RURAL UTILITIES SERVICETELECOMMUNICATIONS PROGRAM

Telergee Alliance 2009 CFO & Controllers Conference

Oct. 16, 2009

David J. Villano

Assistant Administrator

Telecommunications Program

Rural Utilities Service

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The Rural Utilities Service Telecommunications Program loan and grant programs

• Infrastructure Loan Program: Loans to local telephone companies for improving telecommunications service in rural communities

• Broadband Access Loan Program and Community Connect Grant Program: Loans and grants for local telephone companies and other service providers who offer Broadband (high-speed Internet) services in eligible communities

• Distance Learning/Telemedicine Loan and Grant Program: Loans and grants for providing Distance Learning and Telemedicine services to rural residents

•American Recovery and Reinvestment Act of 2009 (ARRA) Broadband Initiatives Program: Loans, grants and loan/grant combinations for broadband in rural communities

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TelecommunicationsLoan Program Budget

Infrastructure 2008 2009 2010 Proposed

• Hardship 5% $ 143,985,000 $ 145,000,000 $ 145,000,000

• Direct, Treasury $ 248,250,000 $ 250,000,000 $ 250,000,000Rate

• Direct, FFB $ 292,935,000 $ 295,000,000 $ 295,000,000

• Total Telecom $ 685,170,000 $ 690,000,000 $ 690,000,000

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Loan Program BudgetFarm Bill Broadband: 2008 2009 2010(Proposed)

• Treasury Rate $ 792,000,000 $ 406,231,179 $ 531,698,895

• Grants $ 13,405,000 $ 13,813,145 $ 13,406,000

• Total Broadband $ 805,405,000 $ 420,044,324 $ 545,104,895

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Loan Program BudgetDLT and Public TV: 2008 2009 2010

(Proposed)

• Treasury Rate $ 28,265,000 $ 0 $ 0 Loans

• DLT Grants $ 29,790,000 $ 29,790,000 $ 29,790,000

• Public TV Grants$ 4,965,000 $ 4,965,000 $ 0

• Total DLT $ 63,020,000 $ 34,755,000 $ 29,790,000

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Telecom Program FY2009 Obligations

Infrastructure Loans: $690,000,000Broadband Loans: $ 6,652,000DLT Grants: $ 36,287,654DLT Loans: $ 16,265,779Community ConnectGrants: $ 13,385,526Public TV Grants: $ 5,086,460

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Telecom Loan Investment

• $690 million in loans made in FY 2009

• $3.7 billion in principal outstanding; 503 borrowers

• 92% of borrowers are providing Broadband service

• 90% of loans made in the last 2 years have been for fiber-to-the-home projects

Infrastructure: Farm Bill Broadband:

• 96 loans have been made, for $1.2 billion, in 1,865 communities

• More than 835 thousand households will receive broadband access under loans made

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Revised Farm Bill Broadband Loan Program Regulations (under final departmental review):

• Promote deployment to rural areas with little or no service

• Limit funding in urban areas and areas where a significant share of the market is served by incumbent providers

• Clarify equity and marketing survey requirements

Broadband Program

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Revised Farm Bill Broadband Loan Program Regulations (continued):

• Increase the transparency of the application process

• Promote a better understanding of application requirements

• Ensure that projects funded are keeping pace with increasing demand for bandwidth

Broadband Program

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American Recovery and Reinvestment Act of 2009 (“ARRA”)

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ARRA Broadband FundingUSDA Rural Uti lities Service : $2.5 billion to tal budget au thority auth orized und er the ARR A in the fo rm of loans, gran ts and loan /grant comb ination s for broadb and infrastru ctureThe RUS Broad band Initiati ves Program (BIP)First NOFA : $2.4 b illion pro gram level fund ing

Up to $1.2 b illion for Last Mile projectsUp to $800 million fo r Middle Mile projectsUp to $325 million fo r a Nation al Reserve

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ARRA Broadband FundingDep artment o f Commerce – Nati onal Teleco mmun ications In formation Admin istration: $ 4 .7 b illio n to tal b u d get au th o rity au th o rized u n d er th e A R R A in th e fo rm o f gran ts Th e B ro a d b a n d Tech n o lo g ies O p p o rtu n iti es P ro g ra m (B TO P )First N O FA : $ 1 .4 b illio n p ro gram level fu n d in g

U p to $ 1 .2 b illio n fo r b ro ad b an d in frastru ctu re p ro jectsU p to $ 5 0 m illio n fo r P u b lic C o m p u ter C en ter p ro jectsU p to $ 1 5 0 m illio n fo r Su stain ab le B ro ad b an d A d o p ti o n p ro jects

(Sep arate N O FA issu ed fo r $ 3 5 0 m illio n in fu n d s availab le to states fo r b ro ad b an d m ap p in g)

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RUS BIP Project Requirements• 75 percent of the areas to be served by a project receiving

funds from such grants or loans shall be in a rural area without sufficient access to high speed broadband service to facilitate rural economic development;

• Priority shall be given to:– Projects that will deliver end users a choice of more than one

service provider;– Projects that provide service to the highest proportion of rural

residents that do not have access to broadband service;– Current or former RUS Title II borrowers– Projects that commence immediately upon approval.

