Thursday, January 16, 2014

FirstNet and their view of State Opt-Outs -- It seems that the fear is real, but is it necessary? Perpetuity can go both ways.

I just read a very interesting article that may hint to a hidden fear when it comes to “Opt-out” or “Opt-in” scenarios. “If FirstNet does its job, ‘opt out’ is not a practical choice for states”,  Jan. 16, 2014 by Donny Jackson in Urgent Matters. Makes for a very interesting read, but I would like to address the 3 main bullet items in the article.

In the article it’s evident that FirstNet is concerned with State Opt-Outs, but that fear is unfounded. In actuality FirstNet, and the Federal Government, has more to gain by the States deciding too Opt-out. In short, it allows FirstNet to maintain governance control nationwide at the same time allowing the States to capitalize on needed revenue to help sustain their own Public Safety programs. But, then again Social Security is only suppose to be spent of the welfare of the citizens and we all know it bleeds money into other Federal programs – which by the way is controlled by the feds. To further that point, it also allows FirstNet to partake in the “ownership” model of each and every state as well. Imagine FirstNet coming in with a 5% ownership stake of a State’s given Public Private Partnership. Now imagine that 5% multiplied by 56 (States and territories). Such a scenario would generate more cash for FirstNet than asking taxpayers to fund it. Can anybody look up the revenue last year from AT&T and tell me what 5% would be -- annually?

As it states in the legislation, a State, or FirstNet, cannot sell direct commercial access to broadband (make note of the term “Third Party” though), nor can they utilize the revenue for general funds. In fact what it states is that any revenue made off the network has to be reinvested back into the network to help with “self-sustainment” and furthering the purposes of Public Safety.  To illustrate I have inserted (below) “The First ResponderNetwork and Next-Generation Communications for Public Safety: Issues forCongress". By Linda K. Moore, Specialist in Telecommunications Policy, January 8, 2014, section entitled:

FirstNet: Fee Income and Other Revenue

FirstNet has the authority to obtain grants and to receive payment for the use of network capacity licensed to FirstNet and of network infrastructure “constructed, owned, or operated” by FirstNet.25 Specifically, FirstNet is authorized to collect network user fees from public safety and secondary users26 and to receive payments under leasing agreements in public-private partnerships.27 These partnerships may be formed between FirstNet and a secondary user for the purpose of constructing, managing, and operating the network. The agreements may allow access to the network on a secondary basis for services other than public safety. FirstNet and its partners may also receive payments for leasing access to infrastructure, such as towers.28 The act requires that these fees be sufficient each year to cover annual expenses of FirstNet to carry out required activities,29 with any remaining revenue going to network construction, operation, maintenance, and improvement.30 There is a prohibition on providing service directly to consumers; this does not impact the right to collect fees from a secondary user or enter into leasing agreements.31

Other Sources of Funds

The construction of this new network represents a significant investment for all participants. State public safety agencies have multiple obligations to build, upgrade, and equip other networks and may not be in a position to contribute to building and maintaining the new broadband network. The ability of FirstNet to procure funding from the private sector may be crucial to its success.

25 P.L. 112-96, Section 6206 (b) (4).
26 P.L. 112-96, Section 6208 (a) (1).
27 P.L. 112-96, Section 6208 (a) (2).
28 P.L. 112-96, Section 6208 (a) (3).
29 P.L. 112-96, Section 6208 (b).
30 P.L. 112-96, Section 6208 (d).
31 P.L. 112-96, Section 6212.

With that said, allow me to specifically address each of the points made in Mr. Jackson’s report.

      1.     States and territories that choose to “opt out” are not opting out of FirstNet entirely. There will be a first-responder broadband network in that state regardless that must meet FirstNet’s requirements—the difference is that the “opt out” state would have build and operate the network, instead of letting FirstNet do it.

