Opt-out scenarios from FirstNet appear increasingly tough for states, territories

While a legitimate argument can be made that revenues generated from the RAN in an opt-out state or territory should remain in the jurisdiction, there could be a significant price to pay for just making the argument. In addition to the financial costs associated with the lawyers needed to make the argument, there could be a significant political price to pay.

Assuming the state/territory is a “have” jurisdiction—and it probably should not pursue the opt-out alternative if it is not—putting its revenue in doubt could have a detrimental impact on the deployment of the nationwide FirstNet system, because the business model already is challenging enough.

If the FirstNet buildout is delayed for a protracted period because of the situation, the political pressure on an opt-out governor could be enormous, with scrutiny coming from Congress, FirstNet, other governors and public safety.

The fallout could make it hard for an opt-out governor to pursue higher political office. More immediately, it could put the state government in an awkward position with the public-safety agencies within its jurisdiction.

If a state or territory accepts FirstNet’s plan for its jurisdiction, the governor and other officials will be able to support their public-safety agencies’ requests—be it for greater coverage, reliability or capacity—in virtually all cases, advocating their first responders’ positions to FirstNet with little or no impact on the state budget. Whether the advocacy is effective is a separate question, but there would be little downside to supporting the public-safety position.

In contrast, it seems inevitable that an opt-out state or territory at some point may have to play the role of the “bad guy” with its public-safety agencies. After all, the opt-out state or territory may have to say “No” to certain ideas, because it—not FirstNet—would have to pay the bills associated with fulfilling public-safety requests.

In addition to the potential financial gains—if allowed—the opportunity to have greater control of the RAN is another prime reason cited by many for a state or territory to consider the opt-out alternative.

An opt-out state or territory would have greater influence on the network design and buildout of the RAN within its territory, but it also would be responsible for the operation and maintenance of the network. That means that an opt-out state or territory would have to pay for technology upgrades—be it related to the latest release of LTE or a security implementation—instead of having FirstNet pay for them, as would be the case if the FirstNet plan for the state is accepted.

“Look, if we do a nationwide software upgrade and you’re a state that decided to build your own radio access network, you’ve got to hook into our schedule for that upgrade—you can’t be one version off,” Swenson said, noting that state officials should ask themselves, “What control do you really want?”

In addition, there is no way to predict how market conditions might change a state’s outlook on the subject. A sudden downturn in a key industry within a state could dramatically impact its ability to pay for network upgrades. One particularly bad scenario would be a situation in which a state would have to lay off public-safety personnel to help fund a technology upgrade to the FirstNet system, which was established to help public safety.

There may be other factors that I am missing. For example, I’ve heard suggestions that opt-out states and territories could benefit from “management” or “administrative” fees that would not be classified as user-fee or secondary-leasing revenue.

I know a lot of good people who have been asked to evaluate whether the opt-out alternative makes sense for their state or territory. Based on the rules in place and FirstNet’s preliminary legal interpretations, I think those advising a governor on this subject will be hard-pressed to recommend that a state assume the considerable responsibilities associated with a statewide RAN buildout and maintenance in return for little or no additional control or financial benefit.

Given the logistical issues, financial implications and potential political fallout, the risks associated with an opt-out decision appear to be much greater than the potential rewards.