Fiber and network connection agreements for AI data centers

In short

The main federal laws for fiber network buildout are the Pole Attachments Act 47 U.S.C. § 224 and the interconnection duties in 47 U.S.C. § 251. Section 224 gives telecom carriers and cable systems a right to attach fiber to utility poles. Section 251 requires carriers to interconnect their networks. On the contract side, AI data centers rely on dark fiber IRUs (long term, exclusive rights to unlit strands), dark fiber leases, lit fiber services, and cross connects. AI workloads are changing the market. The FCC adopted new rules for large pole attachment orders that took effect May 7, 2026. It proposed to sunset mandatory ILEC interconnection by December 31, 2028 and to bar certain Chinese carriers from U.S. data centers and interconnection points. This article describes the agreement types, the federal framework, and what developers and their lawyers need to watch.

Why does fiber capacity matter for AI data centers now?

An AI training cluster is not like a traditional data center. Its traffic flows mostly east to west between GPUs rather than north to south between users and servers. That shift multiplies the fiber needed per facility by a factor of 10 to 36 compared to a legacy site. Global Data Center Hub A modern AI facility can require hundreds of fiber connections per rack, where a conventional setup might need 15 to 30. Global Data Center Hub

The market is moving quickly. Between 2020 and 2024, hyperscalers and carriers made 91.2% of all metro dark fiber purchases with Zayo and 66.8% of all wavelength deals exceeding 1TB of capacity with Zayo. Zayo press release Zayo’s standard dark fiber order moved from 8 to 12 fibers in mid 2023 to 144 or 432 fibers by early 2025, a full order of magnitude increase. RCR Wireless Lumen secured $8.5 billion in AI focused dark fiber deals with Microsoft, Google, AWS, and Meta. CBRE H1 2025 Data Center Trends

Fiber supply has tightened severely. Cable lead times reached 60 weeks in 2024 and 2025. Prices rose as much as 70% between 2021 and 2024. Global Data Center Hub In many markets, pre deal fiber diligence eliminates up to half of candidate sites because they cannot meet the route diversity and delivery timelines required by AI-grade tenants. Global Data Center Hub Understanding the legal structures for acquiring and connecting that fiber is now essential to any AI data center project.

What types of fiber and network agreements do AI data centers use?

Dark fiber

Dark fiber is unlit fiber optic cable. The AI data center customer buys or leases the glass strands and installs its own transmission equipment at each end to light them with lasers. This gives the customer full control over bandwidth, protocol, and timing. A single dark fiber pair can carry 96 or more individual wavelengths using dense wavelength division multiplexing (DWDM), each supporting up to 1.6 Tbps with modern optics, all upgradeable without replacing the physical fiber. Data Center POST

Dark fiber is treated as a facility, not as a telecommunications service. A dark fiber agreement therefore does not by itself trigger common carrier regulation under Title II of the Communications Act. Law firm analysis The owner’s own carrier obligations may still apply if the owner is a common carrier.

Dark fiber IRU

An Indefeasible Right of Use is a long term contract that gives the buyer an exclusive, irrevocable right to use specified dark fiber strands for typically 20 years or more. The word indefeasible means the right cannot be cancelled or undone. The grantee pays a large upfront lump sum, often half or more of the total fee, and then ongoing maintenance charges. The grantee does not take legal title to the fiber. On the balance sheet, the IRU is generally treated as a capital asset rather than an operating expense. SEC testimony on IRU accounting, Indefeasible rights of use

The IRU structure is common for hyperscale AI projects because it locks in capacity for decades and can survive the fiber owner’s financial trouble if drafted correctly (see below).

Dark fiber lease

A dark fiber lease operates on a shorter term, usually 1 to 5 years. The customer pays recurring monthly fees that may bundle maintenance. The lease is treated as an operating expense and gives the lessor more ongoing control. A dark fiber lease is easier to exit but provides less security. Law firm analysis It is also less vulnerable to rejection in the network operator’s bankruptcy. Telecom law analysis

The IRU and lease structures compared

Lit fiber services

Lit fiber is dark fiber that the provider has already equipped with transmission gear. The customer buys a wavelength or a managed service instead of raw glass. Lit fiber deals generally carry a monthly recurring charge and shift the burden of maintaining and upgrading electronics to the provider. For AI workloads, lit services are often used for long haul backbone connectivity, while dark fiber IRUs dominate the metro and last mile segments where the customer wants maximum control and capacity.

