The provision of broadband Internet infrastructure and services in the United States is generally privately financed. Rural areas, though, can have conditions that increase the cost of broadband deployment, such as remote areas with challenging terrain like mountains, which increase construction costs, or conditions that make it difficult to recoup deployment costs, such as relatively low population densities and incomes. These conditions make it less likely that a service provider will build out or maintain a network. Low population density can mean fewer potential subscribers, and lower-income populations are less likely to use broadband. There is also evidence that rural low-income households are less likely to use broadband than metropolitan low-income households. As a result of these factors, rural areas tend to lag behind urban and suburban areas in broadband deployment. However, because of broadband’s economic and social benefits, several public programs aim to encourage greater investment in rural areas. RUS administers several such programs intended to accelerate the deployment of broadband services. One program is the Rural Broadband Access Loan and Loan Guarantee Program, which authorizes RUS to provide treasury rate loans, 4 percent loans, and loan guarantees. The loan program was authorized by the Farm Security and Rural Investment Act of 2002 (2002 reauthorization act) and RUS approved the first loans under the program in fiscal year 2003. On February 6, 2013, RUS published in the Federal Register the final rule implementing the loan program, as reauthorized in 2008. Entities eligible to receive these loans include corporations, limited liability companies, cooperative or mutual organizations, Indian tribes, and state or local governments. The program is “technology neutral” in that RUS can finance any type of broadband service as long as the applicant plans to deliver broadband to every customer in the proposed service area at certain speeds. The loan program was reauthorized by the 2014 reauthorization act, which modified some eligibility requirements and included a new requirement for any entity receiving a loan to submit a semiannual report, for the 3 years after completion of the project, which includes data on broadband adoption rates. According to RUS officials we spoke with, until RUS publishes regulations implementing the changes in the 2014 reauthorization act, it will not accept new loan applications. To administer the loan program, RUS has approximately 22 program staff as well as 25 field staff assisting part-time. According to RUS rules for the loan program, the service area of a project eligible for RUS broadband financing must be entirely within a rural area, defined for this loan program as any area not contained in an incorporated city or town with a population in excess of 20,000 inhabitants, or an urbanized area contiguous and adjacent to a city or town that has a population greater than 50,000 inhabitants. In addition to being located within a rural area, a service area must meet the following conditions: At least 25 percent of the households are underserved, meaning they are offered broadband service by no more than one “incumbent service provider.” Incumbent service providers are broadband providers that RUS identifies as directly providing broadband service to at least 5 percent of the households within a service area. No part of the service area has three or more “incumbent service providers.” No part of the funded service area overlaps the service area of current RUS borrowers and grantees. No part of the funded service area is included in a pending application before RUS seeking funding to provide broadband service. RUS has a total authorized value of all the loans it can approve each fiscal year, based on lending authority approved in annual appropriations and the estimated long-term cost of extending credit over the life of the loans approved that fiscal year. See table 1 below for yearly authorized total value of loans as well as loans approved. RUS loans can have a variety of repayment outcomes. Loans are paid out as eligible project costs are incurred, on an agreed-upon repayment schedule. For the purposes of this report, “active” loans are those that are being paid back by the borrower as scheduled. “Repaid” loans include those that have already been fully paid back. When a loan is never paid out, it is referred to as a “rescission.” Loans can also be reduced from the approved amount, for instance when a borrower does not need the remainder of a loan upon completion of a project. Borrowers can also fail to abide by the terms of the loans, such as missing payment deadlines, which may result in a “default.” Whereas RUS broadband loans are used as up-front capital to invest in broadband infrastructure, the USF has functioned as an ongoing subsidy for telecommunications providers that offer telephone and other communications services such as broadband access. The USF includes four programs that subsidize these providers. Within the USF program, the largest amount of annual expenditures involve the High-Cost Program, which subsidizes telecommunications providers that serve rural, remote, and other areas where the costs of offering telephone