Thursday, March 28, 2013

FirstNet and Multi-State Regional Partnerships will be a disaster?

There has been a lot of talk of possible multi-state regional relationships that FirstNet and the States can use to fund and build the Public Safety Broadband Network. After looking at these specific issues for the last 10-years, and understanding the issues facing the Public Safety community, and the necessity to build a large complex broadband solution, the evidence always points one model of execution – the Public Private Partnership model I am promoting. In short, I wouldn't waste your time or your money on the multi-state solution -- or the Feds money. 

The combined regional efforts of multi-state partnerships may seem to be a good idea (such as theState coalition surround Nevada and its 11 adjoining States), but it lacks the ability to balance the needs of all the States that take part. Plus, having a major vendor lead such an effort will ultimately be perceived as anti-competitive and only introduce further delays when the practices are challenged in court. Believe me they will be challenged. There is too much at stake for it not to be challenged.  

The imbalance of the State partnership scenario ultimately is faced with the execution of the ownership model as well as the execution of the physical activity. Somebody in that scenario needs to take the lead. Which State within that scenario will do that? The most valuable part of this relationship is who owns and controls the spectrum and how it will be used across Border States. We aren’t just talking about a small chunk of spectrum to deliver an LMR type solution. We are talking about spectrum that has the ability to make a lot of money using the broadband technology of today’s 4G markets. Who within the State regional model will be in control of that? Which State is willing to give control of its valuable monetization of the spectrum to an adjoining State? Plus, which State wants an adjoining State interfacing with its own internal State agencies and entities to physically build and deliver the solution? How will the controlling State work with all the internal State agencies and entities of their partner States to collect badly needed revenue? What happens down the road when the States want to take on their own network responsibilities? I can go all day at poking holes in this one.

Furthermore, for a vendor to lead such efforts introduces even more costly mistakes. How will the State, or States, issue an RFP to the market without it being challenged in court for anti-competitive practices? How will a State Legislature view this action and what will the State taxpayers say? When an OEM or vendor takes the lead it ultimately means that the control of the program relies on the technical input of the design and the requirements of the entities that will ride the network. How will an OEM be allowed to design a multi-vendor solution when they themselves are in the business of selling their own gear? What happens if some of the internal State agencies and entities don’t want to work with such an OEM? What happens if the OEM has faced legal hurdles in the past from different State agencies and entities that reside within the State? How will the taxpayers respond to such behavior – an election nightmare?

Ultimately the only way this national public safety broadband network can be built is through the use of a properly formatted Public Private Partnership where as private equity is introduced. You can take my word on this (being that I have put more than 10-years in researching the topic), or you can listen to a few who have just been introduced to the topic and have alternative motives… its up to you to consider.

By introducing private equity we allow for each State to fund and build its own portion of the national network. This allows the State to control its partnership arrangement as well as its share of the ownership, which directly reflects the amount of revenue the State can collect to reinvest back into the network. Plus, the State is in the best position to negotiate with existing internal, and external, agencies and entities that will pay to utilize the network. These negotiations will lead to users of the network, which in turn will produce the recurring revenue to attract private equity to bid.

By introducing private equity as the lead we also eliminate any “anti-competitive” scenarios where as a State can put out an RFP to the private equity market of which they will receive multiple private equity teams responding. It is up to the private equity team to pick who its DBOM (Design, Build, Operate and Maintain) team members will be and what technically approved OEM solution they will use (they are limited to just a few LTE vendors and the backhaul is standard assets of the States).[1] In this scenario even multiple private equity responses can present the same OEM solutions.

The end game here is private equities bid to pay for the State’s build-out and its long-term management (thus avoiding the taxpayer issue because we won’t need any taxpayer money to make it happen). In short, private equity will pull together its own project team to which they can obtain a DBOM proposal based off the RFP requirements from the State. The private equity team will then propose to buy the rights to build and maintain the network for the State of which will be reflected in their offer to the State. In return the private equity team will get 49% of the recurring revenue from the entities that will pay to ride the network for the long-term.

There are hosts of State Legislature’s that are already pursing the Public Private Partnership format and have even introduced them as law (see paragraph below). We just need to align the team players to achieve what we need.

"Business Digest: Public-private partnership bill advances in (Texas) Legislature

Legislation regulating public-private partnerships on Wednesday cleared the SenateCommittee on Economic Development.

Senate Bill 507 by Sen. Kirk Watson, D-Austin, is a broad reform bill that includes protections for neighborhoods where state lands may be developed with the help of the private sector. Senate Bill 894 by Sen. John Whitmire, D-Houston, would bar public-private partnerships in the Capitol complex without legislative approval. The committee voted 5-0, without debate, to move the legislation to the whole Senate for a vote. No one testified against the bills.

Just some guy and a blog...

[1] For those OEM’s that are taking the initiative to help the States with their so-called “Public Private Partnerships”, I would suggest this is where they need to concentrate. It would be wise for them to team with, or help establish, their own private equity team. This will position them much better than trying to do it themselves and will eliminate the stigma of anti-competitive results.

No comments:


Words to Live By: “Here’s to the crazy ones, the misfits, the rebels, the troublemakers, the round pegs in the square holes… The ones who see things differently — they’re not fond of rules… You can quote them, disagree with them, glorify or vilify them, but the only thing you can’t do is ignore them because they change things… They push the human race forward, and while some may see them as the crazy ones, we see genius, because the ones who are crazy enough to think that they can change the world, are the ones who do.” (Steve Jobs)