The Wireless Telecommunications Bureau of the Federal Communications Commission today announced that it would allow winners of its Mobility Fund Auction (Phase I) to obtain and submit to the FCC letters of credit issued by CoBank.
CoBank does not meet all of the FCC’s criteria for an eligible letter of credit issuer. Specifically, according to FCC rules, issuers of letters of credit must be insured by the Federal Deposit Insurance Corporation. CoBank is not a depository bank, but an agricultural credit bank and as such is insured as a part of the U.S. Farm Credit System. The FCC decided that the system under which CoBank is insured would suffice and that the public interest would not be negatively impacted by a waiver of its rules.
The Phase I auction is designed to provide high-cost support to carriers as incentive to deploy voice and broadband services into geographical areas carriers would otherwise not deploy facilities. The intent of the auction is to raise and target an additional $300 million in support to carriers, including Bell Operating Companies, other large carriers, and smaller mid-sized carriers so that hundreds of thousands of unserved potential customers would receive voice and broadband services.
Universal service is usually listed among risk factors that may impact a telecommunications carrier. Bell Operating Companies and other large carriers, such as Verizon and AT&T, are no exception. Changes in universal support mechanisms can have an impact on a company’s cost of doing business leading to impacts on company profits. Today’s ruling does not appear to cause any such threat.
