FirstNet RFP calls for 25-year deal, contractor to pay FirstNet at least $5.625 billion

[Editor's note: The minimum total payment amount to be paid by the contractor under the FirstNet RFP is $5.625 billion, not the $6.75 or $5.75 billion cited in previous versions of the story. IWCE's Urgent Communications regrets the errors.) 

FirstNet’s selected contractor will gain access to 20 MHz of spectrum and receive as much as $6.5 billion to support the buildout and operation of the proposed public-safety broadband network, but the contractor must pay FirstNet a minimum of $5.625 billion over the life of the 25-year deal, according to the request for proposal (RFP) released today.

Unlike most government-related procurements, the FirstNet RFP does not call for FirstNet—an independent authority within the National Telecommunications and Information Administration (NTIA), a government agency—to pay a contractor to provide a product or service.

FirstNet will provide as much as $6.5 billion to the contractor, but industry experts say that figure is well below the tens of billions of dollars that a contractor will have to invest in the deployment and operation of the proposed nationwide broadband network. However, gaining access to the valuable 20 MHz of contiguous 700 MHz spectrum—with the ability to gain new public-safety customers on a priority basis and secondary commercial users—is expected to be the primary enticement to potential bidders.

Under the RFP business model, FirstNet would provide the contractor with access to the spectrum and as much as $6.5 billion. In return, the contractor would build and operate the nationwide public-safety network, while making regular payments to FirstNet that would fund the organization’s operations.

According to the RFP, the contractor would pay FirstNet at least $80 million during each of the first five years of the contract, with the payment amount the following year to $130 million. The annual payments would be increased to $205 million in Year 11 of the deal, to $305 million in Year 16 of the contract, and a $430 million would be required during each of the last four years of the contract.

In total, the minimum payment thresholds are $5.625 billion.

“The offeror may propose payments above these minimum payment thresholds,” according to the FirstNet RFP.

One potential caveat to these payment amounts is that bidders will be able to assign a net-revenue value they project to receive from each of the 56 states and territories. If any of those states and territories decide to opt out—assuming the responsibility to deploy the LTE radio access network (RAN) within it boundaries—the contractor payment amount to FirstNet will be adjusted to reflect the lost revenue opportunity, according to the RFP.

Bids are due on April 29. FirstNet estimates that it will award the contract on Nov. 1, according to the RFP. Last week, FirstNet CEO Mike Poth said the plan is to select a winning bidder and sign a contract by the end of the year, but that timetable could be adjusted based on the number of bids that have to be evaluated.