent Service Provider will be 

considered existing service areas of the 

applicant. 

§ 1738.22 Items eligible to be financed. 

The proceeds of any loan made under 

this part may be used: 

(a) To fund the construction, 

improvement, and acquisition of all 

facilities, wherever located, required to 

provide Broadband Service to Eligible 

Rural Communities, including facilities 

required for providing other services 

over the same facilities that Broadband 

Services are being provided. Start-up 

and overhead costs that can be 

capitalized and included as part of the 

cost of facilities required to provide 

Broadband Service are eligible for 

financing. 

(b) To fund Pre-Loan Expenses not to 

exceed 5 percent of the requested total 

Broadband Loan amount, excluding any 

amounts requested to refinance 

outstanding telecommunication loans. 

(c) To finance facilities to provide 

Broadband Service leased under the 

terms of a capital lease as defined in 

generally accepted accounting 

principles. Loan funds will be limited to 

the cost of the capital lease for the first 

5 years of the loan amortization period. 

(d)(1) To finance an Acquisition, 

provided that: 

(i) The Acquisition is necessary for 

furnishing or improving rural 

Broadband Service; 

(ii) The acquired Service Area, if any, 

is in an Eligible Rural Community; and 

(iii) Funds provided for the 

Acquisition do not exceed 50 percent of 

the approved loan amount. 

(2) For the purposes of the 

Acquisition, the applicant will be 

considered the Incumbent Service 

Provider with regard to the acquired 

Service Area, if any. 

(e) To refinance an outstanding 

obligation of an applicant on another 

Telecommunications Loan made under 

the RE Act if the use of the proceeds 

realized will further the construction, 

improvement, or acquisition of facilities 

for the provision of Broadband Service 

in Eligible Rural Communities, provided 

that: 

(1) Funds used for refinancing may 

not constitute more than 40 percent of 

the loan; 

(2) The amortization period for the 

funds associated with the refinancing of 

outstanding obligations cannot exceed 

the remaining amortization period of the 

notes being refinanced. If multiple notes 

are being refinanced, an average 

remaining amortization period will be 

calculated based on the weighted dollar 

average of the notes being refinanced; 

and 

(3) The Applicant must be current 

with payments on the notes to be 

refinanced. 

§ 1738.23 Items not eligible to be financed. 

The proceeds of any loan made under 

this part cannot be used: 

(a) To fund the costs associated with 

facilities covered by an Indefeasible 

Right of Use Agreement (IRU); 


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(b) To acquire less than the majority 

interest of the stock of a company 

offering, or capable of offering 

Broadband Services, unless otherwise 

approved by the Agency; 

(c) To acquire the stock of an affiliate; 

(d) To purchase or acquire any 

facilities or equipment of an affiliate of 

the applicant. However, the Agency may 

consider, on a case by case basis, such 

funding if the Applicant can 

demonstrate that the purchase or 

acquisition will be an arms-length 

transaction, and that the cost is the most 

economically available for the facilities 

or equipment in question; 

(e) To finance Customer Premise 

Equipment (CPE) not owned by the 

Applicant during its economic life and 

any associated inside wiring, unless: 

(1) Additional collateral, acceptable to 

the Agency, at least equal to the 

purchase price of the CPE is pledged, 

which collateral has not been purchased 

with loan funds, or 

(2) A revolving fund for the initial 

purchase of CPE to be sold is 

established, and as CPE is sold to the 

customer, at least the Borrower’s cost of 

such equipment is deposited back from 

the proceeds of the sale into the 

revolving fund to purchase additional 

CPE units. For additional information 

on this option, refer to Bulletin 1738–1. 

(f) To purchase or lease vehicles not 

used primarily in construction of the 

Broadband Service project to be 

financed; or 

(g) To finance systems or facilities 

that have not been designed and 

constructed in accordance with the loan 

contract, which incorporates 

Bulletin1738–2. 

§§ 1738.24–1738.29 [Reserved] 

Subpart D—Loan Application 

Requirements 

§ 1738.30 General. 

A loan application will be considered 

complete upon the submission of 

acceptable information regarding: 

(a) The equity requirement; 

(b) The legal notice; 

(c) The market survey; 

(d) The competitive analysis; 

(e) The business plan; 

(f) The financial information; and 

(g) The system design. 

§ 1738.31 Equity requirement. 

(a) To be eligible for a loan, an 

applicant must have a minimum equity 

position in the operation proposed to be 

funded. For start-up companies, new 

entrants into an area and Incumbent 

Service Providers that are proposing to 

extend their service territory, the 

applicant must demonstrate a minimum 

equity position equal to 10 percent of 

the requested loan amount at the time 

the application is submitted. For all 

other applications, the applicant must 

demonstrate a minimum equity position 

equal to 20 percent of the requested loan 

amount at the time the application is 

submitted. If the applicant does not 

have the required equity in the 

operation to be funded at the time the 

application is submitted, the shortfall 

for this requirement can be satisfied as 

follows: 

(1) With an investor’s proposal to 

cover the shortfall of the equity 

requirement by infusing additional 

capital into the operation. The 

additional capital must be deposited 

into the applicant’s operating accounts 

prior to loan closing. If this option is 

elected, evidence must be included in 

the application that clearly identifies 

the investor’s commitment to the project 

along with its bank or financial 

statements that demonstrates its ability 

to satisfy this requirement. This 

evidence must be acceptable to the 

Agency before the application will be 

considered complete and ready for 

further processing. If an investor’s 

proposal to satisfy this requirement is 

not included in the loan application, the 

application will be returned. The 

Agency reserves the right to reject 

investments that are on a preferred basis 

for any reason. 

