Telecommunications System Planning and Design Criteria, and Procedures

SUMMARY: The Rural Electrification Administration (REA) proposes to

amend its interim rule regarding the State Telecommunications

Modernization Plan requirements. The proposed changes are in response

to comments received from the public regarding the interim rule. All

Telephone Borrowers will be affected by this proposed rule.

DATES: Comments concerning this proposed rule must be received by REA

or bear a postmark or its equivalent no later than November 28, 1994.

ADDRESSES: Submit written comments to Matthew P. Link, Director, Rural

Telephone Bank Management Staff, U.S. Department of Agriculture, Rural

Electrification Administration, 14th & Independence Avenue, SW., Room

2832-S, Washington, DC 20250-1500. REA requests an original and three

copies of all comments (7 CFR part 1700). All comments received will be

made available for public inspection at Room 2238-S, at the address

listed above, between 8:30 a.m. and 5 p.m. (7 CFR 1.27(b)).

FOR FURTHER INFORMATION CONTACT: Robert Peters, Assistant

Administrator, Telephone Program, at the address listed above,

telephone number (202) 720-9554.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This proposed rule has been determined to be significant and was

reviewed by the Office of Management and Budget (OMB) under Executive

Order 12866.

Executive Order 12778

This proposed rule has been reviewed under Executive Order 12778,

Civil Justice Reform. If adopted, this proposed rule will not: (1)

Preempt any State or local laws, regulations, or policies, unless they

present an irreconcilable conflict with this rule; (2) Have any

retroactive effect; and (3) Require administrative proceedings before

parties may file suit challenging the provisions of this rule.

Regulatory Flexibility Act Certification

REA has determined that this proposed rule will not have a

significant economic impact on a substantial number of small entities,

as defined in the Regulatory Flexibility Act (5 U.S.C. 601 et seq.).

The REA program provides loans to REA Borrowers at interest rates and

terms that are more favorable than those generally available from the

private sector. REA Borrowers, as a result of obtaining federal

financing, receive economic benefits which ultimately offset any direct

economic costs associated with complying with REA regulations and

requirements. Moreover, this action is in response to the Rural

Electrification Loan Restructuring Act of 1993.

Information Collection and Recordkeeping Requirements

The reporting and recordkeeping requirements contained in the

proposed rule have been submitted to OMB for approval in accordance

with the Paperwork Reduction Act of 1980 (44 U.S.C. 3501 et seq.). Send

comments regarding this collection of information to: Department of

Agriculture, Clearance Office, Office of Information Resources

Management, Room 404-W, Washington, DC 20250, and Regulatory Affairs of

OMB, Attention: Desk Officer for USDA, Room 3201, New Executive Office

Building, Washington, DC 20503.

National Environmental Policy Act Certification

REA has determined that this proposed rule will not significantly

affect the quality of the human environment as defined by the National

Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.). Therefore,

this action does not require an environmental impact statement or

assessment.

Catalog of Federal Domestic Assistance

The program described by this proposed rule is listed in the

Catalog of Federal Domestic Assistance Programs under 10.851, Rural

Telephone Loans and Loan Guarantees, and 10.852, Rural Telephone

Bank Loans. This catalog is available on a subscription basis from

the Superintendent of Documents, the United States Government

Printing Office, Washington, DC 20402-9325.

Executive Order 12372

This proposed rule is excluded from the scope of Executive Order

12372, Intergovernmental Consultation. A Notice of Final Rule entitled

Department Programs and Activities Excluded from Executive Order 12372

(50 FR 47034) exempts REA and RTB loans and loan guarantees to

governmental and nongovernmental entities from coverage under this

Order.

Background

On December 20, 1993, REA published an interim rule (58 FR 66250)

to incorporate changes to telephone loan policies required by the Rural

Electrification Loan Restructuring Act of 1993 (RELRA) (107 Stat.

1356). RELRA amended several provisions of the Rural Electrification

Act of 1936, as amended (7 U.S.C. 901 et seq.) (RE Act), and mandated a

restructuring of the telephone loan program.

On April 13, 1994, REA adopted its interim rule as a final rule (59

FR 17460) with one exception, 7 CFR Part 1751, Telecommunications

System Planning and Design Criteria, and Procedures. Because of the

overwhelming response and concerns regarding the requirements of the

State Telecommunications Modernization Plan (Modernization Plan), REA

is proposing to amend 7 CFR part 1751, subpart B.

As revised, this Rule would require that Modernization Plans, at a

minimum, apply to all REA borrowers. If a Modernization Plan is

developed by the PUC or the State Legislature, REA encourages, but does

not require, that the Modernization Plan's requirements apply to the

rural service areas of all Telecommunications Providers. A State's

decision not to include non-REA borrowers will not prejudice REA

approval of their Plan. The PUC or the State Legislature may also, at

its option, extend coverage of the Modernization Plan to all service

areas of all Telecommunications Providers in the State. In addition,

while requirements contained in Sec. 1751.106 apply only to wireline

services, the State Legislature or PUC, at its discretion, may extend

coverage of Modernization Plans to wireless or other communications

services in a State as it deems appropriate.

