A. Eligible Services
3. Dark and Lit Fiber
120. Background. In this section, we address the NPRMproposal to allow eligible HCPs to receive support for the lease of dark or lit fiber to provide broadband connectivity.323 For clarity, we use the term dark fiber to refer to “unused” fiber within an existing fiber optic cable that has not been activated through optical equipment to make it capableof carrying communications services.324 Fiber must be activated, or “lit,” before it can be used to provide communications services.325 A key distinction is the entitythat furnishes the modulating electronics and other equipment necessary to light the fiber. If
316See 47 C.F.R. § 54.634(a); ATA Comments at 12 (urging the Commission to adopt a provision whereby Internet access support can still be available to existing RHC program participants, as many of them will still need assistance with gaining Internet access).
317See supra n. 311.
318Pilot Evaluation, 27 FCC Rcd at 9421-22, paras. 54-55.
319National Broadband Planat 209-213.
320NRHA Comments at 9 (suggesting that the Commission assess current actual usage statistics to drive its policies determining minimum broadband speed to help the Commission better adjust to changes and measure actual usage trends); CTN Comments at 22-23 (suggesting that a benchmark speed, as opposed to a mandated minimum speed, would be an acceptable compromise over the next few years).
321See supra section III.A.
322See Appendix D, 47 C.F.R. § 54.640(b).
323NPRM, 25 FCC Rcd at 9411, para. 101.
324Review of the Section 251 Unbundling Obligations of Incumbent Local Exchange Carriers, WC Docket No. 04- 313 et al., Order on Remand, 20 FCC Rcd 2533, 2607, para. 133 (2005).
325Fiber that has not been “lit” in this sense is called “unlit” (or sometimes, simply “dark”) fiber. See Schools and Libraries Sixth Report and Order, 25 FCC Rcd at 18766-7, para. 9 (requiring applicants who choose to lease dark unlit fiber to light it immediately in order to receive E-rate support).
the service provider provides the equipment to light the fiber, the resulting connectivity is typically referred to as “lit” fiber or a fiber-based service. In contrast, if the customer provides the equipment, the lease of the fiber is typically referred to as “dark fiber.”326 When a customer provides the equipment, it is typically responsible for lighting the fiber and the resulting connectivity over that lit fiber.
121. Discussion. Service providers today provide numerous broadband services over fiber that the service provider manages and has “lit” (i.e., the service provider has furnished the modulating
equipment and activated the fiber). HCPs are currently able to receive support for telecommunications services and Internet access services provided over such fiber, as are schools and libraries in the E-rate program. The Healthcare Connect Fund will continue to support broadband services provided over service provider-lit fiber. The NPRM proposal, however, raised two additional issues: (1) the eligibility of dark fiber, and (2) support for costs associated with dark or lit fiber leases, including upfront payments associated with leases or indefeasible right of use (IRU) arrangements for lit or dark fiber. We address both issues below.
122. Eligibility of dark fiber. We conclude that eligible HCPs may receive support for “dark”
fiber where the customer, not the service provider, provides the modulating electronics. In the NPRM, the Commission noted that under such an approach, applicants would, for instance, be able to lease dark fiber that may be owned by state, regional or local governmental entities, when that is the most cost-effective solution to their connectivity needs.327 Consistent with our practice in the E-rate program, however, we will only provide support for dark fiber when it is “lit” and is actually being used by the HCP; we will not provide support for dark fiber that remains unlit.328
123. Consistent with Commission precedent, we find that dark fiber is a “service” that enhances access to advanced telecommunications and information services consistent with section 254(h)(2)(A) of the Act.329 As in the E-rate program, we conclude that supporting dark fiber provides an additional competitive option to help HCPs obtain broadband in the most cost-effective manner available in the marketplace.330 HCPs generally support making dark fiber eligible.331 For example, IRHN states that the varying broadband environments in rural areas throughout the country need to be “mined” to find the most cost-effective solution, including existing fiber infrastructure that can be brought into use by HCPs seeking dark fiber.332 Commenters also agree that making dark fiber eligible will allow the cost-
326See the Matter of Applications for Authority Pursuant to Section 214 of the Communications Act of 1934 to Cease Providing Dark Fiber Service,8 FCC Rcd 2589, para. 1 (1993) (referring to “dark fiber” as “the provision and maintenance of fiber optic transmission capacity between customer premises where the electronics and other equipment necessary to power or ‘light’ the fiber are provided by the customer”); Southwestern Bell Tel. Co. v.
FCC, 19 F.3d 1475, 1478 (D.C. Cir. 1994) (“The provision of the fiber optic lines without the necessary electronic equipment to power the fiber is commonly known as ‘dark’ fiber service . . . .”); Schools and Libraries Sixth Report and, 25 FCC Rcd at 18765, para. 8 n.6 (referring to “dark fiber” as fiber capacity “that does not include modulating electronics”).
