Broadband builders contend with BEAD's letter of credit rule

As states prepare to roll out Broadband, Equity, Access and Deployment (BEAD) program funding they will have to ensure that providers and local stakeholders are educated on the process of being approved to build with that money. Notably, the program’s letter of credit requirement will still be a must-have for those who want to work through BEAD, despite some pushback on that rule. Illinois Office of Broadband Director Matt Schmit said that his office will have to do outreach so that providers understand the letter of credit is an additional requirement that might not have been there for other grant opportunities. “I think awareness is the key there, with letters of credit,” said Schmit.  Under the existing guidelines, potential grant seekers are required to provide the National Telecommunications and Information Administration (NTIA) with a letter of credit from a bank as evidence that they have at least 25% of the grant dollar amount in a liquid cash bank account. The real issue is that the letter of credit applies on top of NTIA's 25 percent match requirement for providers – and that could start to add up. For example, a $20 million broadband construction project would require a $5 million match (25 percent of the total project amount) and a $3.75 million letter of credit (25 percent of the $15 million grant amount), so the company or municipality would need to have about $8.75 million in a cash account at the time the grant was awarded. Aristotle President Elizabeth Bowles said that the letter of credit is "a singularly bad way to go about this." Additionally, Bowles added that the letter of credit will disproportionately affect smaller providers, “the very providers that have been going out in rural America and deploying.”