The National Telecommunications and Information Administration (NTIA) should not require a letter of credit (L/C) for its grant funding programmes to stimulate the rollout across the US of broadband infrastructure because it squeezes out small- and minority-owned service providers, industry leaders told delegates at a Broadband.Money event last week.

The US$42.5-billion Broadband Equity, Access and Deployment Programme currently requires grant applicants to provide an L/C to demonstrate they have the financial capacity to meet the programme's obligations throughout the construction process.

L/C requirements

Applicants are in most cases required to submit an L/C worth 25 per cent of total project costs, on top of matched funding of 25 per cent of the project costs.

Industry experts who question the effectiveness of an L/C to guarantee a project is completed include the president of one of the smaller providers, Aristotle ISP.

Costly exercise

"A letter of credit is a singularly bad way to go about this," said Elizabeth Bowles, who argues that due to the large investments involved in the rollout, banks insist on cash collateral, which significantly increases the cost of receiving grant funds.

Cash held by banks as collateral meanwhile cannot easily be used to invest in the projects, she explained.

Rumbling on

The issue of L/C usage in the US' broadband rollout process has been rumbling on for some time. In 2022, internet service providers in Arkansas expressed concerns over how the use of L/Cs in newly revised state-level grant funding requirements could hamper broadband internet expansion across the US state (DC World News, 12 September 2022).

Republican lawmaker Andy Harris soon after sent a letter to US commerce secretary Gina Raimondo expressing his concerns about the L/C requirement (DC World News, 26 September 2022).

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