This section of the FEDERAL REGISTER

contains regulatory documents having general

applicability and legal effect, most of which

are keyed to and codified in the Code of

Federal Regulations, which is published under

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

The Code of Federal Regulations is sold by

the Superintendent of Documents. Prices of

new books are listed in the first FEDERAL

REGISTER issue of each week.

Rules and Regulations Federal Register

8171

Vol. 60, No. 29

Monday, February 13, 1995

DEPARTMENT OF AGRICULTURE

Rural Utilities Service

7 CFR Part 1751

RIN 0572–AB07

Telecommunications System Planning

and Design Criteria, and Procedures

AGENCY: Rural Utilities Service, USDA.

ACTION: Final rule.

SUMMARY: The Rural Utilities Service

(RUS) hereby amends its rule on State

Telecommunications Modernization

Plans to incorporate changes in RUS

Telecommunications Program policy.

These amendments also incorporate

suggestions received from the public in

response to the proposed rule. All

Telephone Borrowers will be affected by

this final rule.

EFFECTIVE DATE: March 15, 1995.

FOR FURTHER INFORMATION CONTACT:

Orren E. Cameron III, Director,

Telecommunications Standards

Division, U.S. Department of

Agriculture, Rural Utilities Service, 14th

& Independence Avenue, SW., Room

2835–S, Washington, DC 20250–1500,

telephone number (202) 720–8663.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This final rule has been determined to

be significant and was reviewed by the

Office of Management and Budget

(OMB) under Executive Order 12866.

Executive Order 12778

This final rule has been reviewed

under Executive Order 12778, Civil

Justice Reform. This final rule will not:

(1) Preempt any State or local laws,

regulations, or policies, unless they

present an irreconcilable conflict with

this rule; (2) Have any retroactive effect;

and (3) Require administrative

proceedings before parties may file suit

challenging the provisions of this rule.

Regulatory Flexibility Act Certification

RUS has determined that this final

rule will not have a significant

economic impact on a substantial

number of small entities, as defined in

the Regulatory Flexibility Act (5 U.S.C.

601 et seq.). The RUS

Telecommunications Program provides

loans to RUS Borrowers at interest rates

and terms that are more favorable than

those generally available from the

private sector. RUS Borrowers, as a

result of obtaining federal financing,

receive economic benefits which

ultimately offset any direct economic

costs associated with complying with

RUS regulations and requirements.

Moreover, this action is in response to

the Rural Electrification Loan

Restructuring Act of 1993.

Information Collection and

Recordkeeping Requirements

The reporting and recordkeeping

requirements contained in the final rule

have been submitted to OMB for

approval in accordance with the

Paperwork Reduction Act of 1980 (44

U.S.C. 3501 et seq.). Send comments

regarding this collection of information

to: Department of Agriculture, Clearance

Office, Office of Information Resources

Management, Room 404–W,

Washington, DC 20250, and Regulatory

Affairs of OMB, Attention: Desk Officer

for USDA, Room 10102, New Executive

Office Building, Washington, DC 20503.

National Environmental Policy Act

Certification

RUS has determined that this final

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.

Catalog of Federal Domestic Assistance

The program described by this final

rule is listed in the Catalog of Federal

Domestic Assistance Programs under

10.851, Rural Telephone Loans and

Loan Guarantees, and 10.852, Rural

Telephone Bank Loans. This catalog is

available on a subscription basis from

the Superintendent of Documents, the

United States Government Printing

Office, Washington, DC 20402–9325.

Executive Order 12372

This final rule is excluded from the

scope of Executive Order 12372,

Intergovernmental Consultation. A

Notice of Final Rule entitled

Department Programs and Activities

Excluded from Executive Order 12372

(50 FR 47034) exempts RUS and RTB

loans and loan guarantees to

governmental and nongovernmental

entities from coverage under this Order.

Background

The Federal Crop Insurance Reform

and Department of Agriculture

Reorganization Act of 1994 (Pub. L.

103–354, 108 Stat. 3178),

(Reorganization Act), signed by

President Clinton on October 13, 1994,

provides for a streamlining and

reorganizing of the Department of

Agriculture (Department). The

Reorganization Act requires the

Secretary of Agriculture (Secretary) to

establish the Rural Utilities Service

(RUS) within the Department. On

October 20, 1994, the Secretary of

Agriculture, in Secretary’s

Memorandum 1010–1, abolished the

Rural Electrification Administration

(REA) and established RUS, as required

by the Reorganization Act.

On December 20, 1993, RUS (formerly

REA) published an interim rule (58 FR

66250) to incorporate changes to

telephone loan policies required by the

Rural Electrification Loan Restructuring

Act of 1993 (RELRA) (107 Stat. 1356).

On April 13, 1994, RUS adopted its

interim rule as a final rule (59 FR 17460)

with one exception, 7 CFR Part 1751,

Telecommunications System Planning

and Design Criteria, and Procedures.

Because of the overwhelming response

and concerns regarding the

requirements of the State

Telecommunications Modernization

Plan (Modernization Plan), RUS

published proposed amendments to 7

CFR Part 1751, Subpart B on October 27,

1994 (59 FR 53939).

During the comment period RUS

received 39 comments regarding the

proposed rule and these comments were

taken into consideration in preparing

the final rule. Comments were received

from the following:

(1) Colorado Public Utilities

Commission Staff.

