Private financing could help rural ISPs meet BEAD requirements

Rural internet service providers (ISPs) could find financial support through a new offering from The Avery Companies designed to help them meet the requirements for the Broadband Equity, Access and Deployment (BEAD) program.

This week the private investment company announced a new initiative to support BEAD applicants in rural and underserved areas by providing the funds needed to obtain a letter of credit (LOC).

Currently, BEAD subsidy seekers are required to provide the National Telecommunications and Information Administration (NTIA) with 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.

With its new initiative The Avery Companies will step in as the capital source for approved ISPs, posting credit on their behalf to secure LOCs from banks, which could also free up their balance sheets to make it easier to start and complete broadband projects on time, without incurring fines or other penalties.

“The idea here is to really give smaller operators the tools necessary to be able to compete and succeed,” said Ben Friedman, managing partner of The Avery Companies.

Other programs like the Rural Digital Opportunity Fund (RDOF) saw a lot of funding awarded to top-tier public market players that have “significantly different balance sheet dynamics and availability of capital,” Friedman noted. “But they're not necessarily building in the places where the government, and frankly the broader swath of America, needs internet access.”

The Avery Companies offer already has significant amount of interest, and "a number of far-along conversations," according to Friedman. With “no limit” to what the company is willing to financially back, it will also look to help the service providers roll their projects out, whether it be with permitting, the subsidy application or finding appropriate equipment and construction crews.

The end goal is to be “a full-service solution,” Friedman told Fierce, to ensure “the returns for the ISP or whoever may be building the project are as high and as efficient as possible, and that the government is getting the most efficient return to ensure that we're able to provide internet access to these underserved communities.”

The LOC requirement has received criticism from smaller providers who say it will block small and community-centered ISPs, minority and women-owned providers, nonprofits and municipalities — “the very entities the program aims to prioritize” — from participating in the BEAD program. Industry groups have approached the NTIA with alternative options for smaller providers and municipalities.

In a letter to the NTIA last month, several industry groups claimed that factoring in the additional 25% match requirement, awardees will face a capital hurdle of more than 60% of their grant. For example, a provider seeking a $7.5 million grant for a $10 million project would need to have at least $4.6 million of their own capital available upfront.

“The LOC requirement, intended to ensure accountability in the distribution of broadband grants by the NTIA, has raised concerns as it may hinder participation from ISPs best suited to connect underserved communities,” the letter stated. “Instead of safeguarding taxpayer funds, the LOC creates prohibitive capital barriers.”

That said, in August the NTIA did acknowledge that in some cases an alternative to LOCs may be appropriate, such as for municipalities who can access capital in the bond market, and urged states and territories to “accommodate these differences in establishing their requirements.” 

An NTIA representative previously told Fierce that the administration is open to LOC alternatives "if they are necessary and sufficient to ensure that the program’s objectives are met."