Telecommunications System Planning and Design Criteria, and Procedures

SUMMARY: The Rural Utilities Service (RUS) hereby amends its rule on

State Telecommunications Modernization Plans to incorporate changes in

RUS Telecommunications Program policy. These amendments also

incorporate suggestions received from the public in response to the

proposed rule. All Telephone Borrowers will be affected by this final

rule.

EFFECTIVE DATE: March 15, 1995.

FOR FURTHER INFORMATION CONTACT: Orren E. Cameron III, Director,

Telecommunications Standards Division, U.S. Department of Agriculture,

Rural Utilities Service, 14th & Independence Avenue, SW., Room 2835-S,

Washington, DC 20250-1500, telephone number (202) 720-8663.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This final 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 final rule has been reviewed under Executive Order 12778,

Civil Justice Reform. This final 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

RUS has determined that this final 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 RUS

Telecommunications Program provides loans to RUS Borrowers at interest

rates and terms that are more favorable than those generally available

from the private sector. RUS Borrowers, as a result of obtaining

federal financing, receive economic benefits which ultimately offset

any direct economic costs associated with complying with RUS

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 final

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 10102, New Executive Office Building,

Washington, DC 20503.

National Environmental Policy Act Certification

RUS has determined that this final 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 final 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 final 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 RUS and RTB loans and loan guarantees to

governmental and nongovernmental entities from coverage under this

Order.

Background

The Federal Crop Insurance Reform and Department of Agriculture

Reorganization Act of 1994 (Pub. L. 103-354, 108 Stat. 3178),

(Reorganization Act), signed by President Clinton on October 13, 1994,

provides for a streamlining and reorganizing of the Department of

Agriculture (Department). The Reorganization Act requires the Secretary

of Agriculture (Secretary) to establish the Rural Utilities Service

(RUS) within the Department. On October 20, 1994, the Secretary of

Agriculture, in Secretary's Memorandum 1010-1, abolished the Rural

Electrification Administration (REA) and established RUS, as required

by the Reorganization Act.

On December 20, 1993, RUS (formerly 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).

On April 13, 1994, RUS 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), RUS

published proposed amendments to 7 CFR Part 1751, Subpart B on October

27, 1994 (59 FR 53939).

During the comment period RUS received 39 comments regarding the

proposed rule and these comments were taken into consideration in

preparing the final rule. Comments were received from the following:

(1) Colorado Public Utilities Commission Staff.

(2) Florida Public Service Commission.

(3) Idaho Public Utilities Commission.

(4) Illinois Commerce Commission. [[Page 8172]]

(5) Louisiana Public Service Commission.

(6) Michigan Public Service Commission Staff.

(7) Missouri Public Service Commission.

(8) Nebraska Public Service Commission.

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

(10) New York State Department of Public Service.

(11) Ohio Public Utilities Commission.

(12) Pennsylvania Public Utility Commission.

(13) Texas Public Utility Commission.

(14) Virginia State Corporation Commission.

(15) Wisconsin Public Service Commission.

(16) Wyoming Public Service Commission.

(17) National Association of Regulatory Utility Commissioners.

(18) GTE Service Corporation.

(19) Joint comments from 15 RUS Telephone Borrowers and 2 consulting

engineering companies located in South Carolina.

(20) TDS Telecom.

(21) Unicom.

(22) United and Central Telephone Companies.

(23) National Emergency Number Association.

(24) Joint comments from the National Rural Telecom Association and the

Western Rural Telephone Association.

(25) Nebraska Telephone Association.

(26) North Dakota Association of Telephone Cooperatives.

(27) National Telephone Cooperative Association.

(28) New York State Telephone Association, Inc.

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

Arkansas Telephone Systems, and Texas Statewide Telephone Cooperative,

Inc.

(30) Organization for the Protection and Advancement of Small Telephone

Companies.

(31) Oregon Independent Telephone Association.

(32) United States Telephone Association.

(33) Bell Atlantic Telephone Companies.

(34) Southwestern Bell Telephone Company.

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

(36) MCI Telecommunications Corporation.

(37) Kadrmas, Lee & Jackson, P.C.

(38) GVNW Inc/Management.