(2) Florida Public Service Commission.

(3) Idaho Public Utilities Commission.

(4) Illinois Commerce Commission.
8172 Federal Register / Vol. 60, No. 29 / Monday, February 13, 1995 / Rules and Regulations

(5) Louisiana Public Service

Commission.

(6) Michigan Public Service

Commission Staff.

(7) Missouri Public Service

Commission.

(8) Nebraska Public Service

Commission.

(9) New England Conference of Public

Utilities Commissioners, Inc.

(10) New York State Department of

Public Service.

(11) Ohio Public Utilities Commission.

(12) Pennsylvania Public Utility

Commission.

(13) Texas Public Utility Commission.

(14) Virginia State Corporation

Commission.

(15) Wisconsin Public Service

Commission.

(16) Wyoming Public Service

Commission.

(17) National Association of Regulatory

Utility Commissioners.

(18) GTE Service Corporation.

(19) Joint comments from 15 RUS

Telephone Borrowers and 2

consulting engineering companies

located in South Carolina.

(20) TDS Telecom.

(21) Unicom.

(22) United and Central Telephone

Companies.

(23) National Emergency Number

Association.

(24) Joint comments from the National

Rural Telecom Association and the

Western Rural Telephone

Association.

(25) Nebraska Telephone Association.

(26) North Dakota Association of

Telephone Cooperatives.

(27) National Telephone Cooperative

Association.

(28) New York State Telephone

Association, Inc.

(29) Joint comments from the Oklahoma

Rural Telephone Coalition, Rural

Arkansas Telephone Systems, and

Texas Statewide Telephone

Cooperative, Inc.

(30) Organization for the Protection and

Advancement of Small Telephone

Companies.

(31) Oregon Independent Telephone

Association.

(32) United States Telephone

Association.

(33) Bell Atlantic Telephone

Companies.

(34) Southwestern Bell Telephone

Company.

(35) U.S. West Communications, Inc.

(36) MCI Telecommunications

Corporation.

(37) Kadrmas, Lee & Jackson, P.C.

(38) GVNW Inc/Management.

(39) Reed Veach Wurdeman and

Associates.

1. Comment Summary. Many

commenters argued that the

Modernization Plan requirements in the

proposed rule go beyond a reasonable

reading of RELRA. More specifically,

they said that RELRA requires

‘‘objectives’’, but the proposed rule

translates those into requirements, and

sets deadlines for accomplishment of

those requirements that are insensitive

to market forces, technological

development, and State regulatory

authority.

Response. RUS believes that a

Modernization Plan without service

improvement requirements, and

timeframes for achievement, would be

ineffective in accomplishing the

modernization of rural

telecommunications infrastructure that

RELRA clearly intends. RELRA makes

the Modernization Plan a condition to

eligibility for certain financing programs

administered by RUS. An ineffective

Modernization Plan would undermine

this direction of financing resources

under RELRA.

In response to the substance of these

comments, RUS has recast its

requirements and timeframes. The longterm requirements have been changed to

goals, and some requirements have been

reduced. From the comments received,

RUS believes that these changes will

mitigate the concerns about

marketability of required technologies.

RUS again invites States to exercise

their authority by taking advantage of

the one year period of eligibility to

prepare a Modernization Plan.

2. Comment Summary. One

commenter noted that if no

Modernization Plan is developed for a

State, thereby excluding the State from

some RUS program benefits, service

rates would probably increase in the

State. Others expressed concern that

investments made to comply with

Modernization Plan requirements would

affect other Telecommunications

Providers through the universal service

fund and other toll settlement plans.

Response. The Telecommunications

Providers covered by Modernization

Plans are interconnected with other

telecommunications carriers in many

ways, and they are certainly

interconnected economically. Borrowers

and PUC’s can make various decisions

that can jeopardize RUS funding of

projects, and these may affect service

rates for subscribers and toll pool

distributions. RELRA requires that no

loans except guaranteed loans be made

in a State without a Modernization Plan.

3. Comment Summary. Many

commenters suggested that the language

in § 1751.106(a)(5) is not consistent with

the language in § 1751.106(f) of the

proposed rule. Some commenters

preferred the language in the response

to comments to the language presented

in the proposed rule.

Response. The language in

§ 1751.106(a)(5) was a restatement of the

provision in RELRA. Paragraph (g),

(paragraph (f) in the proposed rule) of

the subsection is RUS’s effort to clarify

the term ‘‘uniform deployment

schedules’’ and is intended to allow

Plan Developers some latitude in the

timing of deployment of advanced

services. § 1751.106(a) has been

rewritten to clarify that it is a

restatement of RELRA so as to eliminate

any appearance of a conflict with

paragraph (g).

4. Comment Summary. Many

commenters wonder what guidelines

RUS will use to determine whether

something is ‘‘technically or

economically feasible’’, under

§ 1751.103(b) of the proposed rule.

Response. Technical feasibility means

the equipment is available to do the job.

Economic feasibility means the job can

be done at a reasonable cost. Every

telecommunications loan processed by

RUS is studied for technical and

economic feasibility. Technical

feasibility of the loan is determined by

telecommunications engineers with

knowledge of current technology and

facility costs. Economic feasibility is

determined by the loan feasibility study

which is a comprehensive consideration

of projected revenues and expenses for

the particular Borrower. The results of

RUS’s studies are submitted to the

Borrower for concurrence before a loan

is approved.

