Fiber – Summary Overview
There are three types of fiber services eligible for Category One E-rate support:
- Leased Lit Fiber: A fiber-based broadband service where the service provider owns, maintains, and manages the network, and the E-rate applicant pays a recurring fee to have data transported over the network.
- Leased Dark Fiber including Indefeasible Rights of Use (IRU): The E-rate applicant leases capacity (i.e. a specific number of fiber strands) on a provider-owned fiber network. The applicant pays separately for modulating equipment to light the fiber in order to transmit data over that fiber. The maintenance and operations (M&O) charges related to leased dark fiber service can be the responsibility of the service provider or the applicant dependent on the terms of the contractual agreement.
- Self-Provisioned Network: Applicant ownership of a high-speed broadband network. The applicant hires a vendor to construct the network or a portion of the network, and thereafter completely or partially owns and maintains that network or portion. An E-rate eligible entity may share the services and equipment used to construct and/or operate a self-provisioned network supported by E-rate funding with an ineligible third-party entity so long as the ineligible third-party entity pays its fair share of the costs, i.e., its pro-rata portion of the undiscounted costs of the network.
Note: Although included as a fiber option, a self-provisioned network may utilize technologies other than fiber.
Applicants may request Category One support for the following charges related to each type of fiber service, subject to program rules:
|Leased Lit Fiber||Leased Dark Fiber||Self-Provisioned Networks|
For the purposes of the E-rate program, special construction charges are the upfront, non-recurring costs of deploying new or upgraded network facilities to E-rate eligible entities. Special construction consists of three components:
- Construction of network facilities
- Design and engineering
- Project management
Special construction does not include charges for Network Equipment, i.e., modulating electronics and other equipment necessary to make a Category One service functional.
An applicant may not receive E-rate support for recurring charges for leased lit fiber or leased dark fiber until the fiber is lit. Additionally, an applicant may not receive E-rate support for special construction related to leased lit fiber or leased dark fiber if the fiber is not lit by the end of the funding year (i.e., June 30). Similarly, an applicant may only receive E-rate support for a self-provisioned network if the network is constructed and is in use within the funding year.
Sharing Self-Provisioned Networks
E-rate applicants can share self-provisioned networks with ineligible third-party entities so long as the ineligible entities pay their fair share of the undiscounted costs associated with constructing and/or operating the network. In general, the “fair share” is the ineligible entity’s pro-rata portion of the undiscounted cost of the shared services and equipment.
To determine the ineligible entity’s fair share, applicants must prorate the undiscounted price for the shared facility (including any supported maintenance and operating costs) between eligible and ineligible entities on a proportional fully distributed basis, using a cost allocation method based on objective criteria that reasonably reflects the eligible use of the share facilities and/or services.
Moreover, an applicant that seeks to share a self-provisioned network with an ineligible entity must submit documentation demonstrating the reasonableness of the methodology used to determine the ineligible entity’s fair share. This documentation should be submitted with the FCC Form 471, and must contain a clear explanation of how the ineligible entity’s pro-rata share was calculated and demonstrate the reasonableness of the cost allocation methodology used to ensure that they are not using E-rate funding to provide services to ineligible entities.
If You Cannot Meet the June 30 Deadline
If an applicant cannot meet the June 30 deadline to complete special construction and light the new fiber because construction was unavoidably delayed due to weather or other reasons, they may request a one-year extension to complete special construction and light the fiber (or use the self-provisioned network if another technology is employed). Applicants may request an extension by filing an FCC Form 500 through the E-rate Productivity Center (EPC). Please contact the Client Service Bureau at 888-203-8100 for additional information.
Requesting Funding Before July 1
Program rules permit applicants to request E-rate discounts for special construction charges incurred up to six months prior to the July 1 start of the funding year (i.e., on or after January 1), provided that:
- Construction begins after selection of a service provider pursuant to a valid competitive bidding process;
- 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 that choose to start special construction prior to receiving a Funding Commitment Decision Letter (FCDL) approving a special construction funding request assume the risk that the funding request may be denied or reduced.
Competitive Bidding & Cost-Effectiveness
Program rules contain specific competitive bidding requirements for leased dark fiber and self-provisioned networks:
- Leased Dark Fiber: Applicants seeking bids for leased dark fiber (whether or not special construction is required to connect eligible entities) must also seek bids for the needed connectivity via leased lit fiber.
- Self-Provisioned Networks: Applicants seeking bids for self-provisioned networks must also seek bids for services provided over third-party networks in the same FCC Form 470.
Remember that applicants seeking bids for leased dark fiber and self-provisioned networks must seek bids for their internet access service separately in an FCC Form 470 posting and seek E-rate support for internet access service in a separate FCC Form 471 funding request.
Applicants must consider all responsive proposals received and select the most cost-effective service offering using price as the primary factor. When comparing the cost-effectiveness of the three fiber service offerings – leased lit fiber, leased dark fiber, self-provisioned networks – the expected useful life of the asset is a key consideration when comparing the combined upfront and recurring costs. Self-provisioned networks—whether completely owned or shared—are eligible only in limited circumstances when they are determined to be the most-cost effective option after competitive bidding.
See Competitive Bidding Requirements for Leased Dark Fiber & Self-Provisioned Networks and the Fiber Services FAQ for additional information on competitive bidding and conducting a cost-effectiveness review for fiber services.
Option to Pay Non-Discount Share of Special Construction Costs in Installments
Typically, an applicant is required to pay the non-discount share of E-rate program supported services within 90 days of receipt of service. If an applicant is considering seeking support for special construction charges, the applicant may request that bidders allow for the non-discount share of these charges to be paid in installments up to four years from the first day of the relevant funding year. This request for installment payments must be included in the applicant’s FCC Form 470.
Bidders are not required to offer installment payments, but if they choose to do so they must disclose the material terms, including the interest rate and terms of the payment plan, in their bid submission. 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/Tribal Match for Special Construction Projects
Applicants may request additional E-rate discounts to match state funding for special construction projects that meet the FCC’s long-term connectivity goals. The E-rate program will increase an applicant’s discount rate for the special construction charges up to an additional ten percent to match the state funding on a one-to-one dollar basis.
Tribal schools and libraries may also receive up to an additional ten percent in E-rate discounts, on a one-to-one dollar basis, for eligible special construction projects to match funding from states, Tribal governments, or other federal agencies.
However, total support for a special construction project through the E-rate program including matching funds from a state, Tribal governments, or other federal agencies may not exceed 100 percent.
For additional information, see Additional Discount to Match State/Tribal Funding for Special Construction.
Frequently Asked Questions (FAQs)
For additional information about the E-rate requirements applicable to funding requests for fiber services, please see the Fiber Service FAQ page.