It is REA's policy that every State have a Modernization Plan which

provides for the improvement of the State's Public Switched Network. If

the Plan Developer is either the State Legislature or the PUC, such

entity must submit for REA approval its Modernization Plan by a date

one year from issuance of the Final Rule. After this date, if a State

or its PUC declines or fails to submit for REA approval its

Modernization Plan, eligibility to develop the Plan passes to a numeric

majority of the Borrowers within the State. While there is no time

limit requiring States to have an approved plan in place, REA, as

required by RELRA, will not approve any direct loans in States without

such a plan.

During the comment period, REA received 81 comments regarding the

interim rule, and these comments were taken into consideration in

preparing the proposed amendments. Comments were received from the

following:

(1) Alaska Public Utilities Commission.

(2) Arkansas Public Service Commission.

(3) California Public Utilities Commission.

(4) Joint comments from the Colorado Office of Consumer Counsel,

Texas Office of Public Utility Counsel, Iowa Office of Consumer

Advocate, and D.C. Office of the People's Counsel.

(5) Colorado Public Utilities Commission Staff.

(6) Florida Public Service Commission.

(7) Idaho Public Utilities Commission.

(8) Illinois Commerce Commission.

(9) Indiana Utility Regulatory Commission.

(10) Iowa Utilities Board.

(11) Michigan Public Service Commission Staff.

(12) Minnesota Public Utilities Commission.

(13) Missouri Public Service Commission.

(14) Nebraska Public Service Commission.

(15) New England Conference of Public Utilities Commissioners, Inc.

(16) New Hampshire Office of the Consumer Advocate.

(17) New York State Department of Public Service.

(18) North Carolina Public Staff Utilities Commission.

(19) North Dakota Public Service Commission.

(20) Pennsylvania Office of Consumer Advocate.

(21) Pennsylvania Public Utility Commission.

(22) Tennessee Public Service Commission.

(23) Texas Public Utility Commission.

(24) Utah Department of Commerce Division of Public Utilities.

(25) Virginia State Corporation Commission.

(26) Wisconsin Public Service Commission.

(27) ALLTEL Service Corporation.

(28) Century Telephone Enterprises, Inc.

(29) Golden West Telecommunications Cooperative, Inc.

(30) Great Plains Communications, Inc.

(31) GTE Service Corporation.

(32) Hiawatha Telephone Company.

(33) Hills Telephone Company, Inc.

(34) Interstate Telecommunications Cooperative, Inc.

(35) James Valley Cooperative Telephone Company.

(36) Kingdom Telephone Company.

(37) Mark Twain Rural Telephone Company Group.

(38) Martin and Associates, Inc., submitted comments on behalf of

16 local exchange carriers located in South Dakota.

(39) Matanuska Telephone Association, Inc.

(40) MEBTEL Communications.

(41) Pacific Telecom, Inc.

(42) Project Mutual Telephone Company.

(43) Rochester Telephone Corporation.

(44) Sioux Valley Telephone Company.

(45) Steelville Telephone Exchange, Inc.

(46) TDS Telecom.

(47) United and Central Telephone Companies.

(48) Young, Van Assenderp, Varnadoe & Pennon, P.A., submitted

comments on behalf of 7 REA Telephone Borrowers located in Florida and

Alabama.

(49) Association of Communications Engineers.

(50) Eastern REA Borrowers Association.

(51) Idaho Telephone Association.

(52) Illinois Independent Telephone Association.

(53) Illinois Telephone Association.

(54) Iowa Telephone Association.

(55) Missouri Telephone Association.

(56) Montana Telephone Association.

(57) Joint comments from the National Rural Telecom Association,

and the Western Rural Telephone Association.

(58) Nebraska Telephone Association.

(59) New York State Telephone Association, Inc.

(60) North Dakota Association of Telephone Cooperatives.

(61) National Telephone Cooperative Association.

(62) Joint comments from the Oklahoma Rural Telephone Coalition,

Rural Arkansas Telephone Systems, and Texas Statewide Telephone

Cooperative, Inc.

(63) Organization for the Protection and Advancement of Small

Telephone Companies.

(64) Oregon Independent Telephone Association.

(65) Pennsylvania Telephone Association.

(66) Telecommunications Industry Association.

(67) Texas Telephone Association.

(68) United States Telephone Association.

(69) Washington Independent Telephone Association.

(70) Ameritech Operating Companies.

(71) Bell Atlantic Telephone Companies.

(72) BellSouth Telecommunications, Inc.

(73) NYNEX (New York Telephone Company and New England Telephone

and Telegraph Company).

(74) Pacific Bell and Nevada Bell.

(75) Southwestern Bell Corporation.

(76) U.S. West Communications, Inc.

(77) MCI Telecommunications Corporation.

(78) Central Associated Engineers, Inc.

(79) Fred Williamson & Associates, Inc.

