Urgent Matters

Unanswered questions loom as governors prepare to make ‘opt-in/opt-out’ FirstNet choices

by Donny Jackson
Oct 04, 2017

Most governors have until Dec. 28 to make their "opt-in/opt-out" choices regarding FirstNet. Considerable information about FirstNet is available, but several key data points that could impact a governor's decision remain unknown as the 90-day decision clock ticks.

Meanwhile, for those states that are confident they can overcome these concerns and believe they have a viable “opt-out” alternative, do they have all of the data points necessary to make the “informed decision” that FirstNet officials repeatedly have said they want governors to make?

Increasingly, sources from representing various roles in the FirstNet ecosystem indicate that the answer is “No,” noting a series of unanswered questions (at least not answered publicly; we do not have access to any of the state-plan portals) that many had hoped would be addressed before the 90-day window opened for governors to make their “opt-in/opt-out” decisions by Dec. 28. Here are some of the key questions raised:

How much will an “opt-out” state have to pay FirstNet for use of the FirstNet core and licensed spectrum?

No one is contesting the fact that such payments will need to be made (with the exception of states that want to use the LTE core of its contractor partner, but that’s a subject for another day), but all indications are that no state has been told what the amount of the payments will be. This is important, because the costs could be extremely large, depending on the method used to determine the payments.

For instance, AT&T and other bidders for the FirstNet nationwide contract submitted a value for each state and territory, based on the amount of revenue—from public-safety entities and commercial customers---they expected to generate from the state or territory. The bids also included estimates for the deployment costs for each state or territory. The net difference in each state

Some have speculated that FirstNet would require an “opt-out” state or territory to make payments that match the net total that AT&T cited for its prospective payment to FirstNet for the particular state or territory. If this is the case, the payments easily could amount to billions of dollars in certain states over the 25-year life of the FirstNet deal, according to multiple sources.

But all information to date from state sources indicate that state officials have not been given any indication what these payments to FirstNet would be in an “opt-out” scenario, creating a large financial unknown for governors contemplating “opt-in/opt-out” decisions.

FirstNet certainly has to establish the payment amounts before the spectrum-lease agreement is signed, but waiting until those negotiations to share the figure late in the “opt-out” process would be difficult on governors, who want to know the payment amounts before submitting alternative-RAN proposals to the FCC.

What competition might an “opt-out” state face from providers offering FirstNet services or FirstNet-like services?

An “opt-out” state will have exclusive right to operate on the 20 MHz of 700 MHz Band 14 spectrum licensed to FirstNet within the state’s borders, according to NTIA officials. However, it is not clear whether an “opt-out” state would be the only entity in the state to offer FirstNet services.

Now that AT&T is offering FirstNet services that leverage all of AT&T’s commercial spectrum bands, there certainly would be a theoretical possibility that AT&T could offer FirstNet services nationwide—even in opt-out states where the carrier lacks the legal authority to operate on Band 14. IWCE’s Urgent Communications has made multiple calls regarding this matter to officials at FirstNet and AT&T during the past month, but no response was shared in time to be included in this article.

Meanwhile, there is uncertainty surrounding the public-safety LTE offering Verizon has pledged to make available. Will Verizon’s public-safety services be interoperable to, and mirror, the FirstNet services that the “opt-out” state will offer. If an “opt-out” state has to compete against Verizon and AT&T, the economics could get much more difficult, especially if the answer to the next question is unfavorable.

Will an “opt-out” state be required to match the public-safety adoption thresholds set by AT&T in its bid? Ultimately, the goal of the FirstNet mission is to have public-safety users subscribe to FirstNet. In its bid for the nationwide FirstNet award, AT&T and other bidders set public-safety adoption goals in each state or territory. If these adoption thresholds are not achieved by AT&T in “opt-in” states, the carrier giant must pay financial penalties and even risk losing the right to operate on Band 14 spectrum.

What’s not clear at this point is whether an “opt-out” state will have to meet AT&T’s public-safety adoption threshold for the state—and whether it will face the same financial penalties, if it fails to achieve this goal. If an “opt-out” state is required to meet the AT&T public-safety adoption thresholds, some have suggested that AT&T’s subscriptions count toward the adoption figure, if AT&T is allowed to offer FirstNet services on its existing commercial spectrum bands.

How is the revenue generated within an “opt-out” state handled?

There is little question that “opt-out” states will be required to make payments to FirstNet to access the FirstNet core and Band 14 spectrum. Two purposes of collecting this money from states that generate the most commercial revenue—often considered to be the most likely candidates exercise the “opt-out” alternative—is to help pay for ongoing FirstNet operations and to help fund network deployments and operations in states that do not generate as much revenue.

In addition, some payments to FirstNet from AT&T are slated to be held by FirstNet until a technology upgrade is required, at which time FirstNet would release the funds to pay for the network enhancements. In an “opt-out” scenario, it would be understandable for an “opt-out” state to make payments to FirstNet to cover FirstNet operations and funding for other states.

However, it is unclear what would happen to the money earmarked to pay for network upgrades in the future. Would the money be paid to FirstNet, which would then distribute the money to the “opt-out” state to fund a technology update for the RAN? Or, would the money be held by the state in a “reserve” fund until it is needed to pay for a network upgrade? If these funds are held by the state, does FirstNet have any oversight rights regarding its use in investment vehicles or to prevent the “reserve” fund from being raided, as state 911 funds commonly are?

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Discuss this Blog Entry 3

Wilfredo Miranda (not verified)
on Oct 4, 2017

I haven’t see a single article stating the vulnerability of FirstNet given what happened to AT&T and others in Puerto Rico in lieu of Hurricane Maria. Reciliancy was NOT there.

on Oct 4, 2017

The Opt-Out issue for Governors really boils down to two questions:
What business are they in, governance or telecom?
How much risk are they willing to take to compete with existing carriers and wireless providers?

It's pretty clear what the sane answers are.

Burch Falkner (not verified)
on Oct 7, 2017

I understand in my home state of Alabama that our Governor could announce her decision as early as next week. She has been very transparent by requesting input from committees and agencies throughout the State. That is commendable. What is questionable is how can a decision be made when all the facts are not known.

It now appears that Band 14 may never actually be used unless AT&T just needs more bandwidth in major urban areas. The rural areas will likely be served by what is available currently. So what is the benefit of FirstNet? I have a portable network radio right now that costs less than $250 for the equipment and under $20 per month with unlimited nationwide PTT, active GPS, cloud message storage, and a whole bunch of talkgroups. So what is it that FirstNet can do that isn't already commercially available and what does it cost? Who knows?
I don't!

And what business does government have in telecom? Government has yet to figure out how to manage itself, and now Government is going to succeed in private enterprise? What basis do we use to arrive at this conclusion? And whatever happened to that grand idea of building a "hardened" system that would continue to work when others fail. An now we learn that we are using the same network? Something is very wrong with this picture!

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