Month: August 2012

First Responders Broadband Network and a States Right to "Opt In"?

/ drmikemyers / Leave a comment

The recent Federal legislation opening up the D-Block 700 Mhz broadband spectrum to Public Safety includes a clause for a States right to Opt-out. I would like to add some discussion topics about “Opt-In” part.  Just so you know, I am not an advocate one way or another…. I believe in doing what makes sense for the given situation.
These are just observations but to me the term “Opt-In” highlights a high-level effort of managing the build out of the Nations First Responder Network via the FirstNet organization in whole, where as the State will relinquish the build to FirstNet. In essence, FirstNet will be setup to be the “Program Management Organization” or oversight committee of a solicited “Program Management Entity” (thus the reference associated with a “one RFP solution” for the build). This is a very effective way to centralize the management of the build-out into one hierarchy of a support structure of which they can delegate down to the State level elements or sub-projects. But is this the right model for such a large and complex national build?
This model is an effective model if there is one business model in place, but when you have multiple and competing business models at the State level there will be vast amounts of complexities to overcome. For example: how would FirstNet, or the Program Manager, coordinate all the State entities through their individual audits for existing inventories of towers and fiber optic inventories? How would they “scrub” an entire national inventory of towers from all the State entities and owners? How would they manage the regulatory issues of individual State legislature bodies?  How would they handle the unlimited liability clauses mandated in their State Constitutions? How would they manage the investment and equity shares of State sponsored Public Private Partnerships to a level that will adhere to all parties involved, especially those parties that have established assets and money to help fund the builds? These are just a few examples. You can imagine a few think tanks coming up with a deluge of other issues. Do we have the time to go through all this?
Having a Federal Agency setup to insure execution of a standardized approach to project management, procurement, governance or technical interoperability is a good idea and can be achieved through this hierarchical approach. But at the State level wouldn’t a matrix model be well suited for ownership and implementation? One of the main aspects of the “Opt In” scenario will be the loss of potential recurring revenue models at the State level, to which the State could benefit from. In one observation a State choosing to “Opt In”, could allow the Federal Government complete control via a centralize build model, relinquishing the States ability to control any State sponsored Public Private Partnership, thus conflicting with the Federal mandate to use Public Private Partnership to “self fund” the network build out. Maybe what’s important at this stage of the game is the definition of Public Private Partnership to which there are many. Even a preliminary business case would address most of these concerns. 
Hopefully these issues will be addressed and come to light once the FirstNet Board is created. After all, with all the doom and gloom of past large-scale contracting IT and telecom jobs within State and Federal Programs, to which there are many, its best we build a solid business case of execution before we just start building the network.  Its through that solid business case we can easily address these types of issues.
Just some guy and a blog…

Public Private Partnerships and the Execution of the Nations First Responders Broadband Network for Public Safety

/ drmikemyers / Leave a comment

In highlighting the FCC’s recent announcement, dated July 31st, I would like to touch on the topic within Section 25 where it covers a solid foundation of funding sources to help justify the issuance of a STA. This is only the tip of the ice-berg. I would not advise trying to go it alone. The complexity of a multi-million/billion dollar program would be at stake. 
To help justify such a large and complex broadband solution, that will inherently be able to collect revenue, administer services and maintain long-term operations, it is important that each State understand its obligations of developing a solid framework of regulatory capabilities in administering its Public Private Partnership. This goes way beyond the governance model of executing a project timeline or instituting technical design standards. This regulatory solution is to construct a solid system of financial modeling observance that will help with mitigation and its administration of contractual alliances throughout the partnership framework. This is a highly complex topic to which I will not cover here in great detail, but to illustrate I have started with the basics of the contractual models to make this affective. 
  • Special Purpose Vehicle construct (Private third party entity, Project or Program profile)
  • Political support beyond pilot or trial stage
  • Procurement process and complexity of valuation
  • Risk transfer sublets to investors, service providers, etc..
  • Availability of appropriate funding
    • Short or long term
    • Equity position, shareholder agreements, non-recourse debt
  • Market focus and competition
  • Political will
To further illustrate I have illustrated below some common contractual frameworks that most are familiar with. The frameworks are nothing new and can be modified to fit the initiative, but they do provide some basic insight into the types of Public Private Partnership contracting frameworks. The most likely candidates for the Public Safety Broadband Network deployments will be the highlighted top two.  What’s most important , and I can not stress this enough, is the alignment of the business model and the requirements of the stakeholders as laid out in the contractual framework for execution. 
  • Build-Own-Operate (BOO): The private investment partners will provide financing and will construct, own and operate the broadband network as well as provisioned services in perpetuity. The public constraints are stated in the original agreement and through on-going regulatory obligations. Typically we could also see a design element here but most of the design characteristics would have already been completed by the FirstNet Board prior to a States rollout. 
  • Operating License: A private operator receives a license or rights to build and operate a public service, usually for a specified term. Similar to BBO arrangement. This has been the most widely used format within the telecommunications projects but mainly overseas. Success has been intermittent mainly due to its implementation through commercial carriers. What really lacks here is that the solution would utilize existing constructs of service provisioning and hardening requirements per the carriers business objectives, which means the State would risk outages due to catastrophic events. 
These are other variants of Public Private Partnership frameworks, but these would not be advised.
  • Provision (e.g., Specific customer services or operation & maintenance) contract: A private operator, under contract, operates a publicly-owned asset for a specified term. Ownership of the asset remains with the public entity. With this model the State, and FirstNet, would lose the revenue base of operations which would be needed for the “self funding” capability to administer long-term operations and maintenance. 
  • Management contract: A private entity contracts to management a Government owned entity and manages the marketing and provision of a service.  This format lacks complexity and would not be cost effective in how it collects revenue, shares risk, investor adherence, nor the introduction of approved and installed assets which may already exist.  
  • Lease and operate contract: A private operator contracts to lease and assume all management and operation of State owned facility and associated broadband services, and may invest further in developing the service and provide the commercial service for a fixed term. This model basically expands the commercial industry model and thus may not be able to fulfill requirements of staying “Public Safety” in its service approach. Such a format would open the door for commercialization of services which could be detrimental to the execution of public safety solutions. 
  • Design-Build-Finance-Operate (DBFO): The private sector designs, finances and constructs a new facility under a long-term lease, and operates the facility during the term of the lease. The private partner transfers the new facility to the public sector at the end of the lease term. The real obstruction to this format is the leasing arrangement and the fact of transfer to a government entity. This broadband solution is best placed and run from the P3 concept indefinitely. 
  • Build-Operate-Transfer (BOT): A private entity receives a franchise to finance, design, build and operate a facility (and to charge user fees) for a specified period, after which ownership is transferred back to the public sector. This has been used in telecommunications service contracts. Same as bullet above. The broadband solution will have long-term leasing arrangements that will preclude it from passing ownership back tot a government entity due to revenue collection model. This is not precluded form government takeover in the event of financial difficulties or failure of the business model. 
  • Buy-Build-Operate (BBO): Transfer of a public asset to a private or quasi-public entity usually under contract that the assets are to be upgraded and operated for a specified period of time. Public control is exercised through the contract at the time of transfer.
  • Finance Only: A private entity, usually a financial services company, funds a project directly or uses various mechanisms such as a long-term lease or bond issue.Design
  • Build (DB) or “Turnkey” contract: The private sector designs and builds infrastructure to meet public sector performance specifications, often for a fixed price, so the risk of cost overruns is transferred to the private sector. Once again transference is the issue. 
If you need some help just let me know.
Just some guy and a blog….

