Webinar panel outlines the financial challenges facing FirstNet

FirstNet needs to utilize partners to make its vision of a nationwide first-responder broadband network a reality, but there are myriad business models that could be considered to maximize the $7 billion in federal funding earmarked for the much-anticipated system, panelists said last week during an Urgent Communications webinar sponsored by Rivada Networks. (Ed.: Viewing the archived webinar requires free registration).

Financially, the challenge for the FirstNet board is considerable. While commercial carriers like Verizon and AT&T have built nationwide networks, each is able to spread the capital costs across more than 100 million subscribers, according to Bill Schrier, senior policy advisor in the state of Washington’s Office of the Chief Information Officer.

In contrast, FirstNet wants to deploy a broadband system that is more reliable and with greater coverage, but it will be fortunate to get 5 million subscribers on its network if only first responders are allowed access—and it is doubtful that they will pay much of a premium for access to the FirstNet network, he said.

“This network really is in competition with the existing commercial carriers, because many of the public-safety officers … use the existing telecommunications carriers, so they’re not going to be willing to pay—in all likelihood—much more than what they’re paying now,” Schrier said. “That kind of puts an upper limit on the monthly fees that FirstNet’s able to charge, if they want to capture market share.”

Joe Ross, a partner with Televate, said that his company’s research indicates that the $7 billion in federal funding will be $5.5 billion to $9.4 billion less than the amount needed, depending on what kind of network is built and which business model is used.

By partnering, FirstNet can address this funding gap by increasing the user base and offsetting capital costs by leveraging assets—for example, sites and backhaul—from the partners, whether they are utilities, transportation entities, commercial carriers or others.

At the heart of all partnering models is that first responders will have priority access—preemption, if necessary—during times of emergency. However, during routine times the FirstNet system is expected to have a significant amount of excess bandwidth available that can be sold to operators to generate much-needed revenue that can be used to fund deployments and operations.

Partnerships with utilitiesand transportationhave been discussed for some time, but one of the most intriguing propositions is the use of dynamic spectrum arbitrage (DSA) to enable real-time auctions for bandwidth at any given time or location to monetize the excess throughput in FirstNet.

Under this model, the DSA provider would pay to build out the public-safety-grade broadband network and would be given the right to sell excess bandwidth to operators, with the understanding that first responders would get all of the bandwidth during an emergency response, said Chris Moore, senior vice president at Rivada Networks and former police chief for the city of San Jose, Calif. This approach would get the broadband network built faster, which is important, rather than waiting for the FCC to conduct spectrum auctions that are supposed to generate $5 billion of the $7 billion that Congress earmarked for FirstNet, he said.

“The problem with that is that we’re not going to see that revenue in FirstNet for probably two or three years, if not longer,” said Moore, who played a key role in lobbying Congress to pass legislation last year that created FirstNet. “We hope that it’s shorter. But with $2 billion … that we have up front, you’re not going to be able to get much done in the next three years.

“My belief is that, if we don’t get started on this now, we will not be successful. And Congress will come back to us and say, ‘Look, you couldn’t do it. We didn’t think you could.’ and take back the spectrum. We can’t allow that to happen.”