Thursday, October 4, 2012

Should FirstNet go the way of the Commercial Carriers?

Prior to this documents creation I did a financial estimate on the one common element that would connect the statewide initiative for PSBN with the business aspirations of an electric cooperative. But this concept is the same across all the vertical industries, i.e. Transportation, Police, Fire, EMS, Agriculture, Forestry and many others. So if you read this write-up please view it as pliable to all those industries that have “Public Safety Service” requirements during an emergency.

In analyzing this Electric Cooperatives business model against its planned partnership with the State Public Safety Broadband Network (PSBN) I focused on the one common element was the necessity of both parties; that being broadband access, or 4G services. Both parties need this technology to accommodate their individual business plan. One should consider that one of the primary purposes for doing this business case is to demonstrate a viable path for the Electric Co-Op to refocus its intent towards the business of providing power…not being a telecom company. This same concept can be used for a mass transit system or a local police force. In doing so the PSBN presents a great opportunity for this Electric Co-Op to align itself with its core business at the same time off-loading the risk of complex, and costly, telecommunication platforms.

In the past this Electric Co-Op, as did all Utility providers, were forced under market demands to augment their power distribution model with the risk of advanced telecommunication platforms such as T1s, microwave, 3G Cellular, ZigBee, WiFi, WiMax and now LTE. These platforms immediately began to challenge and burden the overall business objective of providing power with unavoidable higher cost of communication deployment’s; plus the introduction of uncontrollable technology curves; and the requirement for high-salaried engineers that really have nothing to do with power. With the introduction of the State’s PSBN now presents the opportunity for this Electric Co-Op, as it does for all power Utilities, the chance to merge its communication needs with one single, private, broadband provider that can administer to the direct needs of all that ride on its airwaves.

The concept of out-sourcing the communication needs of the Utilities is not new. Such out-sourcing strategies have been tried in the past with commercial carriers, and although the commercial carriers are in the business of telecommunication specifically, they do not have the same alignment of business philosophies. In short, it’s not only that the technical aspects have to integrate and interoperate, but also the entire ecosystem of the business case has to align. In this case the carriers are in the business of selling subscriber based services through their telecommunication networks; where as an Electric Co-op is, primarily, only using its telecommunication platform to support its primary business objective of selling power. Thus, it has been the tradition that such relationships, although started with good intentions, end with utter disgrace or chaos where one part is reaping the benefits over another.

Somewhere along the way the Utility market realized it had to build a private network to sustain its own requirements of providing power, thus such rollouts as WiMax and private backhaul decisions, but now unforeseen events are limiting that strategy as well.  With the shortage of spectrum the Utilities, as are others in the vertical markets, are being forced to consider alternatives, but reality is starting to set in that the market forces are against them and that the expenditures of the past, to sustain their own private communication needs, will increase dramatically across the board. These new platforms are so complex and frequency specific that they require a business case in itself to achieve suitable results. But an opportunity presents itself…. the State Public Safety Broadband Network.

The State PSBN is only a sub-set of the much larger National Public Safety Broadband Network. This network has the business philosophies that align perfectly with those of the Utilities market (as with all critical infrastructure based vertical markets). In essence it’s not about sustaining subscribers on the network to generate revenue; it’s about sustaining a vital lifeline of critical communications to protect critical assets of our great nation – in this case those assets being our electrical grid.

The State has been mandated by the Federal Government to use LTE (Long Term Evolution) broadband access as its primary tool for communications for Public Safety. The Federal Government’s decision stems from the alignment, and necessity, for the Public Safety Broadband Network to use consumer based commercial carrier technology that is off-the-shelf capable and that has a proven track record with a sustained foreseeable future. This technology has the potential to ultimately replace all known wireless platforms and will cover 99% of the geographic landmass of the United States. It will also be the primary tool for First Responder communications.

Since the introduction of this effort there are those that pursue the hope that because the technical platform aligns with the commercial carrier market, which is deploying the exact same technology, that it would somehow provide an advantage to building the Nations Public Safety Broadband Network. But, given the nature of the technical hardening requirements, and the federal requirement of “self-funding” capability, it is becoming infeasible for the carriers to sustain a viable business model of revenue collection to sustain its profit margins. Thus the same issue that the Utilities faced in the past, that of alignment of business objectives, still presents an unwinnable situation today…and for the foreseeable future. The only viable solution is a private solution. This is exactly what someone was thinking when they originally put the legislation together to build a separate broadband network for Public Safety.

