On 6 March 2019, Democrats in the House and Senate introduced the “Save the Internet Act of 2019.” The three-page bill (1) repeals the FCC’s Restoring Internet Freedom Order released in early 2018, as adopted by the Republican-led FCC under Chairman Ajit Pai; (2) prohibits the FCC from reissuing the RIF Order or
Keller and Heckman’s Telecommunications Procurement Update — Winter 2019 (Wireline Services)
This Update is intended for enterprise IT, telecom, procurement staffs, and in-house counsel responsible for telecommunications management and procurements, focusing on strategies to maximize savings and optimize services to meet projected enterprise requirements.
Industry Consolidation
XO Communications is now part of Verizon, CenturyLink has acquired Level 3, and, among the cable operators, Charter has acquired
Financing In-Building Systems
In late September, MissionCritical Communications posted several online articles about network-based and wireless handset-based emergency location technologies that will provide local public-safety answering points (PSAPs) the physical location of wireless callers dialing 9-1-1. These articles coincided with the FCC’s implementation of Kari’s Law, which Congress enacted this year.
Kari’s Law was enacted in response to
Important Policy Outcomes from the Pending CAF II Reverse Auction
On June 28, the FCC released a Public Notice announcing the 220 applicants that qualified for the CAF II reverse auction. These entities include rural rate of return carriers, electric cooperatives, wireless internet services providers, satellite providers, cable operators, and price cap ILECs (or affiliates thereof). Several consortiums also qualified. In one sense, the auction
In-Building Wireless Reception—Creative Solutions Wanted
In-building reception of mobile service is a prerequisite in multitenant commercial and residential properties. Office environments in which individuals cannot check their smartphones or place a call during a break in a meeting or conference leave impressions—negative ones. Asking a resident to pay $2000 or more per month in a Class A apartment complex having
Telecommunications Services Agreements—The Underlying Business Deal
This entry provides an overview of how enterprise customers shape the underlying business deals in telecommunications services agreements. In the previous entry, we discussed the primary objectives enterprise customers look to achieve in negotiating telecommunications services agreements. In our initial entry in this series, we discussed the challenge counsel for enterprise customers face in
Time to Refresh FCC Forms 499-A/Q
Updated May 2, 2018
Trends in wireline and mobile services strongly suggest a refresh to the FCC Forms 499-A/Q is warranted. A shift to fewer revenue buckets (reporting categories and lines) consistent with the major services currently being offered to customers could reduce the time for services providers to prepare Forms 499-A, assist USAC staff
Objectives in Negotiating Telecommunications Services Agreements
This entry discusses the primary objectives that enterprise customers look to achieve in negotiating telecommunications services agreements. In a recent entry, we discussed the challenge counsel for enterprise customers face in confining telecommunications services agreements to the four corners of the customer contract. In a future entry, we will look at how the underlying
Telecommunications Services Agreements and the Four Corners Defense
A guiding principle for attorneys and their clients when negotiating telecommunications services agreements is the four corners defense. No, not the end-of-game defensive strategy devised by the legendary Dean Smith for his UNC basketball team, but the straightforward strategy of keeping the terms and conditions of telecommunications services agreements within the four corners of an
Enterprise Customers and Dark Fiber: An Important Connection (Part 2)
This is the second of two entries on dark fiber arrangements. Dark fiber is a realistic option for high-bandwidth requirements of businesses, medical and educational institutions, and state and local governments (collectively “enterprises”). This entry focuses on the two principal types of dark fiber arrangements: indefeasible rights of use (“IRUs”) and leases. The IRU agreement is different from a telecommunications services agreement, but the dark fiber lease resembles a services agreement.
Under an IRU or a lease, the customer is obtaining a “facility,” not a service such as broadband or VoIP. The term of an IRU often tracks the useful life of the fiber—at least 20 years. A dark fiber lease extends up to 5 years, often with renewal options. Under generally accepted accounting principles, an IRU is typically treated as an asset and a dark fiber lease is treated as an expense. In addition to different accounting treatment, state property and transactional tax implications may be different.
Indefeasible Rights of Use
Pricing. IRU customers (“grantees”) typically make two payments to IRU network operators: the one-time charge for access to and use of the fibers for the duration of the IRU and an annual maintenance charge. The latter covers “routine” maintenance that is typically scheduled during off-hours and emergency restoration of a fiber cut or other damage to the dark fiber cable or strands. The IRU fee is often paid in two installments: 50% at contract signing and 50% upon acceptance. The “cost per fiber per mile” is the principal metric for comparing IRU pricing.
In major metro areas, dark fiber network operators (that may also offer telecommunications services) extend their network to customer locations. This network extension is typically expressed as an agreed-upon, one-time charge that includes the splicing of customer’s fibers at agreed upon demarcation points.
Outside of major metro markets, the network operator may construct all or a portion of a fiber route for a customer (retail services provider, another dark fiber network operator or a technology company). Network design and construction costs typically are built into the IRU fee. A newly constructed fiber route invariably includes more fiber strands than a given customer requires. Network operators often view the initial IRU customer as its “anchor tenant” from which it looks to recover most of the construction costs for a given fiber route. The total fiber count for a route is a major decision for a network operator; however, other costs of dark fiber network construction (see initial entry) typically exceed significantly the incremental cost of additional fibers along a route.
Business Risks in IRUs. Customers bear three principal risks in IRU agreements: the fiber network operator’s bankruptcy; loss of underlying rights; and fiber cuts. The network operator’s bankruptcy poses the most significant risk. This is due to the term of IRU agreements being 20+ years, the IRU fee typically being paid in full during the initial year, and the relative modest capitalization of dark fiber network providers (as compared to the major telecom and cable service providers).