Mid-Size Broadband Providers Say Letter of Credit Requirement in Current BEAD Program Will Reduce Broadband Expansion Investments

We write today to ask the National Telecommunications and Information Administration (NTIA) to provide guidance on alternatives to the Broadband Equity Access and Deployment (BEAD) program’s requirement that all applicants for program funding obtain an irrevocable letter of credit of 25% of the award, in addition to the 25% company match requirement. We believe that the letter of credit requirement in its current state will force many ISPs out of the program. And with our companies, the requirement may reduce our ability to reach—at a minimum—20% of the recipients we could deploy to absent the current framework. Small, rural, municipal, and tribal ISPs have been vocal about the burden this requirement will create for their companies, organizations, and governments. We may be larger companies, but we 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. We believe that there are alternatives to the BEAD letter of credit requirement that will both show financial capability and protect taxpayers in the event an ISP defaults, while at the same time allowing the BEAD program to achieve its goals. We suggest that NTIA encourage broader participation by financially capable ISPs of all sizes by modifying the letter of credit requirement as follows:

• Reducing the letter of credit requirement to 5% of the total grant amount;
• Requiring ISPs to obtain the letter of credit when grant funds are received, not during the application process and the initial construction phase (this will ensure taxpayer dollars are protected); and
• Retire the Letter of Credit upon certification of grant compliance.

In addition, 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.