FirstNet sheds light on financial challenges during Industry Day event 

Industry observers have varied opinions about the value of the excess broadband capacity on the FirstNet system, with skeptics stating that the potential value is diminished greatly by the fact that commercial users can be preempted by public-safety users during times of emergency. But others are more optimistic, noting that an emergency typically would affect capacity only on one cell sector, so most commercial users would not be noticeably impacted.

Quinlan said the demand for spectrum is high, citing the recently completed AWS-3 auction that generated more than $40 billion in revenue for the U.S. Treasury.

“If we just adjusted for the size of FirstNet’s excess capacity, it would equate to $17 billion,” Quinlan said. “I’m not saying that that is the value per se, but it’s a good benchmark to keep in mind.”

Quinlan said other advantages that secondary use of FirstNet’s spectrum capacity can offer include:

• FirstNet does not require a lump-sum, upfront payment, so value could be derived over time through cash or in-kind benefits;
• FirstNet’s spectrum is largely unencumbered and is “potentially immediately available upon award,” whereas AWS-3 and TV spectrum that is scheduled to be auctioned next year will take more time to be cleared and secondary-market spectrum transactions also can take years to execute; and
• FirstNet’s 700 MHz spectrum “is considered ideal, both for coverage and data capacity” and historically has been greater than the AWS-3 airwaves.

Throughout the Industry Day event, FirstNet officials reiterated the need to provide a financially sustainable network and that bid proposals would be evaluated based on how they would impact FirstNet’s ability to provide public safety with a nationwide broadband network.

Of course, the law creating FirstNet mandates that states and territories will have the option to “opt out” of the FirstNet system, which means the “opt out” jurisdiction would deploy the radio access network (RAN) within its territory and integrate it within the larger FirstNet system. In a recent proceeding, several states questioned FirstNet’s preliminary legal interpretation that revenues generated within an opt-out state should be available for use in other parts of the country.

Quinlan said that federal laws require FirstNet has to be deemed financially sustainable “before we can award a solution, contract or contracts.” Given this criteria and the potential impact that opt-out decisions in key states could have on FirstNet’s overall financial model, one attendee asked whether FirstNet would wait until opt-out decision were made before awarding a contract.