(80) Hastad Engineering Company.

(81) Hicks & Ragland Engineering Co., Inc.

1. Comment Summary: REA should not specify specific technologies.

Response: This was a nearly unanimous comment and one with which

REA concurs. REA's intent is to specify information carrying

capability, i.e., bit rate. References to specific technologies, like

ISDN, have been removed.

2. Many commenters asserted that REA exceeded its statutory

authority in one or more of the following ways:

a. Comment Summary: Congress intended State Telecommunications

Modernization Plans to be guidelines.

Response: Many commenters believe that the use of the word

``objectives'' in RELRA implies non-binding guidelines. REA believes

the commenters are taking the word out of context. The entire provision

is as follows:

``REQUIREMENTS.--For purposes of subparagraph (A), a

telecommunications modernization plan must, at a minimum, meet the

following objectives.''

REA believes that an objective that must be met is mandatory. In

the interim regulation (7 CFR part 1751, published December 20, 1993),

REA set forth both ``requirements'' and ``objectives'' to be contained

in the Modernization Plan. Requirements were to be binding while

objectives were only goals or targets. This may have led to confusion

because both words are used in RELRA. In the proposed rule, REA has

included only requirements.

b. Comment Summary: REA went beyond the intent of RELRA by

establishing timeframes for modernization.

Response: REA set timeframes because a requirement with no due date

is not a requirement.

REA believes that advanced telecommunications services should be

available to the public within a reasonable time after they are

developed. Broad experience in bringing modern telephone service to

rural America teaches the value of caution and reflection before

imposing binding requirements on future business activities. Varying

construction schedules, economic conditions and rates of technological

innovation affect even the most careful projections. REA conservatively

projected the reasonably expected growth of both the public's need for

telecommunications services and the ability of Telecommunications

Providers and equipment manufacturers to provide those services.

REA consulted both its past experience and its expectations of

future technological development before setting the short-, medium- and

long-term deadlines in the regulation. Our experience with new

technology such as buried cable, digital switching, and fiber optic

systems where the widespread deployment into the telecommunications

network took two to five years, lead us to adopt the five year phase-in

concept. The timetable is achievable, given the telecommunications

services presently available, the resources of the Telecommunications

Providers, and the accelerating engineering achievements likely in the

next few years.

The regulations phase in the requirements in three steps to provide

for an orderly deployment of these telecommunications services.

Facilities constructed more than one year after REA approves a

Modernization Plan are required to provide those services that can be

produced by equipment now in existence. The one year delay allows for

construction-in-progress to be completed before the Modernization Plan

requirements go into effect. The requirements for the medium and long

terms simply expand the coverage of the requirements so that when the

long term period (11-16 years) is reached, all subscribers will have

the services deployed during the short term period available to them.

c. Comment Summary: RELRA does not require that telecommunications

improvements be deployed ``concurrently'' in rural and nonrural areas

but only that ``the plan must provide for uniform deployment schedules

to ensure that advanced services are deployed at the same time in rural

and nonrural areas''.

Response: Several commenters thought that REA intended all

improvements to be made simultaneously throughout a service area. REA

understands that there is a logical order to providing improvements and

that they will often happen first in nonrural areas. REA intends that

they should be deployed and available at approximately the same time in

rural and nonrural areas. For example, if digital switching technology

is being deployed in a nonrural area, replacement switches in rural

areas would also employ digital technology. This does not mean that if

a switch was replaced in a nonrural area, a switch would have to be

replaced in the rural area. In the proposed rule, REA has clarified

this requirement. See Sec. 1751.106(a).

d. Comment Summary: REA has no basis for requiring either the

elimination of mileage and/or zone charges or that Telecommunications

Providers adopt flexible tariffs. These issues concern rates and are

not ``service standards''.

Response: The stated requirement in RELRA is the elimination of

party line service. REA's experience has been that imposing zone and

mileage charges on one-party service creates a large disincentive for

subscribers to choose this service. However, REA will not require the

Modernization Plan contain a provision to eliminate zone and mileage

charges.

RELRA provides that the Modernization Plan ``must provide for the

availability of telecommunications services for improved business,

educational, and medical services.'' Rigid rate structures have served

as the primary impediment to the provision of distance learning and

medical link services. REA has seen cases where states have set

wideband rates in direct proportion to the voiceband rate resulting in,

for example, rates for schools far beyond what they can afford. REA has

clarified its intent on this subject in Sec. 1751.106(e).

e. Comment Summary: It is not always practical to build only non-

loaded twisted pair plant.

Response: REA concurs and has given the Plan Developer some

discretion in this matter. Section 1751.106(g)(2)(ii) has been revised

to allow a Telecommunications Provider to request additional time from

the Plan Developer in the case of a PUC or State Legislature developed

plan, or from the REA in the case of a REA Borrower developed plan. The

Plan Developer or REA, as the case may be, must consider each request

separately and can grant additional time only if either the best

available telecommunications technology lacks the capability to enable

the Telecommunications Provider to comply with the non-loaded

requirement or complying with the requirement would impose prohibitive

cost on the Telecommunications Provider.

f. Comment Summary: Nothing in the law suggests the need for 150

Mb/sec transmission rate for video. Many compression technologies are

available which allow video to be transmitted over ordinary telephone

lines.