5. Comment Summary. One

commenter pointed out that the

extension process discussed in

§ 1751.106(b) may require Borrowers to

request extensions from groups of other

Borrowers who might have competitive

interests. This could happen if the Plan

Developer is a Borrower group.

Response. This has been rewritten to

give this authority to RUS in those cases

where the Plan Developer is the

majority of RUS Borrowers.

6. Comment Summary. Many

commenters opposed the requirement in

§ 1751.106(g)(2)(ii) for eliminating

inductive loading of copper loops. Some

commenters argued that

§ 1751.106(g)(2)(ii) is contradictory to

§ 1751.103(b) in the proposed rule.

Response. The requirement in

§ 1751.106(g)(2)(ii) has been deleted.

7. Comment Summary. Some

commenters expressed concern about

the exception process mentioned in

§ 1751.106(g)(2)(i) in the proposed rule

for those who do not want the

elimination of party line service.
Federal Register / Vol. 60, No. 29 / Monday, February 13, 1995 / Rules and Regulations 8173

Response. The language providing for

the elimination of party line service has

been revised to focus this requirement

on the capability of providing one-party

service.

8. Comment Summary. Many

commenters argued that the powering

requirement in § 1751.106(h)(2)(ii) and

§ 1751.106(i)(2)(iv) in the proposed rule

is not supported by industry consensus

at this time. Some suggested that this

item be approached from a reliability

standpoint. Some commenters believed

this requirement covered powering of

fax machines and PBXs.

Response. RUS does not want to see

the reliability of basic

telecommunications service decline as a

result of modernization. Such a decline

will most certainly occur if local

powering is relied upon even for basic

voice telephone service, because the

average annual outage time for a

residential line connected to the public

switched network is estimated at 105

minutes, whereas the average annual

outage time for residential power users

is over 300 minutes. The final rule has

been revised to require that the Plan

Developer make ‘‘provision for’’ service

continuation during local power failure.

Regarding the confusion over what has

to be resilient to local power failure, this

provision was carefully written in the

proposed rule to cover only basic voice

communications in the event of a local

power failure. RUS has rewritten this

provision to make this point without

mentioning specific equipment and

technologies that need not be provided

with alternative power.

9. Comment Summary. Many

commenters expressed opposition to the

medium-term requirement for switched

1.544 Mb/sec service. Some commenters

suggested that this would be very

expensive to provide. Others suggested

that only a few central office switches

could provide the service. One

commenter suggested the capability

would be useless unless interexchange

carriers could carry such signals. One

commenter noted that in Alaska, where

satellites play an important role in

connecting exchanges to the network,

this requirement would be very

difficult.

Response. The substance of the

comments received has caused RUS to

reconsider this requirement. The

requirement for switched 1.544 Mb/sec

service in the proposed rule has been

changed to a requirement for the

transmission and reception of at least 1

Mb/sec and the reception of video. The

Plan Developer may specify how this is

to be accomplished.

10. Comment Summary. Two

commenters observed that the

Modernization Plan would apply to all

Borrowers, and as defined that would

include past as well as present and

future Borrowers. This would mean that

RUS would apply RELRA requirements

retroactively.

Response. This was not RUS’s intent.

The language has been changed to

clarify that the Modernization Plan for

a State will only act to set requirements

on Borrowers for certain kinds of loans,

and further, only if the loan is approved

after the date that the Modernization

Plan is approved by RUS.

11. Comment Summary. Some

commenters thought that

§ 1751.106(i)(2)(iii) in the proposed rule

was intended to eliminate plain old

telephone service (‘‘POTS’’) as a new

service offering, and that this long-term

requirement would force subscribers to

purchase digital telephones.

Response. This requirement has been

deleted from the regulation as part of

the recasting of the Modernization Plan

discussed above.

12. Comment Summary. One

commenter suggested that § 1751.105 be

revised to state that no amended

Modernization Plan could increase the

requirements of a previously-approved

Modernization Plan.

Response. RUS disagrees. This could

unreasonably limit a State or group of

Borrowers in their efforts to continue to

modernize telecommunications systems

in the State.

13. Comment Summary. One

commenter is concerned whether RUS

will follow 5 U.S.C. § 553 regarding

notice and comment procedures if the

rule is changed in the future. Another

commenter felt that RUS has no

statutory authority to revise the rule

after the final rule is issued.

Response. The underlying purpose of

the Modernization Plan is to stimulate

the continuing modernization of

telephone service. RUS believes that it

has the obligation to provide guidance

to Plan Developers for updating their

Modernization Plans. As is stated in

§ 1751.105(e), RUS, if it revises the rule,

must follow the Administrative

Procedures Act.

14. Comment Summary. One

commenter expressed concern that

under § 1751.103 as written in the

proposed rule, RUS could deny loans to

all Borrowers in a State if any Borrower

does not participate in the

Modernization Plan.

Response. This was not RUS’s intent.

Language in this subsection has been

revised to clarify that only the Borrower

who does not participate in the

Modernization Plan is denied certain

types of loans.

15. Comment Summary. Many

commenters expressed displeasure with

the one year period for State eligibility

with no extensions, and the rejection of

Borrower-prepared plans before the end

of that year. Also, one commenter

recommended that States be required to

notify other interested parties 180 days

before the expiration of the one year

period of their intent to file or not to file

a proposed Modernization Plan.

