FirstNet changes key terms of draft spectrum-lease agreement with Dec. 28 deadline approaching

FirstNet yesterday afternoon changed terms in its draft spectrum management lease agreement (SMLA) in a manner that potentially reduce “opt-out” states’ financial liabilities significantly in the case of a failure in alternative radio access network (RAN) performance or public-safety adoption of the alternative FirstNet service.

These were two of the issues in the original draft SMLA that were cited most by state officials wrestling with “opt-in/opt-out” decisions during recent months. If an “opt-out” state’s alternative-RAN effort failed to meet FirstNet standards—from a financial or functionality standpoint—the state would seek to become part of the nationwide FirstNet system, the state would be responsible for “termination fee” payments up to $15 billion in the case of California.

Officials in many states described these proposed payments as “punitive” or “draconian,” expressing a belief that the figures were designed to scare state officials into making the less risky “opt-in” decision, in which AT&T would build the state RAN as part of the carrier’s nationwide deployment effort.

In addition, officials in some state—most notably, California—have expressed concern that the public-safety-adoption targets for its state were unrealistic, although FirstNet said the adoption targets cited in the draft SMLA were the same as those that AT&T has committed to meet as part of its nationwide contract.

Both of these issues were addressed late yesterday afternoon in a FirstNet e-mail to state officials and in an update to the “FirstNet Facts” section of the FirstNet web page.

“As FirstNet has always done with its outreach and consultation, FirstNet listened to the states’ concerns and is clarifying some information in the model SMLA for states seeking to opt-out,” according to the FirstNet e-mail.“For example, if the opt-out state build or operation of its RAN fails during the term of the SMLA, the state will only be responsible for the actual cost of reestablishing the RAN in the state. The revised SMLA makes clear that these actual costs will be recommended through an independent, third-party assessment.”

In recent public meetings, FirstNet CEO Mike Poth has stated that the figures included in the original draft SMLA were costs that were estimated based on a “worst-case” scenario of FirstNet having to rebuild the RAN in an “opt-out” state as a “greenfield” deployment. The e-mail and the updated “FirstNet Facts” section of the FirstNet web site represent the first written confirmation of this position.

“Any failure of an opt-out state-built RAN over the next 25 years imposes considerable costs and risks on the nationwide network and public safety, impacting both the opt-out state and every other state,” the updated web site states. “If the opt-out state build or operation of itsRAN fails during the term of the SMLA, the state will be responsible for any actual costs thatFirstNet reasonably incurs in reestablishing the RAN in the state, so that public-safety users can continue to perform their life-saving missions with minimal disruptions to their communications.

“These actual costs, to be recommended through an independent assessment, will only be known at the time the state can no longer operate the RAN.”

State officials interviewed by IWCE’s Urgent Communications welcomed the changes in the draft SMLA’s termination-fee language, noting that a “reasonable” standard should expose the state to less financial risk than a “worst-case” standard. However, they also said they wished the new FirstNet position had been clarified earlier, wondering whether alternative-RAN procurements and governor “opt-in/opt-out” decisions might have had different outcomes had the new guidance been in place when state plans were finalized in September.

FirstNet also changed the manner in which the targets for public-safety adoption within an “opt-out” state would be determined and when those adoption goals would be set. Instead of requiring an “opt-out” state to meet the same adoption targets as AT&T committed to meet in the state, the “opt-out” state would submit its own adoption targets when it makes its application to the National Telecommunications and Information Administration (NTIA), which only would happen after receiving an approval from the FCC.

“With respect to adoption requirements for public safety users for an opt-out state, the SMLA will require adherence to any user adoption assumptions provided by a state in its State Alternative Plan Program application submitted to NTIA,” according to the FirstNet e-mail.

This was supported by language in the “FirstNet Facts” section of the FirstNet web site.

“The success of the NPSBN will lie in first responders’ use of the network,” according to the FirstNet web site. “As part of its State Alternative Plan Program (SAPP) application submitted to NTIA, applicants must specify public-safety adoption assumptions. If a state’s application is approved by NTIA, any commitments the state makes regarding the use of adoption assumptions, as specified in the application, will become a requirement of the SMLA.”

Although the new guidance makes it clear that the public-safety adoption targets would be set by an “opt-out” state, it is not certain whether setting a low adoption target could be a cited by NTIA as a reason to reject the state’s applications.

In addition, officials for FirstNet and AT&T repeatedly have declined to address whether AT&T could offer FirstNet services in an “opt-out” state on spectrum other than the 700 MHz Band 14 airwaves licensed to FirstNet—and, if so, whether those subscriptions would count toward the “opt-out” state’s adoption target.

