Special Construction, Self Construction and Self Provisioning are all terms used in the world of E-rate and can be very confusing. They do however, have specific meanings. As you navigate E-rate it is important to understand the differences between these terms.
Self Provisioning / Self Construction
First, self construction and self provisioning mean the same thing in E-rate and refer to when an applicant is constructing their own network. Thus, if an applicant is self provisioning or self constructing this means the applicant is contracting with a construction company to build a fiber network. Meaning digging trenches or boring in the street to lay fiber underground or alternatively putting fiber onto overhead poles. If an applicant desires to self provision or self construct their network the applicant needs to issue an E-rate Form 470, per normal E-rate process and also submit an RFP (Request for Proposal) providing detail on the construction project required. The RFP and Form 470 needs to also request lit service, so that the applicant can compare the cost effectiveness of self construction versus lit service provided by the service provider. In fact, it is mandatory per E-rate rules that if self construction/self provisioning is requested by an applicant then lit service should also be requested. The applicant is then required to do a cost effectiveness analysis between the two solutions, using reasonable assumptions, then choose the most cost effective approach.
Special construction is the term used by E-rate to refer to actual construction of network. The construction of network could be performed by the applicant or by the service provider.
The Funding Year 2016 Eligible Services List defines Special Construction as “the one time costs of physically deploying new or upgraded network facilities and the services required to complete that deployment, i.e., construction of network facilities, design and engineering and project management. Thus costs associated with actual construction of network are Special Construction costs. It is important to understand these Special Construction costs could be incurred by the applicant OR the service provider. Thus Special Construction is not only tied to when an applicant constructs network, but can also be utilized by a service provider.
For example, if a school district is connected via low speed T1’s and wishes to upgrade to 100Mb/s circuits, the school district could submit an E-rate form 470 requesting 100Mb/s circuits with access to the Internet. Lets assume a service provider responds with a lit service of 100Mb/s, but that the service provider also has to construct a half mile fiber network to reach the school district, then has to construct another 1/2 mile network for the school WAN circuits. The service provider could respond to the applicant Form 470 with a lit service component and also a Special Construction component. This would be special construction by the service provider. The FCC has found that it is typically more effective to pay for construction up front versus allowing the service provider to amortize the costs of construction over 5 years. Since, in these scenario’s, the price often does not change once the construction is paid off.
With Special Construction there is more price transparency, since you’re aware of the costs associated with constructing the network versus the lit service. And with the E-rate rule that allows you to pay your portion of the special construction in installments over 4 years (if requested on the E-rate form 470 and if the service provider agrees ) you would not have to come up with a large one time payment.
Another example is if the applicant issues a form 470 for a dark fiber lease. A service provider can respond with a dark fiber lease proposal, that includes a Special Construction component. The applicant here is purchasing a dark fiber lease, built by the service provider, and using a Special Construction component.
A third example is if the applicant issues an RFP for self provisioning, meaning the applicant wishes to construct the network themselves. The construction component can be classified as Special Construction.
I hope I have clarified the differences between Self Provisioning, Self Construction and Special Construction. Special Construction is not the same as Self Provisioning and Special Construction, depending on the scenario, can be associated with either the applicant or service provider.
If you have any questions on this don’t hesitate to send me an email.