Response. Beginning with the

publication of this Final Rule, States

have a one year period of eligibility for

preparing a Modernization Plan. There

is no provision in RELRA for any party

other than a State to prepare a

Modernization Plan until the expiration

of that one year. Regarding the

suggestion for advance notice of the

State’s intent to file, RUS agrees and has

added language to § 1751.102 (b) to

request a State to inform RUS if it does

not intend to submit a proposed

Modernization Plan. RUS will inform its

Borrowers as well as telephone industry

associations when it has been notified

that a State does not intend to develop

a Modernization Plan.

16. Comment Summary. Several

commenters expressed opposition to

§ 1751.106(e) in the proposed rule,

which provides for Modernization Plan

guidelines for the development of

affordable tariffs for medical links and

distance learning services. Two

commenters argued that this provision

would usurp a PUC’s rate regulatory

authority by mandating a subsidy.

Response. One of the requirements of

RELRA is that the ‘‘Modernization Plan

must provide for the availability of

telecommunications services for

improved business, educational, and

medical services.’’ If such services are to

be ‘‘available’’ in any reasonable sense,

they must be affordable.

17. Comment Summary. Several

commenters suggested that RUS should

provide a model Modernization Plan.

Response. RUS believes, and most

commenters have strongly asserted, that

Modernization Plans can best be

developed by local State groups and

Telecommunications Providers. In view

of the preponderance of comments

received on the proposed rule, RUS

declines to issue suggested language

that might be seen as an ad hoc standard

for Modernization Plans.

18. Comment Summary. One

commenter suggested that requirements

for improvements under Modernization

Plans should be made conditional upon

adequate available federal capital and

cost recovery mechanisms.

Response. Unless the PUC decides

otherwise, the Modernization Plan

requirements only apply to RUS
8174 Federal Register / Vol. 60, No. 29 / Monday, February 13, 1995 / Rules and Regulations

Borrowers. Moreover, the only

enforcement of a Modernization Plan

pursuant to RELRA is denial of a loan

to a Borrower that is not participating in

the Modernization Plan. Therefore, to a

considerable extent, Modernization Plan

requirements are conditional upon the

availability of federal capital and cost

recovery mechanisms.

19. Comment Summary. Several

commenters argued that RELRA did not

give RUS the authority to require a

modernization of the national

communications infrastructure. These

commenters noted that this is contrary

to the Communications Act of 1934

objective of consolidating federal

authority over telecommunications into

one agency.

Response. Through various financing

programs and technical initiatives, the

REA, now RUS, has been instrumental

in the modernization of the national

rural telecommunications infrastructure.

The provisions of RELRA as set forth in

this final rule will continue that

modernization.

20. Comment Summary. One

commenter pointed out that since a

Borrower-developed Modernization

Plan can only apply to Borrowers, the

rule should make that clear.

Response. Language has been added

to § 1751.102(c) to clarify that a

Borrower-developed plan will only

apply to Borrowers.

21. Comment Summary. One

commenter said that Borrowerdeveloped plans can affect others, and

proposed that RUS require that

Borrowers allow outside participation in

development of a plan.

Response. RUS encourages all Plan

Developers to include outside

participation, but does not believe it is

necessary for Borrower groups to be

required to include outside

participation.

22. Comment Summary. One

commenter expressed concern that

Modernization Plan requirements would

threaten universal service because it

would require Borrowers and nonBorrowers to build infrastructure

whether or not it met customer needs.

Response. The regulation has been

revised to alleviate this concern. RUS

performs feasibility studies to ensure

that the proposed construction does not

threaten the viability of a Borrower.

23. Comment Summary. One

commenter suggested that in the balance

between cost and improved service, cost

is clearly secondary to RUS.

Response. RUS is concerned with

improved service to rural subscribers at

reasonable prices. RUS strongly feels

that communications infrastructure is

essential to rural economic

development. The real cost of failing to

provide this infrastructure is a failing

rural economy, decline in rural

subscribers and less revenue to the rural

telecommunications provider.

24. Comment Summary. Many

commenters found the approximate

restatement of a part of RELRA in

§ 1751.106(a) to be confusing and vague.

It uses terms that do not seem to apply

to any communications industry

segment such as ‘‘video images’’ and

‘‘proper routing of information to

subscribers’’.

Response. This language has been

clarified to show that § 1751.106(a) is a

restatement of RELRA while the balance

of the section implements the law.

25. Comment Summary. One

commenter proposed that RUS should

automatically grant lien

accommodations for Borrowers that do

not meet the minimum requirements of

their State Modernization Plan.

Response. RUS disagrees. To do so

would negate RELRA’s purpose of

improving and modernizing

telecommunications and might

jeopardize the security of RUS loans.

26. Comment Summary. One

commenter proposed that RUS review

Modernization Plans within 30 days

without exception, and asserts that as

written the rule allows RUS to postpone

denial until it is too late for a developer

to resubmit a plan for approval.

Response. Both Plan Developers and

RUS face difficult schedules as a result

of this regulation. RUS has developed

an internal processing procedure

intended to deal with the estimated 45

Modernization Plans that could be

received simultaneously. It is the intent

of RUS to process all Modernization

Plans within 30 days of receipt of the

proposed Modernization Plan. If the

submission of the proposed Plan is

timely, this will not be a problem.