Response: In the interim rule, all references to provision of 150

Mb/sec service were non-binding ``objectives'', see paragraph 2a. REA

focused on the requirement in RELRA that telephone lines be capable of

carrying at least 1,000,000 bits per second. REA adjusted this to the

standard North American rate of 1.544 Mb/sec. Such a rate allows for

both the transmission of at least 1 million bits per second and for the

transmission of modest quality, highly compressed video. A higher rate

is not required by the proposed rule.

3. Comment Summary: Many radio based services such as cellular and

BETRS will be unable to meet REA bandwidth requirements.

Response: REA interprets the Modernization Plan requirements of

RELRA to apply to service provided by telephone lines, i.e., ``Wireline

Service'', the basic service most Americans receive. This

interpretation has been clarified in the proposed rule.

4. Comment Summary: REA has not defined ``Public Switched Network''

or ``Telecommunications Providers''.

Response: REA has defined these terms in the proposed regulation.

5. Comment Summary: The interim rule violates section 202 of the RE

Act which states that nothing in the RE Act shall be construed to

deprive any State commission of jurisdiction to regulate telephone

service, including the rates for such service.

Response: REA believes there is no conflict between RELRA and

section 202 of the RE Act. The PUC is neither required to develop a

Modernization Plan nor to approve REA loans that are consistent with a

Modernization Plan whoever is the Plan Developer. Therefore the PUC's

jurisdiction to regulate telephone service is not impaired. No change

has been made to the regulation based on this comment.

6. Comment Summary: REA has not considered how the proposed

services can be offered at affordable rates. The regulation could

result in an REA Borrower-developed Modernization Plan which requires

investments that a PUC would not approve.

Response: The requirements included in the proposed regulation

apply almost entirely to new construction. New construction has to be

economically justified to receive either REA financing or PUC approval

for inclusion in the rate base. REA believes strongly in universal

service and would not issue a regulation which it believed to be an

impediment to that goal. No change has been made to the regulation

based on these comments.

7. Comment Summary: REA should include a requirement that other

interested parties be notified of intent to develop a Modernization

Plan.

Response: REA concurs with this comment and has changed the wording

on notification to include other interested parties. See Sec. 1751.102

(b) and (c)(2).

8. Comment Summary: A Modernization Plan should cover only REA

Borrowers or should cover all Telecommunications Providers only if

developed by the PUC or a State Legislature.

Response: As redrafted, the Modernization Plan must apply only to

REA Borrowers unless a PUC or a State Legislature decides, at its

option, to apply the Modernization Plan to non-REA Borrower

Telecommunications Providers. The REA does, however, encourage the PUCs

and State Legislatures to apply the Modernization Plans to all

Telecommunications Providers in the State.

9. Comment Summary: REA requires integration of PCS when it doesn't

exist.

Response: REA intended that a Modernization Plan should encourage

integration of new technologies into the network. REA has substituted

``emerging technologies'' for PCS and clarified its intent. See

Sec. 1751.106(d).

10. Comment Summary: Modernization Plans should be based on market

principles.

Response: The modern telecommunications system envisioned by RELRA

and the Modernization Plan requirements can succeed only if it is

supported by market demand. REA's electric and telecommunications

programs have repeatedly demonstrated how quickly rural America takes

advantage of new utility services. RELRA and the Modernization Plans

lead the way for today's nonrural and rural subscribers to receive the

modern telecommunications services they want and need. REA believes

that the Modernization Plan requirements of this regulation rest on a

sound economic basis. True to its statutory mandate, REA will finance

projects only if it believes there is adequate security and the loan

will be repaid within the time agreed.

11. Comment Summary: It is untimely for REA to develop a rule when

other laws concerning telecommunications have been introduced in

Congress. It is inappropriate for REA to develop rules for

telecommunications. That should be the responsibility of the FCC.

Response: REA, as the agency responsible for promoting rural

telecommunications, has long experience in setting the engineering and

technical standards for service in rural areas and is ideally suited

for the responsibility it was given by Congress. REA is working to

ensure that Modernization Plan requirements and the Proposed Rule

governing their preparation are flexible enough to accommodate evolving

national policies promoting the National Information Infrastructure.

REA will revise, within our statutory constraints, these

regulations and approve amendments to Modernization Plans if the

National Information Infrastructure develops along lines not presently

envisioned. However, the legislative imperative of RELRA and rural

America's urgent need for modern telecommunications services require

that the regulations not be delayed.

12. Comment Summary: The rule is not clear on Plan Developer

eligibility as related to time. The law says the one year period starts

after publication of the final rule. Can Borrowers submit a

Modernization Plan before the end of the year if the PUC or State

Legislature does not intend to? What if a PUC or State Legislature

submits a Modernization Plan on the last day? Won't loans be delayed if

a PUC or State Legislature does not develop a plan and an REA Borrower-

developed one has not been approved?

