Friday, October 20, 2017

FirstNet and AT&T get taken to the cleaners in Pennsylvania?

Sorry to say, but after watching the Technology and Communications Sub Committee meeting for Pennsylvania, I’m afraid the FirstNet “Opt-In” solution just got spanked. Declan Ganley, and the Rivada “Opt-Out” solution, just raised the bar so high for AT&T, that it may be a moot point at this stage. The same old game of a carrier half-baked solution is not going to work for Public Safety. How does FirstNet think it’s going to provide more than 90% geographic coverage within a State without having to go to the taxpayers? How would AT&T justify a bond offering to the State, plus pay for the entire solution out of their own pocket? It won't happen, why? Because AT&T's business model is the oil, and the State Public Safety requirements are the water.

AT&T says it’s going to spend $40 Billion to build out the network, but what they specifically avoided was stating that the $40 Billion was to upgrade AT&Ts network, not build out FirstNet. FirstNet is just riding the coattails of AT&T planned upgrade of their own commercial network, thus all FirstNet is hoping to do is to add an additional $6.5 Billion to AT&T’s already planned expenditures in the hopes that it can get a network to support Public Safety.

I would have to say that FirstNet, and the AT&T representatives, were taken to school on what a sound business plan is for Pennsylvania. I’m afraid the AT&T representative, Mr Bugel, was floundering in his testimony and may have done more harm than good. His demeanor was that of a large unrelenting carrier who is doing Public Safety a favor by allowing them to join in on their commercial network. Even after all the changes, such as the firing of Ms Kampoor, as the Head of the Public Safety effort, and the sandbagging of Mr Sambor, I’m afraid that Mr Bugel did not do well either. It’s hard for a carrier to divert its business model in public, especially when you have investors that are all keenly aware of what’s happening. There is a play for AT&T, but I’m afraid they haven’t found the talent that understands what that position is yet. The longer they flounder on the deck, the more damage done and the more open the door becomes for their competition. Verizon, if it’s their plan to get in the fray, needs to come to grips with what that solution is as well. The solution cannot come from the aspect of a carrier providing a service model to Public Safety. There is a solution though!

As for Mr Ganley, I would have to say I was thoroughly impressed. The model and the solution are coming together quite nicely. It took a while for that model to make itself known, and it took a while to massage the overall strategy, but the solution is becoming quite solid. There are a few holes that can be filled, but overall, the solution is a hundred times better than what AT&T is proposing. I'm even on-board with the "ruthless preemption" proposed by Rivada, especially after finding out that it was a Public Safety direct request that generated the requirement to build the Spectrum Arbitrage solution. 

Having been down this road for quite some time now, Mr Ganley can optimize and expand the service options for the entire deal even more. For example: the revenue forecast for First and Secondary Responders, as well as the tiered State and Federal organizational pool of customers, then the additional commercial entities. It can get quite overwhelming for someone that has never built a large-scale telecom company, but in this case, we aren’t just talking members of the First Responder community who present themselves as experts, Mr Ganley is an entrepreneur that comes from the networking space. Being able to see a clear picture in developing a solid business model, not just build a large-scale broadband company, but to fund it, operate it, and maintain it for the long haul is something that Mr Ganley is keenly aware of. AT&T in this case is viewing the opportunity from the standpoint of how they can just modify and enhance their own network -- a weakened stance. As I wrote about in the past, you can’t get there from here.

Mr Ganley touched on the applications layer in the presentation ever so slightly. Everyone needs to keep their eye on the ball in these solutions, that ball is the money. Maj Stackhouse was obviously on the side of the AT&T Opt-In position, which is depressing, but what do we expect? Maj Stackhouse is not a telecommunication, or broadband expert, in fact, all her testimony accomplished was to help illustrate the influence that AT&T, and FirstNet, has had in selling their own solution. Had Maj Stackhouse been more open to further discussions, she probably would have seen things in a different light, as I’m sure everyone else did. One point Maj Stackhouse tried to raise was that any revenue generated from an Opt-Out decision has to be reinvested in the network. In actuality, the law specifically says that FirstNet has to reinvest all its revenue. The law says nothing about what a State can do, in fact, the law specifically lays out the ability for a State to commission its own Public Private Partnership, thus affording the State the ability to use the revenue.

(1) IN GENERAL.—A State that chooses to build its own radio access network shall not provide commercial service to consumers or offer wholesale leasing capacity of the network within the State except directly through public-private partnerships for construction, maintenance, operation, and improvement of the network within the State.

Even if Maj Stackhouse' point were correct, then why is it okay for AT&T to use the revenue? 

Getting back to the applications though, Mr Ganley spoke about the delivery of applications across the ecosystem of the network. To better illustrate that point, the applications layer is where all the real money is. Just focusing on the subscription model of First, or even Secondary Responders, is not a sustainable business model for a newly created broadband company within the State, especially one that is funding the entire solution. The applications layer is where the real revenue will come from, multiples higher than what Mr Ganley expressed in his presentation. We are talking about multiple direct line service offerings, off-set service offerings, as well as such items as Managed Services. All of the service offerings will be tiered for multiple industries that will require, if not be mandated, to use the network infrastructure for national security reasons, such as Utilities, Transportation, Agriculture, DoD, etc... Now imagine each Utility, an entity having its own business purpose for using the network, outside of its Secondary Responder requirements, each Utility will require some maintenance activity for their own business purposes, control center support for interfacing applications, and possibly direct operational support of applications and broadband servicing to its own customers. Now multiply that by the number of Utilities and the number of entities within all interfacing vertical industry segments. What does this mean? Just to give you an idea, there are more than 17 electric coop providers in the State of Pennsylvania covering the entire State – the entire population – and all those power companies may be required to ride on the infrastructure put in through the Opt-Out solution. I didn't even mention the IOUs (Investor Owned Utilities). 

Rivada’s solution is only seeing the tip of the ice berg here. I know that Mr Ganley probably has an idea of what the potential is, but conveying that to an open market can flood the market with too much information, and excitement, thus shutting down your sole purpose of making progress in actually building something due to the unbelievable returns. Having outlined an extensive amount of product portfolio research for the State Opt-Out solution, there is a whole lot of potential service offerings that aren’t even being talked about yet, services that will help a State, and all of its constituents, in fostering economic growth and jobs creation -- services that ultimate generate a lot of revenue and a basis for the State help in its recovery. To give you an idea; a typical commercial carrier probably has 80-100 product offerings available to consumers and companies in the State, now multiply those service offerings by 4 by inventing new services to commission to a utility company, or better yet, foster a new partnership for the utility to provide its own broadband service statewide. I’m only talking about the utilities, what about DOT, DOJ, or DOI, etc…?

In the end, the presentations made in Pennsylvania pass a great deal of knowledge onto the stakeholders, the market and the industry in whole.  Expanding statewide broadband, when under the control of a State generated opt-out solution, is essentially an investment in the States infrastructure – not just a network.

But what do I know I’m….

Just some guy and a blog…..

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