(2) With an unconditional, irrevocable 

letter of credit (LOC) satisfactory to the 

Agency. If an LOC will be used to satisfy 

the equity requirement, the LOC must 

be secured and serviced by an entity 

other than the applicant applying for the 

loan and must remain in effect until the 

applicant’s financial position has 

reached a Net Worth equal to 20 percent 

of Total Assets after 80 percent of loan 

funds have been expended. The Agency 

must be an unconditional payee under 

the LOC and the LOC must be in place 

prior to loan closing. 

(b) For State and local governments, 

the equity requirement can be satisfied 

with general obligation bonds. If the 

equity requirement is satisfied with 

general obligation bonds, the Broadband 

Loan or loan guarantee cannot be 

subordinate to the bonds. 

(c) Revenue bonds supported by the 

operations being funded cannot be used 

to satisfy the equity requirement. 

(d) Based on the results of the 

Agency’s financial analysis of the 

application, additional equity 

requirements may be included as 

covenants to a loan offer. 

(e) The Administrator reserves the 

right to modify or waive the 

requirements of this section as long as 

those modifications do not result in a 

projected negative cash position in any 

quarter throughout the forecast period 

and the modifications are required to 

provide Broadband Service in areas that 

are not capable of receiving Broadband 

Service or can receive Broadband 

Service from only one Existing 

Broadband Service Provider. 

§ 1738.32 Additional cash requirements. 

(a) Once the Agency has completed its 

review of the loan application, the 

applicant will be notified if additional 

cash requirements are needed to support 

the feasibility of the loan. Additional 

cash infusions will be necessary when 

the Agency’s financial analysis indicates 

that cash from operations and previous 

cash infusions cannot sustain a positive 

cash position throughout the forecast 

period. 

(1) The amount of the additional cash 

infusions required must bring the cash 

balance at the end of each year of the 

Forecast Period to zero. 

(2) For purposes of satisfying the 

additional cash requirement for a startup operation or an operation that has 

not demonstrated positive cash flow for 

the two previous years prior to the date 

the application was submitted, only 50 

percent of projected revenues for each 

year of the forecast period will be used 

in the feasibility study to determine if 

an operation can sustain a positive cash 

position. 

(3) The applicant will be required to 

infuse additional cash into the operation 

to cover projected deficits for the first 

two years of operations at loan closing 

and to enter into legal arrangements 

with the Agency committing to 

additional cash infusions to ensure that 

the operation will sustain a positive 

cash position on a quarterly basis 

throughout the forecast period. 

(4) If debt is incurred to satisfy the 

additional cash requirement, this debt 

must take a subordinate lien position to 

the Agency debt. The Agency will 

provide the applicant with options for 

satisfying any additional requirements. 

(5) Once the applicant has agreed to 

a method for satisfying the additional 

cash requirements, this method will be 

incorporated into the loan documents. 

(6) If a loan is offered to the applicant, 

the applicant will have 120 days from 

the date of the loan contract to have the 

additional cash infusions deposited into 

the company applying for the loan and 

enter into any other legal arrangements 

to cover proposed deficits. If these 

requirements are not completed within 

this timeframe, the loan offer will be 

terminated, absent a written request 

from the applicant, and consent thereto 

from the Agency. 


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(b) If additional requirements and 

covenants are required to obtain loan 

approval, they will be detailed in the 

loan documents. 

§ 1738.33 Legal notice. 

(a) All applicants, as part of 

submitting a completed application, 

must prepare a legal notice to be 

published on the Agency Web page 

stating the applicant’s intent to offer 

Broadband Service in a particular 

community. In addition, if the applicant 

is proposing other (i.e. video, voice, etc.) 

services, these services must also be 

identified in the legal notice. The legal 

notice will be published on the 

Agency’s Web page after the application 

has been received in the Agency’s 

national office and will remain on the 

Web page for a period of 30 work days. 

The notice must set forth the applicant’s 

total proposed service area, including a 

service area map, and request any 

Incumbent Service Provider to submit to 

the Agency, within this 30 day period, 

the following information: 

(1) The number of residential and 

business customers capable of receiving 

Broadband Service in the applicant’s 

proposed service area; 

(2) The number of residential and 

business customers purchasing 

Broadband Service in the applicant’s 

proposed service area, the rates of data 

transmission being offered, and the cost 

of each level of Broadband Service; 

(3) The number of residential and 

business customers receiving other 

services that will be offered in the 

applicant’s proposed service area and 

the associated rates for these other 

services; 

(4) A map of its service territory. 