Response: RELRA sets forth the method of determining Plan Developer

eligibility. With regard to the specific points mentioned above:

a. The one year period starts with publication of the final rule

developed in response to comments on this proposed rule.

b. Modernization Plans developed by REA Borrowers will not be

accepted until a PUC's and State Legislature's eligibility has expired,

unless the PUC and State Legislature officially reject eligibility.

c. A Modernization Plan submitted on the last day will be approved

by REA if it meets the minimum requirements without alteration. The

proposed rule includes language which recommends that to ensure a PUC

or a State Legislature has sufficient time to respond to any REA

comments on its proposed Modernization Plan, the PUC or State

Legislature should submit its plan at least 90 days in advance of the

expiration of its eligibility. See Sec. 1751.104(b)(2).

d. Loans will not be made between the end of a PUC's and State

Legislature's eligibility and the approval of a Borrower-developed

Modernization Plan.

13. Comment Summary: The regulation should allow for waivers to a

Modernization Plan.

Response: REA has changed the regulation to allow the Modernization

Plan developer the authority to grant time extensions necessitated by

the state of technology as long as the extensions are granted on a

case-by-case basis, do not exceed five years, and the circumstances for

which extensions are granted are spelled out in the Modernization Plan.

See Sec. 1751.106(b).

14. Comment Summary: What is a generic design for Broadband

service? How can this be done without local power?

Response: REA believes that the lack of consensus on how to bring

wider band switched service to the home and small business,

particularly in rural areas, means that Telecommunications Providers

continue to build and rebuild their systems essentially for traditional

voiceband service. In many cases this plant can not be adapted to wider

band services.

In the interim rule (dated December 20, 1993) REA had required a

``generic design'' for broadband service. Since REA is no longer

including non-binding goals in the proposed regulation, the requirement

for a generic design has been changed to a requirement for the

developer to provide a strategic development proposal which provides

the Plan Developer's vision of a State telecommunications structure for

the future.

With regard to local power, REA retains a concern over system

reliability. The proposed rule requires that no matter what level of

service is being offered, sufficient system power must be available to

provide voice service during electric utility outages. See

Sec. 1751.106(h)(2)(ii) and (i)(2)(iv).

General Summary: It is REA's belief that national

telecommunications ``highways'' will not and cannot be fully utilized

unless improvements are made to what might be called the

telecommunications ``driveways'', the local loops. Most loops cannot

transmit information over 9600 bits per second (b/s). Consequently,

many advanced telecommunications services are not available on the

Public Switched Network or, where available, operate only on short

loops. This limits use of these advanced services to densely populated

areas.

RELRA requires that telephone lines be capable of transmitting: (1)

Information at no less than 1,000,000 bits per second (1Mb/s) and (2)

video images. REA believes both requirements can be satisfied by

telephone lines which can transmit and receive 1.544 Mb/s, the North

American standard digital transmission rate. This rate is sufficient to

carry both 1 million bits per second and highly compressed, modest

quality video.

To carry 1.544 Mb/sec, the capacity of ordinary telephone loops

must be increased by several orders of magnitude. The other

requirements in the law are more easily met. Therefore, improving the

loop has been REA's focus in preparing minimum Modernization Plan

requirements.

REA believes that the requirements and time limits set forth in

this section will achieve the service standards of RELRA.

However, REA is concerned about coordination between States. REA

recommends that Modernization Plan Developers should work with Plan

Developers in other States both before and after their Modernization

Plans are approved to coordinate proposed improvements.

REA recommends that Modernization Plan Developers give

consideration to planning for outside plant which can ultimately

provide future broadband Wireline Service with a bandwidth equivalent

to a digital rate on the order of 150 Mb/sec. Such facilities could

carry one or more channels of conventional video with the quality

depending on the modulation technique.

List of Subjects in 7 CFR Part 1751

Loan programs--communications, Telecommunications, Telephone.

For reasons set forth in the preamble, chapter XVII of Title 7 of

the Code of Federal Regulations is proposed to be amended by revising

part 1751 to read as follows:

PART 1751--TELECOMMUNICATIONS SYSTEM PLANNING AND DESIGN CRITERIA,

AND PROCEDURES

Subpart A--[Reserved]

Sec.

1751.1-1751.99 [Reserved]

Subpart B--State Telecommunications Modernization Plan

1751.100 Definitions.

1751.101 General.

1751.102 Modernization Plan developer--eligibility.

1751.103 Loan requirements.

1751.104 Obtaining REA approval of a proposed Modernization Plan.

1751.105 Amending a Modernization Plan--

1751.106 Modernization Plan--requirements.

Authority: 7 U.S.C. 901 et seq., 1921 et seq.

Subpart A--[Reserved]

Secs. 1751.1-1751.99 [Reserved]

Subpart B--State Telecommunications Modernization Plan

Sec. 1751.100 Definitions.

