The National Telecommunications and Information Administration (NTIA) has relaxed its letters of credit rules for recipients of funding for federal broadband projects. The decision will apply on August 24 and will impact entities bidding for funding through the Broadband Equity, Access, and Deployment (BEAD) Program.
The changes are expected to enable more small and rural broadband providers to participate in the BEAD program, which covers some of the costs of deploying broadband to underserved and unserved rural areas.
Providers participating in the program will still need to submit a letter of credit from a qualifying bank. However, that bank will no longer need a Weiss rating.
Instead, the bank must be classified as “well-capitalized,” according to standards set by the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve, and the Office of the Comptroller of the Currency.
The NTIA also will allow financial institutions rated by Nationally Recognized Statistical Rating Organizations (NRSROs) to issue letters of credit, as long as those institutions hold a rating of BBB- or higher.
While the rules for eligible banks have changed, the other rules for the letter of credit are “substantially similar,” according to the July 28 notice.
The purpose of letters of credit is to minimize the risk that funding recipients will be unable to complete projects for which they won funding.
The NTIA loosened rules around letters of credit in November of 2023 after a request from a coalition of regional internet providers. Among other things, the waiver issued at that time allowed BEAD funding recipients to reduce the amount of their letters of credit as progress was made on deployments.
The administration had been asked several times previously to change its rules, but that was the first time it conceded to the requests.
States are required to submit final proposals for the Benefit of the Bargain BEAD funding round by September 4, 2025.
