FirstNet sheds light on financial challenges during Industry Day event

FirstNet is seeking partnerships that ensure the nationwide public-safety broadband network is financially sustainable in the long term and provides first responders with “the best price possible” for service, officials said during a meeting yesterday with industry vendors interested in responding to the FirstNet draft RFP.

During the Industry Day event—conducted in Virginia and webcast—FirstNet officials outlined multiple operational and functional aspects of the much-anticipated broadband network that will be deployed on 700 MHz spectrum. But significant attention was paid to information about FirstNet’s business-model vision.

John Quinlan, FirstNet’s deputy chief financial officer for strategic planning, acknowledged that making FirstNet financially sustainable is “potentially a challenge,” because FirstNet has only $7 billion in federal funding—well below the reported tens of billions of dollars that commercial wireless carriers spend annually to maintain and upgrade existing networks.

“We do think [financial sustainability is] achievable, because we have significant assets at our disposal,” Quinlan said. “It’s a critical principle, because, one, it’s required by our own authorizing statute under federal laws, and more importantly, if we were to reach financial sustainability, we can provide assurance to our public-safety end users that we have a financial stable network that will be around for a long time.”

In addition to the $7 billion allocated by Congress, Quinlan reiterated other avenues FirstNet can pursue to realize its financial goals, including revenue from user fees, infrastructure-related synergies, and revenue from secondary use of network capacity by commercial users.

Quinlan said FirstNet believes it could have 4 million to 13 million public-safety users on the network, with the variance depending on adoption and the definition of a “public-safety entity” that qualifies to be considered for priority access to the system. Based on a fee structure of $30 per user per month “would yield over a billion to $3.5 billion per year,” he said.

In terms of synergies from the use of existing infrastructure or capabilities, Quinlan offered a potential example regarding backhaul.

“If FirstNet were to buy a backhaul solution at each one of the sites for the network, we could say that could run about $2,000 per month,” he said. “However, since our FirstNet user base is relatively small compared to the total population of broadband users across the country, the incremental costs of our additional traffic could be significantly less than the $2,000 per month.

“That could produce a financial savings that would further our financial-sustainability objective and also an element that potential offerers could use in developing a solution to meet our financial-sustainability objective.”

However, FirstNet officials have acknowledged that the organization will not be able to fund a long-term sustainable network based solely on the $7 billion in funding, user fees and synergies. To make the funding model work in the long term, FirstNet needs to be able to monetize its greatest asset: the excess capacity created on the network’s 20 MHz of public-safety broadband spectrum in the 700 MHz band.