Nearly 300 Broadband Groups, Experts Urge NTIA to Remove BEAD LOC Requirement

Nearly 300 broadband experts, ISPs, consumer advocates, and business groups urged NTIA to eliminate its letter of credit requirement for the broadband, equity, access and deployment program. The coalition, in a letter Wednesday, raised concerns about how the requirement will affect local providers and competition. Under the current rule, awardees must obtain an LOC for 25% of their award amount.

The current rules "risk excluding thousands of providers whose participation is vital to closing America’s digital divide," the letter said said. The LOC requirement will result in awardees having to "lock away vast sums of capital for the full duration of the build, likely several years," it said. The coalition said the requirement "shuts out the vast majority" of small providers, and some states don't allow municipalities to obtain LOCs. "BEAD has the potential to be one of the most transformative investments in our history," the letter said, "but only if we create a level playing field where all providers have an equal opportunity to participate. A course-correction is therefore needed."

"While the LOC is meant to safeguard funds in the event of default, it fails to find the balance that does this while honoring BEAD’s aim to ensure every American can access high-speed broadband services through a broad sector of ISPs," the letter said. The coalition recommended several alternatives to the LOC requirement, such as performance bonds and delayed reimbursement if it declines to waive the requirement entirely. "These alternatives do not supersede the due diligence that state broadband offices must perform on applicants to ensure proposals are viable and that applicants have the capacity to perform," the letter said.

Among those signing the letter were the American Association for Public Broadband, the American Library Association, Consumer Reports, Public Knowledge, the Schools, Health & Libraries Broadband Coalition, Communications Workers of America, the Wireless ISP Association and Astound Broadband.

“As things stand, BEAD is engineered to shut out the providers most willing and able to build for America’s least connected communities," said American Association for Public Broadband Executive Director Gigi Sohn, urging NTIA to "make a fix that will make the program more competitive and live up to its promise to connect the millions of American families still living without the broadband they need.”

"Unfortunately, as structured, the BEAD letter of credit discourages small, local providers from bidding to deploy broadband where it is most needed," said Benton Institute for Broadband & Society Executive Director Adrianne Furniss: "We hope NTIA will foster competition, not raise barriers to it." NTIA didn't comment.

The current requirement is an "extreme risk-averse approach," said Connect Humanity CEO Jochai Ben-Avie. NTIA "risks undermining the Biden administration’s ambition to connect everyone in America to affordable, reliable high-speed Internet." The Infrastructure Investment and Jobs Act "specifically calls for municipalities and other nonprofit entities to be eligible," said SHLB Coalition Executive Director John Windhausen, but the requirement is "effectively excluding thousands of small, non-profit and minority-owned broadband providers." A mandatory LOC will "reduce competition and jeopardizes the ability of anchor institutions to receive high-quality broadband."

“BEAD will succeed where more solutions can come to the table,” a Wireless ISP Association spokesperson emailed: “Small players already bridging the digital divide are key. One of the main ways to invite them in is by allowing states to more flexibly address BEAD process requirements, such as the [LOC] Simply put, the LOC will keep many small providers out of the picture -- companies that can ably connect the unserved, but which cannot afford its cost and complexity.”

WISPA understands that NTIA and the states “have a legitimate interest to provide taxpayers certainty that BEAD dollars are being put to good use,” but the LOC requirement “is a bridge too far for those small players bridging the digital divide,” the WISPA spokesperson said.