Schools and Libraries (E-Rate)

FAQs: Dark & Lit Fiber

 

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General

Q1: What is "dark fiber" and how do the FCC's new rules "equalize" the treatment of dark fiber and lit fiber?

A1: Dark fiber leases, and other dark fiber service agreements [e.g., indefeasible rights of use (IRU)], are commercial arrangements in which a customer purchases use of a portion of a provider-owned and maintained fiber network separately from the service of lighting (i.e., transmitting information over) that fiber. Many providers now offer such arrangements. Funding for dark fiber may be a cost-effective option for some applicants.

Starting in FY2016, pursuant to the Second E-rate Modernization Order, support is available for special construction projects for lit fiber services, leased dark fiber, and for self-provisioned networks. The Order also made the network equipment necessary to light dark fiber eligible for Category One E-rate Program support.

Applicants that seek bids for leased dark fiber must also seek bids for lit fiber service over a comparable time period. Applicants must include equipment and maintenance costs associated with lighting dark fiber in the same application with the dark fiber lease. Additionally, applicants will not receive E-rate Program support for recurring services associated with dark fiber until it is lit, and may only receive special construction support for dark fiber that is lit in the same funding year.

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Q2: What is special construction?

A2: Special construction projects deploy new fiber or upgraded facilities to E-rate Program eligible locations. Special construction charges are the upfront, non-recurring costs of such installations or upgrades. Special construction consists of three components: (1) construction of network facilities; (2) design and engineering; and (3) project management. Charges for network electronics needed to light the fiber, while eligible for Category One support, are not considered part of special construction.

Applicants may receive funding for special construction charges incurred up to six months prior to the funding year provided that the service provider is selected pursuant to a posted FCC Form 470, a Category One recurring service depends on the installation of the infrastructure, and the service start date is on or after the start of the funding year. Applicants may also receive extensions of up to one year for unavoidable delays (e.g., unavoidable weather delays).

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Q3: What is the difference between special construction and self-provisioning of fiber?

A3: Self-provisioning is complete applicant ownership of a high-speed broadband network. An applicant that self-provisions will construct, own, operate, and maintain the network or a portion of the network. Special construction refers to the upfront, non-recurring costs associated with the installation of new fiber, regardless of whether the owner is the applicant or the service provider (e.g., special construction charges may be incurred in the deployment of service provider-owned lit, service provider-owned dark, and applicant-owned self-provisioned fiber).

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Q4: What FCC Order provides rules about fiber, special construction, and self-provisioning of fiber?

A4: The Second Report and Order on Reconsideration released December 19, 2014, commonly known as the Second E-rate Modernization Order, provides program rules about fiber, special construction, and self-provisioning of fiber. See the Summary of the Second E-rate Modernization Order for an overview.

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Q5: In what funding year will the changes to special construction and self-provisioning of dark fiber go into effect?

A5: Beginning with FY2016 (July 1, 2016 - June 30, 2017), special construction and self-provisioning of dark fiber will be supported.

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Q6: Can applicants receive E-rate Program funding to construct their own high-speed broadband networks?

A6: Yes. A "self-provisioned" network is one that is constructed, owned, and operated by the applicant. If a self-provisioned broadband network is the most cost-effective solution, applicants may seek E-rate Program support to construct their own high-speed broadband networks, or portions of such networks, beginning in FY2016. Applicants must demonstrate that self-provisioning is the most cost-effective option by soliciting bids for both a leased lit fiber service and a self-provisioned network on the same FCC Form 470 and comparing the cost of leased lit fiber service to the total cost of ownership over the life of the self-provisioned network. Applicants may also seek a self-provisioning option if they do not receive any bids in response to a services-only FCC Form 470. In such a case, the applicant would request support for self-provisioning through a second posting for the same funding year.

Applicants may only receive support for self-provisioned facilities built and used in that funding year, and must secure all resources necessary to make effective use of services purchased. Further, applicants may not resell service on the self-provisioned networks.

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Q7: What is USAC's best advice to applicants who are considering self-provisioning?

A7: Start early. The process will involve developing a Request for Proposal (RFP), soliciting bids, and evaluating the bids to make sure self-provisioning is the most cost-effective option. Remember that you are required to solicit bids for both lit service and self-provisioning through the same FCC Form 470 unless you have previously issued an FCC Form 470 for lit fiber service and received no bids. If this is the case, you may pursue a self-construction option through a second posting for the same funding year.

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Q8: Do states that have existing fiber networks have to switch to the self-provisioned model? Or must applicants for fiber services consider the option of self-provisioning?

A8: There is no requirement to consider self-provisioning. It is an option that applicants may choose to pursue if they find that it is the most cost effective option in comparison to their existing situation.

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Q9: Does USAC have representatives who can explain the rules and help provide basic guidance as we consider the self-construction option?

A9: Yes. Those who need more information should call the Client Service Bureau at (888) 203-8100.

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Filing the FCC Form 470

Q10: Should I indicate anything specific when I apply for lit fiber?

