The FCC's Second E-rate Modernization Order adopted rules equalizing the treatment of leased lit and dark fiber services eligible for E-rate Program support. Dark fiber leases permit a customer to purchase capacity on a provider-owned and maintained fiber network without paying for transmission service. The customer pays separately for the modulating electronics required to "light" the fiber (transmit data). Beginning in Funding Year 2016, Category One support is available for special construction projects for lit fiber services, leased dark fiber, and for self-provisioned networks, as well as network equipment necessary to light dark fiber.
Funding for all special construction projects is available for Category One infrastructure costs incurred up to six months prior to the start of 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 due to weather or other reasons.
The FCC's rules establish safeguards to ensure that applicants properly compare the cost-effectiveness of leased dark fiber and self-provisioned fiber with other options, including the requirement to treat price as the primary factor in selecting winning bids. For instance, if applicants seek bids for leased dark fiber or self-provisioned fiber, they must also seek bids for lit fiber over a comparable time period. In addition, applicants must include equipment and maintenance costs associated with lighting dark fiber in the same application with the dark fiber lease.
Applicants may not receive E-rate Program support for recurring services associated with dark fiber until it is lit, and may only receive support for special construction of dark fiber that is lit in the same funding year.
Fiber Special Construction
E-rate Program funding is available for special construction to connect eligible schools and libraries to broadband networks. The eligible components of special construction are:
- Construction of network facilities;
- Design and engineering; and
- Project management.
Special construction funding is available to applicants as an eligible Category One charge, including applicants that are leasing lit or dark fiber services, and applicants that are self-provisioning all or a portion of their own broadband network. A dark fiber IRU (indefeasible rights of use) is treated as leased dark fiber services for the purposes of the E-rate Program.
As with all requests for E-rate Program funding, before requesting support for special construction, the applicant must make a determination that the most cost-effective solution for meeting connectivity needs has been selected.
Keep in mind that, in seeking bids for special construction of either dark fiber or a self-provisioned network, E-rate Program rules generally require the applicant to seek bids for comparable leased lit services on the same FCC Form 470, and to compare the cost-effectiveness of leased lit services with either the dark fiber or self-provisioning bids that the applicant receives. For more information specific to competitive bidding, review the Requirements for Fiber page.
Fiber Special Construction Options
- Lit fiber services special construction. Many providers of leased lit fiber services do not impose a separate construction charge to deploy fiber (or other high-speed connections) from the applicant's premises to the providers' networks. However, where a lit services provider does charge to deploy a new fiber connection to an applicant's building(s), the applicant may seek Category One E-rate Program support for the construction, design and engineering, and project management components of the project as special construction charges. Assuming E-rate Program rules have been followed, including the obligation to select the most cost-effective bid, the E-rate Program will pay the discount share of the special construction charge and of the monthly recurring charge for leasing the lit fiber service.
- Special construction to connect to existing dark fiber. Applicants may seek Category One support for the special construction charges associated with connecting an applicant's building(s) to an existing dark fiber network and a lease of that dark fiber. Assuming E-rate Program rules have been followed, including the obligations to seek lit fiber service bids when seeking dark fiber bids and to select the most cost-effective solution, the E-rate Program will pay the discount share of both a special construction charge and the cost of the dark fiber service, which may be structured as either an upfront IRU or recurring lease payments.
For example, if a school district knows there is dark fiber running near most of its schools, it could seek bids to lease the dark fiber to connect its schools if it also seeks bids for comparable lit fiber services, and evaluates the cost-effectiveness of the responses. If a bidder structures its bid to include upfront special construction charges to connect some of the schools to the dark fiber network, and the bid is the most cost-effective solution, the school district could seek E-rate Program support for the discount share of such construction costs, as well as for the recurring charge for leasing the dark fiber services (or the upfront IRU charge). Remember that if the applicant also seeks support for network equipment and maintenance costs associated with lighting the dark fiber, it must do so in the same application as the dark fiber lease.
- Self - provisioning. An applicant may seek Category One support to self-provision its own network if constructing all or a portion of its own network is the most cost-effective connectivity solution. To qualify for E-rate Program support for a self-provisioned network, the applicant must either: 1) seek bids for leased lit services in the same FCC Form 470, and compare the cost of leased lit fiber service to the total cost of ownership over the life of the self-provisioned network; or 2) have already solicited lit service bids for the upcoming funding year, and not received any bids. In the latter case, the applicant would seek bids for a self-provisioning option through a second posting for the same funding year. Self-provisioned connections may include wide area network (WAN) circuits between eligible schools or libraries, and/or circuits connecting eligible schools or libraries or non-instructional facilities to the commercial Internet.
- Timing of special construction. Reimbursement is available for special construction that begins as much as six months before the start of the funding year. That means a vendor can begin special construction after the applicant has selected the vendor pursuant to E-rate Program 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 assumes the risk that USAC will find a problem with the application that requires its denial or a reduction of the amount requested, or that USAC may not commit funds for some other reason.
- Installment payments. Typically, an applicant is required to pay the non-discount share of E-rate Program supported services within 90 days of receipt of service. However, if an applicant is considering seeking support for special construction charges, the applicant may request on the FCC Form 470 that bidders allow payment of the non-discount share of special construction charges in installment payments over up to four years. Bidders are not required to offer installment payments upon request. If installment payments are not requested on the FCC Form 470, or were declined by the selected vendor as an option, the non-discount share of special construction charges must be paid by the applicant within 90 days of receipt of service.
- State matching. If a state provides eligible schools and libraries with funding for special construction charges to deploy broadband networks that meet the FCC's E-rate Program broadband goals, the E-rate Program will provide a 1:1 dollar match in extra Category One funding up to an additional ten percent discount. For Tribal schools and libraries, the E-rate Program will also match special construction funding provided by states, other federal government entities and Tribal nations, also on a 1:1 basis up to an extra ten percent. Total support from the E-rate Program and a state, other federal government entities, and/or Tribal nations may not exceed 100 percent. More information
Frequently Asked Questions (FAQs)
For additional information about requirements applicable to funding requests for dark and lit fiber services and self-provisioning, please see the Dark & Lit Fiber FAQs page.