Cross connects and Meet Me Rooms

A cross connect is a direct point to point physical cable, usually fiber, linking a tenant’s equipment to a carrier’s or another tenant’s equipment inside the same AI data center. The connection runs through a Meet Me Room, a secure shared space where carriers and tenants physically interconnect. These connections bypass the public internet entirely. Cross connects and MMRs are governed by the AI data center operator’s service agreement, not by federal telecom regulation. Data center guide

How does federal law govern the fiber buildout for AI data centers?

Two core statutes set the ground rules for deploying and interconnecting fiber that serves AI data centers, the Pole Attachments Act and the interconnection provisions of the Communications Act.

Pole attachment rules (47 U.S.C. § 224)

A utility must provide telecom carriers and cable systems with nondiscriminatory access to any pole, duct, conduit, or right of way it owns or controls. 47 U.S.C. § 224(f)(1) A utility that provides electric service may deny access only where there is insufficient capacity and for reasons of safety, reliability and generally applicable engineering purposes, and only on a nondiscriminatory basis. 47 U.S.C. § 224(f)(2)

A utility subject to the Act is any local exchange carrier or electric, gas, water, steam, or other public utility that owns or controls poles, ducts, conduits, or rights of way used for wire communications. Railroads, cooperatives, and government owned entities are excluded from the definition. 47 U.S.C. § 224(a)(1) The NTIA BEAD program extends pole attachment like obligations to certain cooperative and municipal poles when those entities accept BEAD funds. Law firm analysis

The rate for a pole attachment must be just and reasonable, set between the utility’s additional costs and the attacher’s share of the pole’s full cost based on usable space. 47 U.S.C. § 224(d)(1) If an existing attacher must move its equipment to make room for a new attacher, the new attacher bears the cost, not the existing one. 47 U.S.C. § 224(i), 47 C.F.R. § 1.1408(b)

States that set their own rules. Section 224(c) lets a state certify that it will regulate pole attachments on its own. In those states, the FCC’s rules do not apply. As of the FCC’s 2025 Fifth Report and Order, 23 states plus the District of Columbia had done so. FCC 25-38 In the remaining states, the federal rules still govern. This is important for site selection because the permitting timeline and costs can differ sharply depending on whether the state manages its own pole process.

The one touch make ready rule. In 2018, the FCC allowed a new attacher to elect to perform all simple make ready work in the communications space using an approved contractor. Under the FCC’s enhanced non-OTMR pole attachment process, if a utility or existing attacher misses a make ready deadline, the new attacher may use self-help to proceed. FCC 18-111 This speeds up fiber builds by removing the utility’s sequential construction window.

New rules for large orders, effective May 7, 2026. The FCC’s Fifth Report and Order (FCC 25-38), adopted July 2025, creates faster timelines and additional mandatory steps for larger pole attachment orders. For a Mid-Sized Order, one exceeding the lesser of 300 poles or 0.5 percent of a utility’s poles in a state, the attacher must give 15 days advance notice. For a Large Order, one exceeding the lesser of 3,000 poles or 5 percent of a utility’s poles, the attacher must give 60 days advance notice, and a mandatory meet and confer must happen within 30 days. Utilities cannot impose arbitrary limits on application size or frequency. Survey deadlines scale with the number of poles, reaching up to 45 days, and make ready can take up to 90 days for the largest projects, those up to 6,000 poles or 10 percent of a utility’s poles. FCC 25-38 The earlier Fourth Report and Order created the Rapid Broadband Assessment Team (RBAT) to resolve disputes. FCC 23-109

Interconnection duties under 47 U.S.C. § 251

All telecommunications carriers must interconnect directly or indirectly with the facilities and equipment of other telecommunications carriers. 47 U.S.C. § 251(a) Incumbent local exchange carriers (ILECs) have an extra duty to provide physical collocation of equipment at their premises on just, reasonable, and nondiscriminatory terms. 47 U.S.C. § 251(c)(6) For a new AI data center, this matters because the facility may need to interconnect with the local ILEC’s network at the wire center to reach long haul fiber routes or cloud onramps.