(b) The information that is submitted 

by the Incumbent Service Provider will 

be used by the Agency to determine if 

the Incumbent Service Provider will be 

classified as an Existing Broadband 

Service Provider. If an Incumbent 

Service Provider does not submit a 

response to the legal notice, it will not 

be considered an Existing Broadband 

Service Provider. However, all 

Incumbent Service Providers will be 

considered in the Agency lending 

decision. 

(c) All proprietary and confidential 

information submitted by the incumbent 

in response to the legal notice will not 

be released under the Freedom of 

Information Act. 

§ 1738.34 Market survey. 

(a) Except as provided in paragraph 

(b) of this section, the applicant must 

complete a market survey for each area 

where Broadband Service is proposed to 

be provided and include it as part of the 

application. The survey must not only 

include questions about the deployment 

of Broadband Services but must also 

address all other services that are being 

proposed. The survey must be 

conducted on each Eligible Rural 

Community where service is proposed. 

Additional information on the 

requirements of the market survey can 

be found in Bulletin 1738–1. 

(b) For any service that the applicant 

is projecting less than a 15 percent 

penetration of households passed in the 

total proposed service territory, by the 

end of the Forecast Period, a market 

survey does not need to be completed. 

The proposed rates for these services 

must be affordable as determined by the 

Agency. If the rates are not affordable, 

the Agency will require that a market 

survey be completed. 

(c) Generally, for a market survey to 

be acceptable to the Agency, it must 

have been completed within six months 

from the date the application was 

submitted to the Agency for processing. 

The Agency reserves the right to reject 

any market survey so long as it can 

demonstrate that the market survey does 

not support the financial projections or 

the business plan or that the 

demographics of the proposed service 

territory have significantly changed 

since the survey was completed. 

(d) With respect to loans for areas that 

do not have the capability of receiving 

Broadband Service or can receive 

Broadband Service from only one 

Existing Broadband Service Provider, 

the Administrator reserves the right to 

waive or modify the requirements of 

this section on a case by case basis. 

§ 1738.35 Competitive analysis. 

The applicant must identify all 

competitors, including resellers, in their 

proposed service territory irregardless of 

the competitor’s market share and 

prepare a competitive analysis, for all 

types of services proposed and include 

it as part of the application. This 

analysis must include each competitor’s 

proposed rate packages for all services 

offered and to the extent possible, the 

level of service being provided and the 

area that is being covered. Although a 

market survey is not required for areas 

where an applicant is projecting less 

than 15 percent penetration of the 

households passed for a specific service, 

a competitive analysis is required for all 

proposed service territories. 

§ 1738.36 Business plan. 

A business plan must be included as 

part of the application and must 

address, at a minimum, the following 

items: 

(a) The proposed use of loan funds 

and if any non-loan funds will be 

required to complete the proposed 

project; 

(b) A detailed description of working 

capital requirements and the source of 

these funds; 

(c) A description of how the equity 

requirements will be satisfied; 

(d) A description of the services that 

will be offered, the rates for the 

proposed services and the marketing 

plan to sell these services; 

(e) A description of any current 

operations including services being 

provided, areas being served, rate 

structure and penetration rates; 

(f) A description of any licenses and 

regulatory approvals that are required 

for the proposed operation including the 

status of obtaining these items; 

(g) A detailed description of the 

qualifications of the proposed 

management team for the operation 

including a resume of each team 

member detailing prior positions held 

for the previous 10 years from the date 

the application is submitted; 

(h) A description of the staffing 

requirements to operate the proposed 

system; and 

(i) A description of the workforce that 

is required to construct the system. This 

description must agree with the buildout schedule included in § 1738.37. 

§ 1738.37 Financial information. 

The financial information that must 

be included in the application to 

support the business plan is as follows: 

(a) Copies of audited financial 

statements (balance sheet, income 

statement, cash flow statement) for the 

three years preceding the date of the 

application for an existing company. If 

audited statements are not available, unaudited statements and tax returns for 

the three previous years must be 

submitted; 

(b) Copies of audited financial 

statements for the parent operation for 

the year preceding the year the 

application was submitted if the 

applicant for the Broadband Loan is a 

subsidiary operation. If audited 

statements are not available, un-audited 

statements and tax returns for the 

previous year must be submitted; 

(c) Copies of audited financial 

statements for any affiliated operation 

that is providing services to the 

applicant for the year preceding the year 

the application was submitted. If 

audited statements are not available, unaudited statements and tax returns for 

the previous year must be submitted; 

(d) Customer projections for the 

forecast period that substantiate the 

projected revenues for each service that 


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is to be provided. The projections must 

at a minimum be on an annual basis and 

must be provided for each Eligible Rural 

Community that will be receiving 

service. These projections must be 

clearly supported by the information 

contained in the market survey; 

(e) Financial projections in the form 

of balance sheets, income statements 

and cash flow statements for the 5-year 

forecast period. These projections must 

be supported by detailed narrative 

assumptions that fully explain the 

methodology used to develop the 

projections. The financial projections 

submitted by the applicant and the 

feasibility study prepared by the Agency 

must demonstrate that the proposed 

operation will be able to meet a 

minimum TIER requirement equal to 

1.25 by the end of the forecast period. 

(A projected TIER of 1.25 does not 

guarantee that a loan will be approved.) 

