telecommunications program broadband … program broadband workshop 2014 farm bill broadband loan...
TRANSCRIPT
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Telecommunications Program
Broadband Workshop
2014 Farm Bill
Broadband Loan Program
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Evaluation Periods
Published in Federal Register each fiscal
year
Minimum of 2 evaluation periods
Funding split for each period
Application windows established
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Remember the New Definitions
Eligibility
Broadband Service
The amount of bandwidth
being delivered to the
household that will be used
to determine service area
eligibility
4 Mbps downstream
1 Mbps upstream
Construction
Broadband Lending Speed
The amount of bandwidth
that the funded facilities
must be capable of delivering to every
household
10 Mbps downstream
1 Mbps upstream
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Remember the New
Definitions
Incumbent Service Provider (per service
area)
1. Offers terrestrial broadband service
2. 5% of the households subscribe to
broadband service
3. Provides information to support number
of households taking broadband
service
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Remember the New
Definitions
Unserved area or household
An area or household that is not
offered broadband service (4 meg
down/ 1 meg up)
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Eligible Loan Purposes
Facilities required to provide service at
the broadband lending speed (10 meg
down/ 1 meg up)
Capital lease for facilities to provide
service at the broadband lending speed
(up to 3 years)
Pre-loan expenses (up to 5% of loan
amount)
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Eligible Loan Purposes
To fund an acquisition
1. Must be necessary to provide
service at broadband lending
speed
2. Acquired service area is eligible for
funding
3. Is not more than 50% of the loan
amount
4. Must be for a controlling majority
interest
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Eligible Loan Purposes
To refinance an RUS infrastructure loan
1. For providing service at the
broadband lending speed
2. Not more than 40% of the loan
3. Must be current on payments
4. Amortization period is not extended
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Ineligible Loan Purposes
Operating expenses
Any cost incurred prior to the applicant
receiving an offer letter for the loan other
than eligible pre-loan expenses
Acquisition of stock of an affiliate
Acquisition of facilities from an affiliate
Vehicles not for construction
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Ineligible Loan Purposes
Facilities not meeting the requirements
of the construction standards
Facilities leased under an operating
lease
To fund merger or consolidation of
entities
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Ineligible Loan Purposes
Purchase of CPE not owned unless:
Outside collateral is pledge equal to CPE cost
or
A revolving fund is established where the
actual cost of equipment is returned to fund
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Eligible Service Area
Service area is completely rural
15% of household are unserved households
Less than 3 incumbent service providers
Does not overlap current RUS borrowers
Does not overlap service areas of grantees that
RUS funded
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Service Area
Rural Service Area
1000 Households
150 unserved
households
2 incumbent
service providers
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Service Area
Rural Service Area
1000 households
100 underserved
households
100 underserved
households
2 incumbent service providers
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Multiple Service Area
100
HHs
unserved
150 HHs
unserved
10 HHs in town over
20,000
10 HHs
unserved
10 HHs
unserved 100 HHs 2 incumbent
service provider
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Service Area
Rural Service Area
1000 households
RUS borrower or
grantee – 100 HHs 300 unserved
households
2 incumbent service providers
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Service Area Exceptions
Title VI borrowers are exempt from the 15%
unserved requirement for upgrades in their
existing service area
Incumbent service providers are exempt from
the 3 incumbent rule for upgrades in existing
service area unless they are eligible for an
infrastructure loan
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Title VI Service Area
Title VI Service Area
1000 households with broadband service
Incumbent service providers
900 households with broadband service
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Incumbent Service Provider Service Area
Incumbent Service Provider Service Area
1000 households with broadband service
NOT ELIGIBLE FOR INFRASTRUCTURE LOAN
4 other incumbent service providers
400 households with broadband service
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Preliminary Assessment by
RUS
Is the service area rural
Does the service area overlap with RUS
borrowers or grantees
Does the service area overlap with a
pending application
Snapshot in time!