(39) Reed Veach Wurdeman and Associates.

1. Comment Summary. Many commenters argued that the Modernization

Plan requirements in the proposed rule go beyond a reasonable reading

of RELRA. More specifically, they said that RELRA requires

``objectives'', but the proposed rule translates those into

requirements, and sets deadlines for accomplishment of those

requirements that are insensitive to market forces, technological

development, and State regulatory authority.

Response. RUS believes that a Modernization Plan without service

improvement requirements, and timeframes for achievement, would be

ineffective in accomplishing the modernization of rural

telecommunications infrastructure that RELRA clearly intends. RELRA

makes the Modernization Plan a condition to eligibility for certain

financing programs administered by RUS. An ineffective Modernization

Plan would undermine this direction of financing resources under RELRA.

In response to the substance of these comments, RUS has recast its

requirements and timeframes. The long-term requirements have been

changed to goals, and some requirements have been reduced. From the

comments received, RUS believes that these changes will mitigate the

concerns about marketability of required technologies. RUS again

invites States to exercise their authority by taking advantage of the

one year period of eligibility to prepare a Modernization Plan.

2. Comment Summary. One commenter noted that if no Modernization

Plan is developed for a State, thereby excluding the State from some

RUS program benefits, service rates would probably increase in the

State. Others expressed concern that investments made to comply with

Modernization Plan requirements would affect other Telecommunications

Providers through the universal service fund and other toll settlement

plans.

Response. The Telecommunications Providers covered by Modernization

Plans are interconnected with other telecommunications carriers in many

ways, and they are certainly interconnected economically. Borrowers and

PUC's can make various decisions that can jeopardize RUS funding of

projects, and these may affect service rates for subscribers and toll

pool distributions. RELRA requires that no loans except guaranteed

loans be made in a State without a Modernization Plan.

3. Comment Summary. Many commenters suggested that the language in

Sec. 1751.106(a)(5) is not consistent with the language in

Sec. 1751.106(f) of the proposed rule. Some commenters preferred the

language in the response to comments to the language presented in the

proposed rule.

Response. The language in Sec. 1751.106(a)(5) was a restatement of

the provision in RELRA. Paragraph (g), (paragraph (f) in the proposed

rule) of the subsection is RUS's effort to clarify the term ``uniform

deployment schedules'' and is intended to allow Plan Developers some

latitude in the timing of deployment of advanced services.

Sec. 1751.106(a) has been rewritten to clarify that it is a restatement

of RELRA so as to eliminate any appearance of a conflict with paragraph

(g).

4. Comment Summary. Many commenters wonder what guidelines RUS will

use to determine whether something is ``technically or economically

feasible'', under Sec. 1751.103(b) of the proposed rule.

Response. Technical feasibility means the equipment is available to

do the job. Economic feasibility means the job can be done at a

reasonable cost. Every telecommunications loan processed by RUS is

studied for technical and economic feasibility. Technical feasibility

of the loan is determined by telecommunications engineers with

knowledge of current technology and facility costs. Economic

feasibility is determined by the loan feasibility study which is a

comprehensive consideration of projected revenues and expenses for the

particular Borrower. The results of RUS's studies are submitted to the

Borrower for concurrence before a loan is approved.

5. Comment Summary. One commenter pointed out that the extension

process discussed in Sec. 1751.106(b) may require Borrowers to request

extensions from groups of other Borrowers who might have competitive

interests. This could happen if the Plan Developer is a Borrower group.

Response. This has been rewritten to give this authority to RUS in

those cases where the Plan Developer is the majority of RUS Borrowers.

6. Comment Summary. Many commenters opposed the requirement in

Sec. 1751.106(g)(2)(ii) for eliminating inductive loading of copper

loops. Some commenters argued that Sec. 1751.106(g)(2)(ii) is

contradictory to Sec. 1751.103(b) in the proposed rule.

Response. The requirement in Sec. 1751.106(g)(2)(ii) has been

deleted.

7. Comment Summary. Some commenters expressed concern about the

exception process mentioned in Sec. 1751.106(g)(2)(i) in the proposed

rule for those who do not want the elimination of party line service.

