Indefeasible rights of use

Indefeasible right of use (IRU) is a permanent contractual agreement, that cannot be undone, between the owners of a communications system and a customer of that system. The word "indefeasible" means "not capable of being annulled, or voided, or undone." The customer purchases the right to use a certain amount of the capacity of the system, for a specified number of years. IRU contracts are almost always long term, commonly lasting 20 to 30 years. The communication system can be a wire cable, such as submarine communications cable, or a fiber optic cable, or a satellite. Depending on the type of system the customer might be buying exclusive use of one, or more, wires in a wire cable, fibers in a fiber optic cable, or channels through a satellite. An IRU owner can unconditionally and exclusively use the relevant capacity of the IRU grantor’s network for the specified time period.

These contracts obligate the purchaser to pay a portion of the operating costs, and the costs of maintaining the cable, including any costs incurred repairing the cable after mishaps. The right of use is indefeasible, so the capacity purchased is also nonreturnable, and maintenance costs incurred become payable and irrefusable.

Definition of IRU

The IRU "shall mean the exclusive, unrestricted, and indefeasible right to use the relevant capacity (including equipment, fibers or capacity) for any legal purpose."[1] It refers to the bandwidth purchased after, for example, a submarine cable system has been sealed at the end of construction, and to the maintenance agreement (C&MA) among the owners. It is a way for the owners to capitalize the unused capacity or any unowned capacity, after the system comes into service.

In plainer English, the purchase of an IRU gives the purchaser the right to use some capacity on a telecommunications cable system, including the right to lease that capacity to someone else. Smaller companies that need a leased line between, say, London and New York do not buy an IRU – they lease capacity from a telecommunications company that themselves may lease a larger amount of capacity from another company (and so on), until at the end of the chain of contracts there is a company that has an IRU, or wholly owns a cable system.

(extract from WSJ) Pioneered decades ago by AT&T, IRUs allowed competitors to gain access to the costly undersea cables that only AT&T could afford to build. There remains some controversy over booking IRUs as assets in an asset-swap transaction between companies. Since IRU's are technically rights to a physical part of a cable, they can be considered an asset, which means their cost isn't part of the company's operating results, but shows up under tangible assets. The IRU is counted as though it is a part of the physical plant of the business buying the IRU.

Dark Fiber IRU

The Dark fibre (DF) IRU "shall mean the exclusive, unrestricted, and indefeasible right to use one, a pair, or more strands of fibre of a fibre cable for any legal purpose." With an IRU contractual arrangement the buyer of the IRU can unconditionally, and exclusively, use the fibres of the IRU for a long time period.[2]

In this case dark fiber is called "dark" since it has to be lit by the IRU owner, not the cable's owner.

The wholesale purchase of dark fibre has normally been accomplished by means of IRUs. Fibre cable owners do not normally sell their fibre but offer IRUs for up to 20 years for unrestricted use. 10 to 25 years corresponds to a typical lifetime of the Optical fiber cable systems. The up-front cost for the purchase of a 20-year IRU can be a one-time investment. It will normally be associated with ongoing obligations for shared maintenance. Usually, the IRU can be considered to be a physical asset, which can be resold, traded or used as collateral.

For regulatory reasons, generally only licensed carriers are allowed access to support structures, and to municipal rights of way.

The IRU contract defines detailed technical and performance specifications for the IRU fibres. More specifically, it includes dark fibre acceptance and testing procedures, the description of the dark fibre physical route, operating specifications for the dark fibre infrastructure, performance specifications (attenuation, Chromatic Dispersion, Polarisation Mode Dispersion, Optical Return Loss), maintenance and restoration terms. These terms must be valid for the full duration of the IRU contract. Moreover, it includes specific actions and procedures in cases of changes on the IRU grantor’s fibre network, degradation of fibre performance etc.

Payment for IRU

A lump sum payment corresponding to the DF construction cost and the use of the DF infrastructure for the IRU duration. This payment usually accounts for the greatest part of the IRU budget.
A periodic (e.g. annual) fee corresponding to the maintenance services provided to IRU user by the IRU grantor. This is usually fixed or slightly increasing, taking into account a country’s inflation.

References

  1. ↑ http://contracts.corporate.findlaw.com/agreements/athome/att.iru.1998.12.19.html
  2. ↑ http://its.ucsc.edu/core_tech/projects/dark_fiber/frequentlyaskedquestionsaboutdarkfiber.doc

External links

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