The Broadband Equity, Access, and Deployment (BEAD) Program will only succeed if every penny is wisely spent. This includes ensuring that subgrantees have the capacity not just to build and deploy high-speed Internet networks but to operate those networks for years to come, delivering Internet connectivity to areas that for too long have been left behind.
Being a good steward of taxpayer dollars also means encouraging robust participation from Internet service providers (ISPs) of all types and sizes. Inclusivity is key: where larger ISPs may have the resources to deploy quickly, smaller providers often have unique expertise in serving some of the hardest-to-reach communities in America. When providers compete for BEAD funding, states and territories can more efficiently spend their allocations and make the most of this historic investment.
Under the NOFO, prospective subgrantees must provide an irrevocable standby letter of credit (LOC) to the Eligible Entity (i.e., the 50 states, five territories, and the District of Columbia) before entering into a subgrantee agreement. The amount of the LOC must be no less than 25% of the subaward amount. This requirement helps states and territories ensure that potential BEAD applicants have the financial capacity to deliver reliable, affordable high-speed Internet service.
The NOFO acknowledges that “prospective subgrantees may be able to, or required, to demonstrate their capabilities in a variety of manners” and urges states and territories to “accommodate these differences in establishing their requirements,” inviting alternatives “if they are necessary and sufficient to ensure that the Program’s objectives are met.”
Some stakeholders have noted that the LOC requirement may have an adverse effect on smaller providers and could prevent them from participating in the BEAD program. To address these concerns, the waiver released today modifies the LOC requirement for subgrantees of all Eligible Entities in the following ways:
Allow Credit Unions to Issue LOCs. The NOFO requires subgrantees to obtain a LOC from a U.S. bank with a safety rating issued by Weiss of B− or better. The waiver permits subgrantees to fulfill the LOC Requirement (or any alternative permitted under the waiver) utilizing any United States credit union that is insured by the National Credit Union Administration and that has a credit union safety rating issued by Weiss of B− or better.
Allow Use of Performance Bonds. The waiver permits a subgrantee to provide a performance bond equal to 100% of the BEAD subaward amount in lieu of a letter of credit, provided that the bond is issued by a company holding a certificate of authority as an acceptable surety on federal bonds as identified in the Department of Treasury Circular 570.
Allow Eligible Entities to Reduce the Obligation Upon Completion of Milestones. The waiver allows an Eligible Entity to reduce the amount of the letter of credit obligation below 25% over time, or reduce the amount of the performance bond below 100% over time, upon a subgrantee meeting deployment milestones specified by the Eligible Entity.
Allow for an Alternative Initial LOC or Performance Bond Percentage. The NOFO requires that the initial amount of the letter of credit be 25% of the subaward (or the initial amount of the performance bond be 100% of the subaward under the option described above). The waiver allows the initial amount of the letter of credit or performance bond to be 10% of the subaward amount during the entire period of performance when an Eligible Entity issues funding on a reimbursable basis consistent with Section IV.C.1.b of the NOFO and reimbursement is for periods of no more than six months each.
By providing an expanded universe of potential issuers of LOCs and specific, permissible alternatives to the LOC requirement, NTIA remains faithful to our objectives of encouraging robust participation from a broad range of service providers while giving states and territories more ways to ensure that grant recipients can build a high-quality network and operate it for years to come. We appreciate those stakeholders who brought both their concerns and good solutions to the table. NTIA will continue to monitor the implementation of this requirement and may provide additional guidance as needed. States and territories are also free to request waivers for additional circumstances not covered by this programmatic waiver where prospective subgrantees are able to meet the requirements under the NOFO by other means. Achieving Internet for All requires a whole-of-nation approach at every step, and we will continue to collaborate as we implement this historic initiative.