Letter of Credit

NTIA will loosen the letter of credit requirements for the $42.5 billion BEAD rural broadband funding program, senior agency officials told reporters in a pre-briefing yesterday.

The move came in response to service providers’ concerns that the letter of credit requirements were so burdensome that the providers would not be able to apply for funding through the BEAD program. Smaller service providers that already serve large parts of rural America were especially concerned about this possibility.

At issue is the initial requirement for funding recipients to provide a letter from a specific type of bank demonstrating that the bank has committed 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% of the provider’s award 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 the letter of credit as property of the provider’s bankruptcy.

The changes are coming in the form of a programmatic waiver. Key provisions of the waiver include:

  • A provider winning BEAD funding will be able to obtain its letter of credit 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% of the awarded amount.
  • A provider also will be able to replace the letter of credit valued at 25% of project costs with a letter of credit for a lower percentage of project costs after certain deployment milestones have been reached.
  • Those providers opting to provide a performance bond valued at 100% of project costs also 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 has made several other new provisions regarding the BEAD letter of credit requirements. Providers should check NTIA’s notice of programmatic waiver for details. That notice should be available soon on NTIA’s website.

This isn’t the first time some stakeholders have asked NTIA to change the rules for the BEAD program, but it is the first time NTIA has bowed to the stakeholders’ wishes.

Previously NTIA rejected requests to delay making state BEAD allocations to give states and providers more time to file challenges to FCC availability and location data. The agency also rejected requests to broaden the definition of “reliable” broadband service to include fixed wireless operating in unlicensed spectrum bands.

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One thought on “NTIA Loosens BEAD Letter of Credit Requirements

  1. This is a significant improvement but doesn’t give the under capitalized entities free rein to grab responsibilities outside their financial capability as RDOF did.

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