This Electric Cooperative has similar demands in its requirement for broadband technology and it also has an opportunity before them. It’s inherent that such technology must support, for the long-term, its deployment of sub-station and electrification communications; to include it’s mandated SMART Metering program by the Department of Energy. The original intent of the Utilities Industry was to utilize a broadband technology that was prevalent, and being pushed by industry vendors, as a viable solution that meets those demands. In the more recent past the technologies of 3G and WiMax were being advertised by the vendors, and the commercial carriers, to all of the Utility market as the technology that will win the broadband market over. WiMax is a sister technology of LTE, and was actually the first to market in the commercial carrier world. Although the technology is still deployable for the purposes stated, it has been illustrated that all the commercial carriers in the world, and thus the Original Equipment Manufacturers (OEMS), have chosen the LTE technology for the consumer market. Thus the technologies that were sold, primarily by the same commercial carriers, have now declared end-of-life.

“Since we now know that Sprint plans to build and operate its own LTE network, it's pretty fair to say that WiMAX is dead as a technology for consumer handsets in the United States. Once Sprint gets its LTE network up and running, it will mean that all three major wireless carriers in the United States support LTE, as both Verizon and AT&T have already commercially deployed LTE in various markets. The chief reason for WiMAX's downfall in the consumer handset space is a simple one: The tech industry likes uniformity and WiMAX wasn't adopted by enough carriers to make it the de facto standard for 4G mobile data in the U.S.” (LTE World, 2011)[1]

As was presented in the opening paragraphs of this summary, this Electric Co-op’s decision to go with WiMax stresses the point that the “technology curve” is a risky business model to deal with, especially when it relates to telecommunications and its support implications on the core business of providing electrical services to its client base. Therefore, this Electric Co-op, as should all Electric providers and critical infrastructure players, must utilize its expenditure of the WiMax platform to the extent that it’s viably possible. As for the basis of this Electric Co-Op’s business case; it’s my intention to eliminate any future risk yet stay diverse in our capabilities by aligning the Co-op’s telecommunication needs in support of its core business requirements. The PSBN provides this Co-Op, as well as all others in the vertical markets, that opportunity to diversify that risk pattern under the statewide, and national, PSBN initiative. 

The statewide PSBN initiative will be a “private” LTE broadband network. This is the only viable solution. The network is planned to cover 99% of all the geographic landmass, thus any and all Electric Co-op’s can, not only cover their own client footprints, but also off-set its expenditures to date by rolling them into an annual payment to the State P3 effort. For this one electric Co-Op they can recover the expenditures of the WiMax decision by rolling it into the overall annual payment to the State P3. As with any technology, we can utilize the WiMax platform for additional support services, to include Internet access for the client base. So in essence, not only can we recoup the cost of WiMax, we can continue to generate revenue off its services as long as the commercial OEM market produces products that will work on it.

But, ultimately what this means is that the WiMax platform has now become a proprietary platform. As with proprietary technology the cost impacts start to rise due to the lack of support research and development to expand the technology further into the future. Without the support of the consumer market…the market itself starts to shrink. Given the market acceptance and the amount of WiMax technology deployed there should be a 10-year life expectancy remaining as a viable platform in support of SMART grid.

Being that both the State, and this Electric Cooperative, need the broadband technology to support their individual business aspirations, it becomes evident that by properly aligning the business intentions (not the just the technical) with the needs of both parties, we could help foster a mutual agreement for a shared service platform of LTE. A shared service platform that can expand beyond just Utility market and ultimately to all State internal agencies and entities that have similar demands for broadband technology.  This relationship could explore the topic of shared infrastructure to eliminate, or reduce, cost impacts for the statewide build out as well as align State interests for job creation, private investment and centralization of its communication and IT (Information Technology) platforms, such a platform that would benefit all who interface on it. This is something a commercial carrier agreement, whose intention it is to provide the PSBN solution, cannot provide. 

The only way to foster this relationship, and others, is through a Public Private Partnership.

Just some guy and a blog...

[1] Network World, 2011. “LTE vs. WiMAX: When it comes to the U.S. handset market, LTE has landed a knockout blow”. By Brad Reed, Network World. November 02, 2011 

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