Internet service providers (ISPs) in Arkansas have expressed concerns over how the use of letters of credit (L/Cs) in newly revised grant funding requirements could hamper broadband internet expansion across the US state.

They are calling for the state authorities to abandon demands for the providers to provide L/Cs to guarantee they meet their grant funding obligations, and instead ask for a performance bond.

Guarantees for broadband rollout

The L/Cs are being called for to guarantee that ISPs meet their contractual obligations if they receive funding in the Arkansas Rural Connect (ARC) grant programme designed to facilitate projects that expand the broadband footprint in rural Arkansas communities.

Since 2019, US$392 million for 163 projects to connect homes and businesses with high-speed access has been disbursed under the programme. Connecting the states remaining 140,000 homes is expected to cost around US$500 million.

In earlier ARC funding rounds, the authorities did not demand L/Cs, which some of the ISPs say will create additional project costs, add debts to a company's books and make it harder, particularly for smaller providers, to borrow money or finance projects.

Alternatives rejected

Some ISPs have suggested the state require a performance bond issued by a bank or financial institution instead of an L/C to guarantee the completion of projects in the programme.

But the authorities insist that under funding arrangements agreed in 2021 for the federal government to provide Arkansas with at least US$100 million broadband rollout, there is no provision for substituting a performance bond for an L/C from 2022 onwards.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.