As used in this subpart:

Bit rate. The rate of transmission of telecommunications signals or

intelligence in binary (two state) form in bits per unit time, e.g.,

Mb/s (megabits per second), kb/s (kilobits per second), etc.

Borrower. Any organization which has an outstanding telephone loan

made by REA or the Rural Telephone Bank, or guaranteed by REA, or which

has a completed loan application with REA.

Emerging technologies. New or not fully developed methods of

telecommunications.

Hardship loan. A loan made by REA under section 305(d)(1) of the RE

Act bearing interest at a rate of 5 percent per year.

Local power. Electrical source, provided by someone other than the

telecommunications utility, used for powering a subscriber's station

equipment.

Loop. A dedicated facility which connects the customer's station to

the Public Switched Network. The loop may consist of twisted pair

copper wire, coaxial cable, fiber optic cable, radio, or a combination

of these. It may also include dedicated electronic or lightwave

transmission equipment.

Modernization Plan (State Telecommunications Modernization Plan). A

plan, which has been approved by REA, for improving the Public Switched

Network of a State. The Modernization Plan must conform to the

provisions of this subpart.

Plan Developer. The PUC, State Legislature, or a numeric majority

of the REA borrowers within the State that have the responsibility for

creating the Modernization Plan.

Public Switched Network. The network intended for public use

furnished by Telecommunications Providers on a switched basis.

PUC (Public Utilities Commission). The public utilities commission,

public service commission or other State body with such jurisdiction

over rates, service areas or other aspects of the services and

operation of providers of telecommunications services as vested in the

commission or other body authority, to the extent provided by the

State, to guide development of telecommunications services in the

State.

RE Act. The Rural Electrification Act of 1936, as amended (7 U.S.C.

901 et seq.).

REA cost-of-money loan. A loan made under section 305(d)(2) of the

RE Act bearing an interest rate as determined under 7 CFR 1735.31(c).

REA cost-of-money loans are made concurrently with RTB loans.

RTB loan. A loan made by the Rural Telephone Bank (RTB) under

section 408 of the RE Act bearing an interest rate as determined under

7 CFR 1610.10. RTB loans are made concurrently with REA cost-of-money

loans.

State. Each of the 50 states of the United States, the District of

Columbia, and the territories and insular possessions of the United

States. This does not include countries in the Compact of Free

Association.

Telecommunications. The transmission or reception of voice, data,

sounds, signals, pictures, writings, or signs of all kinds, by wire,

fiber, radio, light, or other visual or electromagnetic means.

Telecommunications Providers. Local exchange carriers, competitive

access providers, and interexchange carriers which provide

telecommunications service in the State covered by the Modernization

Plan and such other entities providing telecommunications services as

the developer of the Modernization Plan (See Sec. 1751.102) may

determine.

Wireline Service. Telecommunications service provided over

telephone lines. It is characterized by a wire or wirelike connection

carrying electricity or light between the subscriber and the Public

Switched Network. Wireline Service implies a physical connection.

Although radio may form part of the circuit, it is not the major method

of transmission as in radiotelephone.

Sec. 1751.101 General.

(a) It is the policy of REA that every State have a Modernization

Plan which provides for the improvement of the State's Public Switched

Network.

(b) A proposed Modernization Plan must be submitted to REA for

approval. REA will approve the proposed Modernization Plan if it

conforms to the provisions of this subpart. Once obtained, REA's

approval of a Modernization Plan cannot be rescinded.

(c) The Modernization Plan shall not interfere with REA's authority

to issue such other telecommunications standards, specifications,

requirements, and procurement rules as may be promulgated from time to

time by REA including, without limitation, those set forth in 7 CFR

part 1755.

(d) The Modernization Plan must, at a minimum, apply to all REA

borrowers. If a Modernization Plan is developed by the PUC or the State

Legislature, REA encourages, but does not require, that the

Modernization Plan's requirements apply to the rural service areas of

all Telecommunications Providers. A State's decision not to include

non-REA borrowers will not prejudice REA approval of their Plan. The

PUC or the State Legislature may also, at its option, extend coverage

of the Modernization Plan to all service areas of all

Telecommunications Providers in the State. In addition, while

requirements contained in Sec. 1751.106 apply only to wireline

services, the State Legislature or PUC, at its discretion, may extend

coverage of Modernization Plans to wireless or other communications

services in a State as it deems appropriate.

Sec. 1751.102 Modernization Plan developer--eligibility.

(a) Each State, either by statute or through its Public Utility

Commission, is eligible until one year after publication of the final

rule in the Federal Register to develop a proposed Modernization Plan

and deliver it to REA. REA will review and consider for approval all

PUC or State Legislature-developed Modernization Plans received by REA

within this one year period. The review and approval, if any, may occur

after the one year period ends even though the PUC or State Legislature

is no longer eligible to submit a proposed Modernization Plan.

