BEAD Bonding is committed to highlighting the responses to the Federal BEAD Program project requirements, as the industry lobbies around alternatives to the Letter of Credit Requirement, which will present a significant barrier for many businesses to serve their communities in the broadband buildout.
The Broadband Equity, Access, and Deployment (BEAD) Program provides $42.45 billion to expand high-speed internet access by funding planning, infrastructure deployment, and adoption programs in all 50 states, Washington D.C., Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands.
The program currently has a match requirement of at least 25% of project costs and a Letter of Credit (LC) requirement worth 25% of the grant amount from an FDIC-insured bank with a Weiss rating of B- or better. Banks may be reluctant to issue $10.6B in LCs and, furthermore, may require up to 100% collateral for the LC from the applicant. These two requirements burden businesses by requiring them to commit up to 50-60% of their grant amount in working capital, which could alternatively go towards purchasing equipment, laying fiber, and training the next generation of broadband engineers. The working capital needed to meet these requirements will prevent small community-centered ISPs, minority and women-owned ISPs, nonprofits, and municipalities from participating in this program.
Surety Bonds represent a valid and time-tested alternative because they provide the opportunity to mitigate the risks inherent in such a sizable project while allowing smaller businesses to participate in the program without the capital hurdle established by the LC requirement. The surety bond would act as (1) a method for the National Telecommunications and Information Administration (NTIA) to recover damages if the Internet Service Provider (ISP) failed to complete the project according to the contract AND (2) a qualifying filter for applicants as the bond company evaluates their experience, qualifications, and capacity as a pre-requisite for qualifying for the bond.
We encourage you to check back here often as we continue to follow the progress on the BEAD Program funding requirements. We look forward to helping you understand the bonding process better so that you are best positioned to be ready whenever a bonded project arises.
