As a result of this eligibility change, an E-rate applicant currently receiving dark fiber services under a long-term contract must either convert the contract to cover a lit fiber system, with the necessary modulating electronics being provided (i.e., owned and maintained) by the carrier, or forego E-rate discounts on the service beginning July 1, 2004.

To date, neither the FCC nor SLD has fully detailed the steps an applicant must take to convert an ineligible dark fiber system to an eligible lit fiber system. The two key questions are: (a) what is the minimum modulating electronics that must be provided by the carrier; and (b), what procedures must be followed to modify a contract?

In the absence of more formal instructions, this set of Frequently Asked Questions is designed to provide preliminary guidance on the dark fiber conversion process. It is based on a combination of formal and informal information from the FCC and SLD, and on what we hope is good E-rate common sense. Applicants should be aware that the conclusions expressed herein are solely those of E-Rate Central. Applicants should continue to check the SLD web site for future announcements on this subject.

1. What is the minimum configuration of “modulating electronics” that could be provided by a carrier to assure that a fiber optic service would not be considered an ineligible “dark fiber” system?

   The FCC’s recently released Third Order (FCC 03-323) states:

   “…it 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.” [Paragraph 49]

   The use of the phrase “single basic terminating component” suggests — but does not explicitly say — that basic (and generally low cost) “TX to FX Converters” (e.g., Cisco’s “GBICs”) would qualify as the minimum “modulating electronics.” Pending FCC or SLD guidance to the contrary, applicants can assume that, if such converters are provided by the service provider, the service will not be deemed an ineligible “dark fiber” system.

   In some manufacturers’ product lines, the TX to FX conversion function is integrated into larger pieces of equipment. In this case, the first inline piece of equipment interfacing with a fiber optic cable should be considered the “modulating electronics.”

2. Can more than the minimum modulating electronic components be provided to an applicant as a part of a carrier’s service?

   Yes, but such additional equipment will be subject to the FCC’s Tennessee Decision tests (i.e., it will not necessarily be considered part of a Priority One service). Indeed, the following footnote in the FCC’s Third Order suggests that additional equipment will be considered Priority Two:

   “To the extent an applicant seeks to lease multiple terminating components, one would be deemed eligible for funding as a Priority One service and the remainder would be eligible for funding as Priority Two internal connections.” [Footnote 91]

   Discounts on Priority Two equipment, whether provided by a carrier or owned by the applicant, are available only as Internal Connections services.