(b) The PUC must notify all Telecommunications Providers in the

State that are part of the Public Switched Network and other interested

parties of its intent to develop a proposed Modernization Plan. The PUC

is encouraged to consider all such Providers' and interested parties'

views and incorporate these views in the Modernization Plan.

(c) If the State Legislature or PUC is no longer eligible to

develop a Modernization Plan, as described in paragraph (a) of this

section, eligibility to develop the Modernization Plan passes to a

numeric majority of the Borrowers within the State. In this case, the

following apply:

(1) All Borrowers shall be given reasonable notice of and shall be

encouraged to attend and contribute to all meetings and other

proceedings relating to the development of the Modernization Plan; and

(2) Borrowers developing a Modernization Plan are encouraged to

solicit the views of other Telecommunications Providers and interested

parties in the State.

(3) There is no time limit placed on the REA Borrowers to develop a

Modernization Plan, however, REA, as required by the Rural

Electrification Loan Restructuring Act of 1993 (107 Stat. 1356), will

not approve any direct loans in States that do not have an approved

Modernization Plan. See Sec. 1751.103 of this subpart.

Sec. 1751.103 Loan requirements.

For information about loan eligibility requirements in relation to

the Modernization Plan, see 7 CFR part 1735. In particular, one year

after publication of the final rule, REA will make hardship loans, REA

cost-of-money loans, and RTB loans for facilities and other RE Act

purposes for Telephone Borrowers in a State only if:

(a) The State has an REA approved Modernization Plan; and

(b) The Borrower is participating in the Modernization Plan for the

State. A Borrower is considered to be participating if, in REA's

opinion, the purposes of the loan requested by the Borrower are

consistent with the Borrower achieving the requirements stated in the

Modernization Plan within the timeframe stated in the Modernization

Plan unless REA has determined that achieving the requirements is not

technically or economically feasible.

Sec. 1751.104 Obtaining REA approval of a proposed Modernization Plan.

(a) To obtain REA approval of a proposed Modernization Plan, the

Plan Developer must submit the following to REA:

(1) A certified copy of the statute or PUC order, if the State is

the Plan Developer, or a written request for REA approval of the

proposed Modernization Plan signed by an authorized representative of

the Plan Developer, if a majority of Borrowers is the Plan Developer;

and

(2) Three copies of the proposed Modernization Plan.

(b) Generally, REA will review the proposed Modernization Plan

within (30) days and either:

(1) Approve the Modernization Plan if it conforms to the provisions

of this subpart in which case REA will return a copy of the

Modernization Plan with notice of approval to the Plan Developer; or,

(2) Not approve the proposed Modernization Plan if it does not

conform to the provisions of this subpart. In this event, REA will

return the proposed Modernization Plan to the Plan Developer with

specific written comments and suggestions for modifying the proposed

Modernization Plan so that it will conform to the provisions of this

subpart. If the Plan Developer remains eligible, REA will invite the

Plan Developer to submit a modified proposed Modernization Plan for REA

consideration. This process can continue until the Plan Developer gains

approval of a proposed Modernization Plan unless the Plan Developer is

a PUC or State Legislature whose eligibility has expired. If the PUC's

or State Legislature's eligibility has expired, REA will return the

proposed Modernization Plan unapproved. Because REA does not have

authority to extend a PUC's or State Legislature's eligibility, REA

recommends that a PUC or State Legislature submit a proposed

Modernization Plan at least 90 days in advance of one year after

publication of the final rule to allow time for this process.

Sec. 1751.105 Amending a Modernization Plan.

(a) REA understands that changes in standards, technology,

regulation, and the economy could indicate that an REA-approved

Modernization Plan should be amended.

(b) The Plan Developer of the Modernization Plan may amend the

Modernization Plan if REA finds the proposed changes continue to

conform to the provisions of this subpart.

(c) The procedure for requesting approval of an amended

Modernization Plan is identical to the procedure for a proposed

Modernization Plan except that there are no time limits on the

eligibility of the Plan Developer.

(d) The existing Modernization Plan remains in force until REA has

approved the proposed amended Modernization Plan.

(e) REA may from time to time revise these regulations to

incorporate newer technological and economic standards that REA

believes represent more desirable goals for the future course of

telecommunications services. Such revisions will be made in accordance

with the Administrative Procedure Act. These revisions shall not

invalidate Modernization Plans approved by REA but shall be used by REA

to determine whether to approve amendments to Modernization Plans

presented for REA approval after the effective date of the revision.

Sec. 1751.106 Modernization Plan--requirements.

(a) A Modernization Plan must set service requirements for

improving the Public Switched Network and must at a minimum meet the

following requirements:

(1) The Modernization Plan must provide for the elimination of

party line service.

(2) The Modernization Plan must provide for the availability of

telecommunications services for improved business, educational, and

medical services.

(3) The Modernization Plan must encourage and improve computer

networks and information highways for subscribers in rural areas.

(4) The Modernization Plan must provide for:

(i) Subscribers in rural areas to be able to receive through

telephone lines:

(A) Conference calling;

(B) Video images; and

(C) Data at a rate of at least 1,000,000 bits of information per

second; and

(ii) The proper routing of information to subscribers.

