There has been discussion recently over the court’s dismissal of Rivada’s Pre-Award Bid Protest as it relates to FirstNet. In an attempt to help those with concerns or confusion as to the outcome of the court case, allthingsfirstnet in this article will attempt to provide excerpts (facts of the decision). The editorial staff of allthingsfirstnet admits we are not lawyers and do not present this information in any way to start debate as to interpretation. What we do want to do is to highlight some of the findings from the court case. We have published the document on our site at https://allthingsfirstnet.com/rivada-mercury-u-s-court-case/. You will see a number of areas that have been redacted by the court to protect proprietary information.
On March 31st, 2017, the Federal Claims Court released the redacted version of its findings as it related to the Rivada bid protest. The Court ruled in favor of FirstNet ending Rivada’s protest. Below are a few statements found in the court documents that are attributed to the “Source Selection Authority” (SSA) or the Source Selection Evaluation Board (SSEB) who reviewed the Rivada proposal. In order to further understand some of the courts comments, Rivada’s plan was to sell spectrum through a wholesale market where those who wanted spectrum would bid for it on the open market. This has never been done anywhere, there are no identified buyers and is speculative. In addition, it would require the use of venture capital and because of that would have high interest rates to fund the network build. Below we provide the courts comments in reference to three areas; financing, band 14 devices and selling excess spectrum.
• The SSA found that the “substantial number of significant weaknesses and deficiencies” in Rivada’s proposal “introduce[d] excessive, increased risks.”
• The SSA concluded that Rivada’s plan to sell excess capacity “create[d] a significant risk of unsuccessful performance under the contract.”
• “Rivada’s proposal did not adequately demonstrate that its proposed wholesale marketplace or [ . . . ] would be adopted by potential customers.” Thus, Rivada’s approach “create[d] a significant risk of unsuccessful performance under the contract.”
• SSEB concluded that there was a significant risk that Rivada’s wholesale revenue projections were too rosy, even leaving aside Rivada’s proposed [ . . . ]. (observing that Rivada’s proposal relied on questionable projections of [ . . . ] and [ . . . ]). Rivada does not challenge the reasonableness of the SSEB’s assessment of risk with respect to its wholesale market projections.
• Rivada also complains that the agency erred in identifying Rivada’s reliance on substantial, unconfirmed debt financing as a deficiency in its proposal. As noted, the SSA determined that, to successfully perform the contract, Rivada would need to “obtain substantial third-party funding.” He concluded, however, that Rivada “did not provide acceptable evidence demonstrating that it could obtain” such financing.
• The SSEB determined that the letters on their faces, did not constitute “an acceptable commitment to provide financing for Rivada.”
• The SSA observed that Rivada “lack[ed] . . . executed agreements with the proposed members of the Rivada team for their respective scopes of work in the construction and operation of the NPSBN.”
• To successfully complete performance, Rivada would need to enter into hundreds of subcontracts to complete the work it could not perform itself; and it lacked relevant experience managing subcontractors in ordinary settings, let alone in completing projects of this size and complexity.
The statements below relate to how handsets are built by companies such as Samsung and Apple for example.
• Rivada “did not sufficiently demonstrate a plan to ensure [the] availability of Band 14 devices.”
• The SSA concluded that Rivada “w[ould] not be able to sell sufficient spectrum capacity in order to fulfill the requirements of its business plan” if it proved “unable to obtain the necessary Band 14 devices.”
This last statement further addresses financing and collateral. As we all know, to get a loan you must have collateral. How would Rivada Mercury accomplish this? If Rivada Mercury failed does the financing company own a network they have no ability to operate?
• Moreover, the SSEB believed that Rivada Mercury would “likely face significant challenges in collateralizing the assets related to the NPSBN contract to obtain the necessary financing” because the solicitation expressly “state[d] that NPSBN assets are not to become subject to any mechanic’s or vendor’s lien” and required that FirstNet, not the contractor, “remain the spectrum licensee post-award.” Id. These provisions would “limit Rivada’s ability to offer the FirstNet contract as collateral, or otherwise offer to transfer control of the network in order to support its ability to acquire acceptable financial funding.” Id.
Allthingsfirstnet.com hopes that the above has provided some helpful information for those who have asked about the case. We encourage our readers to review the entire document available on this site and to draw their own conclusions.
Additionally, here is something else to consider. We have been told that Rivada Mercury no longer exists, so who is offering partnerships today? Who will create a one-off user device without a wireless partner, and at what cost? Who will do their network build out if they should win an opt-out state and will it be affordable? Simply look at the cost of wireless services over the past 20 years — when companies like VoiceStream Cellular and Qwest Wireless existed, users were paying a dollar a minute. We all know many of those users and you may have been one. What drove down wireless prices was consolidation and increased user base. How does an opt out state accomplish these same economic benefits? One other way to get this answer is to do research on spectrum valuation and the value of spectrum based on population / users. Research has shown, and is available online, that anyone thinking they can opt out is a good idea should review
Here is one question everyone should have: If spectrum arbitrage will generate such large revenue, why isn’t anyone buying spectrum with the intent of arbitraging that spectrum today? Clearly, any company offering to arbitrage spectrum has the opportunity to buy spectrum but none have at this time. If there is so much value in arbitraging spectrum, why not just buy spectrum and do it?
And finally, we have posed a lot of questions for consideration. If your state opts out and selects a smaller company to build your Radio Access Network, what happens if that company fails? Who pays to pick up the pieces? What is the cost? Who loses? Answer: Your first responders and the citizens that depend on the network.