Below are just some of the issues that are important to Brightspeed and the company’s position on them.
Broadband Equity, Access, and Deployment (BEAD) and the Letter of Credit (LC)
In 2021, the Infrastructure Investment and Jobs Act (IIJA), also known as the Bipartisan Infrastructure Law (BIL), established the $42.45 billion Broadband, Equity, Access and Deployment (BEAD) program, administered by the National Telecommunications and Information Administration (NTIA). The BEAD program focuses on broadband planning, deployment, mapping, equity and adoption projects, while granting awards on a tiered system to prioritize awards for unserved (below 25/3 Mbps) and underserved (below 100/20 Mbps) locations. Entities eligible for the BEAD program include the states, territories and the District of Columbia.
On May 13, 2022, NTIA published a Notice of Funding Opportunity (NOFO) for the BEAD program. The NOFO included a provision that requires broadband providers to obtain a letter of credit to be eligible to receive grant funds. Under the current BEAD program requirements, applicants must obtain a letter of credit from a bank valued at no less than 25% of the award amount. This letter of credit has a goal of reassuring the grant administrator that the applicant has liquid assets they could claw back in the event they do not deliver on grant requirements.
Advocacy
The Federal Government’s $42.45 billion BEAD grant program has the potential to be transformative by bringing access to quality, affordable high-speed internet service to all Americans. Brightspeed appreciates these efforts, and those of the NTIA and looks forward to participating in this opportunity. However, the goal is at risk because of the letter of credit requirement adopted by the NTIA. Under current guidance, BEAD grant recipients will have to post excessively large and completely unnecessary letters of credit long before they receive any grant funds. This is also despite the fact that the agencies managing BEAD will verify the required network deployment before releasing any BEAD funds. This requirement has the potential to reduce broadband deployment in the next few years, rather than substantially increasing it as the White House and Congress intended.
As currently drafted, the BEAD letter of credit requirement does not serve government’s objective of bringing high-speed internet to every home in the country. In fact, the requirement works against the stated program objective by removing approximately $10 billion of private funding that otherwise would be used to deploy fiber broadband. Instead, that $10 billion will just sit in bank accounts until after BEAD even though it is not clear that the banking sector can handle such an increase in demand for letters of credit. Moreover, BEAD recipients will have to spend at least $1 billion in bank fees to maintain those letters of credit over the course of the BEAD program. These extra demands for up-front capital allocation and spending will reduce participation in BEAD, particularly by smaller and regional providers. Importantly, these financial demands will also reduce broadband investment by even the largest broadband providers as they will have to divert funds from ongoing network deployment.
The $10 billion in letters of credit that will be required under current BEAD guidelines is above and beyond the $13+ billion in that providers will have to devote to meet the requirement of a 25% matching investment in BEAD projects. Collectively, BEAD recipients also will need to acquire and invest $42 billion and demonstrate network deployment before receiving those BEAD funds (without interest) on a reimbursement basis. With these company match and reimbursement requirements, the letter of credit requirement is superfluous and does not add any protection for public funds. If a provider does not deliver, it will not get reimbursed—BEAD funding is not at risk.
The proposed BEAD company match, reimbursement, and LC requirements go far beyond what any other broadband grant program has required. Notably, the United States Department of the Treasury has just distributed tens of billions of dollars for broadband grants that will be paid on a reimbursement basis without requiring any letters of credit. Similarly, state grant programs using their own funds generally require company matches and payment of reimbursement basis, but do not require letters of credit. The Federal Communications Commission, (FCC) on the other hand, has distributed tens of billions of dollars for broadband investment with a modest letter of credit requirement, but it has provided the funding up front and not required any company match. And, it appears the FCC has rarely needed to recover funds through the required letters of credit.
NTIA should follow the precedent from the Treasury Department and state grant programs by using a reimbursement process to disburse funds and a residual government interest in funded assets rather than letters of credit to protect government funds and ensure grant compliance.
To the extent BEAD continues to have letter of credit requirements, it is necessary at a minimum, that NTIA substantially reduce the billions of dollars that will be taken away from broadband deployment by making three major changes to any letter of credit requirement.
1. The letter of credit requirement should be reduced to 5% of grant funds to reflect the low risk of total default when paying on a reimbursement basis.
- Grant recipients will still be putting up 100% of project costs, including 25% from their own funds.
- Reducing the letter of credit to 5% unlocks ~$8 billion more for broadband deployment, which will allow providers to deploy broadband to over a million more homes.