(5) The Modernization Plan must provide for uniform deployment

schedules to ensure that advanced services are deployed at the same

time in rural and nonrural areas.

(b) In addition to the requirements set forth in paragraph (a) of

this section, minimum requirements are described in paragraphs (g)

through (i) of this section and are grouped by timeframe, i.e., short-

term, medium-term, and long-term. The Modernization Plan shall provide

that such requirements be implemented as set forth in this section of

the regulation except that the Modernization Plan may authorize the

Plan Developer to approve extensions if the required investment is not

economically reasonable or if the best available telecommunications

technology lacks the capability to enable the Telecommunications

Provider receiving the extension to comply with the Modernization Plan.

Extensions shall be granted only on a case-by-case basis and shall not

exceed a total of five years from the first extension except under

unusual circumstances.

(c) Each State's Modernization Plan shall include a strategic

development proposal for rebuilding the Public Switched Network within

the State. The strategic development proposal shall provide all

Telecommunications Providers in the State the Plan Developer's vision

of a State telecommunications structure for the future. Within the

scope of paragraph (d) of Sec. 1751.101 of this subpart, the

Modernization Plan shall state whether all Telecommunications Providers

in the State are required to construct their systems in a manner

consistent with the strategic development proposal.

(d) The Modernization Plan must require that the design of the

Public Switched Network allow for the expeditious deployment and

integration of such emerging technologies as may from time to time

become commercially feasible.

(e) The Modernization Plan must provide guidelines to

Telecommunications Providers for the development of affordable tariffs

for medical links and distance learning services.

(f) With regard to the uniform deployment requirement set forth in

paragraph (a)(5) of this section, if services cannot be deployed at the

same time, only the minimum feasible interval of time shall separate

availability of the services in rural and nonrural areas.

(g) Short-term requirements. (1) The ``short-term requirements

start date'' is the date one year after the date REA approves the

Modernization Plan for the State.

(2) All facilities providing Wireline Service wholly or partially

constructed or reconstructed after the short-term requirements start

date, even if the construction began before such date, shall be

constructed so that:

(i) Every subscriber can be provided 1-party service. Existing

party line subscribers would be allowed to maintain party line service

only if they requested it and approval is granted by the PUC.

(ii) Twisted-pair copper plant is non-loaded, unless the PUC, in

the case of a PUC or State Legislature-developed Modernization Plan, or

the REA, in the case of a REA Borrower-developed Modernization Plan,

determines, on a case-by-case basis, after written request from a

Telecommunications Provider, that the Telecommunications Provider

should be granted additional time because either the best available

telecommunications technology lacks the capability to enable the

Telecommunications Provider to comply with this requirement or

complying with this requirement would impose prohibitive cost on the

Telecommunications Provider.

(3) All switching equipment installed by a Telecommunications

Provider after the short-term requirements start date shall contain the

hardware, but not necessarily the software, to be capable of:

(i) Switching 1.544 Mb/sec. traffic.

(ii) Providing custom calling features. At a minimum, custom

calling features must include call waiting, call forwarding,

abbreviated dialing, and three-way calling.

(iii) Providing E911 service when required by any local government

for areas served by the Telecommunications Provider.

(h) Medium-term requirements. (1) The ``medium-term requirements

start date'' is the date six years after the date REA approves the

Modernization Plan for the State, or such earlier date as the

Modernization Plan shall provide.

(2) All facilities providing Wireline Service wholly or partially

constructed or reconstructed after the medium-term requirements start

date, even if the construction began before such date, shall be

constructed so that:

(i) Switched 1.544 Mb/sec service is available to any subscriber.

Available means the service will be provided on demand after a

reasonable waiting period.

(ii) The system does not rely exclusively on local power at the

subscriber end. There must be sufficient system power to operate

subscriber voice service during electric utility power outages.

(3) No later than the medium-term start date, all switching

equipment must be provisioned with the necessary hardware to be capable

of providing E911 service when required by any local government for

areas served by the Telecommunications Provider.

(i) Long-term requirements. (1) The ``long-term requirements start

date'' is the date eleven years after the date REA approves the

Modernization Plan for the State, or such earlier date as the

Modernization Plan shall provide.

(2) After the long-term requirements start date, the following

requirements shall apply to all Wireline Service provided by

Telecommunications Providers:

(i) Telecommunications Providers shall eliminate party line

service.

(ii) Telephone service shall be available to any subscriber at

1.544 Mb/sec. Available means the service will be provided on demand

after a reasonable waiting period.

(iii) No service lower than one digital voice circuit (56-64 kb/

sec) shall be offered as a new service.

(iv) The system must not rely exclusively on local power at the

subscriber end. There must be sufficient system power to operate

subscriber voice service during electric utility power outages.

Dated: October 24, 1994.

Bob J. Nash,

Under Secretary, Small Community and Rural Development.

[FR Doc. 94-26761 Filed 10-26-94; 8:45 am]

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