service are high. These subsidies allow providers to charge lower rates than otherwise would be feasible. This support has been a key revenue resource for some telecommunications providers that also offer broadband services, including RUS broadband borrowers. FCC has adopted program rules that change USF support. These changes are outlined in an order released in November 2011, an order that FCC said “comprehensively reforms and modernizes” the universal service system to ensure that affordable voice and broadband service are available throughout the nation. This USF/ICC Transformation Order requires that recipients of high-cost support offer voice and broadband as a condition for receiving USF support. FCC also reformed the ICC system. ICC is a system of payments between providers for the origination, transportation, and termination of telecommunications traffic. ICC payments have traditionally been governed by a complex but related system of federal and state rules than those governing universal service. RUS has approved 100 loans, out of 249 applications, through the Broadband Loan Program since 2003. The total dollar amount of the loans awarded to date is about $2 billion. The agency has approved few loans since 2008, including none in fiscal year 2010. RUS officials stated that after the passage of the Recovery Act, RUS focused on administering the Broadband Initiatives Program. Moreover, a lag occurred between the passage of the 2008 reauthorization act and completion of the regulations to carry out the law, in part because of RUS prioritized distribution of Recovery Act funding. The geographic distribution of RUS loans is widespread, though with more loans going to providers serving the Great Plains, Midwestern and Southern states than to the east and west coasts. Providers in 43 states received one or more loans since 2002 (see fig. 1). The states where providers received the most loans include Iowa, Kansas, Minnesota, Oklahoma, and Texas. RUS officials stated that the loan program is intended to be geographically neutral, and they do not target particular regions of the country. As discussed further below, not all approved loans are still active. We did not observe significant geographic differences between loans with different repayment statuses. RUS broadband borrowers are located in regions with varying topography, including differing weather and terrain. For example, we spoke to borrowers in dissimilar regions, including North Dakota (plains with some hills); New Mexico (high desert); and Vermont (rocky hills and mountains). Some aspects of these rural areas can result in challenges for broadband deployment, with some stakeholders stating that the unique characteristics of their region affected the amount of time and resources they needed to install broadband. Officials at a broadband provider we spoke with in New Mexico, for instance, said that the extremely hard, rocky ground in the service area results in very high per- mile costs for installing fiber infrastructure in the ground. Another provider in North Dakota told us that the long winters limit the time available for installing fiber to about 4 months a year. Loans have been made to providers in areas with a variety of demographics and economies: On average, counties where RUS loans were approved have a higher poverty rate, 15.6 percent, than the national average, 14.9 percent. In these loan counties, the rate ranges from 4.2 percent to 41.1 percent, based on U.S. Census Bureau (Census) data. Overall, counties with approved RUS loans have a higher percentage of adults over age 65, 15.7 percent, than the national average, 13.2 percent. The range of this age group in loan counties is also large, from 4.1 to 44.5 percent. The per capita income of loan recipient communities is also diverse. For example, our site visit communities included Portales, New Mexico, with per capita income of $15,881, and Dickinson, North Dakota, with per capita income of $28,253. Some areas where we conducted interviews, such as Eagle Butte, South Dakota, were highly rural and remote. These areas had low population densities and also tended to be lower-income, overall. Other site visit locations, including the rural communities of Hudson and Catskill, New York, were located in relative proximity to large cities, and had some of the characteristics of more urban areas, such as robust “creative economies.” For example, Hudson, New York, is located within a 2 hour drive from both Albany and New York City, and has recently attracted a number of businesses such as art galleries. Two site visit communities, Dickinson, North Dakota, and Hobbs, New Mexico, have experienced recent surges in population and infrastructure needs associated with the oil and natural gas industry, according to providers with whom we spoke. The definition of what constitutes a “rural” community can be difficult when determining how to target rural communities for broadband assistance. A narrower definition may mean that deserving communities are excluded. A broader definition, though, may mean that communities not traditionally considered “rural” or “underserved” may be eligible for financial assistance, which could then limit funds available to the most rural areas.