The Federal Communications Commission announced today that it will discontinue its requirement that banks obtain certain types of Weiss safety ratings to be eligible to provide a letter of credit to telecommunications provider recipients of the FCC’s Rural Digital Opportunity Fund.
The RDOF was launched in 2020 to expand high-speed broadband in rural areas of the U.S. The FCC has required banks issuing LOCs to telecommunications providers that receive funds from the RDOF and its Universal Service Fund to maintain a Weiss bank safety rating of B- or higher. However, starting in 2023, many banks learned they could no longer issue LOCs because their Weiss safety ratings had dropped for no transparent reason. The FCC issued a temporary waiver for the requirement earlier this year.
Earlier this year, the American Bankers Association and more than 70 national and state bankers associations urged the FCC to drop the requirement. Among other things, they noted the Weiss rating organization is not a nationally recognized statistical rating organization registered with the Securities and Exchange Commission. “There is no transparency as to the formula used for generating their bank safety ratings and several comments on their website raise concerns as to the reliability of their analysis,” they said in a joint letter.
In an announcement, the FCC said that the number of banks that qualify for missing LOCs has significantly decreased because of the Weiss requirement, “raising concerns of increased costs and administrative burdens on support recipients.” The FCC will instead allow U.S. banks that are well-capitalized as determined by the FDIC and other banking agencies to issue LOCs for both the RDOF and Universal Service Fund.
The LOC requirement was originally put in place to ensure the FCC could recoup its funds should a recipient default. That was the right goal, but the requirements “are so stringent that they can get in the way of building better broadband,” FCC Chairwoman Jessica Rosenworcel said.
“That is why we update them here,” she said. “By doing so, we can help speed the deployment of high-speed service to those in places without.”
