Tuesday, September 12, 2017

UPDATE!!! CEO AT&T jumps in to try and save the deal with FirstNet?

As predicted Ms Kampoor is out! This was on the wall.


So now AT&T has called out the Big Guns to address “Public Safety Grade” issue for FirstNet. Holes have started to form in the plan laid-out by FirstNet, ands its carrier relationship, and the context of how it will be delivered, is starting to fray at the edges. As I wrote about almost three years ago now, the concept of a National Carrier acting as a Design, Build, Operate and Maintain (DBOM) solution under the false innuendo of a Public Private Partnership is a Wolf in Sheep’s clothing.

Following the high-rate of cell tower failure during Irma and Harvey, AT&T is in quite a bind with FirstNet. FirstNet, not fully understanding what it really wants, forced a commercial carrier business model into a role of fulfilling a Public Safety mission that they are inexperienced and ill-equipped to handle. After the debacle assertions made by Chris Sambar, SVP of AT&T that a definition of “public-safety-grade” is ill-defined and non-existent, notwithstanding a published NPSTC document on the matter that is expected to be delivered as a standard in the spring. In backtracking those comments, Randall Stephenson, CEO for AT&T, had to step in to try and is now trying to save the deal. When the CEO gets called onto the carpet, you know things aren’t going so well.

The following is an exert from Randall Stephenson, CEO of AT&T, just the other day.

AT&T plans to employ hardening approaches such as “bunkering” and “redundant perpetual backup power” within the FirstNet nationwide public-safety broadband network (NPSBN) to prevent the type of cell-site outages being experienced in Florida as a result of Hurricane Irma, according to AT&T CEO Randall Stephenson.

Such statements from Mr. Stephenson are a good start, and totally contradictory to his SVP, but they still do not address the main issue that everyone in FirstNet fails to acknowledge – who is going to pay for that “bunkering and redundant perpetual power”? I can easily see Mr. Stephenson addressing some of his key commercial sites to insure a constant revenue stream, but the entire issue that FirstNet is supposed to address also includes those hardened sites being administered in the rural areas. Who will have to pay for that coverage?

FirstNet needs to come out and say that the promises made by AT&T, or any carrier, to fully pay for the build out of the Public Safety Broadband Network, as defined as Public Safety Grade, is in fact a farce. Those States that have chosen to Opt-in to the FirstNet/AT&T model have made a huge mistake for themselves and will soon find themselves in the middle of a failed partnership. The delays associated with trying to save the FirstNet/AT&T model will be great, and so will the cost, not only in regard to financing the build, but also for Public Safety itself within those States. Those States that Opt-Out and choose to formulate their own Public Private Partnerships to construct their own networks will jumpstart a lagging telecom market focused on their State based geographic needs. Any State that gets entangled within the mess that is yet to come of FirstNet, Opt-Inners, will be left out to pasture until those resources and funds can be concentrated on their own plans. In short, those Opt-in States will have to wait in line and will not get the focus they truly need to be successful until those market resources and available funds can be brought to bear on their own needs. There are only so many resources left in a telecom industry that has been brow-beaten for the last 15 years.

But let’s look a little bit more at what the cost associated with Mr. Stephenson’s comments.

“Think of bunkering in Florida … and think of redundant perpetual backup power in a place like Florida. Today, because of Irma, 25% of our cell sites are down. Virtually all of that is because of a lack of power. We can't get people in to fuel generators, because the roads are not open. So, think about a hardened network, where you don't have this kind of situation occur, even in the most significant disasters, like we are seeing with Irma.”

In the past, I have addressed the cost associated with hardening existing cell towers. The primary cost associated with hardening any cell-tower is the power to the site. On top of that, the remote location for most of these towers, especially in the rural areas, means the cost of getting power to the site goes up exponentially, why? Because now the electric utility companies have to trench power to the site, especially if you are now adding the cost of “perpetual power” to the site. “Perpetual power” means that the power will be administered directly to the grid, or powered by its own generating source of electrification, i.e. solar farms, thermal power generation, or even coal burning. For a commercial carrier, I can state the term “perpetual power” sounds really nice, but no way will my shareholders go for it. Somebody has to pay for it though. Any guesses? Just remember the hollow promises of “an Opt-in State doesn’t have to pay for anything”.

