FirstNet…we are a stumbling!

One major question that everyone fails to mention is the crunch on field crews to construct these massive networks. Even if the States go with a Public Private Partnership to help establish the capital needed to build the solution, and maintain it, what about execution?

The market is in need of an injection of capital, but their is a limitation on the number of tower crews that build such solutions. Just the certification process alone takes about a week, but a new certified climber can’t even climb until after six months of working around the tower construction site. As it stands, the EFI (engineer, furnish and install) business model, typical strategy of the carriers and the OEMs (ALU, NSN, Ericsson), has totally depleted the turf business to an isolated market of mid-size tower companies (or smaller) due to price crunching, localization and commoditization. If AT&T makes a slight hick-up in the market, these companies are faced with bankruptcy. The climbers themselves will move to another job based on a promise of a dollar more an hour. Have you seen the amount of accidents and deaths associated with tower crews in the last year? This system has bread a mixture of cowboys willing to risk, not only their own lives, but also the liability of the entire program, or at least the representing company.

The only realistic way to consider executing such a mammoth build-out will have to be based on the more traditional EPC (engineer, procure and construct) model. By a State moving forward with a P3 model, to finance its deployment, it can frame its execution strategy around a typical Request For Proposal (RFP) process that is standard to the construction industry. This is not the same as an EFI model. In essence, the EFI model is controlled by the OEMs in support of the carriers (sucking lemonade from a rock).

In an EPC model the major general contractors are positioned as the leads in a P3 response. The OEMs are selected based on need, technical capability and cost. This model is much better for the market because it frees up the market for an hourly rate based solution and enforces quality, but, it totally turns the prior relationships upside-down. In the past the EFI model held the EPC company subservient to the OEM, now the OEM is subservient to the EPC. In my personal view this is the basis for all the troubles in the existing TURF business models, and, moving forward would correct the entire market model. After all, more than 60-80% of the entire build is related to construction, project, or design type services; and less than 20% based on materials (less than 7% actually has anything to do with communications). Why would you want 7% of your capital controlling the other 90% of the job? Seems like a risk issue to me? But hey, if the 7% wants to sign up for all the risk, then so be it. Unfortunately this is how it was done in the past under the EFI model which undermined the entire tower crew market.

Just some guy and a blog….

In a recent interview by Donny Jackson, of Urgent Communications, Bill D’Agostino is quoted as saying, “I think that we’re going to need to look at this regionally—with the opportunity for bidders to bid for multiple regions—but I don’t think we want to approach this at a winner-take-all national level. I think we have to be as specific regionally as we can be, and I think we’ll end up with a better-quality product that way. I’ve always said—and continue to say—that we need to let the market continue to drive us. But we’ve made the decision, for example, to align with the FEMA regions, and we think that makes the most sense for right now, because those FEMA regions are the places where the relationships exist today in the event of emergencies and disasters, and they’re a great place for us to put our state-outreach resources and be able to work in that geographic context. And, I think, to a great degree, those will line up very good from a partnership perspective. So, our hope would be that we focus on the FEMA regions, and we’ll see how that rolls out from there.” (Donny Jackson, Urgent Communications, Aug 26, 2013)

We seem to be heading in the right direction, but, Houston I see a problem.

As I have spoken about in earlier blog entries, the tricky part of doing a deployment of FirstNet, on a regional basis, is not the technical, or tactical, ability of delivering a broadband solution — its the financial governance. Geographically we can deploy LTE, backhaul and fiber transport solutions quite effectively, but, if you are inclined to use the Public Private Partnership model Bill is eluding too, you need to control your financial obligations locally. State constitutions do not account for one state collecting revenue from another State’s public safety service entities.

Through a partnership you need paying customers to help fund your investment, deployment and long-term operations. Those customers will come from two-layers within a State, State public safety service organizations and federal organizations. From a Federal standpoint it would be easier to have one region to deal with when it comes to financial contract obligations, but, in reality each State operates differently with each Federal organization, thus would not footprint into a region very well. Plus, internal State public safety organizations typically may tactically operate well with adjoining States, but their budgets are usually approved through their own State legislature. It’s impractical to believe that one State would just allow another State to collect revenue, or fund budgets, without their respected State legislative body taking interest, especially when the monetization of the D-Block spectrum is so valuable to the State. Don’t know about you, but one State legislature is enough — I can’t imagine trying to corral two, or three, or eleven of them.

With that said, the concept of a regional deployment starts to fall apart. We have to remember that the standards for deployment; the selection for approved vendors; and the interoperability requirements can still be dictated to the States for their deployments, thus one overall network methodology and design. The real secret will be for FirstNet to grasp the P3 model in its entirety and then negotiate its own stake in each of the State’s individual P3 rollouts. It really is the best way forward, but, given the pace of understanding, we still have some sludge to go through before the nay-sayers are brought into the fold.
       
In the end though, I can see that FirstNet is starting to understand the Public Private Partnership model that I have been evangelizing about. It’s a start, but, FirstNet needs to realize that the State’s won’t wait forever on this, and can, in fact, deploy under their own P3 model without FirstNet, thus its important that they grasp the model and format it’s template for all the States to utilize — especially if it wants to capitalize on a share of the projected recurring revenue from each of the State’s P3’s.

Just some guy and a blog…..

It’s been an interesting week at the APCO conference. I think the entire conference got a major boost from all the FirstNet talk going around. Although, one suggestion to APCO …. whenever you have any 700 mhz, LTE for Public Safety, or FirstNet related sessions, please use bigger rooms.

There are many topics that I could choose to write about, but one struct me as obvious — the demeanor of FirstNet is changing — and I’m not sure if its good or bad.

