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Broadband Loan and Grant Programs in the USDA's Rural Utilities Service

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Abstract:

Given the large potential impact broadband access to the Internet may have on the economic development of rural America, concern has been raised over a "digital divide" between rural and urban or suburban areas with respect to broadband deployment. While there are many examples of rural communities with state of the art telecommunications facilities, recent surveys and studies have indicated that, in general, rural areas tend to lag behind urban and suburban areas in broadband deployment.

Citing the lagging deployment of broadband in many rural areas, Congress and the Administration acted in 2001 and 2002 to initiate pilot broadband loan and grant programs within the Rural Utilities Service (RUS) at the U.S. Department of Agriculture (USDA). Subsequently, Section 6103 of the Farm Security and Rural Investment Act of 2002 (P.L. 107-171) amended the Rural Electrification Act of 1936 to authorize a loan and loan guarantee program to provide funds for the costs of the construction, improvement, and acquisition of facilities and equipment for broadband service in eligible rural communities. Currently, RUS/USDA houses the only two federal assistance programs exclusively dedicated to financing broadband deployment: the Rural Broadband Access Loan and Loan Guarantee Program and the Community Connect Grant Program.

RUS broadband loan and grant programs have been awarding funds to entities serving rural communities since FY2001. A number of criticisms of the RUS broadband loan and grant programs have emerged, including criticisms related to loan approval and the application process, eligibility criteria, and loans to communities with existing providers.

The current authorization for the Rural Broadband Access Loan and Loan Guarantee Program expires on September 30, 2007. It is expected that the 110th Congress will consider reauthorization of the program as part of the farm bill. Some key issues pertinent to a consideration of the RUS broadband programs include restrictions on applicant eligibility, how "rural" is defined with respect to eligible rural communities, how to address assistance to areas with pre-existing broadband service, technological neutrality, funding levels and mechanisms, and the appropriateness of federal assistance. Ultimately, any modification of rules, regulations, or criteria associated with the RUS broadband program will likely result in "winners and losers" in terms of which companies, communities, regions of the country, and technologies are eligible or more likely to receive broadband loans and grants.

This report will be updated as events warrant.