FirstNet deployment should be more than 60% complete by end of year, AT&T exec says
More than 60% of the planned buildout of the FirstNet system will be completed by the end of this year—months ahead of the contracted schedule—with a realistic possibility that even more progress will be made on the nationwide public-safety broadband network (NPSBN), an AT&T executive said yesterday.
John Stephens, AT&T’s chief financial officer, reiterated that AT&T—the contractor for FirstNet—had completed 40% of the buildout by the end of 2018, even though the contract only required about 30% of the deployment to be finished in March 2019. The next buildout target is the 60% threshold, which Stephens said he expects will be reached—ahead of contracted schedule—by the end of this year.
“Remember, when we talk about these percentage buildouts, they include both the rural and urban geographic coverage,” Stephens said yesterday at the Morgan Stanley Technology, Media and Telecom Conference. “So, this is a significant piece of the country.
“I’d expect that we’ll get there. I would hope that we would get even farther and we certainly have it funded in the plans to allow the team to do that. [AT&T’s network] team that’s running this is doing a great job of being efficient and effective. We don’t want to race at all costs; we want to do this efficiently and effectively, quickly. And I expect that we’re going to have another significant [FirstNet coverage increase in 2019]—at least to 60% by the end of the year, if not more.”
A significant part of the efficiency realized through the FirstNet deployment is that crews installing equipment to support operation on 700 MHz Band 14 spectrum—the airwaves licensed to the FirstNet Authority—at cell sites also are installing gear to enable AT&T commercial services in the WCS and AWS-3 bands, Stephens said. Deploying across this total of 60 MHz of spectrum increases AT&T’s overall spectrum portfolio by 50%, he said.
These cell sites also are being prepared to support 5G services, as part of AT&T’s 5G Evolution initative, Stephens said.
“So, you only pay that tower-climb cost once, and you get three sets of equipment up,” he said. “In addition, the equipment we’re putting up now is 5G-enabled equipment. We are spending a little bit more money … making sure that equipment—the antennas, the radios, whatever go is going up—is 5G-enabled.
“[When AT&T’s network] team finishes that process, it’ll be 5G-enabled. So, when [5G] software comes out, we can just … upload the software into that tower—into that network—and not have to climb it again.”
Even with such efficiencies, some industry experts questioned whether the FirstNet investment would be worthwhile to AT&T, given that the target market of about 3 million fire, EMS and law-enforcement officers is dwarfed by the commercial market, where AT&T boasts more than 150 million mobile subscribers.
Stephens acknowledged the 3 million figure for potential FirstNet core public-safety users but said the opportunity for AT&T is greater than many observers realize, noting that each first responder could have three or more devices—a smartphone, as well as some combination of a tablet, body camera, drone or other devices, like a smartwatch.
“So, there’s a market there that could be 10 million [connections within FirstNet’s core public-safety base],” Stephens said.
In addition, “there’s an opportunity to expand it into other first-responder-type categories,” Stephens said, citing the Red Cross and FEMA as examples.
By meeting the 60% deployment threshold, AT&T expects to receive “a little bit in excess of $1 billion” from the FirstNet Authority during 2019, Stephens said. Combined with the $1.998 billion that AT&T has received from the FirstNet Authority through 2018, this year’s payout would mean that AT&T would approach collecting almost half of the potential $6.5 billion that the carrier could receive by achieving all deployment goals by March 2022.
While the FirstNet Authority pays AT&T for building, operating and upgrading the network, AT&T has started making annual payments to the FirstNet Authority that are designed to ensure that the authority is sustainable and can afford to pay for technological upgrades to the FirstNet system.
During the 25-year contract period, AT&T is scheduled to pay $18 billion to the FirstNet Authority, which is expected to use about $3 billion of that money to fund the operations of the FirstNet Authority. The remaining $15 billion is expected to be reinvested into the FirstNet system, and AT&T anticipates that it will receive the vast majority of the that reinvestment money.
“Being subject to federal acquisition rules, FirstNet is prohibited from contractually committing to a specific vendor for future network reinvestment,” AT&T states in its annual filing with the SEC. “However, it is highly probable that AT&T will receive substantially all of the funds reinvested into the network, since AT&T will own and operate the infrastructure and have exclusive rights to use the spectrum, as all states have opted in. After FirstNet’s operating expenses are paid, we anticipate that the remaining amount, expected to be in the $15 billion range, will be reinvested into the network.”