[[Page 8173]]

Response. The language providing for the elimination of party line

service has been revised to focus this requirement on the capability of

providing one-party service.

8. Comment Summary. Many commenters argued that the powering

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

the proposed rule is not supported by industry consensus at this time.

Some suggested that this item be approached from a reliability

standpoint. Some commenters believed this requirement covered powering

of fax machines and PBXs.

Response. RUS does not want to see the reliability of basic

telecommunications service decline as a result of modernization. Such a

decline will most certainly occur if local powering is relied upon even

for basic voice telephone service, because the average annual outage

time for a residential line connected to the public switched network is

estimated at 105 minutes, whereas the average annual outage time for

residential power users is over 300 minutes. The final rule has been

revised to require that the Plan Developer make ``provision for''

service continuation during local power failure. Regarding the

confusion over what has to be resilient to local power failure, this

provision was carefully written in the proposed rule to cover only

basic voice communications in the event of a local power failure. RUS

has rewritten this provision to make this point without mentioning

specific equipment and technologies that need not be provided with

alternative power.

9. Comment Summary. Many commenters expressed opposition to the

medium-term requirement for switched 1.544 Mb/sec service. Some

commenters suggested that this would be very expensive to provide.

Others suggested that only a few central office switches could provide

the service. One commenter suggested the capability would be useless

unless interexchange carriers could carry such signals. One commenter

noted that in Alaska, where satellites play an important role in

connecting exchanges to the network, this requirement would be very

difficult.

Response. The substance of the comments received has caused RUS to

reconsider this requirement. The requirement for switched 1.544 Mb/sec

service in the proposed rule has been changed to a requirement for the

transmission and reception of at least 1 Mb/sec and the reception of

video. The Plan Developer may specify how this is to be accomplished.

10. Comment Summary. Two commenters observed that the Modernization

Plan would apply to all Borrowers, and as defined that would include

past as well as present and future Borrowers. This would mean that RUS

would apply RELRA requirements retroactively.

Response. This was not RUS's intent. The language has been changed

to clarify that the Modernization Plan for a State will only act to set

requirements on Borrowers for certain kinds of loans, and further, only

if the loan is approved after the date that the Modernization Plan is

approved by RUS.

11. Comment Summary. Some commenters thought that

Sec. 1751.106(i)(2)(iii) in the proposed rule was intended to eliminate

plain old telephone service (``POTS'') as a new service offering, and

that this long-term requirement would force subscribers to purchase

digital telephones.

Response. This requirement has been deleted from the regulation as

part of the recasting of the Modernization Plan discussed above.

12. Comment Summary. One commenter suggested that Sec. 1751.105 be

revised to state that no amended Modernization Plan could increase the

requirements of a previously-approved Modernization Plan.

Response. RUS disagrees. This could unreasonably limit a State or

group of Borrowers in their efforts to continue to modernize

telecommunications systems in the State.

13. Comment Summary. One commenter is concerned whether RUS will

follow 5 U.S.C. Sec. 553 regarding notice and comment procedures if the

rule is changed in the future. Another commenter felt that RUS has no

statutory authority to revise the rule after the final rule is issued.

Response. The underlying purpose of the Modernization Plan is to

stimulate the continuing modernization of telephone service. RUS

believes that it has the obligation to provide guidance to Plan

Developers for updating their Modernization Plans. As is stated in

Sec. 1751.105(e), RUS, if it revises the rule, must follow the

Administrative Procedures Act.

14. Comment Summary. One commenter expressed concern that under

Sec. 1751.103 as written in the proposed rule, RUS could deny loans to

all Borrowers in a State if any Borrower does not participate in the

Modernization Plan.

Response. This was not RUS's intent. Language in this subsection

has been revised to clarify that only the Borrower who does not

participate in the Modernization Plan is denied certain types of loans.

15. Comment Summary. Many commenters expressed displeasure with the

one year period for State eligibility with no extensions, and the

rejection of Borrower-prepared plans before the end of that year. Also,

one commenter recommended that States be required to notify other

interested parties 180 days before the expiration of the one year

period of their intent to file or not to file a proposed Modernization

Plan.