I’m sure I’m not alone when I can boast about having a meeting with the leadership of FirstNet — Bill D’Agostino, TJ Kennedy and Randy Lyon.  We spoke about the Public Private Partnership model I’ve been promoting, its makeup, and how it gets implemented. I have to say that I am impressed at their understanding of the topic, which leads me to believe that the possibility of hope still exist. My gut feeling is that Bill D’Agostino is very true to what he wants to get done and has the ability to make it a success. It is easy to see he is facing a rather arduous plan of achievement, further complicated with a contentious board of debates (which I believe is a good thing). I was also equally impressed with TJ and his “get it done” spirit. He is a perfect fit for that role. And, although Randy Lyon was just recently appointed FirstNet CFO, I have to commend him for accepting such a role and I wish him well in his future dealings with FirstNet. He has to know it will not be easy.

The conclusion to our discussion I felt came down to two things:

Either we use the Public Private Partnership from the top-down, that being an overarching federal program to implement the entire network as a carrier type model, where private equity would be entertained to help pay for it.

or…

We use the Public Private Partnership model to build it at the State level by inviting private equity into State based rollouts and contracts. Minus the Private Equity input, it is no different than what is already happening with LA-RICS and soon to be many more.

There is a lot of work that FirstNet needs to get done as to understand and analyze its situation so that it can explain, exactly, how the federal P3 model would work. Having been through the analysis myself I am not a supporter of it and I will continue to  explain why….even if you stop reading my bloviating dialogues.

One method of implementation is more beneficial from the federal standpoint; and the other is more beneficial from the State standpoint. In the end we need to ask ourselves a few questions: What model has the better chance of actually getting done? Which path has the better solution for the taxpayer? Which solution creates more jobs? Which solution actually creates more of an economic boom for the market? Which solution does not rely on the taxpayers to fund it…did I say that already? And, ultimately, which solution can best meet the needs of local First Responders?

There are only two groups of people that can answer this question: FirstNet, who holds the rights to the spectrum, and the State’s, who hold the rights to getting anything built locally. Both carry taxpayer burdens, whether federal, or state. But only one solution allows for the complete avoidance of taxpayer money….the Public Private Partnership executed at the State level.

There are a few others spewing possible business case solutions, i.e. carrier subscriber solution, or the spectrum management solution, but, both of these would be overly complicated and vendor specific. The best solution is none other than the State monetizing the use of its own spectrum for the purpose of delivering its Public Safety Broadband Network – and using private equity to do so.

Can you do both? Well we could do both, the federal P3 model and the State P3 model. The real question is which actually creates the best economic advantage over the other…and yes has the better political message? Eventually this will be drawn out into the press, and the public, as a fight between the left and the right….if it hasn’t already. But, in reality, you would think that if anyone were to trademark the term ObamaNet for the purposes of casting ill-will, may actually be saying something positive for the President.

If FirstNet, under the direction of the current administration, were to stand behind the State based P3 model, they could position themselves as the savior who is driving down unemployment; fostering new economic development; relieving the taxpayer of burdens; all at the same time providing for the safety and security of a hardened Public Safety Broadband Network directly supporting our nations First Responders. Alternatively, if for example, FirstNet were to lead with an overarching federal program they, could in fact, be viewed as directly trying to erode the entire Public Safety Broadband initiative as a private political maneuver, as well as a private venture into carrier based relations that leans towards a few select individuals, or groups, whose intentions are to monetize this valuable spectrum for their own use. I would have a hard time comprehending that the latter is a possibility. Who in their right mind would purposefully undermine a State’s ability to deliver its Public Safety solution directly to its constituents?

Not possible…right!?

Just some guy and a blog….

Nice to see some progress is being made with FirstNet. I especially like it that the LA-RICS is moving forward. The economy needs the movement. I am also very excited that Bay-RICS, New Mexico and Mississippi will be coming out soon as well. All very good to hear.

I have a few observations though. What happens when the BTOP funding runs out as well as the 2+5 Billion in FirstNet allocations? To cover the entire US with RAN (Radio Access Network) alone will cost in excess of $14 Billion. What happens when we need to cover the rest? Do the State’s expect that the Feds will come in and fill in the gaps of funding? Who will pay for the long term management and care? Typically the maintenance of a telecom capital program is about 10% of the total capital expenditures to build it, which means, that in order to maintain the RAN architecture alone, we should expect to pay $1.4 Billion annually. Who will pay for that? What happens when you add the transport layer of fiber, microwave backhaul, control centers, data-centers and respective applications? What happens if you have 160 public safety service organizations, within one State, that all require their own specific requirements for the same? Suddenly the $7 Billion really starts to look insignificant and demonstrates a real shortage. We shouldn’t just blindly start building the car without funding it first.  But, we are talking about a government controlled initiative so it wouldn’t be the first time.

Those States, or counties, need to understand that there is no time limit on when the Public Private Partnership model can be put into effect. But, one must consider the use of taxpayer money if you choose to go the traditional route of bonds, taxpayer money and vendor financing. In the end its just money right? What the traditional model does is put you down a familiar path of legislative budgets, allocations and long waits, but, at least we understand the process and know how to navigate the land-mines…right?

Plus, one forced traditional model that will definitely not help is the OEM led EFI model. You aren’t doing yourself any favors in aligning with an OEM led EFI (engineer furnish and install) model. That model suffers tremendously when it comes to quality and source of resources to construct (reference Turf contracts or the original Bay-RICS/WEB contract).  Regardless, the P3 model can come in to save the day later on. I would just suggest you consider the impacts down the road. The person that instituted the plan today, will undoubtedly be the one blamed for its failures, thus may not be the person to implement it later.

Just a thought.

Just some guy and a blog…..