27. Comment Summary. One

commenter noted that RELRA places no

time limit on RUS as to promulgation of

a final rule. This commenter suggested

that RUS should wait for further

congressional direction.

Response. RUS was required under

RELRA to issue the interim regulation,

and RUS wishes to respond to the

public by issuing a final rule that

implements the requirements of RELRA

in a reasonable and effective manner.

Without this final rule, the interim rule

remains in effect.

28. Comment Summary. One

commenter asked why the rule does not

apply to RUS electric borrowers and

grant recipients who may compete with

RUS telephone Borrowers either directly

or through a subsidiary.

Response. As written, the

Modernization Plan will serve as

requirements for all telephone

Borrowers seeking new financing.

Modernization Plans developed by the

States may expand coverage to others in

the telecommunications industry.

List of Subjects in 7 CFR Part 1751

Loan programs—communications,

Telecommunications, Telephone.

For reasons set forth in the preamble,

chapter XVII of Title 7 of the Code of

Federal Regulations is amended by

revising part 1751 to read as follows:

PART 1751—TELECOMMUNICATIONS

SYSTEM PLANNING AND DESIGN

CRITERIA, AND PROCEDURES

Subpart A—[Reserved]

Sec.

1751.1–1751.99 [Reserved]

Subpart B—State Telecommunications

Modernization Plan

1751.100 Definitions.

1751.101 General.

1751.102 Modernization Plan Developer;

eligibility.

1751.103 Loan and loan advance

requirements.

1751.104 Obtaining RUS approval of a

proposed Modernization Plan.

1751.105 Amending a Modernization Plan.

1751.106 Modernization Plan;

requirements.

Authority: 7 U.S.C. 901 et seq., 1921 et

seq.; Pub. L. 103–354, 108 Stat. 3178 (7

U.S.C. 6941 et seq.).

Subpart A—[Reserved]

§§ 1751.1–1751.99 [Reserved]

Subpart B—State Telecommunications

Modernization Plan

§ 1751.100 Definitions.

As used in this subpart:

Bit rate. The rate of transmission of

telecommunications signals or

intelligence in binary (two state) form in

bits per unit time, e.g., Mb/s (megabits

per second), kb/s (kilobits per second),

etc.

Borrower. Any organization that has

received an RUS loan designation

number and which has an outstanding

telephone loan made by RUS or the

Rural Telephone Bank, or guaranteed by

RUS, or which has a completed loan

application with RUS.

Emerging technologies. New or not

fully developed methods of

telecommunications.

Modernization Plan (State

Telecommunications Modernization

Plan). A State plan, which has been

approved by RUS, for improving the

telecommunications network of those

Telecommunications Providers covered
Federal Register / Vol. 60, No. 29 / Monday, February 13, 1995 / Rules and Regulations 8175

by the plan. A Modernization Plan must

conform to the provisions of this

subpart.

New facilities. Facilities which are

wholly or partially constructed or

reconstructed after a short- or mediumterm requirements start date, as

appropriate. This does not include

connections or capacity extensions

within the wired capacity of existing

plant such as adding line cards to

existing equipment.

Plan Developer. The entity creating

the Modernization Plan for the State,

which may be the State PUC, the State

legislature, or a numeric majority of the

RUS Borrowers within the State. When

this part refers to the PUC as the Plan

Developer, this includes the State

legislature.

PUC (Public Utilities Commission).

The public utilities commission, public

service commission or other State body

with such jurisdiction over rates, service

areas or other aspects of the services and

operation of providers of

telecommunications services as vested

in the commission or other body

authority, to the extent provided by the

State, to guide development of

telecommunications services in the

State. When this part refers to the PUC

as the Plan Developer, this includes the

State legislature.

RE Act. The Rural Electrification Act

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

seq.).

REA. The Rural Electrification

Administration, formerly an agency of

the United States Department of

Agriculture and predecessor agency to

RUS with respect to administering

certain electric and telephone loan

programs.

RELRA. The Rural Electrification

Loan Restructuring Act of 1993 (107

Stat. 1356).

RUS. The Rural Utilities Service, an

agency of the United States Department

of Agriculture established pursuant to

Section 232 of the Federal Crop

Insurance Reform and Department of

Agriculture Reorganization Act of 1994

(Pub. L. 103–354, 108 Stat. 3178 (7

U.S.C. 6941 et seq.)), successor to REA

with respect to administering certain

electric and telephone programs. See 7

CFR 1700.1.

RUS cost-of-money loan. A loan made

under section 305(d)(2) of the RE Act

bearing interest as determined under 7

CFR 1735.31(c). RUS cost-of-money

loans are made concurrently with RTB

loans.

RUS hardship loan. A loan made by

RUS under section 305(d)(1) of the RE

Act bearing interest at a rate of 5 percent

per year.

RTB loan. A loan made by the Rural

Telephone Bank (RTB) under section

408 of the RE Act bearing interest as

determined under 7 CFR 1610.10. RTB

loans are made concurrently with RUS

cost-of-money loans.

State. Each of the 50 states of the

United States, the District of Columbia,

and the territories and insular

possessions of the United States. This

does not include countries in the

Compact of Free Association.

