Rural Broadband Experiment Requirements Don't Meet Prudent Lending Practice Standards, Bank Says

of credit when they are selected for funding and then renew and increase the letter of credit each year to reflect the amount of funding they will receive over the next year, the rural lender noted. If a recipient can't obtain a letter in any year, it would be considered in default by the commission, which would be able to demand repayment of the funds, the filing said. The bank that initially approved the letter of credit would effectively be in the position of having to renew the letter of credit each year or having the borrower face default, CoBank said. The lenders’ exposure would increase over time “as it is impossible to assess the various risks facing operators in the rapidly changing telecommunications industry over a 10-year horizon,” the filing said. The amount required to be covered by a letter of credit should increase only through the build-out period and then be reduced or eliminated, CoBank said. The commission’s ability to change performance requirements for carriers also “adds an element of regulatory and political risk,” and is also “inconsistent with commercially prudent lending practices,” CoBank said. The agency should clarify that award recipients are responsible only for meeting the performance standards that exist when the awards are granted, the filing said.