[Code of Federal Regulations]
[Title 7, Volume 11]
[Revised as of January 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 7CFR1735.2]

[Page 302-305]
 
                          TITLE 7--AGRICULTURE
 
    CHAPTER XVII--RURAL UTILITIES SERVICE, DEPARTMENT OF AGRICULTURE
 
PART 1735--GENERAL POLICIES, TYPES OF LOANS, LOAN REQUIREMENTS--TELECOMMUNICATIONS PROGRAM--Table of Contents
 
                           Subpart A--General
 
Sec. 1735.2  Definitions.

    As used in this part:

    Access line means a transmission path between user terminal 
equipment and a switching center that is used for local exchange 
service. For multiparty service, the number of access lines equals the 
number of lines/paths terminating on the mainframe of the switching 
center.
    Acquisition means the purchase of another telephone system, lines, 
or facilities whether by acquiring telephone plant in service or 
majority stock interest of one or more organizations.
    Acquisition agreement means the agreement, including a sales 
agreement, between the seller and purchaser outlining the terms and 
conditions of the acquisition. Acquisition agreements also include any 
other agreements, such as options and subsidiary agreements relating to 
terms of the transaction.
    Administrator means the Administrator of RUS.
    Advance of funds means the transferring of funds by RUS to the 
borrower's construction fund.
    Appropriated means funds appropriated based on subsidy.
    Affiliate means an organization that directly, or indirectly through 
one or more intermediaries, controls or is controlled by, or is under 
common control with, the borrower.
    Borrower means any organization which has an outstanding loan made 
or guaranteed by RUS, or which is seeking such financing.
    Cash distribution means investments, guarantees, extensions of 
credit, advances, loans, non-affiliated company joint ventures, 
affiliated company investments, and dividend and capital credit 
distributions. Not included in this definition are qualified investments 
(see 7 CFR part 1744, subpart D).
    Composite economic life as applied to facilities financed by loan 
funds means the weighted (by dollar amount of each class of facility in 
the loan) average economic life of all classes of facilities in the 
loan.
    Consolidation means the combination of two or more borrower or 
nonborrower organizations, pursuant to state law, into a new successor 
organization that takes over the assets and assumes the liabilities of 
those organizations.
    Construction fund means the RUS Construction Account required by 
Sec. 2.4 of the standard loan contract into which all RUS loan funds are 
advanced.
    Depreciation means the loss not restored by current maintenance, 
incurred in connection with the consumption or prospective retirement of 
telecommunications plant in the course of service from causes which are 
known to be in current operation, against which the company is not 
protected by insurance, and the effect of which can be forecast to a 
reasonable approach to accuracy.
    Economic life as applied to facilities financed by loan funds, means 
the number of years resulting from dividing 100 percent by the 
depreciation rate (expressed as a percent) approved by the regulatory 
body with jurisdiction over the telephone service provided by the 
borrower for the class of facility involved or, if no approved rate 
exists, by the median depreciation rate expressed as a percent as 
published by RUS in its Statistical Report, Rural Telephone Borrowers 
for all RUS and RTB borrowers for that class of facility.
    Exchange access means the offering of access to telephone exchange 
services or facilities for the purpose of the origination or termination 
of telephone toll services.
    Feasibility study means the pro forma financial analysis performed 
by RUS to

[[Page 303]]

determine the economic feasibility of a loan. See 7 CFR part 1737.
    Forecast period means the time period beginning on the date (base 
date) of the borrower's balance sheet used in preparing the feasibility 
study and ending on a date equal to the base date plus the number of 
years estimated in the feasibility study for completion of the project. 
Feasibility projections are usually for 5 years, see Sec. 1737.70(a) of 
this chapter. For example, the forecast period for a loan based on a 
December 31, 1990 balance sheet and having a 5-year estimated project 
completion time is the period from December 31, 1990 to December 31, 
1995.
    Funded reserve means a separate asset account, approved by RUS, 
consisting of any or all of the following:
    (1) Federal government securities purchased in the name of the 
borrower;
    (2) Other securities issued by an institution whose senior unsecured 
debt obligations are rated in any of the top three categories by a 
nationally recognized rating organization; or
    (3) Cash.
    GFR means the RUS general field representative.
    Guaranteed loan means a loan guaranteed by RUS under section 306 of 
the RE Act bearing interest at a rate agreed to by the borrower and the 
lender.
    Hardship loan means a loan made by RUS under section 305(d)(1) of 
the RE Act bearing interest at a rate of 5 percent per year.
    Interim financing means funding for a project which RUS has 
acknowledged could be included in a loan, should said loan be approved, 
but for which RUS funds have not yet been made available. See 7 CFR part 
1737, subpart E.
    Loan means any loan made or guaranteed by RUS.
    Loan contract means the loan agreement between RUS and the borrower, 
including all amendments thereto.
    Loan funds means funds provided by RUS through direct or guaranteed 
loans.
    Local exchange carrier (LEC) means an organization that is engaged 
in the provision of telephone exchange service or exchange access.
    Majority noteholders means the holder or holders of a majority in 
principal amount of the notes outstanding at a particular time.
    Merger means the combining, pursuant to state law, of one or more 
borrower or nonborrower organizations into an existing survivor 
organization that takes over the assets and assumes the liabilities of 
the merged organizations. While the terms merger and consolidation have 
different meanings, for the purpose of this part, ``mergers'' also 
include consolidations as defined above. Furthermore, ``mergers'' also 
include acquisitions where the acquired systems, lines, or facilities 
and the acquiring system are operated as one system.
    Mobile telecommunications service means radio communication voice 
service between mobile and land or fixed stations, or between mobile 
stations.
    Modernization Plan (State Telecommunications Modernization Plan) 
means a State plan, which has been approved by RUS, for improving the 
telecommunications network of those telecommunications providers covered 
by the plan. A Modernization Plan must conform to the provisions of 7 
CFR 1751, subpart B.
    Mortgage means the security agreement between RUS and the borrower, 
including any amendments and supplements thereto.
    Net worth means the sum of the balances of the following accounts of 
the borrower:

------------------------------------------------------------------------
                        Account names                            Number
------------------------------------------------------------------------
(1) Capital stock............................................       4510
(2) Additional paid-in capital...............................       4520
(3) Treasury stock...........................................       4530
(4) Other capital............................................       4540
(5) Retained earnings........................................       4550
------------------------------------------------------------------------
Note: For nonprofit organizations, owners' equity is shown in
  subaccounts of 4540 and 4550. All references regarding account numbers
  are to the Uniform System of Accounts (47 CFR part 32).

    Public switched network means any common carrier switched network, 
whether by wire or radio, including local exchange carriers, 
interexchange carriers, and mobile telecommunications service providers, 
that use the North American Numbering Plan in connection with the 
provision of switched services.

[[Page 304]]

    RE Act means the Rural Electrification Act of 1936, as amended (7 
U.S.C. 901 et seq.).
    RUS means the Rural Utilities Service, an agency of the United 
States Department of Agriculture, successor to the Rural Electrification 
Administration.
    RUS cost-of-money loan means a loan made under section 305(d)(2) of 
the RE Act bearing an interest rate as determined under Sec. 1735.31(c). 
RUS cost-of-money loans are made concurrently with RTB loans.
    RTB loan means 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 RUS cost-of-money 
loans.
    Rural area means any area of the United States, its territories and 
insular possessions (including any area within the Federated States of 
Micronesia, the Republic of the Marshall Islands, and the Republic of 
Palau) not included within the boundaries of any incorporated or 
unincorporated city, village or borough having a population exceeding 
5,000 inhabitants. The population figure is obtained from the most 
recent data available, such as from the Bureau of the Census and Rand 
McNally and Company. For purposes of the ``rural area'' definition, the 
character of an area is determined as of a time the initial loan for the 
system is made.
    Specialized telecommunications service means any telephone service 
other than telephone exchange service, exchange access, or mobile 
telecommunications service.
    Subscriber means the same as access line.
    Survivor means (1) the successor corporation formed by the 
consolidation of one or more borrowers, (2) the corporation remaining 
after completion of a merger involving one or more borrowers, and (3) a 
corporation assuming all or a portion of an RUS loan in connection with 
an acquisition.
    Telecommunications means 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.
    Telephone exchange service means: (1) Service provided primarily to 
fixed locations within a telephone exchange, or within a connected 
system of telephone exchanges within the same exchange area operated to 
furnish to subscribers intercommunicating service of the character 
ordinarily furnished by a single exchange, and which is covered by the 
exchange service charge; or
    (2) Comparable service provided through a system of switches, 
transmission equipment, or other facilities (or combination thereof) by 
which a subscriber can originate and terminate a telecommunications 
service.
    Telephone service means any communication service for the 
transmission or reception of voice, data, sounds, signals, pictures, 
writing, or signs of all kinds by wire, fiber, radio, light, or other 
visual or electromagnetic means and includes all telephone lines, 
facilities and systems to render such service. It does not mean:
    (1) Message telegram service;
    (2) Community antenna television system services or facilities other 
than those intended exclusively for educational purposes; or
    (3) Radio broadcasting services or facilities within the meaning of 
section 3(o) of the Communications Act of 1934, as amended.
    Times Interest Earned Ratio (TIER) means the ratio of a borrower's 
net income (after taxes) plus interest expense, all divided by interest 
expense. For the purpose of this calculation, all amounts will be annual 
figures and interest expense will include only interest on debt with a 
maturity greater than one year.
    Total assets means the sum of the balances of the following accounts 
of the borrower:

------------------------------------------------------------------------
               Account names                           Number
------------------------------------------------------------------------
(1) Current assets........................  1100s through 1300s.
(2) Noncurrent Assets.....................  1400s through 1500s.
(3) Total telecommunications plant........  2001 through 2007.
(4) Less: Accumulated depreciation........  3100 through 3300s.
(5) Less: Accumulated amortization........  3400 through 3600s.
------------------------------------------------------------------------
Note: All references regarding account numbers are to the Uniform System
  of Accounts (47 CFR part 32).


[[Page 305]]


[54 FR 13351, Apr. 3, 1989; 54 FR 16194, Apr. 21, 1989. Redesignated at 
55 FR 39395, Sept. 27, 1990, as amended at 56 FR 26596, June 10, 1991; 
58 FR 66253, Dec. 20, 1993; 62 FR 46869, Sept. 5, 1997; 65 FR 42619, 
July 11, 2000; 65 FR 54402, Sept. 8, 2000]