Telecommunications. The

transmission or 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 providers. RUS

Borrowers and if the Plan Developer is

a PUC, such other entities providing

telecommunications services as the

developer of the Modernization Plan

(See § 1751.101) may determine.

Wireline Service. Telecommunications service provided over telephone

lines. It is characterized by a wire or

wirelike connection carrying electricity

or light between the subscriber and the

rest of the telecommunications network.

Wireline Service implies a physical

connection. Although radio may form

part of the circuit, it is not the major

method of transmission as in

radiotelephone.

§ 1751.101 General.

(a) It is the policy of RUS that every

State have a Modernization Plan which

provides for the improvement of the

State’s telecommunications network.

(b) A proposed Modernization Plan

must be submitted to RUS for approval.

RUS will approve the proposed

Modernization Plan if it conforms to the

provisions of this subpart. Once

obtained, RUS’s approval of a

Modernization Plan cannot be

rescinded.

(c) The Modernization Plan shall not

interfere with RUS’s authority to issue

such other telecommunications

standards, specifications, requirements,

and procurement rules as may be

promulgated from time to time by RUS

including, without limitation, those set

forth in 7 CFR part 1755.

(d) The Modernization Plan must, at

a minimum, apply to RUS Borrowers’

wireline service areas. If a

Modernization Plan is developed by the

PUC, RUS encourages, but does not

require, that the Modernization Plan’s

requirements apply to the rural service

areas of all providers of

telecommunications services in the

State. A PUC’s decision not to include

non-RUS Borrowers will not prejudice

RUS approval of that PUC’s

Modernization Plan. The PUC may also,

at its option, extend coverage of the

Modernization Plan to all service areas

of all providers of telecommunications

services in the State. In addition, while

the requirements and goals contained in

§ 1751.106 apply only to wireline

services, the PUC, at its discretion, may

extend coverage of Modernization Plans

to wireless or other communications

services in the State as it deems

appropriate. Borrower-developed

Modernization Plans apply only to

Borrowers.

§ 1751.102 Modernization Plan Developer;

eligibility.

(a) Each PUC is eligible until February

13, 1996 to develop a proposed

Modernization Plan and deliver it to

RUS. RUS will review and consider for

approval all PUC-developed

Modernization Plans received by RUS

within this one year period. The review

and approval, if any, may occur after the

one year period ends even though the

PUC is no longer eligible to submit a

proposed Modernization Plan.

(b) The PUC must notify all

Telecommunications Providers in the

State and other interested parties of its

intent to develop a proposed

Modernization Plan. The PUC is

encouraged to consider all

Telecommunications Providers’ and

interested parties’ views and

incorporate these views into the

Modernization Plan. In the event that

the PUC does not intend to develop a

proposed Modernization Plan, RUS

requests that the PUC inform RUS of

this decision as soon as possible.

(c)(1) If the PUC is no longer eligible

to develop a Modernization Plan or has

informed RUS that it will not develop

a Modernization Plan, as described in

paragraphs (a) and (b) of this section, a

majority of the Borrowers within the

State may develop the Modernization

Plan. If a majority of Borrowers

develops the Modernization Plan, the

following apply:

(i) All Borrowers shall be given

reasonable notice of and shall be

encouraged to attend and contribute to

all meetings and other proceedings

relating to the development of the

Modernization Plan; and

(ii) Borrowers developing a

Modernization Plan are encouraged to

solicit the views of other providers of

telecommunications services and

interested parties in the State.

(2) There is no time limit placed on

Borrowers to develop a Modernization

Plan. Borrowers should be aware that

certain types of loans may be restricted

until a Modernization Plan is approved.

See § 1751.103.
8176 Federal Register / Vol. 60, No. 29 / Monday, February 13, 1995 / Rules and Regulations

§ 1751.103 Loan and loan advance

requirements.

(a) For information about loan

eligibility requirements in relation to

the Modernization Plan, see 7 CFR part

1735. In particular, beginning February

13, 1996, RUS will make RUS hardship

loans, RUS cost-of-money loans, and

RTB loans for facilities and other RE Act

purposes in a State only if:

(1) The State has an RUS approved

Modernization Plan; and

(2) The Borrower to whom the loan is

to be made is participating in the

Modernization Plan for the State. A

Borrower is considered to be

participating if, in RUS’s opinion, the

purposes of the loan requested by the

Borrower are consistent with the

Borrower achieving the requirements

stated in the Modernization Plan within

the timeframe stated in the

Modernization Plan unless RUS has

determined that achieving the

requirements is not technically or

economically feasible.

(b) With regard to the three types of

loans discussed in paragraph (a), only

loans approved after the date the State

has an RUS approved Modernization

Plan are subject to complying with the

Modernization Plan.

(c) For loans subject to complying

with the Modernization Plan, advances

will not be made if, in RUS’s opinion,

the advances are not consistent with

achieving the requirements of the

Modernization Plan.

§ 1751.104 Obtaining RUS approval of a

proposed Modernization Plan.

(a) To obtain RUS approval of a

proposed Modernization Plan, the Plan

Developer must submit the following to

RUS:

(1) A certified copy of the statute or

PUC order, if the PUC is the Plan

Developer, or a written request for RUS

approval of the proposed Modernization

Plan signed by an authorized

representative of the Plan Developer, if

a majority of Borrowers is the Plan

Developer; and

(2) Three copies of the proposed

Modernization Plan.

