Dollar SignIn what could signal the beginning of the end of the FCC Rural Broadband Experiment (RBE) funding logjam, the commission on Friday said it was ready to authorize RBE support for six RBE projects in two states. The funding, which totals over $4 million, will go to Northeast Rural Services for five projects in Oklahoma and to Lake County for a project in Minnesota.

The RBE program made a total of $100 million available to traditional and non-traditional network operators to cover some of the costs of deploying broadband to rural areas where broadband was not previously available. Winners were chosen through a competitive bidding process, with money awarded to companies that offered to deploy service at the lowest level of support.  Information learned from the RBE program helped in shaping the Connect America Fund (CAF) program, which also will use a competitive bidding process to award a considerably larger $2 billion in funding over a 10-year period.

Awards in the FCC Rural Broadband Experiment program were made over a year ago, but the FCC was slow in releasing funding to some awardees – in part because some small telcos and electric utilities that were awarded funding had difficulty meeting a requirement that they obtain a letter of credit (LOC) from one of the nation’s 100 largest banks.  Those companies typically do not borrow from those banks, and awardees found that many of the large banks were unwilling to provide LOCs to them.

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Initially the FCC anticipated imposing the same LOC requirement for winners in the CAF reverse auction. But when the commission last month adopted a framework for the CAF auction, it expanded the pool of banks from which the FCC would accept LOCs.

In announcing that change, the FCC did not specify whether the change would also apply to the RBE program. But as Doug Jarrett, a partner specializing in telecom law with law firm Keller & Heckman LLP, explained in an email exchange with Telecompetitor, the RBE awardees “get the same relief on the LOCs as the CAF II bidders.”

FCC Rural Broadband Experiment Issues
According to the CAF II report and order, CAF II and RBE awardees now can get LOCs from banks that are insured by the FDIC and have a Weiss bank safety rating of B- or higher – a move that will expand the number of eligible U.S. banks to approximately 3,600.

It’s important to note that RBE awards to Northeast Rural Services and Lake County were held up for reasons unrelated to LOCs in addition to or instead of LOC issues. Other issues involved a requirement to obtain eligible telecommunications carrier status and whether all of a proposed project area was in a price cap carrier territory (a requirement of the program).

Nevertheless, Northeast Rural Services and Lake County are among only a handful of RBE winners to receive “ready to authorize” notices since last year, suggesting that the FCC may have been moving slowly on resolving open issues until the LOC issue could be resolved.

Telecompetitor will be watching closely in upcoming weeks to see whether the FCC will promptly issue decisions on releasing funding for other long-pending RBE awards.

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