FirstNet seeks the right mix
By most standards, $7 billion is a lot of money. But in the world of wireless communications, $7 billion—the amount of federal funding that Congress earmarked for FirstNet, which is charged with building a nationwide broadband network for first responders—is not nearly enough to create a standalone LTE network that blankets the country, particularly with the hardening, redundancy and security that public safety requires, according to most industry experts.
To put the $7 billion funding figure in perspective, consider the annual budget for AT&T, which operates one of the largest wireless systems and spends about $20 billion per year just to upgrade it.
FirstNet’s monumental challenge is to create a business model that (1) makes the first-responder broadband network a reality; (2) sustains network operations and upgrades; (3) provides back-office, technical and billing support; and (4) is priced at a level that is attractive to public safety and other first responders, because no agency or government entity is required to be a FirstNet customer.
Exactly how much money is needed is uncertain, but the consensus is that Congress has not earmarked enough—estimates have ranged from $12 billion to $70 billion, depending on the source and assumptions included in the calculation.
Aside from the $7 billion promised by Congress, FirstNet’s other key asset is the license to 20 MHz of prime 700 MHz broadband spectrum—the 10 MHz D Block spectrum that Congress reallocated to public safety last year, and the 10 MHz previously licensed to the Public Safety Spectrum Trust (PSST). Virtually everyone agrees that leveraging these valuable airwaves wisely will be the key to FirstNet reaching its lofty goals, but there is considerable debate about the best strategy.
“The business models are challenging—they really are,” said Chuck Robinson, director of shared services for the city of Charlotte, N.C., which plans to use stimulus grants to fund a public-safety LTE network that eventually will be integrated into the FirstNet system. “The more you use commercial towers, the more leasing fees you have that go into it. If you’re using commercial fiber for backhaul, you start running into those costs. Depending on the nature of your deployment and those types of things, the operational costs can get expensive.”
“It’s very complicated. I am so glad right now that I am not [FirstNet General Manager] Bill D’Agostino.”
Indeed, there is no precedent for FirstNet to follow.
“Everywhere I go, the first thing I ask is, ‘If anybody has ever built a nationwide public-safety broadband network, please raise your hand—we’d like to talk to you, because we want to know what’s coming next,’” said Jeff Johnson, the FirstNet board member who leads FirstNet’s public-safety-outreach program. “Of course, no one has raised their hand, because this has never been done before.”
Questions of scale and competition
FirstNet’s nationwide mandate means the scale of its potential public-safety users—about 3 million police, fire and EMS personnel—could dwarf that of any state, and FirstNet Chairman Sam Ginn repeatedly has emphasized the importance of leveraging that scale to negotiate deals that will make the broadband service more affordable.
“[A state] will probably pay 5 [times] what we will pay for an order of 3 million units of whatever item,” Ginn said during a presentation to the National Governors Association. “We will have failed, if we don’t build this network cheaper than you can build it.”
And FirstNet hopes to increase its scale beyond traditional public safety, Johnson said.
“The law actually says, ‘public-safety network,’” Johnson said. “But this board is choosing to interpret that pretty broadly. … Whether [the network] is broad enough to include utilities, transportation and public works, I think this board is seeing it as the broader public-safety community and not just the people who spray and shoot and get shot at.”
Expanding the primary user group to include utility, transportation and government personnel could more than double FirstNet’s potential scale, to as much as 10 million users, according to some estimates. Besides increasing the user base, these groups potentially could bring valuable assets such as backhaul, site locations and reliable funding streams to the project.
Whether 10 million users is realistic for FirstNet is questionable, if only because the utility, transportation and government sectors include some of the most-valued enterprise customers for commercial carriers—the kind that carriers will not allow to be wrestled away easily by FirstNet or anyone else.
Indeed, competition already is evident in Charlotte, N.C., even though the city has yet to embark on the construction of its planned public-safety network designed to serve about 10,000 users, according to Robinson.
When planning its LTE network, city officials placed a high value on reliability—the network is designed to survive the roughest of conditions, with priority and preemption promised to public safety—and determined that to be worth a premium of $5-10 per month per user over the $45-50-per-month rate for unlimited data charged by commercial carriers at the time, Robinson said. But carriers have dropped their rates twice in the last 14 months, offering a “special government rate” of $34.99 per month per device for unlimited broadband data, he said.
Charlotte officials now are trying to find a way to adjust their business model so that the city would remain price-competitive with carriers, but it is proving to be difficult, Robinson said.
“You know, competition is a wonderful thing, except when you’re on the wrong end of it,” he said. “It’s a very simple strategy—when you feel threatened in your marketplace, then you price everybody else out.
“That’s the nature of business, so it’s hard to find fault with anyone, to be honest. … Even the competition between those carriers is stiff. It’s just a really tough market to get into, when you know you’re going to have to come out charg
Tipping the scale
Legally, FirstNet is the licensee for the 20 MHz of contiguous 700 MHz broadband spectrum dedicated to public safety, and public safety will get priority access to these airwaves during times of emergency at a given cell sector. That’s the law, and only an act of Congress can change it.
However, on a day-to-day basis, public safety is not expected to need all of the broadband capacity available on the FirstNet LTE system. Because LTE is a commercial technology that features multiple layers of priority, the FirstNet system could be shared with non-first-responder users to generate revenue that could be used to fund operations and upgrades to the broadband network.
But there are significant questions about how valuable that unused network capacity is. After all, with public safety having priority and preemptive access to the FirstNet system, other users only would be allowed to access it on a secondary basis and theoretically could be kicked off the network. Given this circumstance, many industry sources believe commercial operators will not want to invest much money to access FirstNet capacity on a secondary basis.