The proposed sunset. In October 2025 the FCC issued a notice of proposed rulemaking that would end the mandatory ILEC collocation and interconnection obligations under § 251(c)(2) and (c)(6) by December 31, 2028. FCC 25-73 NPRM The proposal asks what IP to IP interconnection framework should replace the legacy rules. If adopted, ILECs would no longer be required to provide physical collocation or to interconnect on demand at regulated rates. This could alter the cost and availability of last mile connectivity for AI data centers, especially those built outside dense urban fiber rings. Developers and their counsel should track the proceeding and expect a final order in 2026 or early 2027.

Proposed ban on certain Chinese carriers

In April 2026 the FCC released a draft NPRM that would bar entities on the agency’s Covered List from operating data centers and Points of Presence in the United States. The proposal would also prohibit all U.S. carriers from interconnecting with those entities and from interconnecting with any foreign carrier that uses Huawei or ZTE equipment. The Covered List includes China Mobile, China Telecom, China Unicom, and their affiliates. The FCC adopted the notice of proposed rulemaking by a 3 to 0 vote at its April 30, 2026 meeting, so the proposal now moves to a comment period. Submarine Networks If a final rule is adopted, any AI data center that currently leases space or interconnection from a Covered List carrier would need to unwind those arrangements. For new projects, it effectively removes those carriers as potential fiber providers or collocation partners.

What terms and risks should counsel watch in fiber agreements?

Core provisions of a dark fiber IRU

A typical IRU agreement, such as the McLeodUSA-Norlight deal filed with the SEC, covers identification of the specific fiber strands, route description, acceptance testing, a one time IRU fee, recurring maintenance fees, cost sharing for fiber relocation, rights to assign or resell capacity, interconnection procedures, governing law tied to where the cable lies, indemnification, and insurance. SEC filing, McLeodUSA-Norlight IRU For an AI data center, testing is especially important because high speed coherent optics are sensitive to impairments that older test regimes might not catch.

Bankruptcy and the property interest

If the fiber network operator files for bankruptcy, the AI data center’s access can survive or fail depending on how the agreement is drafted. An IRU structured as a conveyance of a property interest rather than an executory contract may allow the grantee to retain the fiber rights. In In re WorldCom Inc., 343 B.R. 430 (Bankr. S.D.N.Y. 2006), the court held that an IRU grantee possessed a property right that ran with the fibers because the agreement gave the grantee exclusive use, equitable and beneficial interest, and treated the arrangement as a sale. A dark fiber lease is less likely to be rejected in bankruptcy than an IRU, because the debtor in possession typically wants to retain the monthly lease revenue stream, while an IRU fee is paid in full upfront. Telecom law blog

Pre deal fiber diligence

Before committing to a site, a developer must verify that the location can actually be connected. Key questions include the following.

• How many physically diverse fiber routes are available?
• What is the distance to the nearest carrier hotel or long haul splice point?
• Are there at least 24 to 48 fiber pairs per path?
• What are the pole attachment and permitting timelines in that state and locality?
• Has the fiber owner reserved the needed strands, or are they selling to others?

Dual diverse fiber routes cost roughly $150,000 per mile to construct. A site four miles from existing fiber, requiring two non overlapping paths, can exceed $1.2 million in build costs before permitting begins. Municipal approvals take six to nine months, urban make ready engineering can exceed 12 months, and a single railroad crossing easement can take over a year. Global Data Center Hub These physical and regulatory timelines often decide whether a project site is chosen or eliminated.

Key takeaways

• AI data centers need far more fiber than traditional facilities. Pre deal fiber diligence now eliminates up to half of candidate sites.
• A dark fiber IRU is the preferred structure for long term, bankruptcy resistant capacity. An IRU should be drafted as a property interest, with clear exclusive use, indemnity, and beneficial ownership terms.
• Cross connects and Meet Me Rooms are governed by the AI data center operator’s contract, not by federal telecommunications law.
• Federal pole attachment rules give carriers a right to attach fiber to utility poles, but only in states that have not reverse preempted the FCC’s authority. 23 states plus D.C. regulate their own poles.
• The FCC’s new large order rules (effective May 7, 2026) mandate 15-day advance notice for mid-sized orders (300+ poles) and 60-day advance notice with a 30-day meet and confer for large orders (exceeding 3,000 poles or 5% of a utility’s poles in a state), along with scaled survey and make ready timelines.
• The FCC has proposed to sunset mandatory ILEC interconnection and collocation duties by December 31, 2028 and to bar Covered List Chinese carriers from U.S. data centers and interconnection points.
• Fiber supply is tight. Dark fiber lead times remain long and prices high. Counsel should start fiber diligence early and secure capacity through IRU terms that match the project’s lifecycle.