A10: Yes. The more descriptive you are, the more likely you are to receive a comprehensive bid. You should indicate the bandwidth you are seeking. If you are also seeking bids for leased dark fiber or a self-provisioned network, the bandwidth should be comparable to the speeds that you expect to achieve in the dark fiber or self-provisioned solution. If you would like specific pricing for any bandwidth increments, be sure to include that information in the narrative section of the funding request.

For example, if you state the minimum speed is 2 Gbps and the maximum speed is 5 Gbps, you may want to include a statement like, "Please provide pricing for bandwidth increments of 500 Mbps." Asking for pricing for a range of bandwidths will assist the applicant in comparing lit service with special construction options.

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Q11: If I want to seek bids for dark fiber, is there anything special I need to indicate on the FCC Form 470?

A11: Yes. If you are filing an FCC Form 470 for dark fiber, you will need to do the following things in the E-rate Productivity Center (EPC):

  • Create an RFP or equivalent document that provides all potential vendors sufficient information to formulate a bid.
  • Before selecting dark fiber as a funding request line item, you must first upload the RFP associated with your dark fiber request.
  • Select "Dark Fiber" from the "Function" dropdown.
  • Indicate the quantity of strands of fiber you would like to lease.
  • Enter the number of entities seeking dark fiber.
  • Indicate whether you are requesting bids on installation charges.
  • Indicate whether you are requesting bids on maintenance charges.
  • Notify potential bidders that you are interested in bids that would allow you to pay the non-discount portion of special construction charges in installment payments and the length of time you would like to make these payments (up to four years).
  • Add a new "Service Request" line for "Network Equipment" to light the dark fiber.
  • Add a new "Service Request" line for bids on lit fiber services.

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Q12: Do I select "Dark Fiber" on the FCC Form 470 if I am seeking bids to build and own my own network?

A12: If you are seeking bids on a self-provisioned network, select the "Self-Provisioning" option from the dropdown menu in EPC.

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Q13: On the FCC Form 470, how do I indicate my intent to seek bids for network equipment?

A13: To seek bids for network equipment to light dark fiber or for self-provisioning, utilize the "Other" selection from the dropdown menu in EPC. Provide the type of network equipment you are requesting in the "Functional Description" box and add any additional details to the "Narrative Description" section.

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Q14: Where do I indicate that I am seeking bids that provide for installment payments for special construction?

A14: The installment payment question will appear on the "Service Requests" page in EPC, below the "Narrative" after you have created and saved your line item seeking dark fiber with special construction.

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Competitive Bidding

Q15: Can you explain the competitive bidding requirement for special construction projects?

A15: As with all requests for E-rate Program funding, before seeking support for special construction via the FCC Form 471, the applicant must make a determination that the most cost-effective solution for meeting connectivity needs has been selected.

Keep in mind that, if seeking bids for either dark fiber or a self-provisioned network, E-rate Program rules usually require the applicant to seek bids for comparable leased lit services and to compare the cost effectiveness of leased lit services with either the dark fiber or self-construction bids that you receive. If the FCC Form 470 seeks bids for self-provisioning, the applicant must seek lit service bids on the same form.

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Q16: How does an applicant determine the elements of a cost comparison between lit services and special construction?

A16: Expected useful life of the asset is the key consideration when comparing the combined upfront and recurring costs of leased lit service to those of dark fiber or self-provisioning. The expected use may vary for equipment, fiber, etc. Applicants should determine a reasonable, defensible period of time for the comparison, based on their anticipated use of the assets. Applicants that choose to self-provision or purchase the equipment required to operate dark fiber may expect to recover their costs in five, seven, ten, or even 20 years. The case can reasonably be made for a range of time periods.

Applicants should also take care to consider all the costs of owning and operating a fiber network. Annual fees for fiber maintenance and operations including time and materials for fiber cut repair, monthly fees for managed service if a third party is managing the network for the applicant, and refresh of equipment should all be considered as part of the self-construction analysis.

On the lit services side, applicants also have to project their demand for bandwidth over the comparison period. Applicants also must consider and project how the costs of bandwidth will vary over time and make this part of their comparison model.

Applicants should be prepared to describe their assumptions clearly for their comparisons. Things like expected useful life of the dark fiber or self-provisioned fiber should be easy to determine, as should the annual costs of operating the self-provisioned or leased dark fiber. The comparison with the lit service should be clear and straightforward.

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Q17: How do you compare the cost of network equipment (lit vs. dark vs. self-provisioned) in competitive bidding?

A17: The cost of network equipment is generally built into lit service charges. There will likely be no direct one-to-one comparison for the costs of network equipment. Instead, you will compare the total lit fiber charges to the sum of all of the dark fiber or self-provisioned components (special construction, if applicable), lease or indefeasible rights of use (IRU) charges, network electronics and maintenance, and operation compared to the total lit fiber charges.

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Q18: Since the refresh of equipment on existing dark fiber or self-provisioned networks is not special construction and the requirement to compare dark or self-provisioned fiber to lit fiber is only for new service, do I still need to file an FCC Form 470 to seek bids on existing equipment?

