WASHINGTON, December 19, 2023 – House Republicans are accusing the National Telecommunications and Information Administration of regulating broadband pricing as part of its $42.5 billion Broadband Equity, Access and Deployment program. 

Their concerns, outlined in a letter to NTIA head Alan Davidson Friday, center on rules requiring states — the entities ultimately awarding grants under the program — to ensure providers set up affordable plans for low-income households to get connected on BEAD-funded infrastructure. States are afforded flexibility in how they do this, but the NTIA has expressed a preference for setting a specific price point or a formula that will be used to calculate the low-cost plan.

Republican lawmakers said in the letter that approving state BEAD plans with required pricing amounts to rate regulation by the NTIA, something the agency is forbidden from doing by the Infrastructure, Investment and Jobs Act, which spawned the BEAD program.

“As we have said before, NTIA’s approval of state plans that include rate regulation is NTIA regulating rates in violation of the IIJA,” the letter reads.

All 16 Republican members of the House Communications and Technology Subcommittee signed the letter, including Communications Subcommittee Chair Bob Latta, R-Ohio, and Commerce Committee Chair Cathy McMorris Rodgers, R-Washington. The two signed another letter on Friday to FCC Chairwoman Jessica Rosenworcel saying her claims about the effectiveness of the Affordable Connectivity Program, a monthly broadband subsidy for low-income households, were overstated.

The issue of alleged rate regulation came up during Davidson’s testimony to the subcommittee at an oversight hearing on December 5. Asked repeatedly if the NTIA would regulate rates to ensure affordability requirements are met, Davidson emphasized the agency would not be handing down price requirements.

“We are not setting a price at the NTIA. We are not setting a national price for broadband,” he said at the hearing.

Davidson did not forestall the agency approving state plans to mandate rates or set price caps, which was not enough for House Republicans.

“If we’re going to spend billions of dollars of federal money, and people are going to take that money,” Davidson said, “it’s not unreasonable to ask them to be careful about affordability when they’re doing so.”

The NTIA has only officially approved one proposal for selecting BEAD grant recipients so far: Louisiana’s. That document sets the state’s low-cost option at $30 – set to match the subsidy provided by the ACP – but gives applicants room to raise that up to $65 if necessary for the financial sustainability of a project.

Virginia’s plan requiring providers to submit their own low-cost plans as part of the application process drew some pushback from the agency. The NTIA asked the state to set up more concrete requirements around the low-cost provision, citing a need to know how consumers would be affected before approving the plan.

The state, citing the same concerns as Republican lawmakers, is asking NTIA to approve its plan as is.

WASHINGTON, November 9, 2023 – There is still more work to do on BEAD program financing requirements, advocates and broadband providers said on Thursday.

“Now the work kind of begins again,” said Quinn Jordan, head of the Mississippi Broadband Association.

He and other stakeholders pushed the Commerce Department to change the letter of credit rules for its $42.5 billion Broadband Equity, Access and Deployment program.

Before November 1, BEAD rules required a 25 percent letter of credit, which advocates said would edge out smaller providers. The updated rules allow states to use other means of confirming the financial viability of projects, like performance bonds, which are only paid out if a project fails,  and reimbursements based on deployment milestones.

But going forward, work will center on making sure state contracts are compatible with the other frameworks allowed in the changed rules, those advocates said at a webinar in the broadband community.

“If there’s too much exposure, we could really run up the cost of these performance bonds,” Jordan said.

Phil Macres, a telecom lawyer who organized a coalition of broadband providers to push the letter of credit changes, said he has been meeting with surety companies – institutions that issue performance bonds – to work on how best to structure these contracts.

The second biggest focus will be ensuring state broadband offices know how to navigate the updated financing rules, said Calum Cameron, a communications manager at Connect Humanity. Cameron drafted a 300-signatory open letter advocating changes to the old letter of credit rules. 

“This group will continue to work on both of these fronts,” he said. 

Working for letter of credit changes

The rule change took months of advocacy work behind the scenes, said Gigi Sohn, the longtime broadband advocate and one-time FCC nominee who now heads the American Association for Public Broadband.

“If anybody tells you this is an issue that was just brought to the attention of the NTIA,” she said, “it’s been much longer than that.”

Panelists credited Sohn’s involvement with some of the effort’s success.

“As soon as Gigi Sohn got involved, that’s when the issue really started to take hold.” said John Windhausen, director of the School, Health, and Libraries Broadband Coalition.

That, Mindhausen said, made it easier to set up meetings in August with White House officials and express concerns that the original letter of credit requirements were too restrictive.

Charles Thomas, director of operations at two small ISPs, said he reached out to Macres and Elizabeth Bowles, another panelist who serves as CEO of the ISP Aristotle Unified Communications, after hearing them speak about the BEAD letter of credit at a webinar.

He eventually sat down with them and NTIA Director Alan Davidson to explain how the old rules would have left him and other small ISPs on the sidelines.

“You got to get involved,” he said.

WASHINGTON, November 1, 2023 – The National Telecommunications and Information Administration released on Wednesday alternatives to the letter of credit requirement for its main broadband program.

The $42.5 billion Broadband Equity, Access and Deployment program rules require grant recipients to produce a letter of credit from a bank for 25 percent of the amount they are awarded. That involves putting the cash up as collateral, which critics have said could prevent small broadband providers from participating.

With the NTIA’s new ‘conditional programmatic waiver,’ states and territories will have other options to ensure the financial reliability of BEAD grants. Those include requiring a performance bond for the full award, which the awardee only pays out if they fail to meet their build out requirements. 

The waiver allows states and territories to use completion milestones to lower LOC amounts over time, meaning the LOC could decrease from 25 percent of the grant as infrastructure is deployed, freeing up money for grant recipients to use in their BEAD projects. That option can also apply to performance bonds.

The agency is also doing away with the 25 percent starting point, allowing the LOC to be as low as 10 percent under certain circumstances, as well as accepting letters of credit from credit unions.

In a blog post announcing the waiver, the NTIA said it may provide additional guidance on the matter in the future and emphasized that broadband offices can work with the agency to deviate from the standard rules.

“States and territories are also free to request waivers for additional circumstances not covered by this programmatic waiver,” it said. 

States will outline the letter of credit rules for their BEAD grant processes in volume two of their initial proposals, due to the NTIA by December 27.

The move comes after months of pressure from the broadband industry and lawmakers to change the BEAD letter of credit requirements. Small providers argued they would be edged out of the program because they have less cash on hand, hindering efforts to close the digital divide in remote and hard-to-serve areas.

BEAD director Evan Feinman first hinted the agency was working on an update to the requirement at the BEAD Implementation Summit on September 22.