FCC Aims to Update Credit Letter Rules for Rural Broadband Support


The FCC has proposed updated rules to offer more flexibility in supporting providers to deploy high-speed internet services in rural, high-cost, areas. To ensure public dollars are safeguarded, the Commission requires that certain broadband providers who receive Universal Service Fund support to deploy broadband to high-cost areas maintain letters of credit from a qualifying bank and with a sufficient value. Amid concerns that the burden from those requirements can curb deployment, the agency seeks comment on changing its existing bank rating standards and allowing certain providers to reduce the value of their letter of credit sooner, freeing more capital for deployment.

In the last two years, what the FCC calls “a significant number” of banks have lost their eligibility to issue letters of credit for high-cost support recipients as their safety ratings have fallen below the standard established by the Commission. Carriers are then burdened by needing to obtain a new letter of credit from a qualifying bank, according to agency officials. 

“When we first laid out the Rural Digital Opportunity Fund in 2020 program, I noted the importance of safeguarding this investment and stated that the letters of credit requirement would help ‘promote responsibility and protect the fund,’” said FCC Commissioner Geoffrey Starks during Thursday’s 5-0 vote. He said the reduced number of banks eligible to issue letters of credit “has resulted in an influx of requests from support recipients for a waiver of these letter of credit rules.” He noted the Wireline Competition Bureau “diligently” worked through those and issued a temporary waiver earlier this year so that Phase II of the Connected America Fund and the Rural Digital Opportunity Fund (RDOF) program can continue to run smoothly.  

“You have to make sure we follow through and have protections in place in case [the banks] don’t-with making sure those protections themselves don’t become so burdensome that we undermine the goal of the program,” said FCC Commissioner Carr during Thursday’s vote. He characterized the proposed changes as a “balanced path forward with a range of options.”

The Notice of Proposed Rulemaking adopted on Thursday aims to address those burdens and seeks comment on the appropriate standard for determining the eligibility of a United States bank to provide a letter of credit to a provider participating in certain FCC high-cost programs. The agency is also looking for public input on reducing the letter of credit value for RDOF support recipients that have demonstrated sufficient broadband deployment using program funds. It seeks comment on allowing Connect America Fund Phase II providers that have met deployment and reporting obligations to reduce their letter of credit burden by following the RDOF letter of credit rules.

By Leslie Stimson, Inside Towers Washington Bureau Chief

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