Frequently asked questions

Q:What is the difference between dark fiber and lit fiber?

A:Dark fiber is an unlit glass strand. The customer buys or leases the glass and installs its own electronics at each end. Lit fiber is dark fiber that the provider has already equipped with transmission gear. The customer buys a finished service, like a wavelength. Dark fiber gives maximum control. Lit fiber is simpler but less flexible.

Q:Does the FCC regulate dark fiber IRUs?

A:Not directly. Dark fiber is treated as a facility, not a telecommunications service. A dark fiber IRU does not by itself trigger common carrier regulation under Title II. Telecom law analysis The fiber owner’s own carrier obligations may still apply if the owner is a common carrier.

Q:What is one touch make ready?

A:One touch make ready (OTMR) is an FCC rule that lets a new attacher hire a single approved contractor to perform simple make-ready work on existing wires and equipment in the communications space of a pole at once, instead of waiting for each existing attacher to move its own lines one by one. FCC 18-111 It speeds up fiber construction.

Q:Can a utility refuse to let an AI data center’s fiber attach to its poles?

A:A utility providing electric service can deny access only if there is insufficient capacity and for reasons of safety, reliability, and generally applicable engineering purposes. The denial must be applied the same way to all similar requesters. 47 U.S.C. § 224(f)(2)

Q:How do I protect my fiber rights if the network operator goes bankrupt?

A:Draft the IRU as a conveyance of a property interest, not as an ordinary services contract. The WorldCom case held that an IRU with exclusive use, equitable and beneficial interest, and treatment as a sale is a property right that runs with the fibers and is enforceable against a subsequent purchaser, though the court did not rule on whether the IRU agreement was an executory contract. Telecom law blog

Q:How many states regulate pole attachments themselves?

A:As of the FCC’s 2025 Fifth Report and Order, 23 states and the District of Columbia had certified that they will regulate pole attachments under their own laws. In those states, the FCC’s rules do not apply. FCC 25-38

Q:Will the Chinese carriers currently operating U.S. data centers be forced out?

A:The FCC adopted a notice of proposed rulemaking on April 30, 2026, by a 3 to 0 vote, to bar Covered List entities from operating U.S. data centers and Points of Presence and to prohibit U.S. carriers from interconnecting with them. If a final rule is adopted, those carriers would need to unwind their U.S. operations. Submarine Networks

Q:What is a Meet Me Room?

A:A Meet Me Room is a secure physical space inside an AI data center where telecom carriers, internet service providers, cloud providers, and tenants connect their equipment with cross connect cables. The room is governed by the data center operator’s lease and service agreement. QTS Switchboard Service Addendum

Q:How much does it cost to build diverse fiber routes to a new AI data center site?

A:Dual diverse fiber routes cost about $150,000 per mile to construct. Global Data Center Hub A site four miles from existing fiber can require over $1.2 million in build costs, plus six to nine months for municipal approvals and over a year for certain railroad crossings.

Q:What is the new advance notice requirement for large pole attachment orders?

A:For Mid-Sized Orders of 300 or more poles associated with a single network deployment, the attacher must give the utility 15 days advance notice. For Large Orders exceeding the lesser of 3,000 poles or 5 percent of a utility’s poles in a state, the attacher must give the utility 60 days advance notice. For Large Orders exceeding the lesser of 3,000 poles or 5 percent of a utility’s poles in a state, a mandatory meet and confer must happen within 30 days of the attacher’s written advance notice. FCC 25-38 These rules took effect May 7, 2026.

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Junde Liu, JD, LL.M. (Taxation) candidate at UF Law. Originally published on Compute Law Blog. This article is general information and does not constitute legal advice. Reading it does not create an attorney client relationship. The reader should not act on the basis of any content here without first consulting a licensed attorney in the relevant state. Last reviewed for accuracy May 23, 2026.