Verizon Urges NTIA to Allow Opt-Out States to Build Cores

Verizon Communications, Inc., urged the National Telecommunications and Information Administration today to permit opt-out states to build their own core networks rather than having to connect to the core of the First Responder Network Authority’s (FirstNet) network partner, AT&T, Inc.

“While the law does not require states to participate in the FirstNet network at all, the opt-out provisions do guarantee that states have a meaningful opportunity to participate in the network while taking on specific responsibilities for its deployment,” Don Brittingham, vice president-public safety policy for Verizon, said during a joint hearing today held by three Pennsylvania state legislative committees. “In order for such an option to be meaningful, however, it must allow states to pick their own commercial partner to establish their own private partnership in a manner that’s comparable to the partnership established by FirstNet. It must also allow states to develop network and service arrangements that are both viable and sustainable over the long term. And critical to the viability of such an option is the ability for a state to use its own network core, or one deployed by its commercial partner.

“States should not be required to use the network core deployed by FirstNet, as such a requirement would put the state in the untenable position of being driven by the interests and decisions of FirstNet’s commercial partner – a condition that would certainly be unattractive to any prospective state commercial partner,” he added. “Unfortunately, based on recent press reports, it doesn’t appear that either FirstNet or AT&T will allow a state to use its own network core if it decides to opt out and would actually require the state’s public safety users to purchase their services from AT&T.”

Mr. Brittingham noted that the FCC in the summer released an order saying that it wouldn’t reject on interoperability grounds an alternative state plan that relied on a separate network core, but the agency saying that such a decision was outside its statutory scope of authority (TR Daily, June 22). “Verizon respects the FCC’s decision, but we hope that NTIA answers that question affirmatively in the near future, as we believe it’s important to any state considering an opt-out choice,” he added.

A summary of a draft spectrum manager lease agreement (SMLA) for Vermont, which was obtained by TR Daily, says that the state must integrate its radio access network (RAN) with the FirstNet core and must pay all costs to do so (TR Daily, Oct. 18).

During today’s hearing, which was held by the Pennsylvania state Senate Veterans Affairs & Emergency Preparedness Committee, the Senate Communications & Technology Committee, and the House Veterans Affairs & Emergency Preparedness Committee, lawmakers asked a myriad of questions about the FirstNet system and the Dec. 28 deadline that governors face to seek to opt out and have their states build their own RANs.  A number of questions showed lawmakers’ confusion about the process being used. So far, 25 states and two territories have opted in.

There was considerable discussion at today’s hearing about the potential costs that states face if they opt out – or opt out and then change their minds and opt in.

Maj. Diane Stackhouse, director of the Pennsylvania State Police’s Bureau of Communications and Information Services and the state’s FirstNet single point of contact (SPOC), said that “NTIA has determined Pennsylvania’s spectrum lease agreement will cost almost a billion dollars over the 25-year contract term. Pennsylvania can apply to NTIA for a state RAN construction grant, which is currently set at almost $149 million but the amount can be increased to $185 million depending on the amount available in the Network Construction Fund. FirstNet has established termination fees than range from multi-millions to billions of dollars if a state who initially opted out later decides they want to opt in. Above all, a state’s opt-out RAN plan must be interoperable with the NPSBN and comply with FirstNet’s requirements and standards for the network; otherwise, the state will default to an opt-in status. Opt-out states will assume all technical, operational, and financial risks and responsibilities related to building, maintaining, and upgrading their own RAN for the next 25 years.”

Ms. Stackhouse also warned that many of state’s “LMR towers are near or at maximum structural loading capacity and would not be able to contribute to building a state-owned RAN in an opt-out situation.”

By contrast, if the state opts in, “there is no financial risk to the commonwealth because it does not have to build its own RAN and AT&T will be responsible to operate and upgrade the network,” she noted. “The commonwealth is not obligated to purchase FirstNet/AT&T’s services. This low-risk option will also support fast delivery of services to Pennsylvania’s public safety community and help create an interoperable network.”

