Indefeasible rights of use

Indefeasible right of use (IRU) is a contractual agreement between the operators of a communications cable, such as submarine communications cable or a fiber optic network and a client.

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 the submarine cable system has sealed the Construction and Maintenance Agreement (C&MA) among the owners or after the system came into service and where the unowned capacity is available. IRU may also be purchased from the existing owner.

The right of use is indefeasible, so as the capacity purchased is also unreturnable and maintenance cost incurred becomes payable and irrefusable. “IRU user” can unconditionally and exclusively use the relevant capacity of the “IRU grantor’s” fibre network for the specified time period.

In plainer, but less accurate 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. However, with that right comes an obligation to pay a proportion of the operating cost and a similar proportion of the costs of maintaining the cable including any costs incurred repairing the cable after mishaps. Companies that buy 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, IRU's allowed competitors to gain access to the costly undersea cables that only Ma Bell could afford to build. There remains some controversy over booking IRU's as assets in an asset-swap transaction between companies. Since IRU's are technically rights to a physical part of an underground cable, they can be considered as an asset. Which means, their cost isn't part of the company's operating results, but show up under PPE.

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.

The wholesale purchase of DF 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 municipal right of ways. With an IRU contractual arrangement the “IRU user” can unconditionally and exclusively use one or more fibres of the “IRU grantor’s” fibre network for a long time period. [2] In this case dark fiber is still called "dark" since it has been lit by a fiber lessee and not the cable's owner.

The IRU contract defines detailed technical and performance specifications for the IRU fibres. More specifically, it includes DF acceptance and testing procedures, the description of the DF physical route, operating specifications for the DF 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.

IRU payment terms usually follow the scheme outlined below:

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 country’s inflation. [3]

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