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Loan Terms
Treasury Rate
Maturity period based on life of
facilities
Two year principal deferment
starting with the first advance
$20 million maximum loan size
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Loan Security
First lien position on all assets and
revenue of applicant
First lien position can be shared
with other lenders
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Special Terms and Conditions
For service areas where at least 50% of the
households are unserved
Up to 4 year principle deferral
25% extension of standard amortization period
up to a maximum of 35 years
Modifications to the security arrangements
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Application Submission
Directly to National Office
NOT Through General Field Representative
Two hard copies and one electronic copy
RUS is developing an online applications system
and when that becomes available, all
applications will be required to be submitted
through the system
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Priority for Process an Application
1. No broadband service available
2. 75% of HHs are unserved
3. 50% of HHs are unserved
4. 25% of HHs are unserved
After an application window closes, applications will
be ranked by the criteria above for a place in the
processing queue and for available funding
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Complete Application
RUS Form 532
Service area maps
Evidence of equity
Market Survey
Competitive analysis
5 year pro forma
Network design
Estimated budget
Legal opinion
Licenses and
regulatory approvals
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Searchable Database
A searchable database has been set up
on the RUS webpage that includes all
approved and pending applications.
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Public Notice on Application
Identity of applicant
Map of the service area
Amount and type of support requested
Status of review of application
Estimated number of unserved
households
Types of services to be offered
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Public Notice Response
In order to be considered as an incumbent
service provider, existing service providers must
submit the appropriate information through the
RUS mapping tool.
If the necessary information is not submitted,
then the existing service provider will not be
considered an incumbent service provider for
the purpose of eligibility of an area.
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Requirements for Public Notice
Response
Number of customers currently offered
broadband service (4 down/ 1 up)
Number of customers currently taking
broadband service
Map of service territory
Other information
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Equity Requirement
Minimum equity is 10% of loan amount
Must be booked or evidence of
commitments must be in application
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Additional Cash
Requirement
If the 10% equity requirement is
insufficient to demonstrate a positive
cash balance then additional cash
infusions will be required
For start-ups, only 50% of projected
revenues will be used in this analysis
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Market Surveys
Must be completed for each service area
For service offerings projecting less than a 20%
penetration rate, no market survey is required
For service offerings projecting more than a 20%
penetration rate, a market survey is required
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Competitive Analysis
A competitive analysis must be
completed for each service area
identifying the competitor’s rate
packages for the proposed service
offerings
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Financial Information
Audited financial statements
If a subsidiary, audited financial
statements of parent
If reliance on an affiliate, audited
financial statements of affiliate
List of all outstanding obligations
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Financial Viability
Customer projections for each service
area
Balance Sheet, Income Statement, Cash
Flow Statement
Projected TIER of at least 1.25 by end of 5
year forecast period
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Network Design
Evidence that all premises can receive service at
the broadband lending speed
Description of any existing and all proposed
facilities
Estimated cost of proposed facilities
Evidence demonstrating that proposed
construction can be completed in three years.
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Construction
Must begin within 6 months from the date funds
are made available
All construction must be completed within 3
years. The 3 year period begins 120 days after
the loan documents are signed by RUS.
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Notification of Completeness
Application complete – will be ranked against
other complete application to determine
processing order
Application incomplete or inadequate –
applicant will be notified that application is
rejected and will be provided with a detailed list
of reasons
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Loan Offer
Unexecuted copy of all loan documents and
requirements
10 days to accept
Executed loan documents
120 days to return
If either deadline is not met, offer could be
withdrawn
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Reporting Requirements
Quarterly financial statements
Annual CPA Audit
Semiannual progress reports for 3 years
after project is completed
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Semiannual Progress Report
Number and location of businesses and
residence receiving broadband service
Types of facilities constructed
Tiers (speed & cost) of broadband service being
provided
Broadband adoption rate and number of new
customers taking broadband service
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Questions & Answers
Now it is time to stump the presenter.
Do you have a question I cannot answer?
I am good at making up answers!
I do work for the government.