$700 million in low-interest loans available for would-be rural broadband providers

In 2009-2010, the Department of Agriculture’s Rural Utility Service (RUS) disbursed several billion dollars in loans and grants for broadband build outs as part of the controversial spending initiative flowing from the American Recovery and Reinvestment Act. Now, hot on the heels of that spree, RUS has opened the gates for new applications for up to $700 million dollars in low-interest loans for broadband. The new funds have been made available by the Food, Conservation, and Energy Act of 2008 (a/k/a the 2008 Farm Act). Interested applicants may file as soon as they’re ready.

The purpose of the funding is similar to that of the 2009-2010 stimulus program: to subsidize the construction of broadband facilities in parts of rural America that are currently unserved or underserved in that regard.

Although RUS is accepting applications now, the actual appropriation for the program remains uncertain due to the inability of Congress to pass a final budget for 2011.   RUS finds itself in a bit of a bind since the funds, if they do become available, must be committed by the end of this fiscal year (i.e., by September 30, 2011). That leaves relatively little time for RUS to solicit, receive and process applications. While there is no guarantee that the funds will actually be in the cookie jar after applications are submitted, RUS obviously feels confident enough about the survival of the program to solicit applications. With the most recent (and likely last) Federal budget “continuing resolution” expiring on April 8, RUS should know by then whether it in fact has any money to lend.

Jaded veterans of the 2009-2010 stimulus program application process will find RUS’s latest program somewhat simplified. As before, the funds may be used for the construction, but not the operation, of broadband facilities. Acquisition of such facilities (apparently including spectrum for wireless broadband) is now a permitted use, whereas the stimulus program declared that taboo. 

Loans may be requested in amounts of between $100 thousand and $100 million, with interest rates set at either 4% or the government’s cost of borrowing.   Loan guarantees are also available.

Underserved areas are now defined as areas with fewer than two carriers providing broadband at a total speed of 3 Mbps (upload and download combined).   Unfortunately, prospective applicants are once again left to their own devices in trying to figure out whether any particular area has service providers that meet that definition.  

New loans are also forbidden in areas where RUS loans or grants for broadband have already been made or where an application is currently pending. Thus, if two applications come in for the same area, the second one in the door will remain in bureaucratic limbo until a decision is made on the first one. This provides incentive to act quickly. Thankfully, RUS is planning to make an online map available to prospective applicants so that this latter bit of information can be readily ascertained.

Other highlights of the program:

  • Applicants must show availability of equity totaling at least 10% of the capital necessary to fund the project from sources other than the RUS loan.
  • Detailed financial information for the applicant’s past three years must be provided, as well as projections of revenue over the next five years showing that the project is sustainable without further capital input.
  • A detailed network design must be supplied demonstrating proposed construction adequate to provide the projected broadband service threshold, the applicant’s ability to provide these services, the costs of construction and operation, and a timetable.
  • Broadband must be provided at speeds of at least 5 Mbps (total of upload and download speeds) subject to later adjustment if broadband speeds increase.
  • Areas eligible for funding must:

be rural (not in either: (a) a city, town or incorporated area with population of more than 20K or more; or (b) an urbanized area contiguous and adjacent to a city or town with population of more than 50K);

be underserved (at least 25% of the service area is served by one or fewer broadband providers and no part of the service area is served by three or more broadband providers);  and

have no overlap with previous RUS beneficiaries or with a currently pending RUS loan application.

  • Special consideration will be given to applications to serve Indian communities. Communities declared to be “substantially underserved trust areas” (i.e., lands held for Native Americans) qualify for waiver of many of the rules, such as reduced equity requirements and longer term loan repayment (up to 35 years).

There is no specific filing deadline for these applications, but since applications are generally processed first come, there is an advantage to filing early. Once the money is gone, it’s gone. And if someone else files for your area first, that application will be processed before yours.

A summary of the terms of the RUS program, together with links to (among other things) the application guide and related attachments, may be found here. If you would like more information about this opportunity, feel free to contact us.