Wednesday, June 29, 2016

FirstNet -- Why Opt-Out? What are the next steps to Opt-Out? Why?

Time to move past the “Opt-in” versus “Opt-Out” show. As blatant as can be, each State needs to stop trying to define Opt-in and Opt-Out, and all the theatrics being devised, and start putting your “constituents” to work. No one is going to come into your State and build a Public Safety Broadband Network better than you can do for yourself. If you know that the FirstNet plan “to come in and pay for it all” is too good to be true, then you already know what you have to do.

The answer to unemployment lines, the shortfall in budgets, and the success of delivering a solution for your local First Responders lays at your feet…not FirstNet’s. There is no silver bullet coming from the Federal Government to save the day. You are the only ones that can make your PSBN solution a success.  Stop waiting for hand-outs and act on what you know is the right thing to do. What is it that you need to do? You need to start putting your product portfolio, revenue and marketing plans together, so you can define your Public Safety Broadband Network.

These plans will define what your broadband solution will be. Without your products being defined you can’t create your revenue projections; without knowing the revenue projections you can’t attract the needed private investment to secure your “self-funding” and “self-sustainment”. Without a marketing plan you can’t create your design and schedule. If you decide to appease the federal government and declare yourself as “Opt-In”, then these studies become all the more important for your comparison between Opt-Out versus Opt-In. How do you expect your Governor to make a sound decision against the Opt-In scenario if he/she doesn’t even know what the network looks like; what it can do; and how much it can generate in the way of revenue and market penetration? Without those basic criteria your Governor can’t make a sound decision. Just so you know; it will take 6-12 months for you to put your revenue and marketing plan together – the law is only giving you 90 days to Opt-Out, plus another 120 to put your entire plan together if you decide to Opt-Out. Failing to do so will enable FirstNet to push the NTIA to deny your grant and your Opt-Out plan, to which you will relinquish all your rights to apply for the grant (if you decide to opt-out) while in return they come in and do their own plan, regardless of your needs.

Let’s concentrate on you doing what you need to do for your local First Responders and your own constituents. You need to start your analysis today! If you are entertaining the idea of “waiting to see what FirstNet comes up with” approach, then there is one thing you should note – the Law only talks about how FirstNet can and must perform its duties. The law does not address what the Opt-Out State has to do. For example: the law only addresses the “Opt-Out” State as requiring a two-step approval by the NTIA (not FirstNet) to insure interoperability and technical adherence. If the State meets these requirements, then its plan should be approved. Once the approval is granted the State can apply for its portion of the $7 Billion allocated for the Public Safety Broadband Network buildout (theoretically $127 Million [$7B/55]) – this section of the law only addresses “State Opt-Out” and says nothing about FirstNet. What the law does clearly illustrate is a lot of restrictions put upon “FirstNet”… not the State. In short, the rules that are laid out by, and for, FirstNet don’t apply to a State that decides to Opt-Out from FirstNet. The law only states that the State has to be “interoperable” and “meet technical standards”, thus any timelines are moot in that regard, i.e. 90 days to Opt-Out and 180 to RFP a solution. Those timelines are only addressing a FirstNet solution for a State that is willing to listen to FirstNet’s plan…. thus…. a State can Opt-Out at any time and the rules applying to FirstNet do not apply.  But, those States that want to wait for FirstNet, will have the 90 and 180-day restriction apply to them, thus risk their approval and grant money if they wish to Opt-Out after being presented FirstNet’s plan. For a State that Opts-Out today then it doesn’t apply.

What’s the first step: Step 1 is a Product Portfolio that will define your revenue forecast and market plan -- here you need someone who can think like a telecom/broadband entrepreneur (like me). The defined product of broadband access will be broken into service offerings that you can sell through your network. Those service offerings equate to charge-for-service which generates revenue. Broadband Product Portfolios can include 100’s, if not 1000’s, of services that can be rendered, i.e. VoLTE, Access, VPNs, VNOs, Internet Access, etc..  Each service is based on an hourly, monthly, quarterly, or annual service agreement that generates revenue. Based on the market analysis, which defines the users of the network, and aligns the phased build out of the network, you can convey your capital needs to construct and your operational needs to sustain. All of this material is then sold to the investment community.

Investors are interested in one thing -- their return on investment. Does the investment demonstrate a strong return; is the user base sustainable; are the services expandable; is there an exit strategy. The documentation you put together today will generate the demand for investors that want to invest into your network, without your plan you have nothing to sell and nothing to compare.

So let’s say the investors indicate they are excited and wish to move forward, what then? Now you need to engage your financial management firm to construct the framework for the board of investors and outline your governance structure of the new P3 (Public Private Partnership) entity – in short, your “NewCo”. From this point forward the DBOM (Design, Build, Operate and Maintain) solution will be conducted by NewCo. Note that the State doesn't have to do anything, plus being that the State isn't using tax dollars to pay for anything you also don't need to go to legislative session to have anything budgets....nothing to approve. The beauty of the P3! But I would encourage mustering the support behind the Governor's decision, always looks good when its a team effort.

In the end, all we are doing is creating a new broadband company for the State governed by a private board that is inclusive of the State through a shareholder agreement. This company will construct a hardened infrastructure based on a prioritized user base where as First Responders are considered Priority 1; Secondary Responders are Priority 2 and are made up of State and Federal entities; and Priority 3 traffic is allocated to commercial services through commercial entities. Why is this priority scheme and user base so important – outside of the obvious? The answer to this question is based on the P3 model being a balanced approach of needs utilizing all aspects of product introduction through wireline and wireless assets. A good case in point would be the failure of the Kentucky Wired P3.

As I stated in the past, you cannot deploy the P3 model without fully utilizing the balanced and complimentary product solutions of the wireline (fiber and backhaul) and wireless (LTE) broadband solutions. You also need to diversify the risk profile into multiple investing parties, to include the State. For Kentucky Wired, outside of the fact they tried to plagiarize my model, they only had two real investment parties and the success of their investment and implementation only considered revenue projections from the wireline portion of fiber optic network -- a technology that is already in abundance through the main corridors of the State -- thus it’s failure and the ability for AT&T to have so much influence in sabotaging the deal. Had the P3 for Kentucky Wired been setup to take advantage of both the wireline, and wireless capabilities, they could have capitalized on many more product offerings; thus created a more robust demand from a larger user base; and a cooperative framework that the commercial carriers (such as AT&T) could utilize to push their own product offerings at the same time increasing margins.

Unfortunately, the Macquarie deal with Kentucky Wired only addressed the fiber portion, thus its failure to allure all interested parties – including the carriers – was a huge failure. With a proper P3 (my model) AT&T, Verizon, Sprint, and all other commercial entities, would be clamoring to be a part of the deal – why? Because my P3 allows the State to create a robust, hardened, infrastructure, throughout all the rural and metro areas, that is suitable for a commercial carrier to host its services on without spending a dime in capital. By hosting their services on such a network relieves the commercial carriers of the burdened of maintaining costly infrastructure (something the carriers are trying to move away from); expands their customer base to be inclusive of rural areas (something they have struggled with); while at the same time giving them more coverage area which means more customers, thus more revenue with very little overhead (something they constantly fight for).

But what do I know I’m….

Just some guy and a blog….

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