Broadband Breakfast follows the reasons and realities behind the FCC’s decision to quit using Weiss ratings for banks’ letters of credit of RDOF, CAF II winners for one year…

 In January, Consolidated Communications notified federal regulators about a financial issue that had cropped up, could do harm to hundreds of broadband Internet Service Providers, and frustrate the effort to deliver high-speed Internet service to rural America.

In a filing with the Federal Communications Commission, Consolidated said the bank from which it had received a letter of credit (LOC) – a requirement under the Rural Digital Opportunity Fund auction rules – was no longer an eligible lending institution.

Although the FCC did not provide data, the agency in the Consolidated filing was evidently looking in broad terms at a problem that involved hundreds of banks that were backstopping millions of dollars pledged to the FCC as protection against auction winners that defaulted or otherwise underperformed in a manner that would trigger payment to the agency.

Under the FCC’s rules, an LOC had to come from a bank with a Weiss rating of at least B-minus. Consolidated’s bank had just dipped to C plus. The FCC’s rules stipulated that an inferior Weiss rating required the suspension of RDOF support until the auction winner found a new bank with a Weiss rating with at least a B minus.

Finding a new LOC provider can take time and involve additional expense. The FCC’s rules said an LOC from a qualified bank had to be equal to the amount of RDOF support in the first year.

Consolidated sought a six-month waiver from the Weiss requirement, which the FCC granted shortly thereafter. Based in Mattoon, Il., Consolidated has about 393,000 broadband subscribers located in more than 20 states.

That’s just the first chapter but it speaks to the intricacies behind every aspect of every question on these federal applications and the frustration of these intricacies.