The agency has changed the bonds' outlook to negative from stable due to “the further delays in project completion and the rising disagreement between the project company and the Commonwealth”.
This disagreement relates to the amount of schedule and compensation relief due to the project company.
Moody's, which kept the bonds rated as Baa2, said resolution of these issues in the coming months would be “the next key credit event”.
There are concerns that the authority's adjusted longstop dates are not sufficient to complete the project when compared to the contractor's updated project completion dates.
The project company is led by Australian investor Macquarie and the deal was signed back in September 2015.
In August, the Kentucky government sought a P3 counsel to advise on the broadband contract.
KentuckyWired troubles hit bond rating
Ratings agency Moody's has given the bonds underpinning the KentuckyWired broadband P3 progam a negative outlook amid continuing difficulties on the project.