Feds to Lend $1.4B for Rural Broadband

Washington— The federal government is preparing to distribute up to $1.4 billion this year in loans and loan guarantees to encourage companies to launch broadband Internet services in underserved rural areas.

The 2002 federal farm bill created the Rural Broadband Loan and Loan Guarantee Program, which will dole out hundreds of millions of dollars each year in technology-neutral, low-interest loans, as well as loan guarantees to help companies secure privately-financed loans.

Cable operators and other high-speed data providers are eligible for the loans, administered by U.S. Department of Agriculture's Rural Utilities Service, to help defray the costs of broadband deployment.

To be eligible, a provider must set up services in a community that currently lacks broadband, has fewer than 20,000 inhabitants, and is located outside of a major metropolitan area.

Applications to receive the loans are due by July 31 and will be distributed this fiscal year, which ends Sept. 30.

Small cable operators welcome the formal initiation of the loan program, which has existed for two years on a limited, experimental basis.

But they're concerned about how the program will be administered, and other operators wonder whether the loans will provide a sufficient incentive for cable companies to significantly expand their broadband services.

The loans provide "a very viable alternative" to small operators in relatively small markets, said Matt Polka, president of the American Cable Association, the trade group representing small operators. "The funding through some of these RUS loans might be just what's needed. The technology is there. The problem has been finding the funding."

In regions where a phone company or other telecommunications provider already has received a Rural Utilities Service loan, even one unrelated to broadband, that company will have first dibs at receiving broadband loans, said agency spokesman Claiborn Crain.

"We're not inclined to loan against ourselves," he said. "We don't want to go out there and put one [company] out of business to make another loan."

That could put small cable operators at a disadvantage, said Polka, because the rural areas that many of them serve also are home to mobile phone services and other providers that already receive loans from the Rural Utilities Service.

States News Service