NTIA releases waiver for BEAD letter of credit rule

The NTIA released on Wednesday a waiver for the letter of credit (LOC) requirement in the Broadband Equity, Access and Deployment (BEAD) program, addressing industry concerns about how the rule may prevent smaller ISPs from participating.

Current BEAD rules require applicants to provide a letter of credit from a bank as evidence that they have at least 25% of the grant dollar amount in a cash bank account. That capital would need to be set aside for the entire duration of a BEAD-funded project.

The so-called programmatic waiver outlines four alternatives to the LOC. Subgrantees now have the option to get the LOC from a credit union instead of a bank, as credit unions typically offer lower interest rates for loans and lower fees.

Additionally, applicants can provide a performance bond “equal to 100% of the BEAD subaward amount.” Frequently used in construction projects, a performance bond is a financial guarantee that a contractor or company fulfills their contractual obligations.

The NTIA is also offering ISPs more flexibility with the amount obligation on a LOC or performance bond, provided they meet certain deployment milestones.

For instance, if a subgrantee shows they completed 40% of their BEAD buildout (the percentage of locations to be served), they may obtain a new LOC or renew an existing LOC so it’s valued at 20% of the grant amount. The more progress a provider makes on their BEAD project, the lower the LOC or performance bond amount goes down.

Finally, subgrantees can submit a LOC or performance bond worth 10% of their grant amount for the duration of the project. States would issue funding to ISPs incrementally over the course of a build, with reimbursement periods “of no more than six months each.”

The NTIA said states and territories are also free to request waivers “for additional circumstances not covered by this programmatic waiver, where prospective subgrantees are able to meet the requirements under the NOFO [Notice of Funding Opportunity] by other means.”

Industry groups in the past several weeks have urged the agency to adopt LOC alternatives. In October, six regional ISPs signed a letter to Secretary of Commerce Gina Raimondo, stating the rule is “overly burdensome” and will hinder broadband investment in rural areas.

Trade groups that praised the NTIA’s decision today include the American Association for Public Broadband (AAPB), INCOMPAS, NTCA – The Rural Broadband Association, the Schools, Health & Libraries Broadband (SHLB) Coalition, USTelecom and the Wireless Internet Service Providers Association (WISPA).

Gigi Sohn, AAPB’s executive director, said the NTIA’s guidance provides “greater flexibility for smaller, minority and female owned and public broadband providers,” by allowing them to participate in a program that’s “critical to ensuring that every U.S. household has robust and affordable broadband.”

For NTCA’s part, CEO Shirley Bloomfield stated the organization is still reviewing the announcement’s details, but “it appears to strike a welcome balance between promoting accountability in the use of BEAD program funds and relieving the burdens of stricter and more expansive letter of credit requirements.”

At a recent USTelecom event, the CEOs of Brightspeed and Ziply Fiber discussed the issues surrounding the LOC rule. According to Brightspeed’s Tom Maguire, some alternatives may not be sufficient for smaller providers.

“A lot of smaller companies, mid-sized companies, we just don’t have that capability to go out there and do what we need to do to secure a 10% bond,” he said in October.

The NTIA this summer also proposed some waivers for BEAD’s Buy America requirements, after receiving some pushback from industry.