O’Brien: PSST pursuing D Block consortium
Public safety’s commercial partner for a nationwide 700 MHz wireless broadband network likely will consist of several operators, with the two largest U.S. carriers probably not participating, the head of the Public Safety Spectrum Trust’s (PSST) lead advisor said yesterday.
During an interview with MRT, Cyren Call Chairman Morgan O’Brien said he believes it would be difficult for a single operator to bear all the expense of building and maintaining the shared wireless broadband network envisioned in the 700 MHz band. As a result, O’Brien said Cyren Call representatives would be talking with a number of carriers over the next several months before the FCC reauctions the D Block in the fourth quarter of this year.
“There will be a successful auction winner, and it is most likely going to be a consortium of some number of players, probably familiar players,” O’Brien predicted. “It is highly unlikely that either AT&T or Verizon will be part of it.
“That would be pretty much how I see it. That’s trying to get as good a crystal ball as possible, which is different from saying that I wouldn’t be very happy to see Verizon or AT&T be part of it—I would, but I don’t see it.”
O’Brien said he believes “the right kind of deal” with top U.S. carriers AT&T Mobility and Verizon Wireless would be “very attractive” to the PSST. But O’Brien said he does not believe either company is interested in a public-private partnership with the PSST.
“Each of those companies has dramatically improved their position at 700 MHz and, therefore, has less need at 700 MHz,” he said. “Just as important, each of them had an opportunity to come into the [D Block] auction and didn’t.”
Indeed, a Verizon Wireless representative testifying before a House subcommittee this week questioned the viability of a business model that would include public safety’s coverage and network-reliability expectations.
“The economic imbalance is such that, even if we tinker around the edges [of the current D Block proposal], I don’t think you will have a successful bidder,” said Steve Zipperstein, the carrier’s vice president of legal and external affairs.
O’Brien said the PSST will talk with smaller wireless carriers in an effort to establish a consortium that would allow participants to share the financial burden of a nationwide public-safety network in a manner that would make economic sense to each.
“There’s such a tremendous advantage for anybody who’s going to be building a network to be able to have access to an existing network, that we’d like to try to find the right kind of arrangement with one of the existing networks out there, then build around that some other players to offset some of the risks and put together the right kind of combination of interests and capital that could really take on this big job,” O’Brien said.
A significant problem for the PSST is funding. Other than holding a nationwide license for 10 MHz of 700 MHz spectrum earmarked for public-safety broadband use, the organization has no assets. At some point, the PSST expects to generate money from the spectrum—via a spectrum lease with the D Block winner and/or a portion of public safety subscriber fees—but the organization has no way to generate revenue until a network-sharing agreement is reached with the D Block winner.
Meanwhile, the PSST has several duties that inherently require money, including oversight of 700 MHz public safety narrowband systems, preparation for a D Block reauction and negotiations with an eventual D Block winner.
O’Brien described funding the PSST during this interim period as “the No. 1 challenge for the PSST and, therefore, it’s my No. 1 challenge.”
During the House subcommittee hearing this week, O’Brien was grilled by members of Congress regarding the financial arrangement between Cyren Call and the PSST. During the hearing, O’Brien said Cyren Call is being funded by venture capitalists. Cyren Call has loaned the PSST $4 million to cover its cost of operations, O’Brien said during yesterday’s interview.
Rep. John Dingell (D-Mich.), chairman of the House Energy and Commerce Committee, questioned O’Brien at length during the latter portion of the hearing about the financial arrangement between Cyren Call and the PSST. Dingell noted that the FCC called for the PSST to be a non-profit organization and expressed concern that a for-profit entity like Cyren Call was involved in the PSST’s operations.
PSST Chairman Harlin McEwen confirmed Cyren Call has loaned money to the PSST. Should the PSST be unable to reach an agreement with the D Block winner on a spectrum-lease arrangement, “we basically know there is no way to pay this back,” McEwen said.
With this in mind, O’Brien said he would prefer that the PSST have its own funding source and not require financial support from Cyren Call. However, any federal-government funding of the PSST would have to be legislated by Congress.
“I’m urging each and every one of them to quickly sever the financial ties between Cyren [Call] and the PSST by doing what they should have done in the first place, which is giving funding to the PSST,” O’Brien said.
“I just didn’t think it was going to happen before, and it didn’t, so we made an arrangement. Otherwise, exactly what kind of position would the PSST have been in if somebody had bid in this last auction and they were supposed to sit down and start negotiating [a network sharing agreement with a D Block winner]?”