Who’s buying Nokia Siemens Networks?

/ drmikemyers / Leave a comment

I read a recent article to which labor statistics show that over 165,000 jobs were lost in the telecom industry…thats more than 15% within the last year. The consolidation and convergence towards IP is having a deeper impact now because the process is speeding up given our current market conditions. It may be a perfect storm scenario here. 

Much like GD bought IP Wireless, which was a brilliant move by the way, and the new market of the Public Safety now moving into its next generation of wireless, that being LTE, it makes for a perfect buying position for a major Defense Contractor to buy, at least, the LTE product line. You would think that if we are building the Nations First Responder Network, a private network, that it would be viewed as a National Security Asset, thus requires the protections as we have in all our secure government networking solutions…those solutions are run by these big contractors….not the OEMs or carriers. After all there is a reason for the term “buy America” when it comes to the Government and its not all about just employing more Americans….its about the safety of knowing — intimately — your assets and securing them from intrusion. Such a solution is only achievable, or I should best achievable, if the general contractor actually buys the asset. In the end, these product lines are a small piece of what someone like Raytheon does everyday. Last year Raytheon did 25 Billion in government work alone. 

Just some guy and a blog….

High Speed Rail needs LTE Broadband too! Another key player in the Nations First Responder Broadband Network and State Initiated Public Private Partnerships.

/ drmikemyers / Leave a comment

Did you realize that the California High Speed Rail program, which was just voted in by the State Constituents, is made up of 10 segments? And the last I heard…when I was deeply involved…it was running in the estimates of 90-100 Billion dollars fully completed (forecasted 2009).
Did you also realize that the GSM (Global System for Mobile Communications) standard was a basis for on-board high-speed rail communications…better known as GSM-R? The “R” stands for Rail. There is an entire multi-billion dollar industry behind just this solution. I bet you may also know that the standards body for the High Speed Rail Communications (an APTA sub-committee) is adopting an LTE-R as its standard moving forward. That means they will actually need to get access to the LTE broadband technologies. This would put them in the same boat as the Utilities, Healthcare, Agriculture and DOTs (other than rail) in requiring access to the spectrum… that means they will have to go private or commercial to get it. They could fight for the spectrum — but that would be a long and strung out battle. Plus they would still need to convince the OEM manufacturers to produce the gear to talk on any frequencies not included in the current spectrum roadmap.
On a typical DB (design build) job for the rail industry; communications and IT solutions run at around 10-15% of the total capital budget allocated for the build. It also runs at around 10% of the CAPEX (pertaining to the communication and IT subset) that would be allocated towards operating the technical platforms on an annual basis. For the California High Speed Rail Program that would mean that (and I will use a conservative 10%) $9 Billion would be spent throughout the entire build phase with another $900 Million in annual operating costs. Someone check my math please….. I hold a PhD in Organizational Management not Math. That seems like a pretty good size market to me. The only real issue, much like other industries that are in the same size and scope, they take a long time to get moving. So don’t charge out there and try to build your business on it expecting returns within a few months…it will be awhile.
Did you also know that a typical Transit Agency (one that would operate such a rail program) typically has its own Police Force? It may be just me, but wouldn’t that constitute them as a First Responder and Public Safety Broadband player as well? Also you must realize that just in the High Speed Rail market alone, not including Heavy Rail, Mass Transit Subways and Telecommuter Rail, there are more than 53 planned routes for high speed service throughout the Untied States.
Just some guy and a blog….