327NPRM, 25 FCC Rcd at 9411, para. 101.
328See infra para. 127; cf. Schools and Libraries Sixth Report and Order, 25 FCC Rcd at 18766-67, para. 9.
329Schools and Libraries Sixth Report and Order, 25 FCC Rcd at 18769, para. 12.
330Id.at 18764, para. 6.
331RNHN Comments at 15-16 (noting that fiber solutions are the most cost-effective facilities to provide the bandwidth needed by health information technology applications now and in the future); ATA Reply at 3; CTN Comments at 24; NETC Comments at 4; PEM Filings Comments at 2.
332IRHN PN Comments at 2; see also Letter from Linda L. Oliver, Attorney Advisor, Federal Communications Commission, to Marlene H. Dortch, Secretary, Federal Communications Commission, WC Docket No. 02-60, at 3
(continued…)
effective leveraging of existing resources and investments, including state, regional, and local networks.333
124. As the Commission concluded in the E-rate context, we are not persuaded by arguments that entities who are not telecommunications providers, such as HCPs, “have a poor track record making dark fiber facilities viable for their services.”334 While dark fiber will not be an appropriate solution for all HCPs, Pilot projects have demonstrated that they can successfully incorporate dark fiber solutions into a regional or statewide health care network.335 We are also not persuaded by the argument that dark fiber solutions may not be cost-effective. HCPs will be required to undergo competitive bidding, and our actions today merely ensure that HCPs have an additional option to consider during that process.336 If service providers can provide comparable, less expensive lit fiber alternatives, we anticipate that such providers will bid to provide services to HCPs, who are required to select the most cost-effective option.
As the Commission found in the Schools and Libraries Sixth Report and Order, if more providers bid to provide services, the resulting competition should better ensure that applicants – and the Fund – receive the best price for the most bandwidth.337
125. In order to further ensure that dark fiber is the most cost-effective solution, however, we will limit support for dark fiber in two ways. First, requests for proposals (RFPs) that allow for dark fiber solutions must also solicit proposals to provide the needed services over lit fiber over a time period comparable to the duration of the dark fiber lease or IRU. Second, if an applicant intends to request support for equipment and maintenance costs associated with lighting and operating dark fiber, it must include such elements in the same RFP as the dark fiber so that USAC can review all costs associated with the fiber when determining whether the applicant chose the most cost-effective bid.
126. We are not persuaded that allowing a HCP to purchase dark fiber from state, regional, or local government entities will negate the HCP’s ability to “maintain a fair and open competitive bidding environment” if the HCP is “linked” to the governmental entity in question.338 As discussed below, we adopt requirements that prohibit potential service providers, including government entities, from also acting as either a Consortium Leader or consultant or providing other types of specified assistance to HCPs in the competitive bidding process.339 Allowing HCPs to lease dark fiber should increase competition among fiber providers and ensure a more robust bidding process. HCPs still must
demonstrate that the bid they choose is the most cost-effective. As the Commission stated in the E-rate (Continued from previous page)
(filed Mar. 16, 2012) (summarizing ex partethat nonprofit electrical companies in Tennessee were willing to share fiber with the Erlanger Pilot project for use in its health care network).
333See ATA PN Comments at 3; CTN Comments at 23-24; NETC Comments at 4. The NPRMnoted the National Broadband Plan recommendation that “federal and state policies should facilitate demand aggregation and use of state, regional, and local networks when that is the most cost-efficient solution for anchor institutions to receive their connectivity.” See NPRM, 25 FCC Rcd at 9411, para. 101 (quoting National Broadband Planat 154 (NBP
Recommendation 8.20)).
334CenturyLink Reply at 4.
335See, e.g., Quarterly Report of Illinois Rural Healthnet, WC Docket No. 02-60, at 11 (filed Oct. 25, 2012).
336See infra section VI.B; cf.Qwest Comments at 8 (“at a minimum, [Qwest recommends] if the Commission moves forward with supporting leasing of dark fiber, it must ensure that an applicant is appropriately and fully evaluating whether leasing dark fiber is the most cost-effective solution.”).
337Schools and Libraries Sixth Report and Order, 25 FCC Rcd at 18769, para. 13.
338Verizon Comments at 7.
