NTIA Issues Conditional Waiver of BEAD Letter of Credit Rules

Under the programmatic waiver, subgrantees may receive an LOC from any U.S. credit union that is National Credit Union Administration-insured with a Weiss credit union safety rating of B- or better. Subgrantees alternatively may provide a performance bond issued by a company holding a certificate of authority and equal to 100% of the BEAD subaward. The waiver allows eligible entities to reduce their LOC obligation amount below 25% or performance bond below 100% over time based on meeting deployment milestones. It also lets the initial LOC or performance bond amount to be 10% of the subaward amount if an entity issues funding on a reimbursable basis of no more than six months.

"Being a good steward of taxpayer dollars also means encouraging robust participation from [ISPs] of all types and sizes," NTIA said, noting smaller providers "often have unique expertise in serving some of the hardest-to-reach communities in America." The agency "remains faithful to our objectives of encouraging robust participation from a broad range of service providers while giving states and territories more ways to ensure that grant recipients can build a high-quality network and operate it for years to come. A senior NTIA official told reporters Tuesday that the agency will "continue to monitor the implementation of this requirement" and states may request waivers for additional circumstances not covered by this waiver.

Industry and advocacy groups widely welcomed the move. Wireless ISP Association Vice President-Policy Louis Peraertz said NTIA "explicitly recognizes that smaller broadband providers have unique experience in serving America’s hardest-to-reach communities, allowing them to play a significant role in the success of BEAD." It will "improve the pool of available solutions for states, inviting more providers needed to reach the millions of locations that truly lack reliable broadband," Peraertz said. The announcement "highlights [NTIA's] willingness to work with industry to address their concerns and find solutions," said Incompas CEO Chip Pickering.

The waiver will "help maximize dollars for deployment" and encourage greater provider participation, said USTelecom President-CEO Jonathan Spalter: "We look forward to continued work with all stakeholders to reach our nation’s connectivity goals.” 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," said NTCA CEO Shirley Bloomfield: "We greatly appreciate the Administration’s willingness to engage with NTCA and its members and to take the concerns of small rural broadband providers into consideration in refining BEAD obligations carefully, and we look forward to further collaboration as implementation of this historic program continues.”

The original LOC obligation "disadvantaged smaller, non-profit, municipal and community-based organizations that cannot afford to sock away 25% of the project’s costs upfront in addition to providing 25% match funding," said Schools, Health & Libraries Broadband Coalition Executive Director John Windhausen. "Universal broadband is an all-of-nation effort and today's action by the NTIA means that all broadband providers can participate in this historic investment to connect everyone everywhere," said Benton Institute for Broadband & Society Executive Director Adrianne Furniss.

The Washington State Broadband Office supported the waiver. “We’ve heard from some stakeholders that obtaining a letter of credit can be a barrier for small entities and tribal nations due to the significant cash-on-hand required to demonstrate financial stability to lenders,” said Director Mark Vasconi. “This can create a hardship for some BEAD applicants and the communities they serve.”

"The LOC clarifications and alternatives represent a significant advancement that will enable the BEAD program to have maximum impact in Maine,” emailed Maine Connectivity Authority President Andrew Butcher: They open participation to more kinds of ISPs, “which will be key to ensuring a competitive landscape that provides affordable and quality high-speed internet for all."

The waiver solves Colorado local governments’ concern that requiring an LOC would “put local governments in a position where they might be violating the state constitution,” said Colorado Communications and Utility Alliance counsel Ken Fellman of Kissinger & Fellman. Colorado’s taxpayer’s bill of rights requires localities to obtain voter approval before pledging credit or creating multiyear fiscal obligations. “We probably couldn’t have gotten grants because you can only vote in certain times of the year,” special elections are costly and BEAD has tight deadlines, said Fellman: Most communities would have declined to try. Performance bonds are an “affordable” alternative that won’t require elections, he said.

“We spoke and NTIA listened,” said Gigi Sohn, American Association for Public Broadband executive director. “The guidance provides greater flexibility for smaller, minority and female owned and public broadband providers and allows them to participate in a program that is critical to ensuring that every US household has robust and affordable broadband.” The waiver will "allow many more entities to participate that would have otherwise been left on the sidelines," said Klein Law Principal Philip Macres but "getting this result was no easy task." The barrier "disproportionately affected small and communitycentered ISPs, minority- and women-owned ISPs, nonprofits, and municipalities, contradicting the program's objective to include these entities."