National Telecommunications and Information Administration (NTIA) announced Wednesday that it will loosen the letter of credit (LoC) requirements for the $42.5 billion BEAD rural broadband funding program.
The decision comes in response to service providers’ concerns the requirements were so taxing many smaller providers would not apply for funding through the Broadband Equity Access and Development (BEAD) program, part of the 2022 bi-partisan infrastructure bill that focuses on bridging the digital divide.
Smaller service providers that serve large parts of rural America especially were concerned with NTIA’s original stance on LoCs.
At issue was the initial requirement for funding recipients to provide a letter from a specific type of bank demonstrating the bank would commit to issuing an irrevocable standby letter of credit to the provider. The value of the letter of credit would have had to be at least 25 percent of the provider’s awarded amount.
In addition, the provider would have been required to provide an opinion letter from legal counsel stating that in a proceeding under the bankruptcy code, the bankruptcy court would not treat LoC as property of the provider’s bankruptcy.
The NTIA changes come in the form of a waiver. Key provisions of the waiver include:
- A provider winning BEAD funding will be able to obtain its LoC from a credit union that is insured by the National Credit Union Administration and has a credit union safety rating issued by Weiss of B- or better.
- The providers will not have to provide the bankruptcy opinion letter if they obtain a performance bond that meets the requirements of the state administering the funding in a value of at least 100 percent of the awarded amount.
- A provider will be able to replace the letter of credit valued at 25 percent of project costs with a letter of credit for a lower percentage of project costs after certain deployment milestones have been reached.
- Providers who opt to provide a performance bond valued at 100 percent of project costs will be able to replace those bonds with performance bonds valued at a lower percentage of project costs after the providers have reached certain deployment milestones.
NTIA also made other provisions regarding the BEAD letter of credit requirements. Providers should check NTIA’s notice of programmatic waiver for details on NTIA’s website.
After NTIA released its LoC modification, Wireless Internet Service Provider Association’s (WISPA) VP of Policy Louis Peraertz praised the move.
Peraertz explained that allowing subgrantees to use performance bonds in lieu of an LoC, reducing LoC obligations after meeting certain milestones, and allowing lower initial LoC and performance bond percentages will be helpful to smaller wireless internet service providers that often find it difficult to obtain LoCs, or to do so on acceptable terms.
He said that NTIA’s announcement recognizes that smaller broadband providers have unique experience in serving America’s hardest-to-reach communities, allowing them to play a significant role in the success of BEAD.
“This waiver will help smaller players embrace the opportunities within BEAD to reach our un- and underserved farms, manufacturers and service centers, isolated and sparsely populated communities, Tribal areas, and public institutions, among others,” Paraetz said.
