Mon Nov 14 15:05:25 2016
The State’s Opt-In or Opt-Out Decision
Soon after FirstNet announces the RFP winner (its Partner), the clock starts ticking down to the first six-month milestone. States will have to be prepared to decide whether to opt in and let FirstNet build out the network in that state or opt out and go it alone. Opting out means navigating their way through three different federal organizations, going out to bid, and then most likely being on the hook for the next 25 years for any financial shortfalls, system upgrades, and system expansions. The decision will be tough for some states that have, it seems, been promised they can reap huge rewards from use of the FirstNet spectrum for secondary uses. This is even though FirstNet has repeatedly clarified this issue declaring that states may use funds from a state-operated network only for that network and must turn any surplus over to FirstNet for the good of the nationwide network.
Because of the law passed by Congress—not because FirstNet made it difficult—the process of opting out is not a simple one. Further, the issues for a state to consider are many and the rewards are few. The responsibility of committing to building, operating, and funding a statewide network for the next 25 years should be considered very carefully. I have watched as efforts to convince states to opt out had, in the early days, been very vocal, then were quieted by realities of the financial implications. These efforts are underway again with a refined message suggesting opting out is not a move against FirstNet but rather a smart move for a state.
What is missing from these discussions is a reality check about which states can, in fact, support the buildout cost of FirstNet even with NTIA assistance, and then upgrade and operate the network over the course of the next 25 years. When the network needs the installation of the next revision of the LTE software it will cost a state money. If the need to upgrade to stay current with the nationwide network happens between state funding cycles, from where will the money come? Those who are promoting or at least suggesting opt-out scenarios are not taking into account the fact that many states simply cannot support the costs associated with the network. Let me explain:
Many states cannot be self-sustaining when it comes to FirstNet. They do not have sufficient numbers of first responders nor population totals, and in many cases existing network operators already have licensed spectrum not yet deployed in a given state because the need for the added capacity has not been there. The theory of FirstNet envisioned by Congress was that the network would be successful since states that can support the network and where secondary spectrum will be able to provide income for the Partner and FirstNet would offset those states that cannot sustain FirstNet on their own. If states that cannot support FirstNet on their own opt out, they are facing a number of funding issues over the next 25 years. If a state that can more than support FirstNet opts out and believes it can keep all of the network income, it is essentially saying to the rest of the nation that its state is more important than the sum of the whole of the United States.
For the past six months, my team, independently, has taken a deeper dive into areas that can afford to build a network and sustain it and those that cannot. We did not look at the map of the United States as states, tribal lands, and territories, rather we looked at the map as counties within a state framework. There are more than 3,000 counties or county equivalents in the United States, and more than 50 percent of these cannot sustain FirstNet. Within some states the number of counties that cannot sustain FirstNet is small and the rest of the state will be able to carry them, but in others, almost all of their counties meet the criteria for counties that cannot sustain the network. Ironically, after a thorough review of the one state that has issued an “if we opt out” award, every county within that state meets our criteria as not being able to sustain the network. The state has a huge population surge during the summer and that was figured into our calculations. The number of first responders in the state cannot support FirstNet as customers, especially since the number of volunteer fire, EMS, and rescue services typically do not have funds to expend on the cost of the network. Further, most, if not all of the existing network operators still have unused licensed broadband spectrum within the state so the value of the secondary spectrum, unless it is used for a special purpose, is nonexistent.
We also looked at the other two states that have issued RFPs and found while one has more counties that cannot sustain the network, there are enough population areas that can and the state could go it alone if it so decided. The other state is in the same class as the state we mentioned above that cannot, by itself, sustain the network.
The decision to opt in or opt out should be a state’s decision, not driven by what any vendor says or promises, nor should it be based on who has political clout with the governor. Remember that this is a 25-year commitment and today’s state elected officials will be passing the responsibility of the network from elected official to elected official. If an election race is close and one governor has made a bad decision, perhaps those running against him/her will use the network against the incumbent. Politics has no place in the opt-in or opt-out decision but it will be there and it will, unfortunately, play a role in the decision made by each governor.
I have said all along states should plan to be able to weigh the facts by having alternative options mapped out when FirstNet and the Partner show up. However, those options should be in a form as close to what the state provided FirstNet as possible rather than a more generic RFP. The state of Arizona stands out as a perfect example. Its RFP, from what I can see, contains all of the same information it provided to FirstNet. Thus when FirstNet comes knocking on the door with its proposal, those in Arizona who will be making the decision will be able to compare like to like and not have to wonder if the RFP bidder for a state opt-out system will provide everything FirstNet and the Partner are for the same economies of scale. Being prepared to compare and contrast is step one.
Next my recommendation is that after a state plan is presented by FirstNet and the Partner, the state sit down with those presenting the FirstNet plan and start a series of negotiations. Some of the issues I would explore with the FirstNet team include things such as:
1) When network coverage needs to be expanded beyond what you are offering, how do we work with FirstNet to accomplish that in a timely fashion?
a. We (the state, counties, or cities) may be willing to fund some network expansion in the future, how can we the state and FirstNet remain compliant and accomplish this expansion?
2) Will we receive credit if we permit colocation of FirstNet on some of our sites, provide in-state backhaul or other types of services that will reduce the cost of building the system in our state?
I am sure there are many more issues, some state-specific and some more generic to the overall network. However, the state should be able to negotiate a number of issues so the FirstNet/Partner plan is not simply a take it or leave it proposition but in fact provides the state with some measure of freedom to work with FirstNet and the Partner as the system is built and becomes operational. In essence, the FirstNet project in each state should be a private/public partnership between FirstNet, the states and their counties, the FirstNet Partner, and the Public Safety community in that state.
Rural coverage will also be important to many states (counties) and it is to Congress as can be seen from the many times the subject is brought up in House or Senate FirstNet hearings. Here again, politics is important because those in Congress who end up with more rural coverage not only for Public Safety but for citizens of their district will have bragging rights to say they took wireless coverage where there had been little or none. Politics yet again, but important for both FirstNet and Public Safety.
The decision to opt in or opt out is a state by state decision and today there are some trying to convince states to do one or the other prior to even knowing who the Partner will be or what the plan for their state looks like. Again, it is good for each state to have competitive information available to them in one form or another, but it is too soon to make any predetermination to opt out.
The Downside of Opting Out
The worst-case scenario is that too many states opt out for whatever reason and therefore the FirstNet Partner has no path to profitability and pulls out of the contract. With the elections over and the changes in Washington DC taking place starting January 20, 2017, an opportunity for a second chance for FirstNet and the Public Safety community will be slim and none. FirstNet success for Public Safety depends on the states coming together to help put together a nationwide network that is sustainable everywhere. If too many states come to believe FirstNet could be a windfall for them if they opt out, then nobody wins. Not FirstNet, not the states, and certainly not the people who are what this is all about: the Public Safety community.
Andrew M Seybold
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