A18: While there is no requirement to do a full dark and lit fiber comparison if seeking only network equipment to light dark fiber, applicants are still required to submit an FCC Form 470 to competitively bid the network equipment.

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Q19: If I am seeking bids only to refresh network equipment for leased dark fiber, how do I post for this on the FCC Form 470?

A19: Utilize the "Other" drop-down in the "Function" menu in EPC as you add a new services request.

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Q20: If I have a dark fiber lease or an IRU already, do I still need to post a new FCC Form 470 for FY2016?

A20: Dark fiber and dark fiber IRUs have been eligible for E-rate Program support since FY2011. If you have already purchased a dark fiber IRU using an E-rate Program compliant competitive bid process, and that lease or IRU has not expired, you do not need to repeat your competitive bidding process.

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Q21: Adding on to the last question about pre-existing leases or IRUs, do I need to perform the new competitive bid comparison of dark vs. lit fiber to determine which is the most cost-effective?

A21: Pre-existing dark fiber contracts which were signed prior to FY2016 and were competitively bid through the FCC Form 470 process are not required to perform the dark vs. lit fiber comparison.

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Funding and Payments

Q22: Can applicants get E-rate Program support for dark fiber that is not lit?

A22: No. The E-rate Program will support only fiber that is lit in the same funding year. However, applicants may receive up to a one-year extension of the service start date if they demonstrate that construction was unavoidably delayed due to weather or other reasons.

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Q23: Is there a cap on the funding that is available for self-provisioning?

A23: No. However, the self-provisioned solution must be the most cost-effective solution.

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Q24: When can I begin my special construction project?

A24: Applicants may receive support for special construction charges incurred as much as six months before the start of the funding year (this is January 1 for a funding year that commences on July 1), provided that the following three conditions are met:

  • Construction starts only after selection of the service provider pursuant to a posted FCC Form 470;
  • A Category One recurring service must depend on the installation of the infrastructure; and
  • The actual service start date of that recurring service is on or after the start of the funding year (July 1). This means that a vendor can begin special construction after the applicant has selected the vendor pursuant to the E-rate Program competitive bidding rules, but before the applicant has received a funding commitment.

If, however, an applicant allows special construction to start before receiving a funding commitment, the applicant takes the risk that USAC may find a problem with the application and may not commit funds.

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Q25: Am I still required to amortize large capital costs over a period of three years for charges of $500,000 or greater?

A25: Amortization requirements for FY2015 through FY2018 have been suspended for all non-recurring charges in excess of $500,000.

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Q26: Can you explain the rules around an applicant requesting installment payments for special construction projects?

A26: E-rate Program rules previously required applicants to pay the non-discount share of E-rate Program supported services within 90 days of receipt of service. However, if an applicant anticipates that it may seek support for special construction charges, it may now specify on its FCC Form 470 that it is requesting that bidders allow the applicant to pay the non-discount share of special construction charges in installment payments for up to four years. Bidders are not required to offer installment payments upon request. If an applicant does not request installment payments in its FCC Form 470, or did request it, but the winning vendor selected declined to offer installment payments as an option, then the applicant must pay its non-discount share of special construction charges within 90 days of receipt of service. An applicant can, however, use a bidder's willingness to accept the installment payment option as part of the applicant's evaluation of competitive bids.

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Q27: Do I have to do anything special if I want to take advantage of installment payments?

A27: Yes. You need to indicate the number of years (up to four years) over which you would like to pay using the dropdowns on the FCC Form 470 found below the "Narrative" section in EPC after you have completed your dark fiber "Service Request" entry.

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Q28: Are service providers required to do anything when their bid includes an installment payment option?

A28: Those service providers that do offer an installment payment option must disclose all material terms and conditions of that arrangement including any interest rate charged over the lifespan of the installment payments.

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Q29: The Second E-rate Modernization Order allows states to provide funding for special construction projects within their state. Can you explain the state match?

A29: If a state provides eligible schools and libraries with funding for special construction charges for high-speed broadband that meets the FCC's bandwidth targets, the E-rate Program will provide a 1:1 dollar match in extra Category One funding up to an additional ten percent discount (with a maximum of an effective 100 percent discount for a school or library at an 80 percent discount with a state match of ten percent). For Tribal schools and libraries, the E-rate Program will also match special construction funding provided by states, other federal entities and Tribal nations, also on a 1:1 basis up to an extra ten percent. Total support may not exceed 100 percent.

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Q30: In lieu of a state match, can grant funding from a private entity be used for special construction and be eligible for the E-rate Program match of up to ten percent?

A30: No, only state funding for special construction is eligible for the additional E-rate Program match of up to ten percent, except that for Tribal schools and libraries, Tribal and other federal sources may provide the matching funds.

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Q31: Can an applicant or a state seek an opinion from USAC on whether their proposed state funding for special construction is eligible for the E-rate Program match?

A31: Yes, USAC will review proposed state matches and provide an opinion on their eligibility. State matches must be appropriations of state funds with disbursement overseen by a state entity. Supporting deployment of broadband infrastructure for eligible entities has to be one of the eligible purposes for use of these funds.

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