Rivada Networks CEO Declan Ganley disagrees, as his company is proposing a business model that has been one of the hottest topics in the public-safety-communications arena over the past several months. Rivada Networks has built a dynamic-spectrum-arbitrage (DSA) engine that would let network operators bid for access to unused broadband capacity on the FirstNet system on a nearly real-time basis, similar to the approach used by utilities in the energy markets.
Under this model, Rivada would build and operate the LTE network, but ownership of the system would remain with FirstNet, according to Chris Moore, a senior vice president with the company. In return, Rivada would get the right to auction access to the FirstNet system’s unused broadband capacity, which would be particularly valuable in certain areas of the country, where commercial carriers may have little or no access to 700 MHz spectrum.
Based on initial discussions with investors and network operators, Rivada is confident that it can build the LTE network at no cost to FirstNet and conduct a very healthy business auctioning the unused broadband capacity, Ganley said. Meanwhile, even if the worst-case scenario becomes reality—the DSA provider goes bankrupt—public safety still would have an operational network, Moore said.
“You have, in effect, a public utility,” Moore said. “The collateral for the debt is not the spectrum—that is absolutely not the case and never could be. It cannot be the infrastructure. … It’s the right to arbitrage the spectrum, within the rules of public safety and FirstNet. And that, in and of itself, is worth much more than what the debt is ultimately going to be.
“The good news is that the network gets built, and it’s functioning,” he said. “And, as in the case of any utility that would go bankrupt, it doesn’t shut down. PG&E here in California, when it went bankrupt, it didn’t shut down. They reorganized and were able to refinance it. You have people who are willing and understand the value of the secondary use of spectrum, and they’re willing to bet on us to make sure that it works.
“It removes the risk for FirstNet—the spectrum’s not at risk, and the infrastructure’s not at risk. That’s the key: get it built and not have the risk on FirstNet.”
Reaction to the Rivada proposal has been mixed within the public-safety community.
Proponents have been extremely enthusiastic, expressing the belief that the Rivada model is the only approach that makes the FirstNet system economically viable and keeps the cost low enough for even volunteer fire departments to subscribe. Opponents describe it as a “Santa Claus” proposal that cannot generate the revenue that Rivada officials believe is possible, because of the problems inherent to secondary access. In addition, some public-safety officials fear that Rivada’s investors may sour on the proposal after learning all of public safety’s network requirements, much like Frontline Wireless’s investors did prior to the FCC’s original 700 MHz auction.
Because the Rivada model has never been executed, it and any other new wrinkles need to be vetted thoroughly before being incorporated into a system being used by public safety, according to consultant Robert LeGrande, who oversaw the buildout of the first public-safety 3G network as the CTO for Washington, D.C.
“We have to make sure that we can operationalize all of these innovations,” LeGrande said. “I’m thrilled that Rivada has built this opportunity for us to leverage, but I’m really advising a very cautious and a very careful approach to introducing it into the public-safety community.”
What about commercial carriers?
A nationwide broadband network for first responders has not been built before, so no potential FirstNet partner can claim to have experience with such a deployment, including system integrators that are accustomed to delivering large federal projects. However, commercial carriers could bring some very key attributes to the table that other partners cannot, such as experience in deploying a nationwide LTE network, back-office support systems, and access to backhaul assets throughout the country.
Carriers also bring the advantages of scale to the table—lots of scale. Even the smallest nationwide wireless carrier in the U.S. has three times more subscribers than the 10 million users that FirstNet hopes to reach. Meanwhile, the largest carriers—Verizon and AT&T—have more than 10 times that figure.
At the very least, most industry observers believe FirstNet will want access to carrier networks as roaming partners, particularly during FirstNet’s initial deployment phases. But having a carrier as FirstNet’s primary partner and leveraging the carrier’s considerable investments on some expensive necessities—for example, the core network and customer call centers—could save FirstNet significant amounts of money when compared to making the investment on its own.
Of course, one of the primary reasons that public-safety officials lobbied so hard for the 700 MHz D Block spectrum and the funding for a dedicated first-responder broadband network is that commercial networks sometimes are not available during large-scale emergencies. Given the well-chronicled outages and capacity issues that afflicted commercial-carrier wireless networks during Superstorm Sandy and the 2012 derecho, many question why FirstNet would consider partnering with carriers.
This sentiment is understandable on the surface, but carriers like Verizon and AT&T also supply network assets to the U.S. military and other federal-government entities, so they have experience providing secure communications that have the highest levels of reliability.
In addition, a carrier partnership likely would enable greater speed to market than other options, because Verizon and AT&T already have nationwide 700 MHz LTE networks. And speed to market is critical, because Congress is expected to monitor the progress of the network deployment very closely, according to Rivada’s Moore, the former San Jose police chief who helped lead public safety’s lobbying effort on Capitol Hill that led to the creation of FirstNet.
“My belief is that, if we don’t get started on this now, we will not be successful,” Moore said. “And Congress will come back to us and say, ‘Look, you couldn’t do it. We didn’t think you could,’ and take back the spectrum. We can’t allow that to happen.”
With so many disparate factors and moving parts in play, it is difficult to speculate what business model ultimately will be adopted by the FirstNet board. Many believe it is likely that the FirstNet board’s final recipe will incorporate aspects of multiple partnering ideas mentioned by sources interviewed for this story. The one real consensus is that FirstNet will not be successful if it tries to build and maintain the network on its own, and restricts its use solely to police, fire and EMS personnel.
“Public safety is going to have to share,” mobile wireless consultant Andrew Seybold said.