Thursday, August 23, 2012

NTIA Addresses Where to Spend the $135 Million in Grant Money: for State Business Plans to Initiate the Nations Public Safety Broadband Network

*** Update: In my original post I made a mistake in saying FCC of which I meant NTIA. Sorry for the confusion. Too many acronyms. ***

An interesting bit of information that needs to settle in. I just read the Federal Register and it lays out the use of the $135 Million going to each State and what it can and cannot be used for. In short, it will be used to make the State business plan and perform inventory audits, but the States cannot use it to start physically building their networks. (see below)

Now this is just me, but I view this as a smart, and logical, move given that the majority voted for such steps. It was actually one of my driving points in my response to the NTIAs request in that we need to use the grant funding allocated from the $7 Billion to help States build a business model for their own State broadband needs. Without a business plan for each State (and FirstNet) we have no course of execution or philosophical approach to what we are trying to accomplish. Now it’s time that all the States start learning what a Public Private Partnership means, because this will be the primary basis for the entire business case and will also dictate the requirements that drive the design; which in the end will show us how much this costs and how much we can expect to recover in the way of self-funding its operations. .

I hope you don’t mind my interpretation, and suggestion, but as with the standardization of the technical aspects of the broadband network, and its interoperable features between elements, it is vitally important that a consistent, and standardized, shell of a business model be utilized by all the States and FirstNet. Although the template will not define the specifics of a given States requirements, that has to come from the States input, but it should outline the overall strategy and high-level concept that can be administered in all States. If we don’t utilize a standard template for the business case, and its adaptation of a solid P3 RFP process, a given States deployment and “self-funding” requirement will run short on cash causing financial complications and project delays.  Therefore we need to adapt a solid financial governance model that can sustain the program entirely…most importantly a real solution for recurring revenue to attract investment.

An example: all States should standardize to a sound Build, Own and Operate (Boo) model of a P3 RFP that aligns with the States Business Plan. This P3 RFP would be advertised to interested financial investment houses that in turn would build a team of respondents (Investment Management Team, GC, Project Management, Integrator, OEM, etc..). In response to the States P3 RFP these newly formed investment teams will create a P3 BOO proposal that demonstrates a full investment strategy utilizing the recurring revenue of the State entities. They will present their proposals to the review board that in return would provide access to the awardee for spectrum and the rights to operate the State Broadband Special Purpose Vehicle (SPV). The SPV would then act as the State’s broadband company for Public Safety. This will then position the SPV to fall under the federally created FirstNet the top. In essence creating a commercial model of a broadband company of which the FirstNet SPV would act as the corporate headquarters and each State would act as a regional Headquarters.

One thing to point out is that the governance model of the financial controls does not have to, necessarily, follow the guidelines of the technical design, i.e. each State does not necessarily have to maintain a master core. It would most likely need to be reviewed though, because of tracking and billing issues between the State SPV and its direct State entity customers may be complicated where as each State will want to track and control its revenue operations.  

Those State entities, which have viable First Response requirements, will be positioned as paying clients for broadband access from the States P3 plan. The amount of recurring operational payments from the State entities will be dependent upon a fixed percentage of a similar solution design the entity would have executed under a capital program if it had built the same solution itself (ballpark of 10% of the total capital program). Each entity within the State that would require the broadband access would follow the same mold. There will be cost offsetting due to infrastructure sharing arrangements. This provides the long-term, recurring, revenue that the investment community is interested in. The various State entities will dictate their hardening requirements (written into a long-term SLA), which dictates the design for the P3, which then dictates the cost model for the investment offered by the proposal teams. In the end the amount of revenue that comes from the States entities for broadband service will balance the investment scenario the financial services are willing to pay.

This is just my take and obviously just one little piece of a much larger RFP framework that needs to be laid out, and approved, by FirstNet. I suggest that we must remember that the most important piece of a business plan is its fundamental capability to capture a framework of financial governance -- which is what I recommend the State start to investigate. Just as the physical deployment takes time, so does the due diligence for the financial community to look at each State opportunity.

Here is the NTIA plan for the $135 Million that will be allocated to the States to get things started.

Based on input received from multiple commenters, eligible costs under the planning grant program will likely include the following categories of expenses:
1. Hiring staff and consultants required for the planning process (such as project managers, program directors, engineers, grant administrators, financial analysts, accountants, and attorneys);
2. Holding planning meetings with state agencies, local and tribal stakeholders, and regional partners;
3. Covering travel costs for state, local, and tribal representatives to attend planning meetings (such as preparing for FirstNet consultations and attending state, regional, and national meetings that address public safety broadband issues);
4. Developing, modifying, or enhancing state plans and governance structures, including efforts to adapt existing public safety governance authorities, such as the Statewide Interoperability Coordinators (SWIC), Statewide Interoperability Executive Committees (SIEC), and Statewide Interoperability Governing Bodies (SIGB), to include public safety broadband stakeholders and expertise, and determining the role of the state Chief Information Officers (CIO), Chief Technology Officers (CTO), or Chief Budget Officers (CBO);
5. Conducting communications, education, and outreach activities with state, local, tribal, and regional stakeholders;
6. Developing standardized MOUs and other types of agreements to facilitate access to and use of existing infrastructure;
7. Identifying potential public safety users for the public safety broadband network;
8. Administrative services and supplies necessary to prepare for and manage the grant program;
9. Legal services related to the planning process; and
10. Training costs related to the planning process.
NTIA does not envision allowing funds awarded under the State and Local Implementation Grant Program to be used for activities related to site preparation, broadband deployment, installation, construction, or the acquisition of equipment used to provide wireless broadband services, including LTE-related activities.

Just some guy and a blog….

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