Thursday, August 29, 2013

FirstNet - you may be missing a key point to your execution!

FirstNet...we are a stumbling!

One major question that everyone fails to mention is the crunch on field crews to construct these massive networks. Even if the States go with a Public Private Partnership to help establish the capital needed to build the solution, and maintain it, what about execution?

The market is in need of an injection of capital, but their is a limitation on the number of tower crews that build such solutions. Just the certification process alone takes about a week, but a new certified climber can't even climb until after six months of working around the tower construction site. As it stands, the EFI (engineer, furnish and install) business model, typical strategy of the carriers and the OEMs (ALU, NSN, Ericsson), has totally depleted the turf business to an isolated market of mid-size tower companies (or smaller) due to price crunching, localization and commoditization. If AT&T makes a slight hick-up in the market, these companies are faced with bankruptcy. The climbers themselves will move to another job based on a promise of a dollar more an hour. Have you seen the amount of accidents and deaths associated with tower crews in the last year? This system has bread a mixture of cowboys willing to risk, not only their own lives, but also the liability of the entire program, or at least the representing company.

The only realistic way to consider executing such a mammoth build-out will have to be based on the more traditional EPC (engineer, procure and construct) model. By a State moving forward with a P3 model, to finance its deployment, it can frame its execution strategy around a typical Request For Proposal (RFP) process that is standard to the construction industry. This is not the same as an EFI model. In essence, the EFI model is controlled by the OEMs in support of the carriers (sucking lemonade from a rock).

In an EPC model the major general contractors are positioned as the leads in a P3 response. The OEMs are selected based on need, technical capability and cost. This model is much better for the market because it frees up the market for an hourly rate based solution and enforces quality, but, it totally turns the prior relationships upside-down. In the past the EFI model held the EPC company subservient to the OEM, now the OEM is subservient to the EPC. In my personal view this is the basis for all the troubles in the existing TURF business models, and, moving forward would correct the entire market model. After all, more than 60-80% of the entire build is related to construction, project, or design type services; and less than 20% based on materials (less than 7% actually has anything to do with communications). Why would you want 7% of your capital controlling the other 90% of the job? Seems like a risk issue to me? But hey, if the 7% wants to sign up for all the risk, then so be it. Unfortunately this is how it was done in the past under the EFI model which undermined the entire tower crew market.

Just some guy and a blog....

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