This subpart establishes policies and procedures for the review, approval and servicing of projects authorized to use funding for broadband and smart utility facilities (Special Broadband Authority) in select Rural Development programs. This special broadband authority will leverage the federal resources available for the deployment broadband services in rural areas. The Secretary has discretion to allow recipients of RD grants, loans, or loan guarantees to use a limited amount of funds for broadband purposes.

(a) The Secretary, acting directly or through authority delegated to the RD agency heads, may allow a recipient of an RD grant, loan, or loan guarantee to use up to 10 percent of project funds for any purpose outlined in § 1980.1205 and in compliance with this part.

(b) Prior to exercising authority under this part, the Agency with a request for special broadband authority (the Awarding Agency) shall consult with the Administrator of the affected RD Agency to determine:

(1) If the provision of broadband service by the recipient (or another party under a wholesale broadband service agreement) would cause competitive harm to a current Rural Development borrower, grantee, or guaranteed lender with respect to an active project for broadband deployment and provision of services With respect to a current RD awardee in the project service area that has significantly defaulted on, or not material complied with its award requirements, the affected RD agency may make a finding of no competitive harm unless it is necessary to protect the government's interest;

(2) If the recipient intends to use the funds for the provision of retail broadband service and, if so, assist the agency in providing public notice and receiving responses from existing service providers, as provided in this rule, so that a determination can be made as to whether the minimum acceptable level of broadband service exists in the service area at the time of the request; and

(3) If the recipient does not intend to provide broadband service, and the funded facilities will only be used for internal use, such as smart utility, there shall be no finding of competitive harm and the recipient shall be relieved of the public notice provision requirement of § 1980.1207 and reporting requirements of § 1980.1209. Note that recipients funding broadband facilities for internal use under an RD program's existing authority would not be subject to this part with respect to the 10 percent funding limitation; however, if such facilities are contemplated to provide retail broadband service in the future, the public notice requirements of § 1980.1206(b) and (c) will apply.

Agency. One of the three Rural Development agencies, the Rural Housing Service, the Rural Business-Cooperative Service or the Rural Utilities Service.

Agency head. The Administrator of the applicable RD agency.

Awarding Agency. An agency which has received an application for special broadband authority or has approved an application for such authority.

Broadband service. Any technology identified by the Secretary as having the capacity to provide transmission facilities that enable a subscriber to originate and receive voice, data, graphics, and video.

Con Act. The Consolidated Farm and Rural Development Act of 1972, as codified and amended at 7 U.S.C. 1921 et seq.

Minimum acceptable level of broadband service. The minimum transmission capacity with respect to terrestrial service that will qualify as broadband service, as published by the RUS in the Federal Register pursuant to 7 CFR part 1738. If a new minimum transmission capacity is published in the Federal Register while a request for smart utility authority is pending, broadband service for the purpose of reviewing the request will be defined by the minimum transmission capacity that was in effect at the time the request was received by the Agency.

Rural Development (RD). A mission area of the United States Department of Agriculture (USDA) made up of the Rural Housing Service (RHS), Rural Business-Cooperative Service (RBCS) and the Rural Utilities Service (RUS).

Retail broadband service. For the purposes of this subpart, retail broadband service means any broadband service that is provided to the public at a charge. Broadband Service which is used exclusively by the recipient for its own purposes and is not sold to the public is not retail broadband. Broadband service which is sold to other service providers through wholesale agreements shall also not be considered retail broadband service.

RE Act. The Rural Electrification Act of 1936, as codified and amended at 7 U.S.C. 901 et seq.

Secretary. The Secretary of Agriculture.

Special broadband authority. Approval by an RD program to use up to 10 percent of the proceeds of an RD loan, grant, or loan guarantee for the purposes of constructing, improving, or acquiring broadband facilities and equipment in rural areas, whether or not retail or wholesale broadband service will be provided.

Smart utility. The use of broadband facilities and equipment that is only available internally by a recipient during the economic life of the assets financed by an RD loan, grant, or loan guarantee.

Programs eligible to be considered for smart utility and broadband service authority include RD programs under the Rural Electrification Act and the Consolidated Farm and Rural Development Act. Programs included, but not limited to, are as follows:

(a) 7 CFR part 1710—General and Pre-Loan Policies and Procedures Common to Electric Loans and Guarantees;

(b) 7 CFR part 1779—Water and Waste Disposal Programs Guaranteed Loans;

(c) 7 CFR part 1780—Water and Waste Loans and Grants;

(d) 7 CFR part 1783—Revolving Funds for Financing Water and Wastewater Projects (Revolving Fund Program);

(e) 7 CFR part 1942, subpart A—Community Facility Loans;

(f) 7 CFR part 3575, subpart A—Community Programs Guaranteed Loans;

(g) 7 CFR part 3560—Direct Multi-Family Housing Loans and Grants;

(h) 7 CFR part 3565—Guaranteed Rural Rental Housing Program;

(i) 7 CFR part 3570, subpart B—Community Facilities Grant Program;

(j) 7 CFR part 4274, subpart D—Intermediary Relending Program (IRP);

(k) 7 CFR part 4279, subpart B—Business and Industry Loans;

(l) 7 CFR part 4279, subpart C—Biorefinery, Renewable Chemical and Biobased Product Manufacturing Assistance Loans;

(m) 7 CFR, part 4280, subpart A—Rural Economic Development Loan and Grant Programs;

(n) 7 CFR part 4280, subpart B—Rural Energy for American Program; and

(o) 7 CFR part 4280, subpart E—Rural Business Development Grants.