Response. Beginning with the publication of this Final Rule, States

have a one year period of eligibility for preparing a Modernization

Plan. There is no provision in RELRA for any party other than a State

to prepare a Modernization Plan until the expiration of that one year.

Regarding the suggestion for advance notice of the State's intent to

file, RUS agrees and has added language to Sec. 1751.102 (b) to request

a State to inform RUS if it does not intend to submit a proposed

Modernization Plan. RUS will inform its Borrowers as well as telephone

industry associations when it has been notified that a State does not

intend to develop a Modernization Plan.

16. Comment Summary. Several commenters expressed opposition to

Sec. 1751.106(e) in the proposed rule, which provides for Modernization

Plan guidelines for the development of affordable tariffs for medical

links and distance learning services. Two commenters argued that this

provision would usurp a PUC's rate regulatory authority by mandating a

subsidy.

Response. One of the requirements of RELRA is that the

``Modernization Plan must provide for the availability of

telecommunications services for improved business, educational, and

medical services.'' If such services are to be ``available'' in any

reasonable sense, they must be affordable.

17. Comment Summary. Several commenters suggested that RUS should

provide a model Modernization Plan.

Response. RUS believes, and most commenters have strongly asserted,

that Modernization Plans can best be developed by local State groups

and Telecommunications Providers. In view of the preponderance of

comments received on the proposed rule, RUS declines to issue suggested

language that might be seen as an ad hoc standard for Modernization

Plans.

18. Comment Summary. One commenter suggested that requirements for

improvements under Modernization Plans should be made conditional upon

adequate available federal capital and cost recovery mechanisms.

Response. Unless the PUC decides otherwise, the Modernization Plan

requirements only apply to RUS [[Page 8174]] Borrowers. Moreover, the

only enforcement of a Modernization Plan pursuant to RELRA is denial of

a loan to a Borrower that is not participating in the Modernization

Plan. Therefore, to a considerable extent, Modernization Plan

requirements are conditional upon the availability of federal capital

and cost recovery mechanisms.

19. Comment Summary. Several commenters argued that RELRA did not

give RUS the authority to require a modernization of the national

communications infrastructure. These commenters noted that this is

contrary to the Communications Act of 1934 objective of consolidating

federal authority over telecommunications into one agency.

Response. Through various financing programs and technical

initiatives, the REA, now RUS, has been instrumental in the

modernization of the national rural telecommunications infrastructure.

The provisions of RELRA as set forth in this final rule will continue

that modernization.

20. Comment Summary. One commenter pointed out that since a

Borrower-developed Modernization Plan can only apply to Borrowers, the

rule should make that clear.

Response. Language has been added to Sec. 1751.102(c) to clarify

that a Borrower-developed plan will only apply to Borrowers.

21. Comment Summary. One commenter said that Borrower-developed

plans can affect others, and proposed that RUS require that Borrowers

allow outside participation in development of a plan.

Response. RUS encourages all Plan Developers to include outside

participation, but does not believe it is necessary for Borrower groups

to be required to include outside participation.

22. Comment Summary. One commenter expressed concern that

Modernization Plan requirements would threaten universal service

because it would require Borrowers and non-Borrowers to build

infrastructure whether or not it met customer needs.

Response. The regulation has been revised to alleviate this

concern. RUS performs feasibility studies to ensure that the proposed

construction does not threaten the viability of a Borrower.

23. Comment Summary. One commenter suggested that in the balance

between cost and improved service, cost is clearly secondary to RUS.

Response. RUS is concerned with improved service to rural

subscribers at reasonable prices. RUS strongly feels that

communications infrastructure is essential to rural economic

development. The real cost of failing to provide this infrastructure is

a failing rural economy, decline in rural subscribers and less revenue

to the rural telecommunications provider.

24. Comment Summary. Many commenters found the approximate

restatement of a part of RELRA in Sec. 1751.106(a) to be confusing and

vague. It uses terms that do not seem to apply to any communications

industry segment such as ``video images'' and ``proper routing of

information to subscribers''.

Response. This language has been clarified to show that

Sec. 1751.106(a) is a restatement of RELRA while the balance of the

section implements the law.

25. Comment Summary. One commenter proposed that RUS should

automatically grant lien accommodations for Borrowers that do not meet

the minimum requirements of their State Modernization Plan.

