C. Fiber Optics

Q1. “Dark fiber” service is not eligible in Funding Year 2004. If an applicant has a contract that includes dark fiber, may the applicant trade-in components that it owns to the service provider so that the service provider can use these components as a part of its provision of a lighted fiber service?

Yes, but care must be taken to ensure compliance with FCC rules:

In cases in which a school or library has previously purchased equipment to light fiber, such equipment may be traded-in to the service provider and leased back by the applicant. The applicant may not use the credit for the trade-in to pay its non-discounted portion of the services. Such a contract modification would be deemed a minor contract modification under section 54.500(g) of the Commission’s rules if this was within the scope of the original contract and the change has no effect or negligible effect on price, quantity, quality, or delivery under the original contract. For instance, such a change could fit within the minor contract modification rule if the original contract was for the provision of high bandwidth transmission capability. Third Report and Order, FCC 03-323, released December 23, 2003, para. 76, footnote 155

If the equipment being traded-in was purchased with E-rate funds, there are additional requirements for the trade-in that are described in the section of these Frequently Asked Questions labeled “Transfer or Trade-in of Components.”

Q2. Can a service provider convert a dark fiber service to an eligible lighted fiber service by installing a copper-to-fiber converter at applicant sites? (A copper-to-fiber converter is also known as a “TX-to-FX converter,” and sometimes known as a “GBIC.”)

A copper-to-fiber converter that provides electronics that modulate the fiber cable can meet the definition of optical equipment that is the single basic terminating component of a lighted fiber service as described below:

[I]t is appropriate to provide Priority One discounts on service provider charges to recoup the cost of leasing optical equipment to light fiber, when that optical equipment is the single basic terminating component of an end-to-end network and it is necessary to provide an end-to-end telecommunications or Internet access service. [The FCC] reach[es] that conclusion even though the optical equipment on the customers’ end, as a technical matter, is dedicated to the customer’s sole use. Third Report and Order, FCC 03-323, released December 23, 2003, para. 49