(a) To be eligible for funding, an Applicant may be either a nonprofit or for-profit organization, and must take one of the following forms:

(1) Corporation;

(2) Limited liability company (LLC);

(3) Cooperative or mutual organization;

(4) Indian tribe or tribal organization as defined in 25 U.S.C. 5304; or

(5) State or local government, including any agency, subdivision, or instrumentality thereof.

(b) For loan guarantees, the underlying loan must be issued to an entity that meets the requirements in this part.

To be eligible for assistance under this part, the Applicant must:

(a) Agree to complete the build-out of the broadband system described in the application within 5 years from the day the Applicant is notified that funds are available. Under the terms of the Award documents, this 5-year period will commence from the date that the legal documents are cleared, and funds are made available to the Awardee. The application must demonstrate that all proposed construction can be completed within this 5-year period with the exception of CPE;

(b) Demonstrate an ability to provide service at the broadband lending speed to all premises in the proposed funded service area; and

(c) Provide additional equity, if necessary, to ensure financial feasibility (see § 1738.204) as determined by the Administrator.

(d) For loan guarantees, the underlying loan must be issued on a project that meets all eligibility requirements required in this part.

(a) A service area may be eligible for assistance as follows:

(1) For loan and loan/grant combinations, the proposed funded service area is completely contained within a rural area. For loan guarantee applications, the proposed funded service area must be contained within an area with a population of 50,000 or less, as defined in 7 U.S.C. 1991(a)(13);

(2) For loan/grant combinations, at least 90 percent of the households in the proposed service area must not have access to broadband service. For loans and loan guarantees, at least 50 percent of the households in the proposed service area must not have access to broadband service;

(3) No part of the proposed funded service area has three or more incumbent service providers; and

(4) No part of the proposed funded service area overlaps with the service area of current RUS borrowers or grantees with outstanding obligations. Notwithstanding, after October 1, 2020, the service areas of grantees that are providing service that is less than 10 Mbps downstream or less than 1 Mbps upstream will be considered unserved unless, at the time of the proposed application, the grantee has begun to construct broadband facilities that will meet the minimum acceptable level of service established in § 1738.55.

(b) Non-contiguous areas in the same application will be considered separate service areas and must be treated separately for the purpose of determining service area eligibility. If one or more non-contiguous areas within an application are is determined to be ineligible, the Agency may consider the remaining areas in the application for eligibility.

(c) When determining the eligibility of a proposed funded service area, the Agency will use the information submitted through the public notice response (see § 1738.106) as well as all available information collected through various means by the Agency, including but not limited to consultation with other Federal and State agencies and RUS' own site-specific assessment of the level of service in an area.

(d) Mobile and satellite services will not be considered in making the determination that households in the proposed service area do not have access to broadband service.

(a) Applicants upgrading existing broadband facilities in their existing service area are exempt from the requirement concerning the limit of incumbent service providers in § 1738.53(a)(3). Additionally, applicants for loans or loan guarantee funding that have received a broadband loan under Section 601 of the RE Act are exempt from the requirement concerning the number of households in § 1738.53(a)(2) without access to broadband service.

(b) Applicants submitting one application to upgrade existing broadband facilities and to expand service beyond their existing service area must segregate the upgrade and expansion into two service areas, even if the upgrade and expansion areas are contiguous. The expansion service area will not be subject to any exemptions.

(c) Applicants will be asked to remove areas determined to be ineligible from their proposed funded service area. The application will then be evaluated based on what remains if the resultant service territory is de minimis in change. Otherwise, the Applicant will be requested to provide additional information to the Agency relating to the ineligible areas, such as updated pro forma financials. If the Applicant fails to respond, the application may be returned.

(a) Projects must meet the broadband build-out standards in paragraphs (a)(1) through (5) of this section in order to be considered for assistance.

