Sunday, January 17, 2016

FirstNet -- RFP falls far short of intention. Why did it take so long to put out an "objectives based" RFP?

There are some key questions that need to be asked of FirstNet; of which I'm putting the questions together in their advertised template and sending them to the Authority. Can anyone tell me why it took 4 years to put out an “objectives based RFP”? Why all the legal jargon and position in the RFP as well? If its objectives based then how would anyone think they know what will be in any contract, especially when it hasn’t been defined yet? This whole RFP could have been half the amount of fluff. But then again we have a lot of people that need to stay employed and do the busy work. The fact is the terms and conditions that are constructed following the awarded proposal is the only thing that will really count. Putting together objectives can be outlined and fought over in about three months even with such a large program. In actuality, the simpler the objectives the easier it will be to communicate to everyone what you need. Why four years?  

I congratulate FirstNet on realizing that they can't do this without the use of a Public Private Partnership (P3). I mean it was only written in the law. I took on great personal pain to get the idea of a P3 incorporated into the overall strategy. You wouldn’t believe all the naysayers out there that said the Federal Government would never do a Public Private Partnership. I have to thank them though, because to me naysayers are the propellant to my fire. There was a great deal of lobbying by many people and organizations trying to influence their own plans onto FirstNet, but reality and commonsense will seep in after awhile, especially with so much chaos going on. It’s a wonder FirstNet was able to get this far with all that attention. There will be issues though.

The RFP, as written, essentially only generates more questions. The lack of knowledge of how to construct the P3, or what it should look like, specifically for telecom, or what type of financial arrangement is required, will become a big issue. The over abundance of information and unclear objectives will only confuse eventual respondents who will ultimately see the complexity and just resort to “just put in a proposal and work on the terms and conditions later” mentality – which always seems to work out…right? Alternatively, as written, the RFP will only attract some very complex business models that will be all over the map further camouflaging the right solution.

Little side note: It’s not like I didn’t offer my assistance, but as I said a long time ago, you can lead a horse to water, but you can’t make them drink.

You can have all the Harvard Grads in the world tell you what a P3 is and how it needs to be designed; but if you don’t understand how telecoms works; or how the market plays out; our how the networks are designed and built; or how the relationships are established; I’m afraid it will be a big waste of time. But we have what we have, so lets go along with it.

First, let me put this into perspective: FirstNet’s RFP is for an overarching solution to build, operate and maintain the national CORE solution for the LTE fabric – not the State’s build-out.  This RFP will come from the top-down and will become overly complex interconnecting and integrating multiple state solutions. Be warned! For those States that decide to Opt-In this RFP would allow their partner (awardee) to build-out the RAN in those States. Some RAN may exist through carrier towers, some existing tower owners, but most will have to be greenfield towers – due to the requirement to cover the rural areas -- where the carriers do not currently have any towers – plus the hardening demands.

Hardening will be a very big issue. Current towers are not designed for the hardening that will be required, so cost analysis justifications will go through the roof adding time, people and cost.
Just remember if you let them come in and build it, then you have to accept whatever terms of the deal they make; meaning you will have no say and you will have no access to potential revenue within the State or how the network will be built – even after they placate you with all the kumbaya. The only thing you will actually get is a new monthly type of service of broadband access, much like you already have, but in this case it will be from a modified existing provider, not your typical AT&T or Verizon. The resulting solution will fall short leaving you with required taxpayer funding -- not including any federal taxpayer support required.

For those States that Opt-Out you will have full access to create your own P3, which has many benefits most specifically the ability for the State to build, operate, and maintain a fully paid solution with private equity that will create a broadband company within the State. In short, you will become a part owner of this new broadband company, thus will be the recipient of revenue, although your share of the revenue has to be re-invested back into the Public Safety Broadband Network to cover public safety needs (to be defined by the Governor). The remaining owners get to NET the remaining revenue for themselves.

The amazing thing is that you actually don’t have to bring any cash whatsoever to the deal, because you will bring the assets – access to existing facilities, land, right of way and most importantly…spectrum. Essentially this brings equilibrium to the P3 deal.