Ms. Stackhouse also said that an “opt-out decision is not a mechanism for Pennsylvania to realize a revenue windfall. Be cautious of promises that Pennsylvania will receive substantial revenue generated by the FirstNet network in an opt-out situation. This is simply inaccurate. The law is clear[:] revenue generated beyond the deployment, operation, and maintenance of the RAN must be reinvested into the nationwide network. No revenue can be redistributed to a state’s general fund or for other purposes.”

Sen. Randy Vulakovich (R.), chairman of the Senate Veterans Affairs & Emergency Preparedness Committee and a former police sergeant who posed the most questions at today’s hearing, asked Ms. Stackhouse to elaborate on her statement that opting out could cost Pennsylvania almost $1 billion over the life of the 25-year contract. She cited spectrum network capacity fees, user adoption disincentive fees, and a termination payment if the SMLA were canceled early. Sen. Vulakovich said it seemed that opting in presented less “fiscal risk and operational risk” to the state, asking, “Is opt-in the better way to go?” Later in the hearing, he called the potential termination fee “somewhat scary.”

“At first blush, opt-in suggests that there is less risk,” Ms. Stackhouse said. “However, until I fully explore the proposals for opt-out, I’m not counting anybody out. Someone there might have a very good plan that is viable.”

She said that the state has received three proposals in response to a request for proposals (RFPs) it issued in July, and that the assessment of the bids should be completed by December.

“And these other plans certainly would have to have some sheet with some pretty big numbers on [them] to be able to pull this off,” Sen. Vulakovich said. “I think this is going to be quite costly to do all of this.”

“Time will tell,” Maj. Stackhouse replied.

As an example of costs that states may face, the summary of the draft SMLA for Vermont said the maximum termination fee would be $173 million, and the state would have to pay $6.075 million in spectrum network capacity fees over the life of the 25-year lease. Payments for missing user adoption milestones would range from nearly $1.2 million in the sixth year to nearly $1.8 million in the 25th year.

Such charges are designed to discourage states from seeking to opt out, said Declan Ganley, chairman and chief executive officer of Rivada Networks LLC, which lost out to AT&T for the FirstNet contract and is hoping to convince states to opt out and partner with it. The company plans to lease excess capacity on the network to commercial entities.

Mr. Ganley said that at a California hearing last week, it was revealed that California would have to pay a termination fee of $15 billion if it pulled out of an SMLA early. He also noted that New Hampshire Gov. Chris Sununu (R.), in establishing a committee to review a recommendation that the state opt out, complained this week about penalties that “appear to be arbitrary and primarily designed to deter states from opting out of FirstNet plans” (TR Daily, Oct. 16). He urged Pennsylvania and other states to urge officials to eliminate such penalties.

Mr. Ganley said Rivada, which submitted a proposal in response to the RFP, is offering a more attractive plan to Pennsylvania than what FirstNet is offering. For example, he said, Rivada’s proposal would include $383 million in revenue sharing over the life of the contract, which could be used to improve the network, and more than $1.4 million in cost savings due to the fact that Rivada would only charge a monthly subscription fee of one center per month. Rivada also expects to pay millions in infrastructure lease agreements, he said. And he repeatedly said the company would be bonded to guard against any state financial liability. He also said the company has financing lined up to build the RAN.

The company plans to build about 200 new towers in Pennsylvania and install equipment on the rest of the towers, for a total of 1,162 towers. It also said it would deploy Band 14 throughout the state, alluding to the fact that AT&T’s statements on its use of Band 14 have varied a bit. The company plans to cover 99.5% of the population and 94.6% of the land mass within four years.

Mr. Ganley also said that with Rivada’s plan, the state would retain control of the network, unlike with the FirstNet-AT&T framework, in which that carrier has an agreement with FirstNet. “You will have absolute transparency and accountability,” he said.