339See infra section VI.B.1.
context, we believe our competitive bidding rules will protect against the possibility of waste, fraud, or abuse in that context.340 To the extent there are violations of the competitive bidding rules, such as sharing of inside information during the competitive bidding process, USAC will adjust funding
commitments or recover any disbursed funds through its normal process. As the Commission concluded in the E-rate context, our RHC rules and requirements, including the competitive bidding rules, apply to all applicants and service providers, irrespective of the entity providing the fiber network.341
127. Fiber leases and IRUs. As proposed in the NPRM, eligible HCPs may receive support for recurring costs associated with leases or IRUs of dark (i.e., provided without modulating equipment and unactivated) or lit fiber.342 We conclude that HCPs may not use fiber leases and IRUs to acquire unneeded fiber strands or warehouse excess dark fiber strands for future use. If a HCP chooses to lease (or obtain an IRU) for “dark” (i.e., unactivated) fiber, recurring charges under the lease or IRU are eligible only for fiber strands that have been lit within the funding year, and only once the fiber strand has been lit.343
128. Eligible HCPs applying as consortia may also receive support for upfront charges associated with fiber leases or IRUs, subject to the limitations applicable to all upfront charges discussed in section V.C below. An IRU or lease for dark fiber typically requires a large upfront payment, even if no new construction is required.344 In some cases, however, service providers may deploy new fiber facilities to serve HCPs under the lease or IRU, and may seek to recover all of part of those costs through non-recurring charges (sometimes called “special construction charges”).345 Such “build-out” costs are eligible for support. Consistent with the general rule we adopt today, we will provide support for build- out costs from an off-premises fiber network to the service provider demarcation point.346 We decline to
340See 47 C.F.R. § 54.603; 47 C.F.R. § 54.619 (Audits and Recordkeeping).
341Schools and Libraries Sixth Report and Order, 25 FCC Rcd at 18771-2, para. 17 n.46.
342An IRU is an indefeasible right to use facilities for a certain period of time that is commensurate with the remaining useful life of the asset (usually 20 years, although the parties may negotiate a different term). As a contract law matter, an IRU differs from a lease because it confers on the grantee the vestiges of ownership. NPRM, 25 FCC Rcd at 9395-96, para. 56. For purposes of the e-rate program, however, the Commission has chosen to treat IRU purchase agreements as “leases.” Schools and Libraries Sixth Report and Order, 25 FCC Rcd at 18772, para.
19 n.51. We similarly treat IRUs and leases as interchangeable for purposes of the Healthcare Connect Fund, especially with respect to upfront payments.
343Similarly, if a HCP obtains a multi-year commitment for a dark fiber lease or IRU, recurring charges are eligible only for fiber strands that have been lit during or prior to the funding year, and only once the fiber strand has been lit. Cf. Wireline Competition Bureau Provides Guidance Following Schools and Libraries Universal Service Support Program Sixth Report and Order, CC Docket No. 02-6 et al.,Public Notice, 25 FCC Rcd 17332, 17335 (Wireline Comp. Bur. 2010) (“E-rate Sixth R&O Guidance PN”) (explaining that E-rate participants cannot receive funding for dark fiber until it is lit).
344The upfront payment can be based on multiple factors, including the length of the IRU or lease and the number of miles or fiber miles. See NPRM,25 FCC Rcd at 9395-96, para. 56. In the E-rate context, the Commission allowed support for such upfront payments associated with IRUs, as long as they were consistent with existing E-rate requirements regarding upfront costs. Schools and Libraries Sixth Report and Order, 25 FCC Rcd at 18772-3, para.
19 n.51. The Commission noted that it did not intend to disfavor or discourage multi-year or pre-paid contract agreements between service providers and eligible schools and libraries, when the appropriate circumstances are present for such contracts. Id.
345NPRM, 25 FCC Rcd at 9411, para. 102.
346See infra section V.A.7.
provide support for such charges after the service provider demarcation point, consistent with the Commission’s current policy of not supporting internal connections for HCPs.347
129. In the E-rate program, fiber must be lit within the funding year for non-recurring charges to be eligible. We adopt this requirement in the Healthcare Connect Fund. HCPs, however, unlike schools, do not have a summer vacation period during which construction can take place without disrupting normal operations. Furthermore, in some rural areas, weather conditions can cause unavoidable delays in construction. Therefore, we will allow applicants to receive up to a one-year extension to light fiber if they provide documentation to USAC that construction was unavoidably delayed due to weather or other reasons.
130. Maintenance Costs. We also find that HCPs may receive support for maintenance costs associated with leases of dark or lit fiber.348 Only HCPs applying as consortia may receive support for upfront payments for maintenance costs, however, subject to the limitations in section V.D below.
131. Equipment. As we discuss below, we will provide support for equipment necessary to make a broadband service functional. Consistent with that standard, we find that HCPs may receive support for the modulating electronics and other equipment necessary to light dark fiber. If equipment is leased for a recurring monthly (or annual) fee, HCPs may receive support for those recurring costs. HCPs applying as consortia may also receive support for upfront payments associated with purchasing
equipment, subject to the limitations discussed below.349
132. Eligible Providers. The Commission has previously authorized schools and libraries to lease dark fiber, and authorizes schools and libraries to lease any fiber connectivity (not just dark fiber) from any entity, including state, municipal or regional research networks and utility companies.350
Consistent with our discussion in section V.E below, we will allow HCPs to lease fiber connectivity from any provider.351