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Monday, October 04, 2010

Some shadows on dark fiber

I'm thinking I'll do a few posts about the Sixth Report & Order, because, well, it is HUGE.

I'll start with dark fiber. In general, it's great that dark fiber is eligible. And great that lit fiber can now be purchased from non-telecom providers. But of course, I'm going to gripe about some details. (Sometimes I think I should call myself the Angry E-Rate Nerd, but the Angry Video Game Nerd would probably sue me. Plus I can't seem to produce the requisite vulgarity.)
My gripes:
  1. “Although lit fiber is already eligible for funding as either a telecommunications service or an Internet access service … an applicant cannot lease the lit fiber for voice telecommunications from a non-telecommunications carrier.” (paragraph 11) I'm sure this isn't supposed to mean what it actually says. It seems to say that fiber leased from a non-ETP cannot be used to transport the district’s internal VoIP between locations. And that if a district has one of the new concurrent-call hosted VoIP services, where the telecom service is riding over the district’s WAN, the WAN must be leased from an ETP. I hope what is meant is that voice service has to be purchased from an ETP, regardless of what transport it rides over. I just wish that's what the order actually said.
  2. “Providing services using dark fiber may involve a number of additional costs beyond lease payments for fiber connectivity, and those costs should be factored in to a total-cost comparison across bids.” (paragraph 19) Oh, the pain. So let's say a typical client seeks a WAN, and they're trying to decide between a typical telco WAN offering, which would give them a live Ethernet port, or dark fiber, which would give them an unlit fiber pair. To use the dark fiber pair, they’ll need to put a fiber GBIC in their switch. The fiber GBIC is not eligible in a Priority 1 FRN, so it can't be included in the "primary factor" cost calculation. So now is the district required to create a separate criterion for total cost? Or one for ineligible costs? Either way, a disgruntled telco bidder can say it's not an "apples-to-apples" comparision, since the cost of the GBIC will be weighted less heavily. What about the cost of the GBIC slot in the switch? And what about the cost of the Ethernet port on the switch that the lit WAN would use? Do we include that cost? How do we calculate the cost of a single Ethernet port on a switch which has 24 copper ports, a fiber port, and a couple of GBIC slots? Now imagine the headache of calculating the cost of a GBIC+slot and Ethernet port on a chassis switch with a half-dozen blades in it. There is not enough caffeine in the world.
  3. “We include as eligible maintenance costs and installation charges.” (paragraph 19) “This includes charges for installation within the property line.” (footnote 52) “For purposes of the E-rate program, we will consider Indefeasible Rights of Use (IRU) purchase arrangements as a lease of dark fiber. To the extent an IRU contract contains significant upfront charges, and consistent with our existing requirements regarding upfront costs associated with the purchase of telecommunications services, applicants must amortize upfront, non-recurring charges where the upfront charges 'vastly exceed' the monthly recurring charges.” (footnote 51) Finally, some good news. It seems the “unused capacity” statements in the press release were more vision than rule. Go ahead and build a new dark fiber network, as long as the construction costs are amortized the way we currently do with lit fiber networks.
  4. “[W]e decline to extend support to cover special construction charges that may be incurred to build out connections from applicants’ facilities to an off-premises fiber network” (paragraph 19) “Special construction charges include costs for design and engineering, project management, digging trenches, and laying fiber.” (footnote 54) Wait.... What?! Did the FCC just say that when leasing fiber (lit or dark), the cost of running the fiber from the pole to the property line can’t be included? Really? Applicants can pay the service provider to run fiber all over town, but not for that one short segment? OK, but what is an applicant supposed to do in the real world? The typical fiber lease is a 40-year IRU, with the buildout cost amortized over the first five years. So the cost to the applicant is, let's say, $2,000 per month for the first 5 years, then $200 per month until the end of the contract. All buildout costs ("special construction" or otherwise) are included in the monthly cost. Is the service provider now required to dig into that cost and separate the cost of connecting the client to a pole from the cost of building out the rest of the WAN? If so, look for lots of contracts where the service provider actually runs their network into the client's building, so there is no special construction required. Another example of bad engineering made cost-effective by convoluted E-rate rules. Let's hope that what this really means is that if your contract has a separate line for special construction, you have to cost-allocate it out of your request.
Maybe I'm reading too much into the sentences I quoted, and my concerns are unwarranted. But I won't be advising any clients to get dark fiber this year. Let some other brave souls be the PIA beta testers on this one. I don't want to sign a 40-year contract based on Version 1.0 of the rules.

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