The best thing about this deal is that you will have full control and access for prioritized public safety broadband to First Responders – at the local level – and you will be fully compliant (actually better aligned) with the FirstNet’s Public Private Partnership and their approved technical platforms if they get their solution together. It still needs to be decided if, and/or, how FirstNet will participate. My recommendation is that FirstNet gets a small percentage of ownership of each State based P3 to produce revenue in support of the national footprint, thus outfitting those State’s that decide not to build it themselves and providing the national solution with “self-sustainment”. This is what I would call welfare for Public Safety Broadband.

After reviewing the entire Request For Proposal (RFP) I think the most important shortcoming for FirstNet will be its lack of understanding of the Partnership and how it needs to utilize with the Private side of the P3. For example: a P3 equates ownership with investment and/or resources. In this case FirstNet doesn’t bring anything to the table as it relates to assets. The only power it has on the deal is what is granted to them by the Opt-In States. Being that there will be a lot of States that Opt-Out FirstNet's national solution will have a hard climb to success. Almost all, if not all, the assets will come from the State. FirstNet is offering up $6.75 Billion of taxpayer money into the partnership -- although very attractive falls drastically short of the 100 Billion it will really cost -- it kind of goes against the original intent of “The Middle Class TAX RELIEF and Jobs Creation Act of 2012”, but who cares…right? If the investment made by FirstNet is less than 7% ownership stake that would mean they will fall drastically short of any type of majority ownership, thus forcing FirstNet into a government-funded solution in the end. If that’s the case why not just let Home Land Defense operate the national platform -- why a private partnership? If FirstNet can’t establish enough revenue to attract private investors all of this will be moot anyway. 

Another issue is that FirstNet believes it owns the D-Block spectrum, which is specifically stated in the law that it belongs to the Public Safety industry, which ultimately means the State.  FirstNet was created to act as the liaison between all the States under the direction of Public Safety to establish the Public Safety Broadband Network. FirstNet was never given the spectrum for their own use. How will this be addressed in any P3 model put forth by FirstNet? After all operating any wireless ether will physically reside locally. I’ve never seen, in my more than 25 years in the industry, any wireless platform specifically owned by the Federal Government except the military -- which definitely has their own spectrum.

Another thing to mention is that the “Partner” will actually be a consortium of private investment companies. A large carrier may be part of that investment team, but I can guarantee you they won’t take on all the risk and devote so much cash on their own. With that said, you need to keep in mind that a “Private Investment PARTNER” is only in the deal to bring the cash with an expected return and exit strategy. The “Partner” will therefore want a lot of protection against its investment – to include control over his/her money. FirstNet and the consortium of Private Investors have to outline – contractually – who gets what when it comes to amount of ownership shares; return on revenue; and ultimately who the majority shareholder is. The majority shareholder will be the one in charge, which will not be the United States Government, else why fashion FirstNet as a “privatized” solution to build the network? Just have DHS run the national CORE solution and let the States run their own P3s. For any majority shareholder without the control of its majority share, whomever that may be, will not just sanely give their money over for the cause – that I can guarantee you. Would you?

Majority shareholders tend to be very shortsighted and will hound you for a quick return. I’ve witness some pretty insightful board meetings where the majority shareholders were presented numbers and I can tell you that most were not just complacent mom and pop investors and those meetings tended to be very….colorful. There are a few that don’t mind sticking with the opportunity for sometime, but all will be laser focused on their share of the investment. FirstNet needs to decide how it is going to handle this -- they haven’t even started -- and it definitely is not addressed in the RFP. If this does not get ironed out now, then the FirstNet initiative will be a disaster before it even gets off the ground. Or was it proof that it has been a disaster before it even got off the ground?

The best part about this whole thing is that an Opt-Out State need not be concerned about the FirstNet plan, because a State can design, build, operate and maintain its own P3 created private entity to run its Public Safety Broadband Network without FirstNet’s involvement. It would be nice for FirstNet to provide some interconnect, interoperable and hardened standards to build against, but in reality this isn’t a red flag for a State’s effort. It’s not rocket science to get the standards established themselves, especially given that we only have two, or three, equipment providers who have all worked together in the past. Plus, I would think a State would feel better about putting its own standards together anyway. The technical solution is not the issue, as I have said from the beginning, the issue will be the partnering arrangement, but who am I other than…




Just some guy and a blog…

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Moto

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