(b) Generally, RUS will review the

proposed Modernization Plan within

(30) days and either:

(1) Approve the Modernization Plan if

it conforms to the provisions of this

subpart in which case RUS will return

a copy of the Modernization Plan with

notice of approval to the Plan

Developer; or

(2) Not approve the proposed

Modernization Plan if it does not

conform to the provisions of this

subpart. In this event, RUS will return

the proposed Modernization Plan to the

Plan Developer with specific written

comments and suggestions for

modifying the proposed Modernization

Plan so that it will conform to the

provisions of this subpart. If the Plan

Developer remains eligible, RUS will

invite the Plan Developer to submit a

modified proposed Modernization Plan

for RUS consideration. This process can

continue until the Plan Developer gains

approval of a proposed Modernization

Plan unless the Plan Developer is a PUC

whose eligibility has expired. If a PUC’s

eligibility has expired, RUS will return

the proposed Modernization Plan

unapproved. Because RUS does not

have authority to extend the term of a

PUC’s eligibility, RUS recommends that

the PUC submit a proposed

Modernization Plan at least 90 days in

advance of February 13, 1996 to allow

time for this process.

§ 1751.105 Amending a Modernization

Plan.

(a) RUS understands that changes in

standards, technology, regulation, and

the economy could indicate that an

RUS-approved Modernization Plan

should be amended.

(b) The Plan Developer of the

Modernization Plan may amend the

Modernization Plan if RUS finds the

proposed changes continue to conform

to the provisions of this subpart.

(c) The procedure for requesting

approval of an amended Modernization

Plan is identical to the procedure for a

proposed Modernization Plan except

that there are no time limits on the

eligibility of the Plan Developer.

(d) The existing Modernization Plan

remains in force until RUS has

approved the proposed amended

Modernization Plan.

(e) RUS may from time to time revise

these regulations to incorporate newer

technological and economic standards

that RUS believes represent more

desirable goals for the future course of

telecommunications services. Such

revisions will be made in accordance

with the Administrative Procedure Act.

These revisions shall not invalidate

Modernization Plans approved by RUS

but shall be used by RUS to determine

whether to approve amendments to

Modernization Plans presented for RUS

approval after March 15, 1995.

§ 1751.106 Modernization Plan;

requirements.

(a) The requirements for a

Modernization Plan as stated in RELRA

are:

(1) The plan must provide for the

elimination of party line service.

(2) The plan must provide for the

availability of telecommunications

services for improved business,

educational, and medical services.

(3) The plan must encourage and

improve computer networks and

information highways for subscribers in

rural areas.

(4) The plan must provide for—

(i) Subscribers in rural areas to be able

to receive through telephone lines—

(A) Conference calling;

(B) Video images; and

(C) Data at a rate of at least 1,000,000

bits of information per second; and

(ii) The proper routing of information

to subscribers.

(5) The plan must provide for uniform

deployment schedules to ensure that

advanced services are deployed at the

same time in rural and nonrural areas.

(6) The plan must provide for such

additional requirements for service

standards as may be required by the

Administrator.

(b) To implement the requirements of

the law described in paragraph (a) of

this section, RUS has set minimum

requirements as described in paragraphs

(i) and (j) of this section. They are

grouped into short-term and mediumterm requirements. RUS has also

included long-term goals which are not

requirements. The Modernization Plan

must meet all of the statutory

requirements of RELRA and shall

provide that short- and medium-term

requirements be implemented as set

forth in this section of the regulation

except that the PUC, if it is the Plan

Developer, or RUS, if a majority of

Borrowers is the Plan Developer, may

approve extensions of time if the

required investment is not economically

feasible or if the best available

telecommunications technology lacks

the capability to enable the

Telecommunications Provider receiving

the extension to comply with the

Modernization Plan. Extensions shall be

granted only on a case-by-case basis and

generally shall not exceed a total of five

years from the first such extension

granted to the Telecommunications

Provider.

(c) Each State’s Modernization Plan

shall be a strategic development

proposal for modernizing the

telecommunications network of the

Telecommunications Providers covered

by the Modernization Plan. In addition

to implementing the requirements

described in paragraphs (a), (i), and (j)

of this section, the Modernization Plan

shall include a short engineering

description of the characteristics of a

future telecommunications structure

that would enable all

Telecommunications Providers to

achieve the requirements and goals of

the Modernization Plan.
Federal Register / Vol. 60, No. 29 / Monday, February 13, 1995 / Rules and Regulations 8177

1The GAAP treatment focuses on the transfer of

benefits rather than the retention of risk and, thus,

allows a transfer of receivables with recourse to be

accounted for as a sale if the transferor: (1)

surrenders control of the future economic benefits

of the assets; (2) is able to reasonably estimate its

obligations under the recourse provision; and (3) is

not obligated to repurchase the assets except

pursuant to the recourse provision. In addition, the

Continued

(d) Within the scope of § 1751.101(d),

if the Plan Developer is the PUC, the

Modernization Plan shall name the

Telecommunications Providers in the

State, in addition to Borrowers, that are

covered by the Modernization Plan.

(e) The Modernization Plan must

require that the design of the network

provided by Telecommunications

Providers allow for the expeditious

deployment and integration of such

emerging technologies as may from time

to time become commercially feasible.

