FirstNet board approves principles guiding future reinvestments of $15 billion into public-safety broadband system

FirstNet Authority board members today voted unanimously to approve a resolution outlining four key principles that will be followed as the board determines how best to reinvest an estimated $15 billion or more during the next two decades to fund the evolution of the FirstNet system being built and maintained by AT&T.

Under the FirstNet Authority’s contract with AT&T, AT&T is required to make annual payments to the FirstNet Authority that will total about $18 billion over the 25-year deal. Of this total, $2 billion to $3 billion is expected to be used to support the FirstNet Authority’s organizational operations. The rest of this money—more than $15 billion—is slated to be reinvested into the FirstNet system, as the FirstNet Authority has a statutory requirement to reinvest revenues beyond its operating expenses into the FirstNet system.

FirstNet Authority officials pledged to develop a “roadmap” outlining plans to enhance the FirstNet system. Driven by input from the organization’s outreach efforts with public-safety entities, the roadmap is scheduled to be unveiled later this year.

To help fund such system enhancements, the FirstNet Authority will make decisions based on the roadmap and the four investment principles approved today. According to Resolution 98, “The FirstNet Authority’s Investments Principles,” investments must (explanations for items were provided as part of a slide presentation delivered by FirstNet Authority CFO Kim Farington):

Tip Osterthaler, chairman of the FirstNet Authority’s Finance Committee, said the idea of developing principles that would be used to guide future investments to the FirstNet system was proposed initially by FirstNet board members representing aspects of the federal government.

“The purpose of these is to inform and guide investment decision-making,” Osterthaler said during the meeting, which was webcast. “I wish that I would have thought of the need to do this on my own, but I didn’t. It is a great addition, though, to the governance process, so I appreciate those inputs.”

Ron Hewitt, the U.S. Department of Homeland Security (DHS) designee to the FirstNet Authority board, said that Dana Wade—the U.S. Office of Management and Budget (OMB) designee to the FirstNet Authority board—led the effort to develop the principles with the help of Hewitt and Chris Piehota, the U.S. Department of Justice (DoJ) designee.

“We felt very strongly and unanimously that it’s important,” Hewitt said during the meeting. “Just like we have the roadmap, which says how we’re going to be looking at the one aspect of the investments, we have to look at it holistically to ensure that we have enduring principles that meet the fiduciary responsibilities of FirstNet, and that’s what this lays out.

“We wanted to be transparent with everyone external to FirstNet to understand that, in addition to meeting the needs of public safety, we also have to meet the needs of the fiduciary responsibilities of this program. This lays that out for everyone to see and [cites the principles for determining] how ongoing investments are going to be made.”

Under the 2012 law that established the FirstNet Authority, Congress allocated 20 MHz of 700 MHz spectrum to the new organization and $7 billion in funding that was generated from FCC spectrum-auction proceeds. The FirstNet Authority was tasked with building the NPSBN and ensuring that the system would be financially self-sustaining—a significant challenge, given that the $7 billion figure was well below the amount needed to build a greenfield NPSBN, according to all industry sources that analyzed the situation.

Instead of building a separate NPSBN from scratch, the FirstNet Authority issued a request for proposals (RFP) in 2016 that allowed bidders to propose public-private partnership models. AT&T was awarded the contract in March 2017.

The FirstNet Authority’s financial sustainability no longer is considered to be an issue for the organization, thanks to the annual sustainability payments that AT&T will make to the FirstNet Authority totaling $18 billion during the 25-year deal.

While AT&T is scheduled to make these sustainability payments to the FirstNet Authority totaling $18 billion, the carrier giant anticipates it will be repaid most of the money to enhance the FirstNet system, according to the company’s annual 10-K report that was filed with the SEC last month.

“Being subject to federal acquisition rules, FirstNet is prohibited from contractually committing to a specific vendor for future network reinvestment,” AT&T’s 10-K report states. “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 $15,000 [$15 billion, as all figures in the report are based on millions] range, will be reinvested into the network.”