Series Focuses on Matching Funds and Raising Capital

Half-way through the Fiber Broadband Association’s 12-part monthly webinar series, listeners have learned some but not all of the information they need to know about seeking capital for the matching requirement in the $42.5 billion Broadband Equity Access and Deployment program. 

Director of the BEAD program at the National Telecommunications and Information Administration Evan Feinman told the broadband community that the program emphasizes a “bottom-up approach” where state, local, regional, and tribal governments work in partnership with the federal government to expand broadband networks.

According to Feinman, the requirement serves as a gatekeeping and scoring criteria for infrastructure projects and digital equity programs. 

He also discussed how allocations were based on the second version of the Federal Communications Commission’s national broadband map, which has faced criticism from stakeholders across the country. But Feinman said that the map was continuously improving and would help assess general broadband needs and will allow states to submit further in-depth proposals.

“It will create gatekeeping criteria for who is bringing a project properly before them the, and then scoring criteria for both deployment activities, which is to, say, infrastructure, and non-deployment activities, which is digital equity programming,” said Feinman.

David Hartin, president of private equity firm with holdings in telecommunications and technology ITC Holding, suggested that internet service providers start by knowing their business.

“We [as a private equity firm] are looking at you to know your business better than we do so just make sure that you know the number of subscribers, your annual revenue, monthly revenue,” said Hartin. He urged providers to ensure their valuation expectations are correct and applicable.

Connect Humanity Chief Investment Officer Brian Vo, added that financing “starts with a conversation on how you want to optimize your capital.” A provider with 10,000 subscribers might be interested in more of a project or revenue-based financing where small providers may want to avoid banks completely due to recessionary and inflation pressure, he said.

Non-profit organizations often have greater flexibility in providing funding compared to government agencies and banking institutions, said Vo, whose Connect Humanity in a non-profit that works for community financing. But non-profit applicants still must be knowledgeable about their financial abilities, market conditions, potential partnerships, risks and threats, he said. 

Jase Wilson and Mike Faloon, co-founders of Ready.net, urged ISPs to start the matching process early by researching funding options and building capital stack and resources to finance their projects. 

Principal of Klein Law Group Phillip Macres and CEO of internet service provider Aristotle Elizabeth Bowles warned ISPs that they will also have to prepare for the letter of credit requirement. The letter of credit, a bank note that guarantees payment of 25 percent of grant awards in event of a default, adds to the 25 percent project cost match requirement. The money associated with the letter of credit is held in a frozen account during that time and can have significantly detrimental affects on providers.

During Episode 6 and Episode 7, Chris Perlitz, managing director with Municipal Capital Markets Group, told the community that municipal bonds are a great source of capital. Municipal bonds offer tax-exempt benefits for investors and are often among the most affordable means of raising capital, he said. 

All past and future episodes can be accessed on Broadband.Money/WTF. Join us on August 16 for the next episode, Matching Funds for Rural Electric Cooperatives, that will examine the financing options available for rural electric co-ops to expand their footprints.