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RUS Program for Rural Broadband

The Rural Utility Service of the U.S. Department of Agriculture (“RUS”) announced the availability of over $325 million for the Rural Broadband Access Loans and Loan Guarantees Program for fiscal year 2011.  [See a previous post on the Broadband Program.] 

The funding is available for eligible applicants that seek to install qualifying broadband service in eligible areas.  [Of course, the current budget negotiations may impact any incentive program.]  The maximum amount of an individual loan under the program is $75 million.  For eligible applicants, the program can provide vital funding for the installation or upgrade of broadband services in rural areas, especially those areas that are “underserved.”

 Basics of the Program

The primary purposes of the Program are to finance the construction, improvement, and acquisition of facilities required to provide broadband service; to finance the cost of leasing facilities required to provide such service; to refinance an outstanding obligation on another telecommunications loan under the Rural Electrification Act of 1936; and to finance certain pre-loan expenses, such as costs associated with the preparation of the loan application, market surveys, and consulting fees.

Eligibility

Eligible applicants include nonprofit or for-profit organizations, including corporations, limited liability companies, cooperative or mutual organizations, Indian tribes, or governmental entities.

To be eligible for Program funds, broadband service must be provided in an eligible service area.  First, the area must be sufficiently rural to qualify.  Only a service area completely contained within a rural area or composed of multiple rural areas is eligible for a broadband loan.  Under the Program, a rural area is one that is not located within (a) a city, town, or incorporated area that has a population of greater than 20,000 inhabitants, or (b) an urbanized area contiguous and adjacent to a city or town that has a population of greater than 50,000 inhabitants.  Second, the area be an “underserved” area, meaning the area does not have sufficient existing broadband service to meet certain minimum standards.

 The applicant must demonstrate that it will complete the construction or upgrade of the project within three years from the date the applicant is notified that loan funds are available.  It must demonstrate an equity position equal to at least 10% of the amount of the loan requested will be provided.  Other requirements are imposed by the regulations and other rules established by the RUS.

Conclusion

Broadband service is an essential service in today’s economy.  It is indispensible to attracting certain industries to rural areas.  Yet the costs of installing or upgrading broadband service can be insurmountable, despite the long-term benefits.  The Program seeks to remedy this problem by offering lower-cost financing options for such costs.

Autry, Hall & Cook is very familiar with the federal broadband programs through its representation of North Georgia Network Cooperative, Inc., a rural broadband company that received a $33 million federal grant to improve broadband infrastructure in north Georgia.

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