A typical greenfield-commercial-tower costs roughly $100-$300K to build, plus perpetual payments to electric companies, can run in the neighborhood of $1000-$50,000 a month in charges. There can always be trade-offs on power usage. Typically, the site is installed on the electric grid for primary power with direct battery packs installed at the base. As backup, the site also has a diesel generator with at least 8-24 hours of fuel on hand, in a big container, to run the site for at least 80% of the time allocated with the remaining 20% being used for shutdown procedures. Along with that comes other aspects of hardening and security, i.e. hardened tower stands, concrete pedestals, video access controls, and of course fencing. What Mr. Stephenson is addressing is a whole other ballpark of costs.

With a “bunkered” site we are now talking about earth moving equipment to insure the immediate geography, that the cell site sits on, is above the flood zones and then some. On top of that you have sealed and vacuum equipped hut locations with their own auxiliary power separate from the tower itself – yes with its own batteries, diesel generator and grid electric connectivity as well. This will be particularly important when requirements of protecting the tower and the path of its cabling and control systems have to be protected as well. Access and security features also take a Fort Knox approach to the hardened facility housing the bunkered site. This is just a little bit of what has to happen. Now, remember that $100-$300K per commercial site, well with a “bunkered” solution you are more than 5-10 times that in capital costs. We still haven’t addressed the “perpetual power” part yet.

“Perpetual power”, especially in a hardened and redundant site, has multiple avenues for power connectivity to the grid, plus added oversized battery and diesel storage requirements. You also need to make note that “bunkering” a site will also have to include, yet isolate, the diesel storage and battery units. You can’t have your site all secure and bunkered-up and not consider protecting the source of your backup needs as well. Can’t burn a diesel generator in a hardened sealed facility, nor can you have the diesel storage too close to your tower – explosions or fires have a tendency to take out towers as well. I think I am making my point though.

What Mr. Stephenson is stating, and per the conversations that were sold about the “State doesn’t have to pay for anything speeches”, would mean that AT&T is signing up to a drastic increase in capital expenditures for the next 10-years or more. Remember those “asinine” quotes I made about the PSBN costing more than $100 Billion to build, well now those statements don’t seem so far-fetched, do they? Does anyone believe that any commercial carrier would be able to sustain such a demand on its shareholders? Ultimately, that means that commercial services will have to bear the cost of all the required capital costs and long-term operations just to meet the demands of a small group of customers – that being Public Safety compared to commercial services. Enough said.

Mr. Stephenson also made another statement that needs to be addressed. Mr. Stephenson stated the following:

“Companies that come in and want to participate [in FirstNet], they are obviously welcome and free to do that, but they are going to have to be interoperable at all levels with AT&T,” Stephenson said. “And their services are going to have to operate within this spectrum band that the government granted to us—we call it Band 14. So, there is a lot of complexity in terms of how somebody else would come in and compete here.”

“Interoperable at all levels with AT&T”? That’s an interesting statement. Why? Because the standards, which haven’t even been made yet, are set by the Public Safety Technical Advisory Council, a separate entity from FirstNet. If anything, Mr. Stephenson needs to be aware that it won’t be “AT&T” that other carriers needs to administer their standards to, but rather FirstNet and the Technical Advisory Council. Then again, this demonstrates that from the viewpoint of AT&T, they view themselves as the real drivers of the Public Safety Broadband Network….and FirstNet is letting it happen. This brings up the point I made, suggested, sometime ago, FirstNet needs to establish its own consortium within its Public Private Partnership to run the network in its entirety. If FirstNet, and its newly created agency or company, decides to let AT&T operate its newly created entity, then so be it, but that operator needs to understand that the P3 entity, or consortium, is the real organization in full control and it is this organization that all players have to align with – not AT&T. This reminds me of why the New Hampshire Rivada deal with US Cellular is so important.

The Rivada deal, with US Cellular as its operator, creates a private entity in partnership with the State, to fund its statewide build-out. This entity is a consortium of private investors who consolidate their power under the newly created entity. The newly created entity will then have Black and Veatch as its primary contractor to physical manage the build-out (if things haven’t fallen out of favor with them) and US Cellular as the primary operations entity of the newly formed entity. Only in this case, of which I don’t agree with, is the fact that the private P3 entity that is to be created is going to push its “spectrum arbitrage” model rather than the traditional service provider model. The State needs to insure itself if the “spectrum arbitrage” solution doesn’t work out, which empirical evidence demonstrates that it hasn’t, especially under such a large implementation, that they have a recourse they can make. But, refocusing an organization under an original model shouldn’t be an issue – if they have the right people who understand how to do it. To each his own. The State also needs to be aware that the law strictly states that the use of “commercially available and proven technologies can only be used” – spectrum arbitrage does not meet that requirement. Just sayin...

But, what the hell do I know I’m….

Just some guy and a blog…..

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