Thursday, July 5, 2012

Carrier Base Business Model and the Public Safety Broadband Network

The Carrier Position

It has been said that the carriers are the “best tool” to implement the National Public Safety Broadband Network. I would assume the notion is to put emphasis on the “best tool” piece. One needs to understand that I am a strong proponent of the carrier business model. Having been in the industry for 25 years I have dealt with many of that major telecom rollouts that are still in place today. Through that experience I have seen the carriers mold into many things, as I’m sure others have as well. Without having to regurgitate that entire historical record of how the carriers have evolved, instead, I would like to show you, through my eyes, where they stand today and where they may be going in the future as it pertains to the Public Safety Broadband Network (PSBN)…from a business case perspective.

I am but one view of thousands that see the industry in an “Abilene Paradox” of views. From my stance the carriers have evolved quite successfully in the mindset of their own business model…that business model “to make money off people, or groups, who want telecommunication services that the carrier sells” (Nothing wrong with that business case at all). The entire notion of its survival relies upon the need to balance capital and operational expenses against acquired revenue and shareholder investment. In the end the corporate structure of a shareholder organization, like a commercial carrier, is to appease the shareholders themselves. Therefore, all activities, whether selling services, or leasing bandwidth, from say a Utility or Police Department, is to help support that cause. All “users” are secondary to that cause. When looking at “users” they make up anybody who is buying services – that includes Public Safety, Utilities, etc. In essence it is the embodiment of the commercial carrier that it have a winning business model of efficiency and expertise towards achieving its shareholder goals.

I believe this carrier-based solution to be a great example of capitalistic means that drives our way of life. This is a proven business model with over 50 years of building, and rebuilding, that strives to maintain its core business goals – that being making money for its shareholders. But is it best for the PSBN?

What does the Public Safety Broadband Network need?

There are those that believe that the commercial carriers are the “best tool” to implement the National Public Safety Broadband Network. I revisit that phrase from the opening paragraph to stress the point that the carrier are a great example of technical and tactical execution that should be, must be, studied as to a means of reviewing the past to build the future. The primary, and resounding, difference lies in the underlying business model of what the PSBN, FirstNet Board initially, needs to achieve for its long-term goals. It may be just me, but the PSBN’s primary mission is to establish a strong private network that closely resembles the latest technology that the markets are deploying; but, the characteristics and base elements of who, why, what and when need to be readdressed as to align with the ultimate business goals of the PSBN…not a public carrier business model.

It may be just me, but the overall goal of the PSBN will be to setup a physically seperate-private-hardened network that can insure the “public’s safety” when things go wrong, i.e. earthquakes and massive storms that cause long-term power outages.  If the PSBN were deployed into a corporate structure that drives to a similar structure of execution as a commercial carrier – that is driving shareholder value through a sound business model – then the first thing to look at would be what that service will be and who will be the shareholders.

The service will be broadband access; the shareholders will be the State and Federal entities that need that service. With that said then the primary goal of FirstNet should be the baseline executable architecture of a corporate model to fulfill the shareholder requirements, that being, primarily, the State, Federal and private entities. As part of a Public-Private-Partnership there will also be private shareholders of that network.

The established baseline executable architecture will need to be executed at the State level. So, where as the importance of technical interoperability is important, it is just as important for the fiscal and corporate structure for operability be maintained.  After all, the technical interoperability is really no different from a commercial carrier, minus the necessity to replace existing, and aged, infrastructure that has to be maintained by carriers and that the new PSBN will not have; plus, the framework of a corporate structure is the same, but the alignment of business objectives are drastically different. In essence, the commercial carriers operate for profit; the PSBN will not (primarily). To clarify; the commercial carriers operate on primarily a subscriber-based model for revenue to fulfill shareholder agreements, but the PSBN should operate on a fixed model of long-term annual payments from its clients (shareholders).

What do the “shareholders” look like?

The shareholders of the PSBN public-private network will be the Federal and State agencies that require a hardened network that will not go down during an emergency. This network needs to be built to the standards required by those agencies as to insure they can fulfill their long-term requirements (I term Long-Term SLAs). Alternatively, that network can have no competing commercial business that would impede on that requirement, in essence, prioritization.

As an example: if I am a state power distribution utility (one of many State entities), and I need a broadband network to connect all my SMART meters; and ultimately to sustain my core business of power distribution; then I want to make sure that I have the best suited network that has my needs in mind.

I want a strong, hardened network (that meet my specific requirements), which is long-termed in focus and has the technical viability that will allow me to grow. I also don’t want to have to pay for the needed advancements of the technology curve; I would rather a private entity take on the risk associated with the technical curve. In doing so, I would be much more willing to pay a nominal annual payment versus a capital program to build it myself. I would envision, budgetarily, that I would be willing to pay as much as 10% of the total capital costs it would take me to build and operate my own solution for at least 3-5 years out. So, if I spend roughly 500 Million to build a similar solution, then another 50 Million a year to maintain and operate it, then I would be willing to offset the risk and investing into an annual payment of roughly 55-65 Million a year to get the service from the newly State’s private centralized model, or SPV. I would also expect offsets of my infrastructure that I would typically lease as part of this broadband solution. Inclusive to that arrangement I would also like to have the opportunity to invest in the SPV itself.

By joining the shareholders as an investment, I would expect to share in some of the, long-term, recurring revenue from the service rollout itself. In essence, not only would I be willing to set a fixed annual payment to shore up my budgetary requirements on a yearly basis; I would also pay investment dollars, or offset infrastructure sharing as a investment opportunity as a shareholder of that very same network.

This very same concept of an example could be the same vision of any of the State or Federal entities. In essence, I could replace the title utility with being agriculture, transportation, or police. In one case I could be a user, the other case an investor, or both.

In conclusion, as a user, a shareholder, or both, I want to make sure that I am getting what I need in the way of my own business case alignment. I can not risk the alignment with a non-private entity whose interests lay in making revenue, especially when I myself am not in the commercial mode of making revenue; but rather building and sustaining a great, private, network that will insure a more reliable path of communications for both my critical and non-critical forms of communication. A network that will stay in tuned with the advancements of the market, at the same time taking on the risks of the technological curve balls. A network to which I know will be run efficiently, and cost effectively, by a centralized State entity (private) whose primary business model is encased in the necessity to please me as a shareholder by doing nothing but running this private network.

Just some guy whom thinks people are reading his blog... 

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