FCC Expected to Address Letter of Credit Concerns in RDOF Vote

The FCC is expected to make changes to a draft Rural Digital Opportunity Fund order, responding to industry concerns that USF recipients could have trouble meeting financial requirements under the version that circulated earlier this month, agency officials told us Wednesday. They and stakeholders expect changes to address industry concerns about RDOF letter of credit (LOC) requirements (see 2001230005). Changes to allow New York state providers to bid in the program's phase one auctions (see 2001280039) aren't expected.

Wording on the RDOF draft up for a vote at Thursday's meeting of commissioners was fluid Wednesday, and commissioners' offices were expected to work out last-minute details into the night. One Democratic commissioner's office was waiting for answers from Chairman Ajit Pai's office. The agency declined to comment.

The LOC issue garnered many meetings and filings this month. USTelecom led an industry push for RDOF revisions that would "provide a means for auction winners to limit their letter of credit obligations to no more than one year by deploying broadband at an accelerated pace," posted Monday in docket 19-126. CEOs Bob Udell of Consolidated Communications, Darby McCarty of Smithville, Tony Thomas from Windstream Communications and USTelecom's Jonathan Spalter spoke with Pai and Preston Wise, the chair's rural broadband adviser. It was at Pai’s request.

Some stakeholders aren't asking for revisions to LOC requirements but want the FCC to allow alternatives to the letters. Wireless ISP Aristotle voiced opposition to LOC requirements "as the sole mechanism for securing the Commission's investment in RDOF," said CEO Elizabeth Bowles in a Friday phone call with FCC officials, also at Pai's request, and posted Wednesday. She said "banks do not distinguish between a stand-by letter of credit and a loan and generally require 100% collateralization. This has downstream unintended consequences for winning bidders, who must tie up their assets in order to receive support."

In earlier comments on an NPRM, Incompas also asked the FCC to "look at whether letters of credit were even necessary," said Chief Advocate and General Counsel Angie Kronenberg in an interview Monday. She said the USTelecom proposal "goes a long way to address our members' concerns." Such revisions to RDOF LOC requirements, she said, would encourage additional, and smaller, companies to participate in RDOF. Such competition could drive down costs to the USF program and deliver the most capable broadband networks.

Without the proposed revisions to the LOC requirements, some companies wouldn't have liquidity to meet them by year six of RDOF support, said Sarah Tyree, CoBank vice president-policy and public affairs. From a lender's perspective, the USF support helps assure that the provider has the cash flow to repay a loan. "Having support to make a business case to deploy broadband is very important," she said, especially in high-cost areas.

The FCC is widely expected to vote to approve the RDOF rulemaking Thursday (see 2001150005). That's despite concerns from some Democratic agency officials who think the program is moving too quickly, before better broadband mapping is available, and worry it devotes such a high portion of the RDOF support to phase one auction winners. And some states want time to better align their own broadband programs with the federal rules.

Pai is seen as wanting to move forward quickly with RDOF. An item on the phase one auction rules could come up for a vote at the Feb. 28 meeting, an official said. If so, a draft could be released next week. It's not a sure thing the item will circulate so soon.

Once the overall RDOF rules are approved, stakeholders will get new opportunities to comment, such as on whether to devote new funding to support the phase two auction winners, as well as on detailed procedural rules for the phase one auction, according to the draft.