Response. RUS disagrees. To do so would negate RELRA's purpose of

improving and modernizing telecommunications and might jeopardize the

security of RUS loans.

26. Comment Summary. One commenter proposed that RUS review

Modernization Plans within 30 days without exception, and asserts that

as written the rule allows RUS to postpone denial until it is too late

for a developer to resubmit a plan for approval.

Response. Both Plan Developers and RUS face difficult schedules as

a result of this regulation. RUS has developed an internal processing

procedure intended to deal with the estimated 45 Modernization Plans

that could be received simultaneously. It is the intent of RUS to

process all Modernization Plans within 30 days of receipt of the

proposed Modernization Plan. If the submission of the proposed Plan is

timely, this will not be a problem.

27. Comment Summary. One commenter noted that RELRA places no time

limit on RUS as to promulgation of a final rule. This commenter

suggested that RUS should wait for further congressional direction.

Response. RUS was required under RELRA to issue the interim

regulation, and RUS wishes to respond to the public by issuing a final

rule that implements the requirements of RELRA in a reasonable and

effective manner. Without this final rule, the interim rule remains in

effect.

28. Comment Summary. One commenter asked why the rule does not

apply to RUS electric borrowers and grant recipients who may compete

with RUS telephone Borrowers either directly or through a subsidiary.

Response. As written, the Modernization Plan will serve as

requirements for all telephone Borrowers seeking new financing.

Modernization Plans developed by the States may expand coverage to

others in the telecommunications industry.

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 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 and loan advance requirements.

1751.104 Obtaining RUS 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.; Pub. L. 103-354,

108 Stat. 3178 (7 U.S.C. 6941 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 that has received an RUS loan

designation number and which has an outstanding telephone loan made by

RUS or the Rural Telephone Bank, or guaranteed by RUS, or which has a

completed loan application with RUS.

Emerging technologies. New or not fully developed methods of

telecommunications.

Modernization Plan (State Telecommunications Modernization Plan). A

State plan, which has been approved by RUS, for improving the

telecommunications network of those Telecommunications Providers

covered [[Page 8175]] by the plan. A Modernization Plan must conform to

the provisions of this subpart.

New facilities. Facilities which are wholly or partially

constructed or reconstructed after a short- or medium-term requirements

start date, as appropriate. This does not include connections or

capacity extensions within the wired capacity of existing plant such as

adding line cards to existing equipment.

Plan Developer. The entity creating the Modernization Plan for the

State, which may be the State PUC, the State legislature, or a numeric

majority of the RUS Borrowers within the State. When this part refers

to the PUC as the Plan Developer, this includes the State legislature.

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. When this part refers to the PUC as the Plan Developer, this

includes the State legislature.

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

901 et seq.).

REA. The Rural Electrification Administration, formerly an agency

of the United States Department of Agriculture and predecessor agency

to RUS with respect to administering certain electric and telephone

loan programs.

RELRA. The Rural Electrification Loan Restructuring Act of 1993

(107 Stat. 1356).

RUS. The Rural Utilities Service, an agency of the United States

Department of Agriculture established pursuant to Section 232 of the

Federal Crop Insurance Reform and Department of Agriculture

Reorganization Act of 1994 (Pub. L. 103-354, 108 Stat. 3178 (7 U.S.C.

6941 et seq.)), successor to REA with respect to administering certain

electric and telephone programs. See 7 CFR 1700.1.

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

RE Act bearing interest as determined under 7 CFR 1735.31(c). RUS cost-

of-money loans are made concurrently with RTB loans.

RUS hardship loan. A loan made by RUS under section 305(d)(1) of

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

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

section 408 of the RE Act bearing interest as determined under 7 CFR

1610.10. RTB loans are made concurrently with RUS 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. RUS Borrowers and if the Plan

Developer is a PUC, such other entities providing telecommunications

services as the developer of the Modernization Plan (See Sec. 1751.101)

may determine.

Wireline Service. Telecommunica-tions service provided over

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

carrying electricity or light between the subscriber and the rest of

the telecommunications 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 RUS that every State have a Modernization

Plan which provides for the improvement of the State's

telecommunications network.

