ISPs, Banks Still Want Looser Financing Rules for FCC Subsidy
Some commenters wanted a lower minimum Weiss rating, but many have pushed for a different standard entirely.
Jake Neenan
WASHINGTON, August 21, 2024 – Internet service providers and banks continued to ask the Federal Communications Commission to loosen restrictions on where its subsidy participants can obtain a letter of credit.
“The record demonstrates that recipients are laboring under a system that is in need of adjustment to reduce costs, mitigate support suspension and defaults that are not the fault of the recipient, and to minimize the FCC’s and [the Universal Service Administrative Co.'s] administrative resources,” WISPA wrote in reply comments posted Tuesday.
USAC is a non-profit that manages the Universal Service Fund and other broadband subsidy programs for the FCC.
The main question of the FCC proceeding has been whether to continue using Weiss Ratings, the firm whose bank safety grades determine a bank’s eligibility. The agency waived its B- Weiss rating threshold in March after the number of qualifying banks nearly halved over a two-year period, potentially nullifying many existing letters of credit for participants in the $6 billion Rural Digital Opportunity Fund.
Those letters of credit must generally be equal to at least their first year of support, plus yearly increases until certain deployment milestones have been met. That has typically involved putting up an equal amount of cash as collateral.
The banking industry and the largest ISP industry groups have pushed the FCC to ditch Weiss, arguing the firm’s ratings lack transparency and were not reliable. The company’s founder pushed back in a filing with the agency, writing “Weiss firmly believes that the FCC’s decision to use the Weiss Bank Safety Ratings as a standard is a correct one,” and calling criticisms “untruthful or misleading.”
ACA Connects, a trade group representing smaller providers, and Weiss said the FCC should simply move the Weiss threshold down to a C-, which would make most banks eligible.
Aside from Weiss, an association of credit unions asked the agency to follow the National Telecommunications and Information Administration, which handles a separate broadband subsidy program, and allow credit unions to issue letters of credit. Current FCC rules limit participants' options to banks.
WISPA pushed for performance bonds, which providers only pay out if they miss deployment milestones and are also allowed by the NTIA. The group also said the agency should allow RDOF participants to reduce their letters of credit back to one year of support if they meet 10 percent of their deployment milestone in two years, down from 20 percent currently, to ease the financial burden on ISPs.
“Extending eligibility to credit unions would instantly expand the pool of safe and secure financial institutions,” America’s Credit Unions wrote. Credit Unions are also rated by Weiss and could fit into an existing threshold if the agency sticks with the firm, but the group said it “shares the concerns expressed in the record regarding the exclusive use of Weiss ratings to qualify financial institutions,” because of a similarly unexpected drop in credit union ratings.