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Creating the ARRA Broadband Programs – Joint Endeavor between RUS and NTIA

• A joint Request for Information was published by RUS and NTIA in March and public comments were solicited on how the program should be developed– Examples of issues: How should broadband be defined? What

should be the role of the state governments? How can broadband help in the economic development in rural communities?

• Public meetings were held in Washington DC, Las Vegas, NV and Flagstaff, AZ.

• Public comments were reviewed and were considered during the development of the program

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First Round of Funding under ARRA for BIP and BTOP

• First Notice Of Funds Availability (NOFA) was announced by Vice President Biden, Agriculture Secretary Vilsack and Commerce Secretary Locke on July 1, 2009.

• The joint BIP/BTOP NOFA was published in the Federal Register on July 9, 2009

• Application window opened July 14• Electronic application portal available from July 31-August 20, 2009• Outreach and Training:

– Ten how-to-apply workshops were held jointly by RUS and NTIA from July 7-24, 2009– FCC also participated in the workshops– 2,474 non-Federal government attendees– Pre-workshop seminars targeted to minorities and tribes

• Applications are currently being reviewed• Awards are expected to be announced in November 2009• All funds must be awarded by September 30, 2010• All projects must be substantially completed in two years and fully completed

in three years

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Key Definitions in the First NOFA :

• BB - 2-way data transmission w/ advertised speeds of at least 768 KBPS down + at least 200 KBPS up to end users, OR providing sufficient capacity in a middle mile project to support provision of BB service to end users.

• REMOTE - an unserved, rural area 50 miles from limits of a non-rural area.• RURAL - any area, as confirmed by the latest decennial census, NOT located within: 1) a city,

town, or incorporated area w/ pop. greater than 20,000 people; or 2) an urbanized area contiguous and adjacent to a city or town w/ pop. greater than 50,000 people -- URBAN - a densely populated territory as defined in the latest decennial census.

• UNDERSERVED - a proposed service area, composed of one or more contiguous census blocks meeting certain criteria -- Specifically, proposed service area may qualify as underserved for Last Mile projects if at least one of following factors is met: – No more than 50% households in proposed service area HAVE ACCESS to facilities-based, terrestrial

broadband service at greater than minimum BB transmission;– NO fixed or mobile BB provider w/advertised BB speeds of at least 3 MBPS downstream; or – BB subscribership for proposed service area = 40% of households or less -- A proposed service area

may qualify as underserved for Middle Mile projects if one interconnection point terminates in a proposed funded service area that qualifies as unserved or underserved for Last Mile projects.

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Key Definitions in the First NOFA (continued):

• UNSERVED - proposed service area, composed of 1 or more contiguous census blocks, where at least 90% of households lack access to facilities-based, terrestrial BB service, either fixed or mobile, at minimum BB speed. A household has access to BB service if household can readily subscribe to service upon request.

• LAST MILE – Last Mile project means any infrastructure project the predominant purpose of which is to provide broadband service to end users or end-user devices (including households, businesses, community anchor institutions, public safety entities, and critical community facilities).

• MIDDLE MILE - Middle Mile project means a broadband infrastructure project that does not predominantly provide broadband service to end users or to end-user devices, and may include interoffice transport, backhaul, Internet connectivity, or special access.

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Applications Received – Disclaimer: statistics are based on applicant-provided information (pending verification)

• Information on the applications received is available on www.broadbandusa.gov, including a searchable database of the applications and access to maps of the proposed service areas; the public has the opportunity to comment on the description of the proposed service areas as being unserved or underserved

• Applicants proposing to serve rural areas had to apply to BIP but could file jointly with BTOP

• 401 BIP only broadband infrastructure applications were received, for $4.9 billion in requested funding– Last Mile Remote: 214 applications, requesting $1.4 billion– Last Mile Not Remote: 131 applications, requesting $2.9 billion– Middle Mile: 56 applications, requesting $710 million

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Applications Received continued

• 833 joint BIP/BTOP broadband infrastructure applications were received, for $12.8 billion in requested funding– Last Mile Remote: 169 applications, requesting $2.4 billion– Last Mile Not Remote: 502 applications, requesting $5.8 billion– Middle Mile: 162 applications, requesting $4.6 billion

