It's been well over a year since awards were announced in the FCC Rural Broadband Experiment program, but several projects have not started because funds have not been released. The recipients are ready to commence, but the FCC's own requirements have halted expansion of high-quality Internet access to areas that need it the most.
The Rural Broadband Experiments program has required Letters of Credit from the top 100 banks. Although it may have seemed like good regulation, it completely ignores the reality of small businesses.
They Are Experiments
The FCC touted the Rural Broadband Experiments as the answer for small, local, and nontraditional, Internet Service Providers (ISP). The program had $100 million in funding to encourage innovation in ill-served rural areas. After the FCC provisionally approved 37 of the 200 applications, those providers then needed to secure Letters of Credit to ensure that the projects were secure, reliable investments.
The Letters of Credit for this program must be from one of the top 100 banks, and big banks are not known for lending to small ISPs. Local banks, however, do lend to such projects because they are familiar with the local ISP, the local economy, and the community. These big banks that the FCC wants, however, cannot judge the relative soundness of such projects, especially not “experiments.”
Big Banks Don’t Understand Risk
Why would you require a Letter of Credit from these banks? Last year, ILSR published a chart that shows how banks with more than $100 billion in assets “make poorer lending decisions and write-off more bad loans than do community banks, those financial institutions with under $1 billion in assets.”
Not all of the top 100 banks have more than $100 billion in assets, but there is no need to involve the big banks when rural Internet access programs can and often should work with small local banks. For instance, in Bozeman, Montana, eight local banks provided funding for the non-profit community network. The requirement is flawed, ill conceived, and evidence that our system is conditioned to promote the inaccurate premise that "bigger is better."