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With more than 7 million Texas residents disconnected from the rest of the world wide web, Texas’ broadband needs were no secret. With the federal funds, coupled with $1.5 billion from the state’s wallet, rural and underserved Texas communities finally saw a chance to catch up with technology.
But as the state prepares to submit a five-year plan to federal agencies on broadband deployment, the finer details of who may qualify for federal money in the Broadband Equity, Access and Deployment Program (BEAD) has come into sharper focus.
The regulations require each telecommunication company applying for a grant to provide a letter of credit from a major bank that covers at least 25 percent of the proposed project — essentially putting millions of dollars on the table to apply for a grant it isn’t guaranteed to receive.
This is a feasible task for big service providers with access to a qualified bank, but for rural companies, it’s a different story. For many of them, the requirement that they work with a major bank to secure funding is another hurdle.
These requirements were set by the National Telecommunications and Information Administration (NTIA), which will distribute the funds.
The requirements are meant to protect the federal investment. Federal efforts to expand Internet access with fewer safeguards have flopped. The Rural Digital Opportunity Fund (RDOF), a previous attempt by the Federal Communications Commission (FCC) to expand broadband, is estimated to have $2.8 billion in defaults.
Kelty Garbee, executive director of Texas Rural Funders, said she understands the requirement exists to prevent people from accepting money but not following through with projects.
However, she is concerned the rule disenfranchises rural providers.
The federal telecommunications administration declined to comment on this article. The administration did accept public comments regarding the rules after a notice was released last year.
Totelcom, a rural Internet service provider, started as a small cooperative in rural De Leon and now serves 10,000 businesses and households.
CEO Jennifer Prather said she hasn’t decided yet if her company will apply for the federal grants.
“This is harder for us to overcome than those large providers who have already chosen not to serve those areas,” Prather said. “This is something a large national provider doesn’t have a problem with. But they’re not the ones out here doing this already.”
Prather was hopeful about what the money could mean for connecting rural Texas, which has historically had little access to broadband. Now, she is waiting to see how the state might help before applying.
Prather’s business banks locally with one that isn’t on the federal government’s pre-approved list. If she chooses to apply for federal funding, Prather will have to find the closest qualified bank, become a customer, and put in enough money or assets to match 25 percent of the grant. If her funding application is denied, all the extra steps were essentially for nothing.
“Just to get these letters of credit can be impossible without tying up a bunch of funds,” Prather said. “It’s one of many issues that, added together, make us want to put our hands up and say, ‘We’re just not going to do that.’”
Etex Telephone Cooperative serves a slightly larger customer base in Gilmer. The East Texas-based company serves 14,000 customers and could still run into problems obtaining federal grants even though it is a bigger service provider.
“We would probably be limited on how big of a project we would be able to take on because of the cap from our local bank, and that’s one we’re established with,” said CEO Charlie Cano. “If we go to a bigger bank, who knows what they would ask for us to bring to the table.”
The Texas Broadband Development Office (BDO) has until Aug. 28 to submit its five-year plan to the NTIA. Comptroller Glenn Hegar’s office, which oversees the BDO, didn’t respond to a request for comment.
This story originally appeared in The Texas Tribune.
