1. Building our Connected Future:
Minnesota’s Better with Broadband!
November 13-14th , 2012
RURAL DEVELOPMENT
Telecommunications Programs
Thomas P. Jensen, GFR
RUS Telecommunications Program
thomas.jensen@wdc.usda.g
ov
202-834-3393

2. RUS Telecommunications Program
From inception to today…
1949 RUS (REA) Financing for basic telephone service
Enabled ubiquitous service in U.S.
1995 RUS network requirement: broadband-capable
2002 Definition of “Broadband Service” vs ISP
2009 ARRA “BIP” Grant/Loan program
$2.6B, 320 Awardees
2013 completion deadline (2015)
2012 Future: Traditional role: Infrastructure &
Broadband
Farm Bill 2012-13?
2

3. RUS Investment in Rural America
$4.6 billion RUS loan portfolio:
$3.6 billion 487 borrowers Traditional program
132 Minnesota
$0.5 billion 73 borrowers Broadband Loan Program
11 Minnesota
$1.1 billion 320 awardees ARRA 2009 BIP
13 Minnesota
3

4. Broadband Initiatives Program BIP
• This was a one-time program
• RUS provided loans and grants for:
– Broadband infrastructure (last mile) projects
– Technical Assistance grants
• RUS is currently managing:
– 259 infrastructure projects
– $3.2 billion in loan/grant funds
– Providing financial and operational oversight
• The majority of BIP projects are on track.
– $2 billion of projects are under contract
– $1.1 billion reimbursements to date
– 27 projects are fully complete
– 39 are substantially complete.
• Completion target 2013, extension to 2015
4

5. Broadband Initiatives Program BIP
5

6. RUS Telecommunications Program
FY 2012 and 2013 Guestimate
2013
”Bucket” 2012 Available 2012 Proposed
Authorization 2012 Budget Funding* Obligations Budget**
Infrastructure Loans $690 million $690 million $79.7 million $690 million
Broadband Loans $169 million $736 million $68.9 million $169 million
Distance Learning &
Telemedicine Grants $15 million $16.1 million $15.6 million $15 million
Community Connect
Grants $10.4 million $14.2 million $5.5 million $10.4 million
*Available funding includes authorized budget and amounts carried over from the previous fiscal year.
**NOTE: The Federal Government is under a Continuing Resolution for FY 2013 funding.

7. RUS Telecom Program
Considerations
• Market Conditions
• Technology
• Products and Services
• Pricing
• Regulations
• Competition
• Service Providers
• Traditional
• Non-traditional
• Lending Guidelines & Regulations
• Plans and Specs
• What is proposed to be built?
• Operational plan: 5 year historical & 5 year projections
• Subscribers & Services
• Revenues & Expenses
7

8. Market Trends
1. Wire line telephone => Cellular
2. Free VoIP phone service
3. Large bandwidth “Apps”
4. “Television” evolving
5. VOD & web streaming
Consumer wants: “Fat-dumb” pipe!
High capacity - non discriminating broadband service - Net
Neutrality

9. Broadband Service Provider’s Business Plan Challenges
RUS Acknowledges
• High costs: Construction & Operating
• Sparse populations coupled with long distances &
geography
• Low revenue density – low subscriber density
• Unregulated; no requirement to serve all residents
• Public Utility Commission mandate (Telco)
• City franchise requirements (Cable)
• No Cost support & recovery mechanisms
• Access fees
• Universal Service Fund FCC
• Uncertainty of an evolving marketplace.
Result: Challenging funding of business plans!

10. RUS Financing options:
• Infrastructure (Traditional) Loans since 1949
• Broadband Loans since 2002
• Grants:
• Community Connect
• DLT Distance Learning Telemedicine
10

11. Infrastructure Loan Program
Requirements/Terms
• Program provides financing for new and improved telecommunications
infrastructure in rural communities of 5,000 or less.
• Applications are accepted year-round.
• Interest rates are set at current U.S. Treasury rates, depending on loan
maturity at the time of each advance.
• Term of loan is based on life of facilities financed.
• Guaranteed loans from the Federal Financing Bank (FFB) and Hardship
loans at a fixed 5% rate of interest may also be available.
• All infrastructure financed must be broadband capable.
11

12. Infrastructure Loan
Eligible Applicants
• Rural utilities
• Municipalities
• Commercial corporations
• Limited Liability Companies
• Public Utility Districts
• Indian tribes
• Cooperative, nonprofit, limited-dividend or mutual associations
12

13. Infrastructure Loan
Eligible Purposes
• Loan funds may be used to finance services in rural areas for:
• New construction
• Improvements
• Expansions
• Acquisitions (with restrictions)
• Refinancing (with restrictions)
13

14. Broadband Loan
Requirements/Terms
• Serving rural communities of 20,000 or less not in urbanized areas
• 25% of proposed service area is underserved (max. one provider)
• Service area cannot overlap an existing borrower
• maximum loan $100 million
• Term of loan is based on life of facilities financed
• One year principal deferment
• 10% minimum matching equity investment from borrower required
• All construction must be completed w/in 3 years from the date funds available
• Minimum funded speed of 5 Mbps (up+down)
• Technology neutral / agnostic
14

15. Broadband Loan
Eligible Applicants
• Corporations
• Limited Liability Companies
• Cooperative or Mutual Organizations
• Indian Tribes
• Public Body
15

16. Broadband Loan
Eligible Purposes
Loan funds may be used to finance services in rural areas for:
• New Construction
• Improvements
• Expansion
• Acquisitions (with restrictions)
• Refinancing (with restrictions)
16

17. Broadband Loan
Eligible Service Area
• Service area is completely rural
• 25% of household are underserved households
• Less than 3 incumbent service providers
• Does not overlap current Telecommunications Program
borrowers or grantees
• Does not overlap a pending Telecommunications Program
application
17

18. Telecom Loan Program
Information: website
• Complete source of:
– Program information and materials
– Staff Contacts
• Code of Federal Regulations 1735
• General Field Representative
• Minnesota Rural Development Office
18

19. USDA RUS Telecom Program
http://www.rurdev.usda.gov/RUSTelecomPrograms.html

20. Contact Information
Telecommunications Program
1400 Independence Ave.
Washington, DC 20250
http://www.rurdev.usda.gov/RUSTelecomPrograms.html
General Field Representatives: http://www.rurdev.usda.gov/UTP_GFRContact.html
Dominic Henderson
Thomas Jensen
Kristine Reddy (ARRA)
Minnesota USDA Rural Development Staff:
Colleen Landkamer, State Director
Telecommunications Program Headquarters Staff:
David J. Villano, david.villano@wdc.usda.gov; Assistant Administrator, 202-720-9554
Jonathan Claffey, jon.claffey@wdc.usda.gov; Deputy Assistant Administrator, 202-720-9556
Peter Aimable, peter.aimable@wdc.usda.gov; Director, Northern Division, 202-720-0806
Ken Kuchno, kenneth.kuchno@usda.gov; Director, Broadband Division, 202-690-4673
20