NTIA Will Allow Alternatives to Letter of Credit for BEAD Funding in New Guidance

WASHINGTON, November 1, 2023 – The National Telecommunications and Information Administration released on Wednesday alternatives to the letter of credit requirement for its main broadband program.

The $42.5 billion Broadband Equity, Access and Deployment program rules require grant recipients to produce a letter of credit from a bank for 25 percent of the amount they are awarded. That involves putting the cash up as collateral, which critics have said could prevent small broadband providers from participating.

With the NTIA’s new ‘conditional programmatic waiver,’ states and territories will have other options to ensure the financial reliability of BEAD grants. Those include requiring a performance bond for the full award, which the awardee only pays out if they fail to meet their build out requirements.

The waiver allows states and territories to use completion milestones to lower LOC amounts over time, meaning the LOC could decrease from 25 percent of the grant as infrastructure is deployed, freeing up money for grant recipients to use in their BEAD projects. That option can also apply to performance bonds.

The agency is also doing away with the 25 percent starting point, allowing the LOC to be as low as 10 percent under certain circumstances, as well as accepting letters of credit from credit unions.

In a blog post announcing the waiver, the NTIA said it may provide additional guidance on the matter in the future and emphasized that broadband offices can work with the agency to deviate from the standard rules.

“States and territories are also free to request waivers for additional circumstances not covered by this programmatic waiver,” it said.

States will outline the letter of credit rules for their BEAD grant processes in volume two of their initial proposals, due to the NTIA by December 27.

The move comes after months of pressure from the broadband industry and lawmakers to change the BEAD letter of credit requirements. Small providers argued they would be edged out of the program because they have less cash on hand, hindering efforts to close the digital divide in remote and hard-to-serve areas.

BEAD director Evan Feinman first hinted the agency was working on an update to the requirement at the BEAD Implementation Summit on September 22.