(f) The Modernization Plan must

provide guidelines to

Telecommunications Providers for the

development of affordable tariffs for

medical links and distance learning

services.

(g) With regard to the uniform

deployment requirement of the law

restated in paragraph (a)(5) of this

section, if services cannot be deployed

at the same time, only the minimum

feasible interval of time shall separate

availability of the services in rural and

nonrural areas.

(h) The Modernization Plan must

make provision for reliable powering of

ordinary voice telephone service

operating over those portions of the

telecommunications network which are

not network powered. In the event of

electric utility power outages, an

alternative source of power must be

available to ensure reliable voice

service.

(i) Short-term requirements. (1) The

‘‘short-term requirements start date’’ is

the date one year after the date RUS

approves the Modernization Plan for the

State.

(2) All New Facilities providing

Wireline Service after the short-term

requirements start date, even if the

construction began before such date,

shall be constructed so that:

(i) Every subscriber can be provided

1-party service.

(ii) The New Facilities are suitable, as

built or with additional equipment, to

provide transmission and reception of

data at a rate no lower than 1 Mb/sec.

(3) All switching equipment installed

by a Telecommunications Provider after

the short-term requirements start date

shall be capable of:

(i) Providing custom calling features.

At a minimum, custom calling features

must include call waiting, call

forwarding, abbreviated dialing, and

three-way calling; and

(ii) Providing E911 service for areas

served by the Telecommunication

Provider when requested by the

government responsible for this service.

(j) Medium-term requirements. (1) The

‘‘medium-term requirements start date’’

is the date six years after the date RUS

approves the Modernization Plan for the

State, or such earlier date as the

Modernization Plan shall provide.

(2) All New Facilities providing

Wireline Service after the medium-term

requirements start date, even if the

construction began before such date,

shall be capable, as built or with

additional equipment, of transmitting

video to a subscriber. The video must be

capable of depicting a reasonable

representation of motion. The frame

rate, resolution, and other measures of

audio and video quality shall be

determined by the Plan Developer.

(3) No later than the medium-term

requirements start date, all switching

equipment of Telecommunications

Providers covered by the Modernization

Plan must be capable of providing E911

service when requested by the

government responsible for this service.

(4) No later than five years after the

medium-term requirements start date,

one-party service must be provided

upon demand to any subscriber of a

Telecommunications Provider covered

by the Modernization Plan.

(k) Long-term goals. RUS suggests, but

does not require, that the provisions of

each Modernization Plan be consistent

with the accomplishment of the

following:

(1) The elimination of party line

service.

(2) For subscribers that desire the

service, universal availability of:

(i) digital voice and data service (56–

164 kb/sec).

(ii) service that provides transmission

and reception of high bit rate (no less

than 1 Mb/sec) data.

(iii) service that provides reception of

video as described in paragraph (j)(2) of

this section.

Dated: January 23, 1995.

Bob J. Nash,

Under Secretary, Rural Economic and

Community Development.

[FR Doc. 95–3414 Filed 2–10–95; 8:45 am]

BILLING CODE 3410–15–P

FEDERAL RESERVE SYSTEM

12 CFR Parts 208 and 225

[Regulations H and Y; Docket No. R–0835]

Capital; Capital Adequacy Guidelines

AGENCY: Board of Governors of the

Federal Reserve System.

ACTION: Final rule.

SUMMARY: The Board of Governors of the

Federal Reserve System (Board) is

amending its risk-based capital

guidelines for state member banks and

bank holding companies (banking

organizations) to implement section 350

of the Riegle Community Development

and Regulatory Improvement Act of

1994 (Riegle Act). Section 350 states

that the amount of risk-based capital

required to be maintained by any

insured depository institution, with

respect to assets transferred with

recourse, may not exceed the maximum

amount of recourse for which the

institution is contractually liable under

the recourse agreement. This rule will

have the effect of correcting the anomaly

that currently exists in the risk-based

capital treatment of recourse

transactions under which an institution

could be required to hold capital in

excess of the maximum amount of loss

possible under the contractual terms of

the recourse obligation.

EFFECTIVE DATE: March 22, 1995.

FOR FURTHER INFORMATION CONTACT:

Rhoger H Pugh, Assistant Director (202/

728–5883), Thomas R. Boemio,

Supervisory Financial Analyst (202/

452–2982), or David Elkes (202/452–

5218), Senior Financial Analyst, Policy

Development, Division of Banking

Supervision and Regulation. For the

hearing impaired only,

Telecommunication Device for the Deaf

(TDD), Dorothea Thompson (202/452–

3544), Board of Governors of the Federal

Reserve System, 20th and C Streets

NW., Washington, DC 20551.

SUPPLEMENTARY INFORMATION:

Background

The Board’s current regulatory capital

guidelines are intended to ensure that

banking organizations that transfer

assets and retain the credit risk inherent

in the assets maintain adequate capital

to support that risk. For banks, this is

generally accomplished by requiring

that assets transferred with recourse

continue to be reported on the balance

sheet in regulatory reports. These

amounts are thus included in the

calculation of banks’ risk-based and

leverage capital ratios. For bank holding

companies, transfers of assets with

recourse are reported in accordance

with generally accepted accounting

principles (GAAP), which treats most

such transactions as sales, allowing the

assets to be removed from the balance

sheet.1 For purposes of calculating bank