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RUS Telecommunications Program
The document summarizes the Rural Utilities Service (RUS) Telecommunications Program. It discusses the program's history from 1949 to today, providing broadband loans and grants. It outlines funding amounts for infrastructure loans, broadband loans, and grants. It also describes considerations for service providers seeking financing, including challenges in obtaining funding given high construction costs and low subscriber densities in rural areas.
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RUS Telecommunications Program
- 1. Building our ConnectedFuture: 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 inRural 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 ProgramBIP • 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
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- 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. Wireline 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’sBusiness 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 TelecomProgram 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