Friday, January 8, 2016

FirstNet -- Someone was listening? In reality there is no other course that will make this a success.

So if the terms and conditions for FirstNet describe a 20-25 year contract/partnership, then someone has been listening to my recommendations.

The scope of the RFP will have to be focused on the high level aspects of building the management of the CORE. Don’t focus on the build part; only focus on the builds that pertain to States that Opt-In. I would only recommend the awardee act in a program management capacity or investment oversight. Unless FirstNet initiates the discussion with the States to coordinate requirements for hardening, approved vendors and contractual obligations, i.e. P3 ownership and shareholder representation, then the awarded partner will fail when trying to build it themselves. Ownership of the statewide buildout belongs to the State. FirstNet, nor its partner, will be able to control State ownership unless the state gives up all their spectrum and control of the entity created within the State. I can see a few of the economically weaker, or more politically tied states (someone like Hawaii) that will dedicate themselves to FirstNet – at least for a little while anyway.

The issue for moving forward with the “Opt-in” states first is that there will not be enough revenue generated that justifies a full statewide build-out. On average you will see a statewide build-out, covering the rural areas as well as metro environments, will carry a capital cost of roughly $1 Billion per State -- not to mention the outlying Big States that will cost roughly 3 times that. FirstNet will need use the $7 Billion it acquired to cover its operations level that will need to include facilities, datacenters, NOCs and other sites in support of the national CORE layout. We haven’t even begun to talk about the long-term O&M (Operations and Maintenance) costs. Without enough revenue then FirstNet will not attract private money to invest. Without a return on the investment partners will be far and few.

Revenue generation will have to come from the States. Even if you look at the carrier model all revenue is generated at the local level; after all that is where you and I live and that is where we pay our bills so that is where the carriers focus the marketing campaigns. What’s sold in Texas may not be the same in Vermont.

So lets say FirstNet moves forward before the States do. What do you think will happen -- even if they get a great investment consortium? How do you justify or analyze cost estimates if you haven’t even established a relationship with the State you want to build in? For an Opt-Out State what percentage of the State based P3 will you get? How much money will you devote to the deal? Taken a percentage just to cover First Responder costs at the Federal nationalistic level will be quite small. What will the terms and conditions of that deal look like? Who will control that deal? What if the State doesn’t want FirstNet involved at all? What will the legal obligations be? A State doesn’t need anything from the Feds to build their own network and host their own P3 -- FirstNet needs the State though. If FirstNet just goes hands-off with Opt-Out States then there overall mission will fail.

With the three tiered Priority of service model I just described, there will be enough revenue generated to spark the interest of big investors, all done up in a nice and tidy little State based package – none of this multi-State cluster scenarios. Just like the partners, FirstNet can NET revenue to help pay for its efforts at the local level.

There will be States that want to build it themselves no matter what FirstNet brings to the table, especially in today's political charged world. If FirstNet wants to stay involved with these Opt-Out States, then they should outline the requirements the State can follow to construct and stake some ownership (all P3s operate under ownership and risk diversification) in the states P3. The awarded FirstNet partner can act as their facilitator, but a state’s P3 is a completely separate contract -- not under the control of FirstNet. If FirstNet doesn’t address the Opt-Out solution first then they will have cut the arm off that feeds them.

One more thing…the framework of classifying users of the network must be allocated to three priority levels -- not two. Priority one being First Responders (Police, Fire, and EMS); Priority two being state based organizations and companies that are essential to supporting catastrophic situations (Utilities, Transportation, etc…); and Priority 3 belonging to commercial traffic. Priority two and three will be the revenue generating solutions; Priority 1 will be the recipient of the P3 deal – thus paying for First Responders. I can think of more than a 100 different service offerings that can be developed for the Priority 2 and 3 users. I can also envision a number of customers that I know FirstNet has not even thought of yet.

Okay, two more things. There shouldn’t be just one partner; FirstNet should seek a Consortium of Partners. Why you ask? A Consortium spreads the risk of the partners and allows FirstNet not to put all their eggs in one basket; plus most of the investors (private equity) will want an exit strategy.  This allows for interchangeable partners in the deal over the life of the ownership model.

But who am I other than….

Just some guy and a blog…

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