Recipients may use funds for the costs of the construction, improvement, and acquisition of broadband facilities and equipment in rural areas, as set forth in this part. Rural area shall be defined by the applicable program regulations.

(a) Initial notification to agency for all programs. Applicants seeking to use program funds for eligible purposes under § 1980.1205 must inform the RD agency at the time of application, except for Smart Grid loans authorized under the RE Act and 7 CFR part 1710. This is to determine that sufficient funding is available in the applicable program to consider funding this special broadband authority in addition to the underlying RD project.

(b) Notice for retail broadband. All applicants that use special broadband authority to provide retail broadband service must provide the following information, which will be posted publicly on RUS' fully searchable website, in addition to the identity of the applicant and the status of the application:

(1) A description of the proposed retail broadband project;

(2) A map of the proposed service area to be funded under smart utility authority of the applicant;

(3) The amount and type of support requested by the applicant;

(4) The estimated number and proportion of service points in the proposed service territory without fixed broadband service, whether terrestrial or wireless; and

(5) Any other information required of the applicant in a funding notice.

(c) Information available to the public for approved applications. For applications that are approved for the provision of retail broadband service under the special broadband authority, the following information will be made available to the public:

(1) The information provided in paragraph (a) of this section;

(2) Each annual report required under § 1980.1209, which will be redacted to protect any proprietary information; and

(3) Such other information as the Administrator of the RUS deems sufficient to allow the public to understand the assistance provided.

(d) Alternative methods of public notice. The Administrator of the RUS will provide instructions on the RUS website for alternative methods of public notice and responses by existing service providers related to projects seeking funding under the special broadband authority where the Administrator determines that existing procedures and systems used by applicants to RUS' broadband programs would be impracticable, costly, or impose excessive delay.

(e) Additional requirements for guarantees, intermediaries and revolving loan programs. In addition to paragraphs (a) through (d) of this section, participants and recipients of funds from eligible RD guarantee, intermediary, and revolving loan programs set forth in § 1980.1204 shall be subject to the following requirements:

(1) No funds may be issued by program participants to recipients for special broadband authority without written approval from the Awarding Agency.

(2) Recipients must apply for special broadband authority on a project-by-project basis through program participants. Program participants shall serve as the applicant to the Awarding Agency and shall be responsible for ensuring that the public notice, reporting and other requirements of this part are contained in applicable agreements between the participant and the recipient.

(a) Service area assessment. For applicants requesting to provide retail broadband service under the special broadband authority, applications must be posted publicly for 45 days.

(1) During the public notice period, service providers may voluntarily submit information required by the RUS Administrator onto the agency's mapping tool, or alternate methods if determined by the RUS Administrator under § 1980.1206(d). Information submitted by service providers shall be exempt from disclosure pursuant to 5 U.S.C. 552(b)(2)(B).552.

(2) If no broadband service provider submits information under paragraph (a)(1) of this section, the agency shall consider the number of providers in the proposed service area to be established by using any other data regarding the availability of broadband service that the RUS may collect or obtain through reasonable efforts.

(b) Use of funds. After review of information submitted from service providers, if any, and all available data on broadband availability, if the RUS determines that the minimum acceptable level of broadband service is available in the proposed retail service area, the Awarding Agency shall not approve the use of funds for such purpose. The Awarding Agency, however, may approve the use of funds for retail broadband service if:

(1) Areas with the minimum acceptable level of broadband service are eliminated from the proposed service area; and

(2) The applicant covenants that it will not provide service in these areas with funds from the Awarding Agency.

(c) Use of Funds for wholesale broadband service. For applicants requesting that funds be used for wholesale broadband service, the applicant must agree:

(1) To publicly advertise in the service area that broadband service is available at wholesale to any service provider; and

(2) That the same wholesale contract will be used for all service providers requesting wholesale service and offered at the same per unit price.

(a) The Awarding Agency will inform applicants seeking consideration of funding under this part of the agency's disposition of the applicant's request;

(b) Except as provided in § 1980.1206(e), awards made under this part shall be managed and serviced by the Awarding Agency;

(c) Except as provided in § 1980.1206(e), the Agency shall be responsible for oversight and compliance of projects utilizing authority under this part;

(d) Requirements for providing retail broadband service or wholesale broadband service under §§ 1980.1206, 1980.1207, and this section shall be made part of the applicable loan or grant agreement between the recipient and the Awarding Agency, or, with respect to guarantees and intermediaries, between the program participants and the recipients;

(e) The applicable agreement must provide that non-compliance with this part or use of funds for retail broadband service or wholesale broadband service without having received agency authority to do so as required in this part, shall:

(1) Be an automatic event of default under the applicable agreement; and

(2) Require that the associated loan or grant funds used in violation of this part be disallowed or returned immediately to the awarding agency or to the program participant for eligible relending.

For three years starting the first January 31st after completion of the broadband project, recipients of funds used for retail broadband service under this part must submit the following information each year utilizing RUS' online reporting system:

(a) Existing network service improvements and facility upgrades, as well as new equipment and capacity enhancements that support high-speed broadband access for educational institutions, health care providers, and public safety service providers;

(b) The estimated number of end users who are currently using or forecast to use the new or upgraded infrastructure;

(c) The progress towards fulfilling the objectives for which the assistance was granted;

(d) The number and geospatial location of residences and businesses that will receive new broadband service;

(e) The speed and price of the Recipient's broadband service offerings; and

(f) The average price of broadband service in the project's service area.

The information collection requirements in this part are approved by the Office of Management and Budget and assigned OMB control number 0572-0156.