Six of the country’s largest regional internet service providers (ISPs) wrote to Secretary of Commerce Gina Raimondo this week proposing alternatives to the current letter of credit (LOC) requirement for the Broadband Equity Access and Deployment (BEAD) program.
C-level execs at Altafiber, Altice, Brightspeed, Consolidated Communications, Windstream and Ziply Fiber signed the letter which said the LOC rule is “overly burdensome and will reduce private investments to expand broadband, particularly in rural areas.” Between them, those ISPs cover 44 states.
Under the program’s current statute BEAD applicants are required to provide the National Telecommunications and Information Administration (NTIA) with a letter of credit from a bank as evidence that they have at least 25% of the grant dollar amount in a cash bank account. That capital would need to be set aside for the entire duration of a BEAD-funded project.
The NTIA in August said that in some cases, an alternative to LOCs may be appropriate, such as for municipalities who can access capital in the bond market. A spokesperson told Fierce at the time the NTIA "invites states and territories to propose alternatives ‘if they are necessary and sufficient to ensure that the program’s objectives are met.’"
In the letter to the Secretary of Commerce, the regional companies estimated the requirement may reduce their collective ability to reach, “at a minimum,” 20% of the recipients they could deploy to without the LOC framework. They propose several modifications to the rule.
First, the letter asks that the LOC requirement is reduced to 5% of the total grant amount. It also suggests requiring ISPs to obtain the LOC when grant funds are received, not during the application process and the initial construction phase (“this will ensure taxpayer dollars are protected,” the letter said).
The ISPs also propose that the NTIA retire the LOC upon certification of grant compliance. “Many stakeholders have suggested using surety bonds, certification of good standing, or parent guarantees, to protect the government’s interests and NTIA should allow these to be used as alternatives to a letter of credit,” the letter added.
As it stands, the ISPs claim the requirement will force them to “divert funds from ongoing network deployment or not participate in the BEAD program at all.”
This is but one example of objections to the LOC rule.
A separate open letter to the NTIA in September proposed several other alternatives to its LOC requirement, including performance bonds and delayed reimbursement options.
That letter had 300 signatures, including leaders from organizations like the American Association for Public Broadband, The Internet Society and the Schools, Health & Libraries Broadband (SHLB) Coalition, along with ISPs, local government officials, state broadband offices, rural associations and other stakeholders.
Other critics of the LOC rule have said the current LOC requirement will especially block small and community-centered ISPs, minority and women-owned providers, nonprofits and municipalities — “the very entities the program aims to prioritize” — from participating in the BEAD program.
In the wake of these concerns private financing options have emerged for rural providers that might not be able to secure a LOC on their own.
However, the ISPs that signed this week’s letter said they “may be larger companies, but [they] will face similar burdens. These financial demands will reduce broadband investment by our companies, because we will either have to divert funds from ongoing network deployment or not participate in the BEAD program at all.”