The war between the Opt-Outs and the Opt-Ins of the Middle Class Tax Relief and Jobs Creation Act of 2012 was set on February 28th 2012.
As foretold back in 2013, the political battle between the Opt-Out and the Opt-In for FirstNet has begun. We are hearing a lot of talk, what I view as worry, from many supporters of the FirstNet centralized federal solution versus the onslaught of States that choosing to do their own thing. This is what happens when you politicize the build-out of communications. It was bound to happen one way of another. The premise of what is happening today -- you can’t have a lawyer design and build you a broadband network. The expectations of the FirstNet deal with AT&T has started to unfold, thus all the rhetoric surrounding all the positives about the deal and all the negatives of the State that chooses to Opt-Out, when the opposite is actually the case.
I have been designing, building and utilizing telecommunication and enterprise infrastructures my entire adult life and, as an expert, I can safely attest that in no way is the FirstNet solution with AT&T going to end in a good way. Many people ask, "why isn’t Verizon, or any other carrier, interested in FirstNet?" Outside of the obvious and fact based investigation of collusion from the start, the other carriers saw this as a political battle they didn’t want to have anything to do with. I mean, ask yourself this, why would players like Raytheon, Northrop Grumman, Lockheed, Verizon, T-Mobile, Sprint and other large conglomerates not take part in this bidding? That alone should tell you something about this centralized federal monstrosity. If it were just asking to build a physical network, then things would be different. But, instead what we have is a FirstNet business model that was shoved into an RFP and then pleaded to AT&T to bid. All the other bidders, Rivada included, were just the justification for the bidding process. That’s what the Federal Acquisition Regulations (FAR) rules demand. The fact is, FirstNet had the opportunity to really investigate and push forward a real solution that the States could have used, but instead they chose to dig their heels into the carrier solution from the start.
“AT&T expects to deploy the Band 14 FirstNet public-safety LTE network “much quicker” than the five-year schedule included in the request for proposals (RFP), and first-responder subscribers will have “ruthless preemption” access rights on the system, AT&T CEO Randall Stephenson said today.” (JP Morgan Conference)
If I were a shareholder of AT&T I would be worried about this statement. To me it seems as though Mr. Stevenson is going to put a lot of money into building out a network of which he has no control over who will actually use it, let alone he is now going to give “ruthless preemption” over all the commercial service revenue investors bought into. So what happens to the commercial services of, let’s say Shell Oil and its wellheads in Texas if Public Safety decides its mission is more important than readouts from the pressurized pipelines containing liquefied gas from shale deposits? Or what about the large commercial utility providers that utilize AT&Ts infrastructure to govern substations controllers throughout an entire power distribution network flowing through a major metropolitan area like Dallas? How does “ruthless preemption” truly insure Public Safety in those cases?
The fact is, AT&T doesn’t know what the impact will be on its own network, let alone justifying the pursuit of a $7 Billion “much quicker” buildout of a Public Safety Network without any real projections of what the customer base will be or what revenues it can expect. Nobody would know. Why? Because you can’t design a network like this from the top-down, especially not under the auspicious of a federally run program that believes it can design, build, operate and maintain one of the most complex broadband solutions on the planet. AT&T was not built from the top-down, it was built from the bottom-up. If there is anything that FirstNet should learn from its relationship with AT&T, is that you physically can’t build a network from the top-down. Regardless, lets dig a little into the law to set the stage for those who are interested in the investments in this industry, specifically what FirstNet’s impacts will be on the market.
The law basically says that a State doesn’t have to rely upon a federal organization (FirstNet and AT&T) to come into their State to build their own Public Safety Broadband Network -- using spectrum that has been allocated to Public Safety. The law also allocated $7 Billion to the creation of the entire program for Public Safety. Any State that Opts-Out of the FirstNet solution is allowed to apply for its portion of the $7 Billion.
In the Opt-In scenario, FirstNet signed a contract with AT&T to build its solution nationwide. AT&T has promised it would allow Public Safety to use its own network, that’s in existence today, to run Public Safety communications until it can get the Band-14 network up and running. Or maybe AT&T has said it was going to install the Band-14 network from day one while it upgrades its own network to 5G? The actual contract is muddied for the perspective reader -- and it may be intentional. In the end, AT&T gets to use the Band-14 spectrum for their own use, while giving priority access to First Responders. FirstNet gives the $6.5 Billion to AT&T to complete its “supposed” network, while at the same time gets $85 Million a year to fund its own operations for the next 25 years. AT&T will use the $6.5 Billion to help upgrade its network for commercial services and 5G rollouts. The State will be offered another cell-phone service and provided a bill to its taxpayers to help build out AT&Ts network in their own State and pay for its usage of the nework. What could go wrong with that? No mention of competitive markets. No mention of local First Responder needs and controls. No mention of how much the State taxpayer will have to fund. No mention of what the revenue will be. No mention of where that revenue will go. No mention of how the network will actually stay up during a disaster. Who actually benefits from this?
The Opt-Out solution is the only solution that a State, its Public Safety, its constituents, and its overall economically driven broadband solution can benefit from the use of its own spectrum; its own allocation of the $7 Billion; Its own commitment to physical First Responder priority access; its own substantiated economic boom; and reap the benefits of shared revenue to sustain the Public Safety mission for the foreseeable future. The State would create its own Public Private Partnership to bring in its own Private Equity partner to fund its own statewide broadband infrastructure that prioritizes Public Safety overall others – physically and virtually. The State gets its own share of the revenue from the P3. The State gets local control. The State gets full preemption physically and virtually throughout its entire statewide footprint. The State generates an economic boom through the added infrastructure. The State gets to put people to work in the newly created industry. The State doesn’t face any taxation of its citizens. Is there really a question as to why you wouldn’t Opt-Out?
If you take a step back from painting pants on the ants in the law, you will see that its broken up into three sections.
· - The first section of the law, Subtitle A, pertains to the allocation of the spectrum, the FCC oversight board, the creation of the First Responder 15-member board under the NTIA, and the creation of an organization of which is now known as FirstNet (Program Management Org).
· - The second section, Subtitle B, has to do with what “FirstNet” the organization can do in respects of acting as an agent for those States that choose to Opt-in to the FirstNet/AT&T solution.
· - The third section, Subtitle C, outlines what a State can do if it decides to Opt-Out of the FirstNet/AT&T solution.
What does this have to do with what Mr. Stevenson said to all its shareholders? Well, it could be an overall lack of knowledge of the subject. Or, it’s a purposefully perspective of ignorance as to confuse those that are interested in the overall investment and how it will impact AT&T’s bottom-line. The fact is, Mr. Stevenson is making a promise to commit a large amount of cash to fund its build-out of FirstNet without fully understanding the market it is trying to capture, nor understand the options a State has in regards to their solution. Then again, it could be an orchestrated ploy for its shareholders to help offset its own capital expenditures in building out its own 5G infrastructure, while at the same time acquiring an additional 20Mhz of spectrum for free, all on the backs of Public Safety through unsubstantiated claims of technological advantage and coverage overstatements. The fact remains, the FirstNet solution to date, is nothing more than commissioning a new “service” to an already existing class of “public safety users” on an already existing network, while at the same time giving AT&T $6.5 Billion on the promise that the network and the overall solution will work. Don’t know about you, but I don’t think I would invest in such a solution myself. But what do I know I’m….
Just some guy and a blog…..