The Rivada executives repeatedly urged states to opt out as a way of giving them an additional 180 days to review the best path forward. They said there is no downside to doing that. “Opting out really is a risk-free way for a State to have six more months to consider its options,” Mr. Ganley said in a news release today.

However, the draft Vermont SMLA says that spectrum network capacity payments begin accruing 90 days after a governor receives a state plan, which would be Dec. 28.

Another lawmaker asked Rivada officials about concerns that the Association of Public-Safety Communications Officials-International expressed about states opting out.

Rivada Senior Vice President Chris Moore, who is former chief of the San Jose Police Department, said of APCO staff members, “They don’t understand the business piece of it.”

For their part, Dave Buchanan, director-state consultation for FirstNet, and Jim Bugel, VP-FirstNet for AT&T, touted the benefits to states such as Pennsylvania and territories of opting in.

“FirstNet is much more than a few selective features on a commercial network,” said Mr. Bugel. AT&T has 25-year “binding contract” with FirstNet to meet public safety’s needs, and it will include security capabilities such as a dedicated core and end-to-end encryption, among other things, he added.

State Rep. Steve Barrar (R.), chairman of the House Veterans Affairs & Emergency Preparedness Committee, said one concern is whether the state will have “control” and “input” related to the system.

Mr. Buchanan replied that Maj. Stackhouse got the initial state plan 90 days before the final state plan and that the plan details the network construction and where new investments will be made. In response to a question from another lawmaker, he also stressed that FirstNet will have oversight of AT&T and continue outreach with public safety to make sure their needs are being met.

In response to a question about what mechanisms are in place to make sure Pennsylvania has “direct governance” over construction of the network, Mr. Buchanan said FirstNet will continue to interact with the state on matters such as timelines and adoption and will have field staff there.  “We have to work hard to earn your business,” he added.

Mr. Buchanan also told a legislator that any extra revenues from a state must go back to help other states, noting, for example, that less-populous Western states are not likely to generate as much revenue. He also said later that it’s hard to make revenue projections for any state because of uncertainty about how many public safety users will subscribe to the network.

Sen. Vulakovich said he was concerned about whether the FirstNet coverage would be adequate and asked Mr. Bugel whether AT&T would limit how much it would spend in the state.

Mr. Bugel said his company’s budget was “not limitless,” but he said that first responders would benefit from the embedded investment that the carrier had there already and that FirstNet was mandating specific subscribership levels, adding, “We obviously are going to build to those levels.” He also said that AT&T was “building to a public safety grade.”

“The opt-in sounds like it’s the best feature as far saying that you don’t have to worry about it too much,” Sen. Vulakovich said.

The senator also asked about the user fees. “I don’t want people to think this is going to be absolutely cost- free,” he said. “It is going to be taxpayer dollars.”

Mr. Bugel said that state plans include “rack pricing” rates for things such as devices, unlimited plans, and metered plans.

Sen. Vulakovich also asked whether the network should have “as much Band 14 coverage as possible.” “Yes, and we are,” Mr. Bugel replied.

In his testimony, Mr. Brittingham of Verizon noted that Verizon was building its own public safety core and offering priority and preemption to public safety agencies, regardless of whether states opt out or not. He said his company was not advocating that states take a particular position on opting in or out, saying it would work with them either way. Verizon has submitted proposals to some state RFPs.

He said Verizon currently covers about 99% of Pennsylvania’s population and 91% of its geography. He also said Verizon would want to make sure its network solution was interoperable with FirstNet’s. He said first responders would get from Verizon “essentially the same” coverage as they would get from AT&T.

Sen. Vulakovich said lawmakers were worried about FirstNet’s coverage because of problems with a statewide radio system. “It’s not a statewide radio” system, he said. He asked Mr. Brittingham how close Verizon can get to being statewide.

Mr. Brittingham said Verizon understands the importance of first responders having service when they need it.  “We design our network to be public safety grade,” he said. “I don’t think there are other commercial carriers that do that.” —Paul Kirby,

Courtesy TRDaily