Tuesday, September 27, 2016

FirstNet and the 30-second elevator pitch? Q&A from Mr Jackson that seems to be one sided?

Have you read Donny Jackson’s latest article? It makes for an interesting read, but I wanted to address the same questions he posed with alternative answers to what he termed “double talk”. This is a response made in humor, I think, but here it goes.

How much will the FirstNet system cost? The government estimates up to $47 billion, but Congress only allocated $7 billion. FirstNet will pay the contractor $6.5 billion of that, according to the request for proposals (RFP).

Truth be told is that the $47 Billion only covers the 42% of metro and some suburban areas, it does not cover the 58% of rural or wilderness areas. Why? Because with a carrier relationship those are the areas that the carriers are already deployed in. Under a carrier business model, they will not deploy to the rural or wilderness areas because there is no revenue in it. More realistic estimates for FirstNet, including the rural and wilderness areas, have the network capex at over $100 Billion, but who’s counting right? This doesn’t include the $10 Billion a year of operational costs to operate and maintain the network annually.

So, FirstNet doesn’t have enough money to do this, and it’s essentially going to be broke before it gets started? No, the winning contractor is going to build the estimated $47 billion network, and it will pay FirstNet at least $5.625 billion over the next 25 years to sustain FirstNet during that period.

Maybe I’m not getting this, but why would a carrier, who is already deployed in the same footprint of the $47 Billion dollar FirstNet network, want to pay for another network over the same area and then pay the government another $5.625 Billion annually? Am I missing something here? The spectrum isn’t worth that much. Who is going to pay for the real reason FirstNet is being built – that is to get coverage in the rural and wilderness areas? I can guarantee you it won’t be the carrier, there isn’t enough revenue in those areas for them to be concerned. Can someone say “taxpayer”?

That’s not how RFPs work—the government is supposed to just pay a contractor, right? Not in this case. This is a public-private partnership, and FirstNet is trying an unprecedented approach.

Unprecedented is an understatement. First off, the Government is paying for this – what’s the $6.5 Billion? Who will pay for the rural and wilderness coverage areas? Taxpayer? In actuality the only thing Public and Private about the FirstNet approach, given that they follow Federal Acquisiton Requirements (FAR), is the fact the Public will end up giving away its loot to the private side for pennies on the dollar and still not get its objectives met. FirstNet’s approach to a Public Private Partnership, to self-fund and self-sustain a nationwide network, is too much for them to handle and does include the collage of State and user requirements.  I think the term may be called boondoggle?

Why would a contractor be willing to build a network and run it for 25 years, when it won’t even get $1 billion in net cash? Because the contractor can make a lot of money by gaining access to FirstNet’s valuable spectrum, which it can use to sell commercial services.

I already addressed this the second question. In short, they won’t. But, they will let the whole process work its way through the minutia, where as they can position themselves to get the spectrum for free, thus adding to their own stash of spectrum holdings while at the same time looking like the hero. I mean, if I were a carrier, that’s what I would do. Especially if I’m a carrier who is already moving towards an all software based services model on streaming. (topic below)

I thought this was a public-safety network, not a commercial network? It is. Public safety will get prioritized access to the network, but the contractor can offer commercial services on a secondary basis.

I have no idea what is meant here. I’ve never seen a “contractor” sell commercial wireless or wireline services on anything in my entire 30-year telecom career. But maybe I’m missing something here? I still don’t know who will be operating the FirstNet nationwide network and I’ve been studying this market since its inception. I think the word may be “awardee”, but still, who will that be -- a carrier, a vendor, a federal agency, or a hotdog vendor?

You mentioned spectrum earlier. What is that? (Questioner’s eyes glaze over during an explanation of Wireless 101)

Answer: Spectrum is the credit union I used to belong too. If you don’t know what spectrum is, then you shouldn’t be in this market.

As I wrote about in the past, for those that think players like AT&T are the answer to designing, deploying and maintaining the Public Safety Broadband Network – think again. In a recent article in the Dallas Business Journal entitled “Report: AT&T has set a timeline to phase out satellites and set-top boxes” there is one poignant aspect that FirstNet, or any State wishing to partner with such players, should consider when negotiating with such a partner.

The key words to consider here is “move away from legacy hardware”. Given that AT&T has already sold off its last remaining tower assets to Crown Castle, and a host of managed services to third parties, why would anyone think the carriers would be trying to build another network, especially one that runs a really high risk of failure and has a very limited amount of customers? You see the carriers understand that the market they’ve been playing in for the past 50 years, is not the market of the future. If the carriers can shed as much overhead related to owning physical assets and move to a very lucrative model of services, then you must understand that the carriers are shifting into a new market that is dominated by the likes of Google, Netflix, Microsoft and others. In short, the carriers are moving out of a $25 Billion declining industry, and into a $100-$500 Billion market of streaming, content and virtual services market. If I can shed my physical assets to someone, like a Public Safety initiative, why wouldn’t I? It will cut my overheads as I move into a new market while at the same time allowing me to capture some needed revenue for the sale of assets. Let someone else work with the spectrum and the towers…all I want is to profit off a highly lucrative services model.

I believe FirstNet needs to do more than work on 30-second elevator pitches? Maybe they should really be looking at their long-term strategy?

But whom am I other than……

Just some guy and a blog…..

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