In this episode of The Broadband Bunch, we are live from the 25th Annual Joint Conference of the Kentucky Telecom Association and Tennessee Broadband Association. We had the pleasure of speaking with the following industry leaders:
Shawn Arner: RUS was originally started as Rural Electrification Administration in 1935. It’s was a New Deal Program under the Roosevelt administration; its original mission was to provide electric service in rural areas. Then we were given the authority to provide telephone service. So, we’ve been making telephone loans in rural areas since 1949. Our mission morphed in 1995, when we changed to the Rural Utility Service, at that time we also had RUS main mission turned into more of a broadband financing type of a program, and we required all the facilities that we financed to be capable of providing broadband service in rural areas.
We have several products that we do offer to help in this process. We have two loan program, we also have two grant programs, and then finally we have a pilot program called the ReConnect Program, it’s offering $600 million in loans, grants and loan grant combos to provide broadband service in rural areas as well. Each of those programs, are very similar in certain ways, but they also do different things, so, those are our flavor of programs.
When we talk about providing broadband in rural areas, recognize that our agency, we’re not the ones that are providing the broadband service. The ones providing the broadband services are the ones that are really out in rural America, telephone utilities, cable TV companies, wireless entities, even electric co-ops, providing that are interested in providing broadband service in rural areas. We are a funding arm; we provide low interest rate loans and grants.
Craig Corbin: You’re talking about grants and loans for the past nine years, better than $6 billion to build out broadband, has been distributed, that is a phenomenal amount, and obviously already having made a big impact.
Shawn Arner: Indeed. When you think about it on a year to year basis, and then what has been done since 2010, I’m proud to work for this agency. Once again, it’s a public-private partnership. Everybody is very interested in getting a grant, but when you’re talking about loans, we have a responsibility, our mission is obviously to be the funding mechanism for entities, by broadband in rural areas, but we also have the taxpayer funds that we have to consider as well. We’re not just giving away money when we’re making a loan, we have to do a credit decision, we have to make sure that these entities can actually pay the loan back because we have a duty to be good stewards of the taxpayer money.
Craig Corbin: While there are many programs that are specific to a particular fiscal year, there are also programs I understand that would be called no-year money, that could roll over into a future fiscal year if they are not allocated in a particular year.
Shawn Arner: That’s exactly right. We have several programs that are no-year funds, meaning just like you said, if they are not utilized in a fiscal year, they can roll over and be utilized in that next fiscal year. We only have one program right now under RUS that is tied to a specific fiscal year, and that’s our Infrastructure Program. So if we don’t utilize all those funds, those funds do go away, and we have to get new appropriations from congress. But there are other programs, if they’re underutilizing, they usually are almost always used up. But in some cases, if they’re not, they can roll over to the next fiscal year to be used.
Craig Corbin: You mentioned the Infrastructure Program, as I remember, nearly $700 million available annually, with a two year principal deferral on that. And the beauty of the loan maturity is that, it is the life of the facilities that would be built plus three years, and on average it could be 16 to 20 years.
Shawn Arner: Exactly. It’s tied to the facilities that we are financing, the economic life of the facilities that we’re financing. So, if you’re getting into a cable, very cable intensive project that the cable facilities would obviously last a lot longer than some of the more electronic facilities, then it’s going to give you a longer loan term, so it can give you… and so those generally can be up to 22 years.