2. Any letter of credit should not be required until grant funds are disbursed as there cannot be any need to recover funds that have yet to be disbursed.
- Given the reimbursement model, there is no instance in which the letter of credit should be called on during the build phase – applicants won’t receive their grant funding until after buildout has been verified by the government.
- Requiring a letter of credit upon grant award, however, prevents capital from being used productively and deters competition and investment from a variety of providers.
3. All letter of credit obligations should be retired when build-out is complete and verified as the government will retain a security interest in those assets to ensure they are used for the intended purpose.
- BEAD requires semi-annual performance reporting and build status updates by grant recipients, negating the need to hold a letter of credit for the life of the project.
- Once the government verifies completion of deployment, the letter of credit should be released, freeing up capital for additional broadband deployment projects.
Affordable Connectivity Program
The federal government’s Affordable Connectivity Program (ACP) is a $14 billion FCC program, funded by the Infrastructure Investment and Jobs Act. The ACP began December 31, 2021, replacing the Emergency Broadband Benefit (EBB) (a temporary program tied to the pandemic). It is administered by the Universal Service Administrative Company (USAC). ACP provides a discount of up to $30 a month for broadband service ($75 for households on Tribal lands) for qualifying low-income households.
As of September 1, 2023, approximately 18.2M households have registered and 8.7M of those households are in Brightspeed’s 20-state footprint. Eight percent of the registrants in the states we operate, or 704,727 people, are within our service territory. However, not all are Brightspeed customers. Many customers apply their ACP discount to their wireless plans.
The ACP will continue until funds run out, which is expected in early 2024. Brightspeed goes beyond the basic requirements of ACP by offering a zero-cost option to ACP eligible customers using our 200 Mbps symmetrical speed service which retails for $60 a month, but after the ACP discount and Brightspeed’s own $30 discount, the net cost to the customer is $0.
Advocacy
Brightspeed believes the ACP program should be funded indefinitely. If the ACP program is not continued, but other low-cost offerings are required, providers should be allowed to verify eligibility by using the National Verifier to confirm the eligibility of consumers qualified for the low-cost options. Providers should not be required to integrate with a state-specific system or create their own verification process.
Participation in ACP is required for BEAD funding and many state-level funding sources. Brightspeed has committed to continuous participation in this program to make broadband connectivity affordable to as many subscribers as possible.
We firmly believe that ACP and affordable access to broadband connectivity are essential elements to the success of the President’s infrastructure investment programs, including BEAD. BEAD provides the network foundation, and affordability is critical to adoption and alleviates many of the digital equity concerns that the IIJA and BEAD are intended to solve.
Build America, Buy America Act (BABAA)
Brightspeed supports promoting U.S. jobs through BABAA and the goal of manufacturing fiber and other products domestically. However, in many cases the onshoring the manufacturing of these materials and products will take significant time and is largely outside the influence of internet service providers. A strict interpretation and implementation of BABAA would likely delay broadband rollout to underserved areas of the country.
NTIA should continue categorizing fiber optic cables and optical fibers as manufactured products, so that they satisfy the BABAA test, which is that at least 50% of the content is sourced domestically. Otherwise, analysis done at a sub-component level means that fiber would not meet the BABAA standard.
NTIA should grant limited, four-year waivers on certain products required to manufacture fiber optic cable. Those products are plastics and polymer-based products, and non-ferrous metals and steel, which are used as reinforcements within some fiber optic cable designs. The suppliers of those inputs are unlikely to invest in domestic capacity to support the relatively small volumes (compared to other industries) needed to support fiber optic cable manufacturing. Manufacturing of these components should be permitted in countries where the U.S. has free trade agreements.
Precedent: Middle mile waivers granted
NTIA recently granted BABAA waivers for certain classes of broadband-related manufactured products and construction materials for recipients of the Middle Mile grants awarded between March 1, 2023, and March 1, 2024.
These products are simply not available in the quantity or quality required by the Middle Mile program, and onshoring would require significant lead time. These categories included network equipment, fiber, semiconductors, and oil-based polymers. All Middle Mile award recipients will be required to report on their purchases of the above-mentioned items and equipment from foreign sources.
Advocacy: We encourage the U.S. Department of Commerce, the NTIA, and the Administration to interpret BABAA and grant waivers as necessary to ensure broadband providers can meet the President’s important national infrastructure deployment goals.