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

approval. RUS will approve the proposed Modernization Plan if it

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

approval of a Modernization Plan cannot be rescinded.

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

to issue such other telecommunications standards, specifications,

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

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

part 1755.

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

Borrowers' wireline service areas. If a Modernization Plan is developed

by the PUC, RUS encourages, but does not require, that the

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

all providers of telecommunications services in the State. A PUC's

decision not to include non-RUS Borrowers will not prejudice RUS

approval of that PUC's Modernization Plan. The PUC may also, at its

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

of all providers of telecommunications services in the State. In

addition, while the requirements and goals contained in Sec. 1751.106

apply only to wireline services, the PUC, at its discretion, may extend

coverage of Modernization Plans to wireless or other communications

services in the State as it deems appropriate. Borrower-developed

Modernization Plans apply only to Borrowers.

Sec. 1751.102 Modernization Plan Developer; eligibility.

(a) Each PUC is eligible until February 13, 1996 to develop a

proposed Modernization Plan and deliver it to RUS. RUS will review and

consider for approval all PUC-developed Modernization Plans received by

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

occur after the one year period ends even though the PUC is no longer

eligible to submit a proposed Modernization Plan.

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

State and other interested parties of its intent to develop a proposed

Modernization Plan. The PUC is encouraged to consider all

Telecommunications Providers' and interested parties' views and

incorporate these views into the Modernization Plan. In the event that

the PUC does not intend to develop a proposed Modernization Plan, RUS

requests that the PUC inform RUS of this decision as soon as possible.

(c)(1) If the PUC is no longer eligible to develop a Modernization

Plan or has informed RUS that it will not develop a Modernization Plan,

as described in paragraphs (a) and (b) of this section, a majority of

the Borrowers within the State may develop the Modernization Plan. If a

majority of Borrowers develops the Modernization Plan, the following

apply:

(i) 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

(ii) Borrowers developing a Modernization Plan are encouraged to

solicit the views of other providers of telecommunications services and

interested parties in the State.

(2) There is no time limit placed on Borrowers to develop a

Modernization Plan. Borrowers should be aware that certain types of

loans may be restricted until a Modernization Plan is approved. See

Sec. 1751.103. [[Page 8176]]

Sec. 1751.103 Loan and loan advance requirements.

(a) For information about loan eligibility requirements in relation

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

beginning February 13, 1996, RUS will make RUS hardship loans, RUS

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

purposes in a State only if:

(1) The State has an RUS approved Modernization Plan; and

(2) The Borrower to whom the loan is to be made is participating in

the Modernization Plan for the State. A Borrower is considered to be

participating if, in RUS'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 RUS has determined that

achieving the requirements is not technically or economically feasible.

(b) With regard to the three types of loans discussed in paragraph

(a), only loans approved after the date the State has an RUS approved

Modernization Plan are subject to complying with the Modernization

Plan.

(c) For loans subject to complying with the Modernization Plan,

advances will not be made if, in RUS's opinion, the advances are not

consistent with achieving the requirements of the Modernization Plan.

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

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

Plan Developer must submit the following to RUS:

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

Plan Developer, or a written request for RUS 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, RUS 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 RUS 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, RUS 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, RUS will invite the

Plan Developer to submit a modified proposed Modernization Plan for RUS

consideration. This process can continue until the Plan Developer gains

approval of a proposed Modernization Plan unless the Plan Developer is

a PUC whose eligibility has expired. If a PUC's eligibility has

expired, RUS will return the proposed Modernization Plan unapproved.

Because RUS does not have authority to extend the term of a PUC's

eligibility, RUS recommends that the PUC submit a proposed

Modernization Plan at least 90 days in advance of February 13, 1996 to

allow time for this process.

Sec. 1751.105 Amending a Modernization Plan.

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

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

Modernization Plan should be amended.

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

Modernization Plan if RUS 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 RUS has

approved the proposed amended Modernization Plan.

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

incorporate newer technological and economic standards that RUS

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 RUS but shall be used by RUS

to determine whether to approve amendments to Modernization Plans

presented for RUS approval after March 15, 1995.

Sec. 1751.106 Modernization Plan; requirements.