Based on the findings of the feasibility 

study, the Agency will establish a TIER 

maintenance requirement in the loan 

documents that will remain in effect 

throughout the amortization period; and 

(f) A list of all outstanding obligations 

of the applicant. Copies of existing notes 

and loan and security agreements must 

be included in the application. 

§ 1738.38 System design. 

(a) The system design must fully 

support the delivery of Broadband 

Service and any other services being 

provided, must demonstrate that the 

project will be completed within 3 years 

from the date of the loan contract, and 

must include the following items: 

(1) A detailed description of the 

proposed technology that will be used 

to provide the services. This description 

must include sufficient information for 

the Agency to make the determination 

that all households in the proposed 

service territory will have the capability 

of receiving Broadband Services. For 

further clarification, reference Bulletin 

1738–2; 

(2) Existing and proposed network 

diagrams that clearly demonstrate the 

traffic flows through the network from 

the interconnection points with the 

backbone providers to the end users; 

(3) Estimated project costs detailing 

all facilities that are required to 

complete the project. These estimated 

costs must be broken down to indicate 

costs associated with each community 

to be served; and 

(4) A construction build-out schedule 

of the proposed facilities by community 

on a quarterly basis. The build-out 

schedule must: 

(i) Include a description of the work 

force that will be required to complete 

the proposed construction; 

(ii) Include a timeline demonstrating 

project completion within 3 years from 

the date of the Loan Contract; 

(iii) Include detailed information 

showing that all households that are 

proposed to be passed with facilities 

funded by the Agency must have the 

capability of receiving Broadband 

Service with the completion of 

construction of the system. For 

additional information on how to satisfy 

this requirement, please refer to Bulletin 

1738–1. 

(iv) Include detailed information 

showing that construction of the 

proposed facilities will start within 6 

months from the date the Administrator 

signs the Loan Documents. 

(5) A depreciation schedule for the 

proposed facilities; 

(6) Information required by 7 CFR part 

1794, an environmental report prepared 

in accordance therewith; 

(7) Any other system requirements 

which shall be published annually in 

the Federal Register, which the 

Administrator shall determine to be 

necessary in addressing the rapidly 

changing technological needs of the 

Broadband Program. 

(b) With respect to loans for areas that 

are not capable of receiving Broadband 

Service or can receive Broadband 

Service from only one Existing 

Broadband Service Provider, the 

Administrator reserves the right to 

waive or modify the requirements of 

this section on a case by case basis. 

§ 1738.39 Submission of the application. 

Loan applications can be submitted 

directly to the Agency’s National Office 

or can be submitted to the Agency’s 

general field representative (GFR) that is 

assigned to the area where the 

applicant’s headquarters are located. 

Although the applications can be 

submitted directly to the National 

Office, it is recommended that the 

applicant identify and contact the 

appropriate GFR as early as possible 

when preparing a loan application. The 

GFR will assist the applicant with the 

preparation of the application and 

explain the regulations and 

requirements that govern the Broadband 

Program. The applicant should contact 

the National Office in Washington to 

identify the GFR that is assigned to the 

area where their headquarters are 

located or refer to the list of GFR’s 

assigned to different parts of the country 

on the Agency webpage. Please refer to 

the following Web address to identify 

the GFR assigned to your proposed 

service territory: http://www.usda.gov/ 

rus/telecom/staff/gfr-state-list.htm. All 

applications must contain two hard 

copies and an electronic copy of the 

entire application. 

Subpart E—Terms for Loans and Loan 

Guarantees 

§ 1738.40 Direct 4 Percent and Cost of 

Money Loans. 

(a) Terms and conditions of loans are 

set forth in a mortgage, note, and loan 

contract. Provisions of the mortgage and 

loan contract are implemented by 

provisions in the Agency bulletins and 

regulations. Samples of the mortgage, 

note, and loan contract can be found on 

the Agency Web page: http:// 

www.usda.gov/rus/telecom/ 

broadband.htm. 

(b) The Agency reserves the right to 

establish terms and conditions, 

including security requirements, on a 

case-by-case basis. 

§ 1738.41 Loan security. 

(a) The Agency makes loans only if, 

in the judgment of the Administrator, 

the security is reasonably adequate and 

the loan will be repaid within the time 

agreed. 

(b) The Agency generally requires that 

an applicant provide it with an 

exclusive first lien, in form and 

substance satisfactory to the Agency, on 

all of the applicant’s property and such 

additional security as the Agency may 

require. The Agency will share its first 

lien position with another lender 

provided the Broadband Loan is 

adequately secured and the security 

arrangements are acceptable to the 

Agency. The Agency will consider 

entering into joint security arrangements 

with other lenders on a pari pasu, 

prorated basis. 

(c) All collateral that is securing the 

loan must be free from liens or security 

interests other than those permitted by 

the Agency or the Security Documents. 

The applicant must own collateral that 

will be purchased with loan funds 

unless otherwise designated by the 

Agency. 

(d) In the case of loans that include 

the financing of broadband facilities that 

do not constitute self-contained 

operating systems or units, the applicant 

shall, in addition to the mortgage and/ 

or security lien on all of the applicant’s 

facilities financed by the Agency, 

furnish adequate assurance, in the form 

of contractual or other arrangements, 

satisfactory to the Agency, that 

continuous and efficient broadband 

service will be rendered. 

