When applying for federal broadband grants, many applicants look to leverage existing infrastructure assets to meet cost-sharing requirements. One of the most common — and most misunderstood — assets used as in-kind match is the indefeasible right of use (IRU) for fiber optic infrastructure.
Getting the valuation right is not just a best practice; the valuation methodology must comply with federal regulations. In this post, we’ll break down the key regulatory framework, explain how to properly establish fair market value for a fiber IRU, and outline the documentation that must be in place to withstand BEAD Program scrutiny.
How do you verify a fiber IRU valuation as in-kind match?
An IRU is essentially a long-term agreement that grants one party the exclusive right to use a specific portion of fiber optic infrastructure — such as individual fiber strands or capacity — for an extended period, often 20 years or more. It functions similarly to a lease but conveys a more durable, nearly irrevocable right.
When using a fiber IRU as in-kind match, the valuation must be based on the retail price for similar fiber IRU agreements in the same geographic area. That approach aligns with the governing regulation, found at 2 CFR 200.306 (cost sharing), which requires that fair market value be used to value all in-kind contributions applied toward a federal grant’s cost-sharing requirement.
The “same geographic area” distinction is critical. Federal reviewers and auditors want to see that your valuation reflects local market conditions, not national averages or theoretical pricing models. The rationale is straightforward: Fiber costs vary dramatically between urban and rural markets, and between regions with robust competition and those with limited infrastructure. A national average price would fail to capture these realities and could result in either overvaluation or undervaluation of the contribution.
To establish a defensible fair market value, applicants should research comparable IRU transactions in their region, obtain quotes from local providers, or engage an independent appraiser familiar with telecommunications infrastructure. The goal is to arrive at a figure that a willing buyer and a willing seller would agree upon in an arm’s-length transaction under current market conditions.
Documentation is the backbone of a defensible valuation
Federal regulations impose several documentation requirements on in-kind contributions. The contributions must be:
- Verifiable from records. You need a clear paper trail — contracts, agreements, invoices, appraisals, or market comparisons that an auditor can independently review and confirm.
- Reasonable and necessary for project goals. The fiber IRU must directly support the objectives of the funded project. You cannot utilize assets that are tangential or unrelated to the project’s scope as in-kind match.
- Included in the approved budget. The in-kind contribution should appear in the grant application budget and be approved by the funding agency before the contribution is counted.
- Valued using consistent, defensible methods. Your valuation methodology should be clearly explained and applied uniformly. If you use comparable market transactions to value one IRU, use the same approach for all similar contributions.
- Documented with letters of commitment, attestation forms, and valuation justifications. These formal documents demonstrate that the contributing party has committed the asset, attests to its value, and provides the basis for how that value was determined.
Taken together, these requirements form a compliance framework designed to ensure transparency and accountability. Missing even one element can jeopardize the valuation methodology and, by extension, jeopardize a grant award.
Special considerations: Depreciation and BABA compliance
Depreciated fiber assets may still qualify as in-kind match if they retain utility and value and you can demonstrate their continued usefulness with a reasonable current valuation. Additionally, Build America, Buy America (BABA) domestic sourcing rules apply to physical assets used as in-kind match for the BEAD Program; failing to account for BABA compliance may create significant problems during post-award audits.
Key takeaways
Verifying a fiber IRU valuation as in-kind match requires a disciplined approach grounded in an understanding of federal regulations. Use local market comparisons — not national averages — to establish fair market value. Build a comprehensive documentation package that includes letters of commitment, attestation forms, and clear valuation justifications. And don’t overlook special considerations like asset depreciation and BABA compliance.
Legal disclaimer
CTC is not a law firm. Our analysis and recommendations are based on our industry knowledge, experience, and understanding of applicable federal and state rules and regulations. Subgrantees should consult with their attorneys on any contract language.