(a) The requirements for a Modernization Plan as stated in RELRA

are:

(1) The plan must provide for the elimination of party line

service.

(2) The plan must provide for the availability of

telecommunications services for improved business, educational, and

medical services.

(3) The plan must encourage and improve computer networks and

information highways for subscribers in rural areas.

(4) The 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 plan must provide for uniform deployment schedules to

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

and nonrural areas.

(6) The plan must provide for such additional requirements for

service standards as may be required by the Administrator.

(b) To implement the requirements of the law described in paragraph

(a) of this section, RUS has set minimum requirements as described in

paragraphs (i) and (j) of this section. They are grouped into short-

term and medium-term requirements. RUS has also included long-term

goals which are not requirements. The Modernization Plan must meet all

of the statutory requirements of RELRA and shall provide that short-

and medium-term requirements be implemented as set forth in this

section of the regulation except that the PUC, if it is the Plan

Developer, or RUS, if a majority of Borrowers is the Plan Developer,

may approve extensions of time if the required investment is not

economically feasible 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 generally

shall not exceed a total of five years from the first such extension

granted to the Telecommunications Provider.

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

development proposal for modernizing the telecommunications network of

the Telecommunications Providers covered by the Modernization Plan. In

addition to implementing the requirements described in paragraphs (a),

(i), and (j) of this section, the Modernization Plan shall include a

short engineering description of the characteristics of a future

telecommunications structure that would enable all Telecommunications

Providers to achieve the requirements and goals of the Modernization

Plan. [[Page 8177]]

(d) Within the scope of Sec. 1751.101(d), if the Plan Developer is

the PUC, the Modernization Plan shall name the Telecommunications

Providers in the State, in addition to Borrowers, that are covered by

the Modernization Plan.

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

network provided by Telecommunications Providers allow for the

expeditious deployment and integration of such emerging technologies as

may from time to time become commercially feasible.

(f) The Modernization Plan must provide guidelines to

Telecommunications Providers for the development of affordable tariffs

for medical links and distance learning services.

(g) With regard to the uniform deployment requirement of the law

restated 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.

(h) The Modernization Plan must make provision for reliable

powering of ordinary voice telephone service operating over those

portions of the telecommunications network which are not network

powered. In the event of electric utility power outages, an alternative

source of power must be available to ensure reliable voice service.

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

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

Modernization Plan for the State.

(2) All New Facilities providing Wireline Service 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.

(ii) The New Facilities are suitable, as built or with additional

equipment, to provide transmission and reception of data at a rate no

lower than 1 Mb/sec.

(3) All switching equipment installed by a Telecommunications

Provider after the short-term requirements start date shall be capable

of:

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

features must include call waiting, call forwarding, abbreviated

dialing, and three-way calling; and

(ii) Providing E911 service for areas served by the

Telecommunication Provider when requested by the government responsible

for this service.

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

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

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

Modernization Plan shall provide.

(2) All New Facilities providing Wireline Service after the medium-

term requirements start date, even if the construction began before

such date, shall be capable, as built or with additional equipment, of

transmitting video to a subscriber. The video must be capable of

depicting a reasonable representation of motion. The frame rate,

resolution, and other measures of audio and video quality shall be

determined by the Plan Developer.

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

switching equipment of Telecommunications Providers covered by the

Modernization Plan must be capable of providing E911 service when

requested by the government responsible for this service.

(4) No later than five years after the medium-term requirements

start date, one-party service must be provided upon demand to any

subscriber of a Telecommunications Provider covered by the

Modernization Plan.

(k) Long-term goals. RUS suggests, but does not require, that the

provisions of each Modernization Plan be consistent with the

accomplishment of the following:

(1) The elimination of party line service.

(2) For subscribers that desire the service, universal availability

of:

(i) digital voice and data service (56-164 kb/sec).

(ii) service that provides transmission and reception of high bit

rate (no less than 1 Mb/sec) data.

(iii) service that provides reception of video as described in

paragraph (j)(2) of this section.

Dated: January 23, 1995.

Bob J. Nash,

Under Secretary, Rural Economic and Community Development.

[FR Doc. 95-3414 Filed 2-10-95; 8:45 am]

BILLING CODE 3410-15-P