(e) Additional financial, investment, 

operational, reporting, and managerial 

controls will appear in the loan 

documents required by the Agency. 


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Federal Register / Vol. 72, No. 91 / Friday, May 11, 2007 / Proposed Rules 26757 

§ 1738.42 Payments on loans. 

Broadband loans must be repaid with 

interest within a period that, rounded to 

the nearest whole year, equals the 

expected composite economic life of the 

facilities to be financed, as calculated by 

the Agency. The expected composite 

economic life shall be based upon the 

depreciation rates for the facilities 

financed by the loan. 

(a) The depreciation rates used shall 

be the rates currently in place, as long 

as the Agency finds them to be 

reasonable for the telecommunications 

industry. 

(b) Applicants may request a 

repayment period that is shorter than 

the expected composite economic life of 

the facilities financed. A shorter period 

may be approved as long as the 

Administrator determines that the loan 

remains feasible. 

(c) Interest is payable on funds 

advanced each month as it accrues 

beginning with the first billing after the 

advance, as defined in the note. 

Principal payments on each note are 

scheduled to begin one year after the 

date of the first advance. After this 

deferral period, interest and principal 

payments on all funds advanced during 

this one-year period shall be made in 

equal monthly installments. Principal 

payments on funds advanced one year 

or more after the date of the first 

advance will begin with the first billing 

after the advance. The interest and 

principal payments on each of these 

advances shall be made in equal 

monthly installments. On a case by case 

basis for areas that are not capable of 

receiving Broadband Service or can 

receive Broadband Service from only 

one Existing Service Provider, the 

Administrator reserves the right to 

modify the terms and conditions for the 

interest and principal payments. 

§ 1738.43 Loan guarantees. 

(a) Eligible guaranteed lenders. To be 

eligible for a Loan Guarantee, 

guaranteed lenders must be legally 

organized lending institutions, such as 

commercial banks, trust companies, 

mortgage banking firms, insurance 

companies, and any other institutional 

investor authorized by law to loan 

money, which must be subject to credit 

examination and supervision by a 

Federal or state agency, unless the 

Agency determines that alternative 

examination and supervisory 

mechanisms are adequate. 

(b) Requirements for the Loan 

Guarantee. At the time of application, 

Applicants must provide, in form and 

substance acceptable to the Agency: 

(1) Evidence of the guaranteed 

lender’s eligibility under paragraph (a) 

of this section; 

(2) Evidence that the guaranteed 

lender is capable of adequately servicing 

the guaranteed loan; 

(3) Evidence that the guaranteed 

lender is in good standing with its 

licensing authority and meets the loan 

making, loan servicing, and other 

requirements of the jurisdiction in 

which the lender makes loans; 

(4) Evidence satisfactory to the 

Agency of its qualification under this 

part, along with the name of the 

authority that supervises it; 

(5) A commitment letter from the 

guaranteed lender that will be providing 

the funding, and the terms of such 

funding, all of which may be 

conditioned on final approval of the 

Broadband Loan by the Agency; and 

(6) A description of any and all 

charges and fees for the loan provided 

they are not greater than those normally 

charged other applicants for the same 

type of loan in the ordinary course of 

business. Notwithstanding, such charges 

and fees shall not be included within 

the loan guarantee. 

(c) Terms for Guarantee. Loan 

Guarantees will only be given on the 

conditions that: 

(1) The Loan Guarantee is no more 

than 80 percent of the principal amount, 

which shall exclude any and all charges 

and fees; 

(2) The guarantee is limited to the 

loan repayment obligation of the 

Borrower and does not extend to 

guaranteeing that the guaranteed lender 

will remit to a holder, loan payments 

made by the Borrower; 

(3) The interest rate must be fixed and 

must be the same or lesser for the 

Guaranteed Loan Amount or the 

respective Guaranteed Loan Portion 

Amount or the respective GuaranteedAmount Equivalent, as the case may be, 

and Unguaranteed Loan Amount or the 

respective Unguaranteed Loan Portion 

Amount or the respective 

Unguaranteed-Amount Equivalent, as 

the case may be; 

(4) The entire loan will be secured by 

the same security with equal lien 

priority for the Guaranteed Loan 

Amount or the respective Guaranteed 

Loan Portion Amount or the respective 

Guaranteed-Amount Equivalent, as the 

case may be, and Unguaranteed Loan 

Amount or the respective Unguaranteed 

Loan Portion Amount or the respective 

Unguaranteed-Amount Equivalent, as 

the case may be; 

(5) The Unguaranteed Loan Amount 

or the respective Unguaranteed Loan 

Portion Amount or the respective 

Unguaranteed-Amount Equivalent, as 

the case may be, will neither be paid 

first nor given any preference or priority 

over the Guaranteed Loan Amount or 

the respective Guaranteed Loan Portion 

Amount or the respective GuaranteedAmount Equivalent, as the case may be; 

(6) Any assignment by the guaranteed 

lender requires the prior written 

approval from the Agency, which 

assignment shall entitle the holder to all 

of the guaranteed lender’s rights, but 

which shall ultimately maintain the 

guaranteed lender responsible for 

servicing the entire loan; 

(7) The Borrower, its principal 

officers, members of the borrower’s 

board of directors and members of the 

immediate families of said officials shall 

not be a holder of the guaranteed 

lender’s loan; 

(8) The Agency will not guarantee any 

loan under this subpart that provides for 

a balloon payment of principal or 

interest at the final maturity date of the 

loan; or the payment of interest on 

interest; 

(9) All loan guarantee documents 

between the Agency and the guaranteed 

lender are prepared by the Agency; and 

(10) The guaranteed loan agreement 

between the borrower and the lender 

shall be subject to RUS approval. 