Calls by IWCE’s Urgent Communications to the NTIA were not returned in time for a response to be included in this article.

According to the FirstNet RFP that was released almost two years ago, the nationwide contractor would have to pay financial penalties for missing public-safety-adoption targets and could lose access to the Band 14 spectrum, if the adoption targets were missed badly enough.

All sources speaking to IWCE’s Urgent Communications expressed surprise by the timing of the language changes to the draft SMLA, noting that the changes were made with just nine days—and only six business days—before the Dec. 28 for most governors to make their “opt-in/opt-out” decisions.

Governors in 38 states and two territories already have made “opt-in” announcements—four in the two business days before the new guidance was released—and New Hampshire Gov. Chris Sununu has made an “opt-out” decision. Of these, governors in 22 states and two territories made their “opt-out” announcements before the final state plans were released in September, as well as before the original draft SMLA guidelines were released in October.

In addition to the actual “opt-in/opt-out” announcements, multiple RFPs seeking alternative-RAN vendors were evaluated under the guidance included in the original draft SMLA, the sources said. This timing aspect also was noted in a prepared statement on the draft SMLA from Don Brittingham, Verizon’s vice president for public-safety policy.

“It’s good that FirstNet now recognizes that its onerous opt-out conditions were unreasonable, but changing those conditions just one week prior to the opt-out deadline leaves states with no reasonable opportunity to factor those changes into their decisions,” according to Brittingham’s statement.“We believe that Congress intended for states to have a meaningful opportunity to opt-out, but unfortunately the process has not played out that way.”

Brian Carney, spokesman for Rivada Networks—a company that has competed in all of the alternative-RAN procurements to date—said governors that have made an “opt-in” announcement should reconsider their decisions in light of the new draft SMLA language.

“The ‘draconian’ and ‘unrealistic’ threat of huge termination penalties for opt-out states have already driven a number of states to ‘opt in’ to the AT&T/federal plan,” Carney said. “Now, nine days before the opt-in/opt-out deadline … FirstNet is changing the rules again and withdrawing the termination-fee threat and removing the adoption-target penalties in the earlier drafts of the Spectrum Manager Lease Agreement.

“This is good news, even if it may feel to many states like it comes too late. It’s a game changer that should lead every opt-in state to at least reconsider its position.”

A FirstNet spokesperson noted that reconstitution payments and public-safety adoption targets were not removed entirely from the SMLA. Both continue to be integral aspects of the SMLA, despite the changes announced yesterday, according to the spokesperson.

Whether governors can change their “opt-in” decisions has been debated for some time, even before yesterday’s changes to the draft SMLA. Rivada Networks officials have said that governors only sign letters of intent, so an official “opt-in” decision is not binding and can be changed until the Dec. 28 deadline. AT&T has contended that the assertion that a governor’s “opt-in” announcement is not binding is “very much misinformation.”

FirstNet’s e-mail yesterday notes that “the SMLA is not part of the state plan” that a governor would accept when making a “opt-in” announcement. When asked whether a governor’s “opt-in” announcement remains binding in light of yesterday’s changes to the draft SMLA, a FirstNet spokesperson provided the following statement:

“The governors in 40 states and territories notified us of their decision to opt in to the network, and so we are moving forward to the deliver public-safety services and implement the network in those states and territories,” according to the statement to IWCE’s Urgent Communications.

There is no question that AT&T believes that governors have the ability to change an “opt-out” announcement, as the company publicly has stated its hope that New Hampshire Gov. Chris Sununu will reverse his “opt-out” announcement.

Although Sununumade his “opt-out” announcement on Dec. 7, FirstNethas not received any notification of a decision to date, according to a FIrstNet spokesperson. In contrast, FirstNethas received notifications from all 40 governors that have made “opt-in” announcements on behalf of their states and territories.

While there may be some debate whether governors have the legal ability to change their “opt-in” decisions by the Dec. 28 deadline, many sources have said that practical matters will play a bigger role in making announcements binding.

For instance, in Vermont, the governor made his “opt-in” announcement to get a commitment from AT&T to build six additional sites—not included in the formal state plan—before the offer expired on Dec. 1, according to statement in a public meeting. On Monday, Colorado officials noted that the state had negotiated an additional 35 sites to be built by AT&T beyond those that were included in the state plan.

If governors were to reverse their “opt-in” announcement, they likely would jeopardize such negotiated enhancements to the state plan, according to sources.

Another potential complicating issue is that AT&T already has begun signing public-safety agencies located in “opt-in” states to FirstNet contracts, which provides first responders with preemptive access across all of AT&T’s network. It is unclear how those agreements would be altered, if a governor were to reverse “opt-in” decisions, according to sources.


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