What is an IRU?POSTED OCTOBER 21ST, 2011
In the telecommunications industry people tend to use copious amounts of acronyms. The employees here at a2b Fiber are no exception. It was recently pointed out by a friend of the company that perhaps we need to explain some of the most important terms we use. We thought this was a useful suggestion as we continue to bring on new employees and deal with clients who are less familiar with our industry. Within the company we say that we do short term leases of dark fiber (fairly self-explanatory) as well as long term IRU’s (not so much). This blog post aims to clear up that ambiguity.
An Indefeasible Right of Use (IRU) is a contractual agreement between a cable operator (ex. A2b Fiber) and a client. For the client it is essentially a long term lease of a portion of the capacity of a cable. A good example would be a client needing two strands of fiber off of a 144 strand cable owned by a2b. The IRU stipulates that the client has exclusive access to those strands for the length of the agreement, including the right to lease that capacity to another entity. However, the client still has the obligation to pay a portion of the cost of maintaining the cable to the cable owner (a2b Fiber). This is generally a fixed cost and represents a very small yearly fee.
This type of arrangement is advantageous for businesses because IRU’s are essentially granting the rights to a physical portion of fiber optic cable. This is significant because it can then be considered an asset which means the cost doesn’t fall under organizations’ operating costs, but rather under Property, Plant and Equipment (CFO’s love this). At the same time, any organization that manages its own network with fiber will be realizing a great deal of savings from moving away from a managed circuit, which is traditionally offered by the incumbents. Lastly, should a business that has fiber on an IRU move locations or otherwise not need it anymore, they still have the option of leasing this fiber to somebody else so it never becomes a sunk cost. The IRU is essentially a long term lease but it also has a great deal of hidden benefits.
Feel free to post questions/comments below!
Note: We paraphrased a bit from here. A good link for more information as well!