Governors likely will be missing key FirstNet data point, making opt-out decision even more precarious

Here is a scenario that may be happening in several states: A vendor tells a governor that his state or territory could generate $300 million per year in revenue, above the cost of deploying and operating the network. NTIA and FirstNet have made it clear that the money cannot go into the state’s general fund, but there’s some legal debate about money that is reinvested back into the network, and the governor believes the state and its contractor is best positioned to provide the kind of network that the state’s first responders need.

Even if the governor knows that FirstNet will want some money from the “plus” state, advisors—not knowing the contractor’s assigned value for the jurisdiction—may estimate this figure at $150 million. That means the state still would have $150 million annually to reinvest in its network to improve its functionality and reliability (or maybe help fund accessibility to volunteer fire departments).

But what the governor won’t know is that the nationwide FirstNet contractor actually valued the state at $400 million per year, because that is proprietary bidder information that FirstNet must keep confidential. Instead of being $150 million “in the black” as expected, the opt-out decision would mean that the state is $100 million in the hole, because of its necessary payment to FirstNet.

If the governor knew this in the beginning, the governor might not have pursued the opt-out alternative in the first place. But the governor won’t know this when the opt-out decision has to be made, nor will the state know proceeds through the challenging opt-out gauntlet, which includes completing its own RFP process and getting its proposal approved by the FCC and the National Telecommunication and Information Administration (NTIA).

Only at the very late stages of the opt-out process—probably when the state tries to negotiate a spectrum-lease agreement with FirstNet or during discussions with NTIA—would state officials have a clue what the contractor’s assigned value for the state might be. And even that process looks like it would be a difficult one for the state.

It could be somewhat similar to negotiating with a car dealer on the price of a new vehicle. Like FirstNet, the car dealer knows the minimum revenue it needs from a vehicle sale to remain in business. Like the car buyer, the governor does not know what this minimum number is, which puts him at a decided disadvantage in the negotiation.

But in the car scenario, at least the buyer knows the maximum he or she will have to pay the dealer for the vehicle: the sticker price. In the FirstNet-state/territory negotiation, the state would not have such a luxury.

FirstNet has no obligation to provide a “sticker price” to the state, and there is no way for state officials to do “comparison shopping”—remember, this has never been done before, so there are no precedents in general, much less comparables for the unique circumstances surrounding a particular state or territory. FirstNet’s only obligation is to take actions that are in the best interest of building out a nationwide public-safety broadband network, not to facilitate a governor’s desire for the state to control the buildout of the RAN within its borders.