(d) Obligations of Guaranteed lender. 

Once a loan guarantee has been 

approved, the Guaranteed lender will be 

responsible for: 

(1) Fully servicing the loan; 

(2) Determining that all prerequisites 

to each advance of loan funds by the 

lender under the terms of the contract 

of guarantee, all financing documents, 

and all related security documents have 

been fulfilled; 

(3) Obtaining approval from the 

Agency to advance funds prior to each 

advance; 

(4) Billing and collecting loan 

payments from the Borrower; 

(5) Notifying the Administrator 

promptly of any default in the payment 

of principal and interest on the loan and 

submit a report, as soon thereafter as 

possible, setting forth its views as to the 

reasons for the default, how long it 

expects the borrower will be in default, 

and what corrective actions the 

borrower states it is taking to achieve a 

current debt service position; and 

(6) Notifying the Administrator of any 

known violations or defaults by the 

borrower under the lending agreement, 

contract of guarantee, or related security 

instruments, or conditions of which the 

lender is aware which might lead to 

nonpayment, violation, or other default. 

(e) Certain Agency Rights and 

Remedies. The Guarantee must provide 

that: 


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26758 Federal Register / Vol. 72, No. 91 / Friday, May 11, 2007 / Proposed Rules 

(1) Upon notice to the lender, RUS 

may assume loan servicing 

responsibilities for the loan or the 

Guaranteed Loan Amount or the 

respective Guaranteed Loan Portion 

Amount or the respective GuaranteedAmount Equivalent, as the case may be, 

or require the lender to assign such 

responsibilities to a different entity, if 

the lender fails to perform its loan 

servicing responsibilities under the loan 

guarantee agreement, or if the lender 

becomes insolvent, makes an admission 

in writing of its inability to pay its debts 

generally as they become due, or 

becomes the subject of proceedings 

commenced under the Bankruptcy 

Reform Act of 1978 (11 U.S.C. 101 et 

seq.) or any similar applicable Federal 

or state law, or is no longer in good 

standing with its licensing authority, or 

ceases to meet the eligibility 

requirements of this section. Such 

negligent servicing is defined as the 

failure to perform those services which 

a reasonable prudent lender would 

perform in servicing its own portfolio of 

loans that are not guaranteed, and 

includes not only a failure to act but 

also not acting in a timely manner. 

(2) The Guarantee shall cease to be 

effective with respect to any Guaranteed 

Loan Amount or any Guaranteed Loan 

Portion Amount or any GuaranteedAmount Equivalent to the extent that: 

(i) The Guaranteed Loan Amount or 

the respective Guaranteed Loan Portion 

Amount or the respective GuaranteedAmount Equivalent, as the case may be, 

is separated at any time from the 

Unguaranteed Loan Amount or the 

respective Unguaranteed Loan Portion 

Amount or the respective 

Unguaranteed-Amount Equivalent, as 

the case may be, in any way, directly or 

through the issuance of any GuaranteedAmount Equity Derivative or any 

Guaranteed-Amount Debt Derivative; or 

(ii) Any holder of the Guaranteed 

Loan Note or any Guaranteed Loan 

Portion Note or any Derivative, as the 

case may be, having a claim to payments 

on the Guaranteed Loan receives more 

than its pro-rata percentage of any 

payment due to such holder from 

payments made under the Guarantee at 

any time during the term of the 

Guaranteed Loan. 

(f) The Agency shall provide 

additional loan guarantee policies, 

consistent with OMB Circular A–129, in 

order to achieve its mission of 

promoting broadband in rural areas, 

which shall be published annually in 

the Federal Register. 

(g) Loan guarantees made under this 

part are supported by the full faith and 

credit of the United States and 

incontestable except for fraud or 

misrepresentation of which the holder 

had actual knowledge at the time it 

became a holder. 

§§ 1738.44–1738.49 [Reserved] 

Subpart F—Post-Application 

Procedures 

§ 1738.50 Notification of completeness. 

The Agency will conduct an initial 

review of the application after it is 

received in the National Office to 

determine if the application is complete 

and ready for further analysis. 

(a) If the application is determined to 

be complete, the applicant will be 

notified by the Agency and further 

analysis of the application will 

continue. 

(b) If the application is determined to 

be incomplete, the applicant will 

receive a detailed list of items requiring 

further explanation that will have to be 

fully addressed by the applicant and 

submitted to the Agency within a 

specified timeframe. If the applicant 

fails to submit the additional 

information in the specified timeframe, 

the application will be deemed 

ineligible for funding and returned to 

the applicant. 

