WASHINGTON – In the 2002 farm bill, Congress authorized funds to help USDA’s Rural Development Agency extend broadband access to rural communities with 20,000 people or less.
To date, more than $200 million of the “Access to Broadband” funds are in use, but the biggest chunk of the $2.2 billion program is yet to be allocated.
Getting the money out of the government’s hands and into community commerce has been a tedious process. And it’s that process that could be intimidating would-be loan applicants.
In June and July of this year the RDA hosted five regional rural broadband funding workshops to assist potential broadband loan applicants with information and technical assistance on how to apply for broadband infrastructure funding.
Hopefully the workshops will help loan applicants and the RDA speed the application process and identify worthy recipients.
Rural Utilities Service administrator Hilda Gay Legg and her staff are working to ensure the rest of the money is allocated according to Congressional guidelines that support a plan to provide broadband access for all Americans by 2007.
“I am totally, unequivocally convinced the future success of rural America is tied to the telecommunications infrastructure,” Legg says. “Broadband access is today’s equivalent of the interstate highway system. It’s the way we get goods and services to market. Rural people need the same access to markets that urban people have.”
The barrier that’s kept the money from being allocated is many of the applicants do not meet the criteria for receiving loans. By May 15, 2004, RDA evaluated 91 applications, but only 16 were approved and $206.1 million dispensed.
Legg says many applicants sent in incomplete requests to be first in the queue. Those had to be returned for more work. Some of the requests are multi-state applications proposing to serve 75 to 125 communities, which further complicates the process. Some of those communities may be currently served by a competitor. The RDA must determine what portion, if any, of a competitive market the applicant will be able to penetrate.
Hopefully, the recent workshops will eliminate the time consuming task of returning applications and requesting more information from applicants.
“We have a responsibility to make sure our loans are sound and the recipient has a good chance of being successful in building out the broadband infrastructure in the community they designate,” Legg says. “While we are firmly committed to the goals of the broadband program, we also have a responsibility to the taxpayers to make good, feasible loans.
“Now that we’ve had some time to analyze the staffing requirements and procedures, we plan to make additional improvements. The result should be significantly more broadband loans to rural communities over the coming year,” Legg says.
“Even in today’s technology-driven marketplace, broadband service, while critically important, is still not deemed a necessity of life in the same manner as electricity, telephone service, and water and waste disposal. Broadband is a commodity that must be properly marketed. It is more difficult to predict what market penetration will be.”
Large communications companies and private lenders shy away from small communities because they do not see the return on investment they want. While the RDA does not need to see the same return as a private lender, the agency needs reasonable assurance its loan will be productive for rural America and be repaid to the taxpayers.
“If we make bad loans, and the broadband venture fails in a community, it could be a decade or more before anyone else would want to try to go back in,” Legg says. “It would reinforce the private lenders view of how risky it is.”
Applicants are required to submit a business plan, market survey, financial plan and system design. They must have cash or other assets equal to 20 percent of the requested loan amount and have cash equivalent to one year of operating expenses, whichever is greater.
For more information visit a local USDA Rural Development office or the USDA’s Web site at www.rurdev.usda.gov.