FEATURE IRUS AND FIBER OPTIC CABLES An Overview and Examination of Associated Risks
BY FERNANDO MARGARIT, URIEL A. MENDIETA, BRITTANY E. BUHLER AND MICHAEL J. SANCHEZ OVERVIEW OF THE INDEFEASIBLE RIGHT OF USE (IRU) IN THE TELECOM INDUSTRY
Participants in the telecommunications infrastructure industry – particularly those involved with fiber networks and related infrastructure – are likely to have come across indefeasible rights of use, or IRUs. IRUs have been one of the most commonly-used methods of granting rights in telecommunications assets for decades. Their implementation has become mainstream among industry participants, as digital infrastructure development has heated up exponentially to keep up with the ever-increasing demand for bandwidth worldwide. Yet, IRUs are often misunderstood or improperly granted, potentially depriving their recipients of the intended benefits of a true IRU or creating additional risk for the IRU grantor. An IRU is an exclusive, indefeasible right to use a particular asset, such as fiber or the capacity or spectrum on the fiber of a cable system. The IRU is intended to provide its holder rights as to the asset that are as close as possible to actual ownership without actually transferring legal title to the asset. When precisely contracted, an IRU grant conveys
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the “indicia of ownership” in an asset to its grantee (holder), including equitable title (i.e., the beneficial interest) and its accompanying exclusive right to possess, use and control the asset. The IRU grantor, however, retains actual legal title and the non-equitable interest in the asset. It is critical for prospective IRU grantors and grantees to understand what an IRU grant conveys from a title and rights perspective, so they know precisely what they will be conveying or receiving. As an example, a grantee of an IRU as to particular fiber on a cable system will have an exclusive right to use the fiber for a defined period of time but will not actually own the fiber itself. IRU grantees oftentimes fail to appreciate this important distinction. The IRU grantor, on the other hand, must understand that while it retains actual ownership of the asset, it can’t do much of anything with the asset since it has conveyed the traditional ownership rights over the asset to the IRU holder. For example, the grantor cannot use or access the fiber during the IRU term (typically, other than for maintenance purposes, as agreed in advance with the IRU holder). In fact, in a typical IRU agreement, the grantor