(c) If the application is determined to 

be ineligible for funding, the application 

will be returned and the applicant will 

receive a detailed list explaining the 

reasons the application was not 

accepted. 

§ 1738.51 Determination of feasibility. 

(a) Loans will only be made under 

this part if the applicant’s financial 

operations, taking into account the 

impact of the facilities financed with the 

proceeds of the loan and the associated 

debt, are financially feasible, as 

determined by the Agency. 

(b) If the application is determined to 

meet all statutory and regulatory 

requirements and the feasibility study 

demonstrates that the TIER requirement 

can be satisfied, the application will be 

submitted to the Agency’s credit 

committees for consideration. 

Submission of the application to the 

Agency’s credit committees does not 

guarantee that a loan will be approved. 

§ 1738.52 Notice to applicant on decision. 

Once the Agency’s credit committees 

have considered the application, the 

applicant will be notified of the 

Agency’s decision concerning their 

request for financial assistance. 

§§ 1738.53–1738.59 [Reserved] 

Subpart G—Miscellaneous 

Requirements and Information 

§ 1738.60 Interim financing and 

construction. 

(a) Upon notification by the Agency 

that an applicant has submitted all the 

required documentation and the 

application is considered complete for 

the Agency to conduct its analysis, the 

applicant, at it’s own risk, may enter 

into an interim financing agreement 

with a lender other than the Agency or 

use its own internally generated funds 

to start construction that is included in 

the loan application. The Agency’s 

determination that an application is 

considered complete for analysis is not 

a commitment that a loan will be 

approved. 

(b) To qualify for funding, interim 

construction must comply with the 

same requirements that apply to 

construction included in an approved 

broadband loan. For information on 

requirements, see 7 CFR part 1788, 7 

CFR part 1794, Bulletin 1738–2, 

Bulletin 20–15, and Bulletin 320–15. 

§ 1738.61 Priority for processing loan 

applications. 

(a) In making or guaranteeing loans, 

priority shall be given to applications in 

the following order: 

(1) Applications for service areas that 

include only households that have no 

broadband access or receive Broadband 

Service from only one Existing 

Broadband Service Provider. 

(2) Applications for service areas that 

include only areas where at least 40 

percent of households have no access to 

Broadband service or access to only one 

Existing Broadband Service provider; 

(3) All other applications 

(b) Once an application has been 

prioritized according to the criteria 

listed in paragraphs (a) (1) through (3) 

of this section, they will be processed 

on a first-in, first-out basis within each 

priority category. 

(c) As applications are processed, 

using the first-in, first-out process, RUS 

may expedite for consideration for 

funding applications proposing to 

provide service where none is available. 

§ 1738.62 Allocation of funds. 

For funds made available for each 

fiscal year, national and State reserves 

shall be established in accordance with 

Title VI of the RE ACT. 

§ 1738.63 Annual audit and reporting 

requirements. 

(a) If a loan offer is accepted, the 

applicant will be required to submit an 

annual CPA audit. The first audit is 


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Federal Register / Vol. 72, No. 91 / Friday, May 11, 2007 / Proposed Rules 26759 

required for the calendar year in which 

the loan is approved. The Administrator 

can waive the requirement that an audit 

be performed in the year in which the 

loan is approved if operations of the 

applicant have not yet started. 

(b) If a loan offer is accepted, the 

applicant will be required to submit 

quarterly financial and progress reports 

utilizing the Agency’s electronic 

reporting system. 

§ 1738.64 Applicable laws. 

(a) Applicants are required to comply 

with certain regulations on 

nondiscrimination and equal 

employment opportunity. See RUS 

Bulletin 1790–1, ‘‘Nondiscrimination 

Among Beneficiaries of RUS Programs’’

and RUS Bulletin 20–15:320–15, ‘‘Equal 

Employment Opportunity in 

Construction Financed with RUS 

Loans’’; 7 CFR parts 15 and 15b and 45 

CFR part 90. 

(b) Applicants are required to comply 

with all Federal, state and local laws, 

rules, regulations, ordinances, codes 

and orders. 

§§ 1738.65–1738.99 [Reserved] 

§ 1738.100 OMB control number. 

The information collection 

requirements in this part are approved 

by the Office of Management Budget 

(OMB) and assigned OMB control 

number 0572–0130. 

Dated: May 4, 2007. 

James M. Andrew, 

Administrator, Rural Utilities Service. 

[FR Doc. E7–9021 Filed 5–10–07; 8:45 am] 

BILLING CODE 3410–15–P 

ENVIRONMENTAL PROTECTION 

AGENCY 

40 CFR Parts 52 and 81 

[EPA–R04–OAR–2006–0362–200702; FRL–

8312–6] 

Approval and Promulgation of 

Implementation Plans and 

Designations of Areas for Air Quality 

Planning Purposes; Kentucky: 

Redesignation of the Boyd County, 

Kentucky Portion of the HuntingtonAshland 8-Hour Ozone Nonattainment 

Area to Attainment for Ozone 

AGENCY: Environmental Protection 

Agency (EPA). 

ACTION: Proposed rule. 