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Timeline for Next Round of Funding

• One additional round of funding is planned• A joint NTIA/RUS Request for Information will be published later this

month– Seeking comments on the first NOFA, such as the requirements and the

processes– NTIA and RUS will take comments into account in developing the NOFA

for the second round of funding• A second NOFA will be announced in mid to late December 2009• This date is subject to change• The second NOFA may include modifications to the requirements,

definitions and processes of the first NOFA• Application window is not known at this time• Again, all awards must be obligated by September 30, 2010

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Accounting, Monitoring and Reporting Compliance Requirements for ARRA Broadband Loan and Grant

Recipients

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Loans and Grants<$500,000 >$500,000

For profit – incl. co-ops

7 CFR Part 1773 7 CFR Part 1773

Not for profit No Audit Required

Circular A-133

State or Local Government

No Audit Required

Circular A-133

Tribal Authority No Audit Required

Circular A-133

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ARRA Accounting, Monitoring and Reporting Requirements continued

Accounting requirements, which are specified in the award documents, include, but are not limited to, the following:

• i. Awardees must adopt a GAAP system of accounts acceptable to RUS;

• ii. Awardees must submit annual audited financial statements along with a report on compliance and on internal control over financial reporting, and a management letter in accordance with the requirements of 7 CFR 1773.

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7 CFR Part 1773

Annual audit prepared by an independent auditor/audit firm must include:

• Auditor’s report• Report on compliance and on internal control over financial

reporting• Management letter

(Examples are found in Appendices A & B of 7 CFR Part 1773)

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ARRA Accounting, Monitoring and Reporting Requirements continued

Reporting Requirements:• There are general OMB reporting requirements and RUS specific

reporting requirements (see NOFA for detailed requirements)• OMB requirements:

– The awardee and each contractor engaged by the awardee must submit the following information to the relevant agency: • The total amount of Recovery Act funds received; • The amount of Recovery Act funds received that were expended or obligated to projects or

activities; • A detailed list of all projects or activities for which Recovery Act funds were expended or

obligated, including detailed information on any subcontracts or subgrants awarded by the awardee to include the data elements required to comply with the Federal Funding

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ARRA Accounting, Monitoring and Reporting Requirements continued

• BIP-Specific Reporting Requirements (see NOFA for detailed requirements): – Awardees must submit to RUS 30 calendar days after the end of each calendar

year quarter, balance sheets, income statements, statements of cash flow, rate package summaries, and the number of customers taking broadband service on a per community basis utilizing RUS’s Broadband Collection and Analysis System (BCAS).

– Annually on January 31, starting the first January 31 after completion of the project, awardees must submit to RUS, using the electronic reporting system provided by RUS: • Number of households and businesses subscribing to broadband service; • Number of households and businesses subscribing to broadband service that

receive improved access; and • Number of educational, library, health care, and public safety providers receiving

either new or improved access to broadband service. – Awardees shall specifically state in the applicable quarter when they have

received 67 percent of the award funds. Reaching this threshold will indicate that the awardee has substantially completed its project.

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Functions of Field Accountants

• Compliance Reviews– Verify receipt and disbursement of all loan and

grant funds – Verify all loan and grant costs

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Recordkeeping & Documentation RUS shall have reasonable opportunity, at all times

during business hours and upon prior notice, to have access to and the right to inspect the broadband system, and any other property encumbered by the mortgage or security agreement, and any or all books, records, accounts, invoices, contracts, leases, payrolls, timesheets, cancelled checks, statements, and other documents, electronic or paper of every kind belonging to or in the possession of the awardee or in any way pertaining to its property or business, including its subsidiaries, if any, and to make copies or extracts therefrom.

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Rural DevelopmentTelecommunications Program

1400 Independence Ave.Washington, DC 20250

www.usda.gov/rus/telecom

Contact Information

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

Mary Campanola, mary.campanola@usda.gov; Outreach Coordinator, 202-720-8822

Ken Kuchno, kenneth.kuchno@usda.gov; Director, Broadband Division, 202-690-4673

Gary Allan, gary.allan@usda.gov; Acting Director, Distance Learning & Telemedicine Program, 202-720-0665

General Field Representatives:

Broadband Specialist GFRs: Tony Tindall, anthony.tindall@wdc.usda.gov; 612-721-6432; Randy Jenkins, randy.jenkins@wdc.usda.gov; 316-733-7604

Other GFRs: http://www.usda.gov/rus/telecom/staff/gfr-state-list.htm

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bipcompliance@wdc.usda.gov

kenneth.ackerman@wdc.usda.govjames.murray@wdc.usda.govdiana.alger@wdc.usda.gov

ARRA Compliance Contacts