A US telecommunications industry association and a competition watchdog have urged the Federal Communications Commission (FCC) to drop its requirement for bidders to put up a letter of credit (L/C) in order to participate in its programme to expand rural broadband services.

NTCA-The Rural Broadband Association, a non-profit association representing small and rural telephone cooperatives and commercial companies, said it is impractical to require winners of the FCC's rural broadband experiments programme to obtain an L/C from a "top 100 bank".

Public notice

The requirement for the L/C is stipulated in a public notice from the Wireline Competition Bureau (WCB) in the Connect America Fund Phase II competitive bidding process.

The FCC's Connect America Fund will provide roughly US$9 billion in funding over five years to expand broadband service in rural areas.

Overly burdensome

The NTCA does not object to requiring companies to obtain L/Cs, but said limiting the source of such funding is "overly burdensome," particularly for small firms awarded smaller contracts.

"There are many small businesses with decades-long histories of rural operations and substantial experience with federal regulatory and loan/grant programmes that, while perhaps not being able to obtain L/Cs from "top 100 banks" or to justify paying an increasing amount of bank fees for ten years in connection with such L/Cs, have a demonstrated track record of delivering high-quality, affordable services in rural areas," the NTCA said in a reply to a public notice.

Alternative suggestion

The public notice issued by the WCB asked for comments on the L/C requirements after receiving several petitions for waiver.

The United States Telecom Association (USTelecom) said the current L/C requirements, which involve keeping the L/C open for 120 days after the completion of the 10-year programme, are onerous.

USTelecom suggested instead tailoring the programme to the amount of money at risk annually.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.