SUMMARY: On September 29, 2006, the 

Commonwealth of Kentucky 

(Kentucky), through the Kentucky 

Division for Air Quality (KDAQ), 

submitted a request to redesignate the 

Kentucky portion of the bi-state 

Huntington-Ashland 8-hour ozone 

nonattainment area to attainment for the 

8-hour National Ambient Air Quality 

Standard (NAAQS); and to approve a 

State Implementation Plan (SIP) 

revision containing a maintenance plan 

for the Kentucky portion of the bi-state 

Huntington-Ashland area. The bi-state 

Huntington-Ashland 8-hour ozone 

nonattainment area is comprised of one 

county in Kentucky (Boyd County) and 

two counties in West Virginia (Cabell 

and Wayne counties). In this action, 

EPA is proposing to approve Kentucky’s 

8-hour ozone redesignation request for 

Boyd County, which is the Kentucky 

portion of the bi-state HuntingtonAshland 8-hour ozone nonattainment 

area. Additionally, EPA is proposing to 

approve the 8-hour ozone maintenance 

plan for Boyd County, Kentucky, 

including the state motor vehicle 

emission budgets (MVEBs) for nitrogen 

oxides (NOX) and volatile organic 

compounds (VOCs). This proposed 

approval of Kentucky’s redesignation 

request is based on EPA’s determination 

that Kentucky has demonstrated that 

Boyd County, Kentucky has met the 

criteria for redesignation to attainment 

specified in the Clean Air Act (CAA), 

including the determination that the 

entire (both the Kentucky and West 

Virginia portions) Huntington-Ashland 

8-hour ozone nonattainment area has 

attained the 8-hour ozone standard. On 

May 17, 2006, the State of West Virginia 

submitted a redesignation request and 

maintenance plan for the West Virginia 

portion (Cabell and Wayne counties) of 

this 8-hour ozone area. EPA has taken 

action on West Virginia’s redesignation 

request and maintenance plan through a 

separate action. The final rulemaking 

approving the West Virginia submittal 

was published in the Federal Register 

on September 15, 2006. In this action, 

EPA is also providing the status of its 

transportation conformity adequacy 

determination for the new MVEBs for 

2018 that are contained in the 8-hour 

ozone maintenance plan for Boyd 

County, Kentucky. MVEBs for Cabell 

and Wayne counties in West Virginia 

are included in the West Virginia 

submittal. 

DATES: Comments must be received on 

or before June 11, 2007. 

ADDRESSES: Submit your comments, 

identified by Docket ID No. EPA–R04–

OAR–2006–0362, by one of the 

following methods: 

(a) www.regulations.gov: Follow the 

on-line instructions for submitting 

comments. 

(b) E-mail: LeSane.Heidi@epa.gov. 

(c) Fax: 404–562–9019. 

(d) Mail: EPA–R04–OAR–2006–0362 

Regulatory Development Section, Air 

Planning Branch, Air, Pesticides and 

Toxics Management Division, U.S. 

Environmental Protection Agency, 

Region 4, 61 Forsyth Street, SW., 

Atlanta, Georgia 30303–8960. 

(e) Hand Delivery or Courier: Heidi 

LeSane, Regulatory Development 

Section, Air Planning Branch, Air, 

Pesticides and Toxics Management 

Division, U.S. Environmental Protection 

Agency, Region 4, 61 Forsyth Street, 

SW., Atlanta, Georgia 30303–8960. Such 

deliveries are only accepted during the 

Regional Office’s normal hours of 

operation. The Regional Office’s official 

hours of business are Monday through 

Friday, 8:30 to 4:30, excluding federal 

holidays. 

Instructions: Direct your comments to 

Docket ID No. EPA–R04–OAR–2006–

0362. EPA’s policy is that all comments 

received will be included in the public 

docket without change and may be 

made available online at 

www.regulations.gov, including any 

personal information provided, unless 

the comment includes information 

claimed to be Confidential Business 

Information (CBI) or other information 

whose disclosure is restricted by statute. 

Do not submit through 

www.regulations.gov or e-mail, 

information that you consider to be CBI 

or otherwise protected. The 

www.regulations.gov Web site is an 

‘‘anonymous access’’ system, which 

means EPA will not know your identity 

or contact information unless you 

provide it in the body of your comment. 

If you send an e-mail comment directly 

to EPA without going through 

www.regulations.gov, your e-mail 

address will be automatically captured 

and included as part of the comment 

that is placed in the public docket and 

made available on the Internet. If you 

submit an electronic comment, EPA 

recommends that you include your 

name and other contact information in 

the body of your comment and with any 

disk or CD–ROM you submit. If EPA 

cannot read your comment due to 

technical difficulties and cannot contact 

you for clarification, EPA may not be 

able to consider your comment. 

Electronic files should avoid the use of 

special characters, any form of 

encryption, and be free of any defects or 

viruses. For additional information 

about EPA’s public docket visit the EPA 

Docket Center homepage at http:// 

www.epa.gov/epahome/dockets.htm. 

Docket: All documents in the 

electronic docket are listed in the 

www.regulations.gov index. Although 

listed in the index, some information is 

not publicly available, i.e., CBI or other 


sroberts on PROD1PC70 with PROPOSALS