(1) Projects with an Award term of less than 5 years must provide service at the broadband lending speed;

(2) Projects with an Award term of 5 to 10 years must provide service at four times the broadband lending speed;

(3) Projects with an Award term of 11 to 15 years must provide service at six times the broadband lending speed;

(4) Projects with an Award term of 16 to 20 years must provide service at eight times the broadband lending speed; and

(5) Projects with an Award term over 20 years must provide service at ten times the broadband lending speed.

(b) If an Applicant demonstrates that it would be cost prohibitive to meet the broadband lending speed in paragraph (a) of this section in the proposed funded service area due to the unique characteristics of the service territory, the Administrator may agree to utilize substitute service standards. In such cases, Applicants must document in their application why the unique characteristics of such an area make it cost prohibitive to provide service at the broadband lending speed. Note that the proof of burden on Applicants will be extremely high.

Assistance under this part may be used to pay for any of the following expenses:

(a) To fund the construction, improvement, or acquisition of all facilities required to provide service at the broadband lending speed to rural areas, including facilities required for providing other services over the same facilities.

(b) To fund the cost of leasing facilities required to provide service at the broadband lending speed if such lease qualifies as a capital/finance lease under GAAP. Notwithstanding, assistance can only be used to fund the cost of the capital/finance lease for no more than the first three years of the lease period. If an IRU qualifies as a capital/finance lease, the entire cost of the lease will be amortized over the life of the lease and only the first 3 years of the amortized cost can be funded.

(c) To fund an acquisition, provided that:

(1) The acquisition is necessary for furnishing or improving service at the broadband lending speed;

(2) The acquired service area, if any, meets the eligibility requirements set forth in § 1738.53;

(3) The acquisition cost does not exceed 50 percent of the broadband assistance; and

(4) For the acquisition of another entity, the purchase provides the Applicant with a controlling majority interest in the entity acquired.

(d) To refinance an outstanding obligation of the Applicant on another telecommunications loan made under the RE Act or on a non-RUS loan if that loan would have been for an eligible purpose under the Rural Broadband Program provided that:

(1) No more than 50 percent of the broadband assistance amount is used to refinance a non-RUS loan;

(2) The Applicant is current with its payments on the RUS telecommunications loan(s) to be refinanced; and

(3) The amortization period for that portion of the broadband loan that will be needed for refinancing will not exceed the remaining amortization period for the loan(s) to be refinanced. If multiple notes are being refinanced, an average remaining amortization period will be calculated based on the weighted dollar average of the notes being refinanced.

(e) To fund development costs in an amount not to exceed 5 percent of the total Award amount excluding amounts requested to refinance outstanding telecommunications loans. Development costs may be reimbursed only if they are incurred prior to the date on which notification of a complete application is issued (see § 1738.203) and a loan contract is entered into with RUS. Entities that meet the requirements in § 1738.101(d) may request this funding be provided as a grant. Otherwise, the funding will be provided in the form of a loan.

Assistance under this part must not be used for any of the following purposes:

(a) To fund operating expenses of the Applicant except for eligible development costs under § 1738.56(e).

(b) To fund any costs associated with the project incurred prior to the date on which notification of a complete application is issued (see § 1738.203), except for eligible development costs under § 1738.56(e).

(c) To fund the acquisition of the stock of an affiliate.

(d) To fund the purchase or acquisition of any facilities or equipment of an affiliate.

(e) To fund the purchase of CPE and the installation of associated inside wiring, unless the CPE will be owned by the Applicant throughout its economic life.

(f) To fund the purchase or lease of any vehicle unless it is used primarily in construction or system improvements.

(g) To fund the cost of systems or facilities that have not been designed and constructed in accordance with the Award contract and other applicable requirements.

(h) To fund broadband facilities leased under the terms of an operating lease, a short-term lease, or more than 3 years of a capital/finance lease.

(i) To fund merger or consolidation of entities.

(j) To fund non-capitalized labor in accordance with 2 CFR part 200 except for eligible development costs under § 1738.56(e).

(k) To provide grant funding, a subsidized loan or payment assistance to cover the costs to refinance an outstanding loan.