By: Brian Donoghue

Lack of capital for small local Internet providers and community-owned networks is a key contributor to the affordability and access challenges fueling the digital divide. The influx of federal and state broadband funding will create opportunities for developing innovative capital stacks that can help bridge longstanding access gaps for low-income and rural communities.  

Adjustments to the Community Reinvestment Act could help banks take a leadership role in enhancing digital outcomes for residents across the regions they serve.  The Community Reinvestment Act (CRA) of 1977 was passed with the goal of improving the infrastructure of local communities across the country. The CRA’s focus includes housing, education, and workforce development. Now that broadband connections are pathways to achieving the CRA’s goals, the bill must be updated to include digital connectivity, one of the most pressing current needs of low- and moderate-income communities.

Since the CRA’s passage and updates, the economic and social landscape has been drastically shifted by access, or lack thereof, to the Internet. When over 70 percent of jobs in the U.S. require some sort of digital skills proficiency, true economic participation requires reliable broadband access. Many of the communities that lack reliable broadband connections are the same as those that the CRA is meant to serve in other aspects of infrastructure. Addressing digital equity is a clear next step for expanding and modernizing the CRA, and Next Century Cities is proud to join Connect Humanity and allies in making recommendations to reform the CRA.

Bankers should be encouraged to serve on the planning and implementation initiatives of digital inclusion efforts in their communities, under the CRA service test.

The CRA service test assesses an institution’s record of providing retail and community development services in its community. Historically, CRA has encouraged banks to support their local governments’ economic development planning work by recognizing volunteer service in addition to lending and investment under the CRA test. These same types of support, including serving on boards or providing technical assistance, would help digital inclusion initiatives develop robust, sustainable financing models and can further professionalize the field.  

Allow small ISPs to obtain a letter of credit from a Community Development

Financial Institution (CDFI) that supports small businesses and start-ups. 

Broadband funding often requires applicants to submit a letter of credit from a bank to verify their trustworthiness. Although pushback against Letter of Credit (LOC) requirements has been consistent since at least 2020, ISPs will still be required to obtain one from a bank in order to apply for IIJA funds. This requirement often disadvantages small ISPs during competitive funding processes. Changes to the CRA could enable CDFIs to leverage their organizational flexibility to provide these letters and open the door to federal funding.  

Read the August 5th letter here.