This is true, thus my earlier blog postings about the term not really being a term at all. In actuality the legislation doesn’t say anything about “Opt Out”, that was a term made up after the law hit the books. The term “Opt Out”, per FirstNet, really means to not buy the service offering from FirstNet, who they themselves want to build the network to capitalize on the broadband network, as well as control the overarching footprint and carrier relations in the future. In short, FirstNet would be positioned, if all the States “Opt In”, to formulate later plans with the commercial carriers to which the States would have no say in.  Now I’m not saying this was the plan from the beginning, but this would definitely be the result if the State’s don’t have a say in the control of their own footprint, then again, the States could not say anything at all to which FirstNet would not be a success and would rather be more of a burden on the taxpayers in that they would construct a network that nobody uses. If nobody uses it then 5-10 years down the road we will be having talks about how the States will take ownership of their footprints anyway, the result, it will be on the heads of the taxpayers. The only way to avoid this if by using the Public Private Partnership model I have been preaching about. 

      2.     States and territories that choose to “opt out” cannot use partnership deals to bolster their general funds. Any money received, as part of a public-private agreement, must be reinvested into the network, not offset shortfalls elsewhere in the budget.

This too is true. As per the inserted text above you can see that the revenue generated from the sale of services, or access, to the broadband network can, in fact, be sold and then “reinvested” back into the States Public Safety needs -- as well as FirstNet. It does specifically state, in the Legislation, that direct service can be sold by a “third party” though, thus the private investment scenario recouping for it’s investment to pay for the State’s entire broadband network, which is a FirstNet gain as well. Essentially, all boats rise with the tide.

      3.     A state or territory that chooses to “opt out” can present a plan to the FCC that would make it eligible to receive some funding for the build-out of the network. However, the state/territory then would be on its own to pay for the operations of that network in perpetuity.

I’m weary about this statement as it can be construed as intimidation. The build of the network will have to happen at the State level anyway, that’s where all the local resources are. Plus, even if a State opted in, who would be the one’s approving the leasing arrangements? The State! If you are going to build it locally, with local resources, and you have to get approval for any lease arrangements from the State anyway, then why is it we say that the State’s aren’t doing anything? If the State is involved then that means some kind of allocation of taxpayer money has to be spent, thus the State legislature has to get approval. What about those State Constitutions that won’t allow the Feds to come in and perform commerce such as this? The fact of the matter, anyone who has built these networks knows you can’t do it without the State, or the State’s direct oversight. This is not a virtual service offering, such as a Health Exchange, it’s physical and real telecommunications network that has to be monitored, maintained and funded long term. If we think that a single federal entity will be able to come into a State (multiplied by 56) and physically build a network without the State; or if a federal entity thinks it will be able to come in and lease broadband services to certain State entities, and not others, then I’m afraid it will be a long time before we actually see anything get done.

As for the “perpetuity” of the owning and operating the network; who owns, operates and maintains the State networks today? Not the feds. What makes us think this will be any different? Through the Public Private Partnership the State isn’t responsible for the funding the network … private investment is. The State isn’t responsible for the risk in the technology curve…. private investment is. The State isn’t responsible for operating, or maintaining, the network… private investment is. The State’s taxpayers aren’t responsible for funding the entire deployment… private investment is.

To conclude, the path is clear to me, there is no other way to build this nationwide platform for Public Safety, other than the Public Private Partnership model I have been talking about. I didn’t just make this stuff up overnight, this has been more than 10-years of my life researching and analyzing this specific topic culminating into my dissertation and ultimately my doctoral degree, which, I believe, actually makes me the foremost expert... scary isn't it? I was a professional student to say the least. Using the guidance and standardization provided by FirstNet; having a framework laid-out by FirstNet that illustrates the Public Private Partnership in its entirety; and having the State take control of what it already knows it will have to build anyway, is better for FirstNet, the State and the taxpayers.  What better way for FirstNet to maintain control of its national footprint, yet at the same time allowing the States, and the Federal, tax burden to be lifted. In the end we have to do what’s right for the country, not what could be interpreted as an ideological vision. If we don’t, then we will further our decline by “perpetuating” lost expenditures and controls for our fiscal responsibilities.

Then again who am I, other than....

Just some guy and a blog.... 

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