Altice, Windstream and more push NTIA for changes to BEAD letter of credit rule

Another group of service providers is taking aim at the NTIA's rule that participants in the $42.5 billion Broadband Equity Access and Deployment (BEAD) program must obtain an irrevocable letter of credit for 25% of the award.

In a letter to Commerce Secretary Gina Raimondo and Assistant Secretary Alan Davidson on Wednesday, shared with Light Reading, executives at six mid-size providers – altafiber, Altice USA, Brightspeed, Consolidated Communications, Windstream and Ziply Fiber – warned regulators that BEAD's current letter of credit requirement "will force many ISPs out of the program." Brightspeed led the effort, according to the group's press release.

The execs who signed onto the letter include: Josh Duckworth, CFO, altafiber; Michael Olsen, chief corporate responsibility officer, Altice; Bob Mudge, CEO, Brightspeed; Bob Udell, CEO, Consolidated; Tony Thomas, CEO, Windstream; and Harold Zeitz, CEO, Ziply Fiber.

The letter from the six companies follows a prior push from a group of roughly 300 small ISPs, municipalities and broadband experts who wrote to the NTIA last month with similar concerns. That coalition is collaborating with Connect Humanity, a nonprofit working with communities to advance digital equity, which started advocating against the credit letter requirement this summer.

Related:Coalition forms against BEAD letter of credit requirement

Rule threatens to cut BEAD's reach

In their letter to the NTIA on Wednesday, the mid-size ISP execs referenced the concern of smaller and community broadband providers and said it applies to their companies as well.

"Small, rural, municipal, and tribal ISPs have been vocal about the burden this requirement will create for their companies, organizations, and governments. We may be larger companies, but we will face similar burdens," said the group of executives. "These financial demands will reduce broadband investment by our companies, because we will either have to divert funds from ongoing network deployment or not participate in the BEAD program at all."

Indeed, they noted that the letter of credit requirement will result in their companies connecting "at minimum" 20% fewer locations than they could "absent the current framework."

The execs also pointed out discrepancies in the NTIA staff's argument for requiring the letter of credit, saying that "the NTIA's requirements go far beyond any other federal or state broadband funding program." While the NTIA has pointed to the FCC's Rural Digital Opportunity Fund (RDOF) as a model for the rule, the executives note, for example, that RDOF's credit letter requirement is smaller than BEAD's (10% of the award for one year of RDOF funding, versus 25% of the full BEAD award) and that RDOF did not require a capital match, whereas BEAD requires 25%.

Related:Push against BEAD letter of credit gets more ISP support

"Under the current BEAD requirements, award recipients will be required to commit, before the first strand of fiber is placed, capital amounts that exceed 100% of the project cost. Moreover, the rule requires ISPs to obtain the letter of credit at the outset of a project even though the government does not have to disburse funds if the provider fails to complete the build," said the group of service provider executives. "Therefore, requiring ISPs to submit a letter of credit at the outset of a grant award does not actually protect taxpayer dollars."

'Menu of options' to come

The six ISPs further suggested that the NTIA amend the current credit letter requirement in three ways. First, by reducing it to 5%, from 25%, of the total award. Second, by requiring ISPs to "obtain the letter of credit when grant funds are received" rather than during the application process. And third, by retiring the letter of credit "upon certification of grant compliance."

The execs also backed suggestions made by others who oppose BEAD's letter of credit requirement that the NTIA consider alternatives such as "surety bonds, certification of good standing, or parent guarantees."

Notably, the NTIA has indicated in recent weeks that it is working on making some changes.

Speaking at a Broadband Breakfast event last month, Evan Feinman, BEAD program director at the NTIA, said the agency was "hard at work" offering a "menu of options" for ISPs to satisfy the goals of the letter of credit requirement.

Feinman added that the public would hear more from the NTIA on BEAD's credit letter requirement "in the relatively near future."

That's a bit of a departure from prior NTIA sentiment on the matter, indicating that the industry's public pressure is working. Earlier this year, Feinman said on a webinar that applicants may seek waivers to the credit letter requirement, "but those waivers are going to be pretty tightly controlled."

[Ed. note: This story was updated on 10/18/23 at 11:15 a.m. ET to include a link to Brightspeed's press release.]