NTIA issues final rule for its review of FirstNet fees

The National Telecommunications and Information Administration (NTIA) today published its final rule outlining the criteria and processes for annual review of fees established and collected by FirstNet—a review that will not include an assessment of end-user fees for subscriptions, according to an NTIA spokesman.

Under the 2012 law that created FirstNet as the entity to build and maintain a nationwide public-safety broadband network, NTIA—the federal agency that houses FirstNet in the U.S. government—is required to review FirstNet’s proposed fees each year, and the fees only may be assessed after being approved by NTIA. One statutory requirement is that FirstNet be a self-sustaining network, and the review process is designed to ensure this is a reality, according to Leonard Bechtel, NTIA’s director of administration and chief financial officer.

“NTIA’s fee-review program will ensure that FirstNet achieves self-sustainability through a reasonable fee structure,” Bechtel said in a prepared statement.

FirstNet CEO Mike Poth echoed this sentiment.

“NTIA’s final rule on review of FirstNet fees is an important step in the process of deploying the nationwide public safety broadband network, and we appreciate all their efforts,” Poth said in a prepared statement. “With our commitment to maintaining a strong financial condition, we stand ready to deliver a reliable, secure, and financially sustainable FirstNet network that meets the demands of public safety, enabling them to better serve their communities.”

With the self-sustainability of FirstNet in mind, NTIA will review only fees collected directly by FirstNet, as suggested by its proposed rules that were released in December 2015. Those fees include payments to FirstNet by nationwide contractor AT&T—estimated to be more than $18 billion over the 25-year contract—as well as payments by “opt-out” states for use of the FirstNet LTE core and FirstNet spectrum.

Not included in the review process will be fees associated with end-user subscriptions or device charges, according to an NTIA spokesman. Indeed, those fees will be collected by AT&T, not FirstNet.

In the Federal Register notification of the new fee-review rule published today, NTIA notes that its FirstNet fee review will be conducted to determine whether all of FirstNet’s revenues meet the statutory requirement that the “total amount of the fees assessed for each fiscal year . . . shall be sufficient, and shall not exceed the amount necessary, to recoup the total expenses of [FirstNet] in carrying out its duties and responsibilities [under the Act] for the fiscal year involved.”

As a result, NTIA will determine only whether FirstNet’s overall assessment of fees is appropriate, as opposed to reviewing that each individual FirstNet fee is reasonable.

“NTIA will approve FirstNet’s fees as reasonable only if FirstNet’s fees—in aggregate and in combination with any FirstNet non-fee-based income—are sufficient to cover, but do not exceed the amount necessary for, FirstNet’s execution of its statutory duties for each fiscal year,” according to the Federal Register notification.

Although FirstNet is supposed to collect only enough fees to fund its operations for each fiscal year, the NTIA rule notes that FirstNet can maintain “necessary reserve funds.” In its rule, NTIA indicates that it will defer to FirstNet in determining the amount of reserve funds that is appropriate.

“Necessary reserve funds means any amount of money identified by FirstNet in its standard financial documentation to meet expected and unexpected future expenses that may arise in the course of FirstNet executing its statutory powers, duties, and responsibilities under 47 U.S.C. 1401 et seq., including but not limited to capital reserve funds, operating reserve funds, maintenance reserve funds, and improvement reserve funds,” according to a definition included in the NTIA rule.

Non-fee-based income—for instance, potential revenue from the proposed FirstNet App store—will not be part of the NTIA review, but NTIA will consider such income sources as it makes its determination whether FirstNet’s fees will ensure that it will meet the self-sustainability mandate, according to an NTIA spokesman.