Urgent Matters

What just happened? A review of key factors considered during the FirstNet ‘opt-in/opt-out’ decision period

by Donny Jackson
Jan 05, 2018

All states made their "opt-in" decisions for FirstNet by the Dec. 28 deadline given to governors. Although the final choices were all the same, states took many different paths and considered a wide variety of factors in making their FirstNet decisions.

Some states had other complicating factors. While all governors tend to want to avoid future financial liabilities (see next section), this was especially true in states that already face budgetary issues and/or are projected to have financial problems in the future, primarily because of underfunded pension plans or other economic trends. And at least one state was entangled in a budget-related court case that likely would have complicated any “opt-out” efforts.

State differences also manifested themselves in the manner in which governors made their “opt-in” announcements. Some made the announcement amid well-orchestrated pomp and circumstance, while others simply tweeted the news—at times, catching even FirstNet and AT&T representatives off guard. Some governors signed the “opt-in” notification and then waited days—even weeks, according to some sources—to make an official announcement. Other governors declined to even be quoted in their state’s own press releases about the FirstNet decision.

And the approaches taken by the state governments in evaluating the FirstNet options varied tremendously. New Hampshire’s evaluation process took about two years and included a completed procurement. In contrast, the window for evaluating RFP bids seemed to shrink as the Dec. 28 deadline approached, with California giving evaluators only a week to review proposals submitted in December. Pennsylvania’s legislature conducted a public hearing. Meanwhile, Virginia officials had access to the initial state plan for only a brief period before the state’s governor decided to make an “opt-in” announcement.

In other words, this was not a cookie-cutter process, although all of the states ultimately made FirstNet “opt-in” decision.

While there were many differences between the states, there was one consistent theme that emerged:

Avoiding risk was a priority for governors. Officials in many states and territories carefully evaluated the FirstNet deployment plan and the alternative RAN offerings, if an RFP process was conducted. Even after negotiating with AT&T, in some cases—most notably, in California and New Hampshire—the consensus of these evaluations was that the FirstNet deployment plan fell short of what public-safety personnel in the state should have.

Even when announcing “opt-in” decisions, many governors declined to express excitement about the FirstNet system. Instead, almost all governors emphasized that making an “opt-in” decision represented the lowest-risk option to the state, because it meant that the state would not be exposed to any of the financial liabilities associated with an “opt-out” choice.

With an “opt-in” scenario, the state or territory would not assume any financial responsibility for the network deployment or maintenance. Sure, state and local agencies would still face subscription and device costs, but those are optional. If they did not subscribe to FirstNet, they would not incur any expenses. Meanwhile, AT&T would build, maintain and upgrade the network in the state—at no cost to the state—no matter how many public-safety subscribers chose to use it.

In an “opt-out” scenario, the state or territory would be responsible for ensuring that the public-safety wireless broadband system would be built, maintained and upgraded in a manner that would enable seamless integration with the nationwide FirstNet system being run by AT&T.

Admittedly, the state RFPs were designed to protect the state from any financial liabilities, but this was much easier said than done. Virtually all RFPs called for the alternative-RAN bids to provide a “no-cost” solution to the state, and Rivada Networks made proposals promising that states would not have to pay for anything, but the protections were not airtight, according to many sources. And that introduced unwanted risk, as the “opt-out” state ultimately would be responsible for making payments to ensure that public safety had a FirstNet broadband option within its borders.

This is understandable, as performance bonds spanning 25 years are far from normal in the surety industry. Making it even more difficult are the special circumstances surrounding an alternative RAN in an “opt-out” scenario. Issuing a performance bond to build the initial 4G LTE network in a state would be pretty straightforward, but covering upgrades to mobile 5G, 6G and possibly 7G—technologies that are ill-defined, at best—during the next 25 years would be extremely difficult for any financial institution that would consider underwriting the initiative.

Even if that barrier could be cleared—and Rivada Networks officials repeatedly said it could—there was little doubt that such a performance bond would impact the economics of an “opt-out” initiative.

In addition, an “opt-out” state would have faced the need to pay FirstNet for the right to use the Band 14 spectrum and a termination fee, if the “opt-out” initiative went awry, for technical or financial reasons. An “opt-out” state also would have to pay for its own testing to ensure seamless integration with the FirstNet system and have additional personnel to handle the project-management duties with the alternative RAN. Presumably, the vendor would pay for these things, but such expenses negatively impact the economics of the “opt-out” alternative.

While these costs were known or could be estimated, the cost to access the FirstNet core was not. This unknown was a sore spot for many state officials, as was the unwillingness for FirstNet and AT&T to state whether AT&T could offer FirstNet service in an “opt-out” state, which could have played a significant role in determining whether the public-safety-adoption targets were realistically attainable.

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