FIRSTNET FACTS? Separating the Facts from FirstNet Fiction.

FirstNet says it wants you to
“Get the Facts.” Here’s what it isn’t telling you about Public Safety Broadband and the choice facing every State in the nation.

How many states have opted in to FirstNet’s federal plan?

FirstNet would like you to believe that 27 states and territories have “opted in.” But the actual number is zero. That’s right, zero.

While 27 territories and states have expressed an intention to stick with the FirstNet plan, there is no statutory procedure for “opting in,” and so, as FirstNet has acknowledged, the letters of intent are not binding on the states or their governors. Until the clock runs out on December 28, states that signed letters of intent are free to change their minds.

What happens if a State opts out, but decides it doesn’t like its RFP responses or doesn’t receive FCC approval of its State Plan?

FirstNet wants States to believe that an opt-out decision is irrevocable, but it’s not. The only irrevocable choice is to let December 28, 2017 pass without opting out. Because of the statute governing it, FirstNet made clear that if a state sends a notice of opt-out by December 28, 2017, but does not complete its RFP process within 180 days, “the construction, maintenance, operations, and improvements of the RAN within the State shall proceed in accordance with the FirstNet proposed State plan for such state.” 80 Fed. Reg. 63504, 63516 (2015). The statute also directs that if a State plan is not approved by the FCC, “the construction, maintenance, operation, and improvements of the network within the State shall proceed in accordance with the plan proposed by [FirstNet].” 47 U.S.C. 1442(e)(2)(D).

This means that, as a practical matter, so long as the State opts out by December 28, 2017, it can later return to the FirstNet proposed State plan unless its own plan is approved by the FCC. The State is not required to submit its Plan to the FCC until 240 days after the State notifies the FCC, NTIA and FirstNet of its intent to opt-out. But a State will have no option other than FirstNet’s proposed plan if it opts in or takes no action by December 28, 2017. No action is the same as opting in.

What is the accountability mechanism for States to ensure that FirstNet and its contractor actually meet the terms of FirstNet’s final State plan, and how do States negotiate changes and updates over the course of 25 years?

States have no contract privity with FirstNet. FirstNet has made clear that “the presentation of a plan to a Governor and his/her decision to either participate in FirstNet’s deployment . . . do not create a contractual relationship between FirstNet and the State,” “the presentation of a proposed plan to a State from FirstNet does not create any type of contract,” and “the presentation of the State plan does not constitute the necessary elements of ‘offer and acceptance’ to create a contract.” 80 Fed. Reg. at 63505. Yet FirstNet never has explained how States can hold FirstNet and its contractor accountable for meeting the terms of the FirstNet-proposed plan.

Nor has FirstNet explained how a state could obtain future upgrades and improvements over the course of the next 25 years. In an opt-out scenario, a State will have a contract with its vendor and can at least provide for a process that the State and the vendor will undertake as to future improvements. FirstNet has provided no public explanation of any such mechanism that will apply if a State opts in. To illustrate the importance of a future upgrade process, 25 years ago, in 1992, the web browser did not yet exist, nor did Google, Amazon, Facebook or Twitter.

Even if FirstNet’s contractor, AT&T, will have a commercial incentive to deploy new network technologies, States will have a critical interest in where new technologies are deployed over the next 25 years. States, for example, will want to ensure that new RAN technologies are deployed in sparsely populated rural areas, in addition to urban/ suburban areas or along highways. FirstNet has not explained how States will have a meaningful opportunity to influence future investment in the network or push FirstNet and its contractor to undertake those likely unprofitable deployments that will still be important to public safety.

Did FirstNet’s enabling legislation require States to enter into a Spectrum Manager Lease Agreement (SMLA) with FirstNet after achieving FCC and NTIA approval?

FirstNet asserts that “FirstNet’s enabling legislation requires that upon successful completion of the approval process, an opt-out state must enter into a SMLA with FirstNet to access and use FirstNet’s licensed spectrum.” Opt-out states may enter into an SMLA with FirstNet, but nowhere does FirstNet’s enabling legislation ever say that opt-out states need to negotiate with FirstNet for a spectrum lease, or that FirstNet could refuse to grant such a lease.

The law states that a State “shall apply to the NTIA to lease spectrum capacity from [FirstNet].” 47 U.S.C. 1442(e) (2)(C)(iii). The most straightforward reading of this language is that NTIA, not FirstNet, decides whether the State obtains a spectrum lease for that state.

Why are the proposed SMLAs confidential if their terms merely “reflect legislative requirements, standard telecommunications industry regulations, and the critical role of the Network in supporting public safety communications,” as FirstNet asserts?

FirstNet reportedly has marked its summaries of SMLA provisions confidential. But FirstNet has never explained what about these provisions makes them confidential. Because they will be provisions of a lease between the State and FirstNet, they are not proprietary contracts between commercial entities.

If they truly “reflect legislative requirements, standard telecommunications industry regulations, and the critical role of the Network in supporting public safety communications,” as FirstNet asserts, then they should be publicly available. FirstNet’s continuing lack of transparency on the SMLA is also reflected in FirstNet and its vendor’s secrecy on a number of other issues, including the extent and timing of their Band-14 build-out, the extent of their commitment to building to “public safety grade,” the vendor’s fees and whether they are uniform across the country, among other issues.

Did FirstNet’s enabling legislation authorize FirstNet to levy spectrum lease fees, termination fees, and user-adoption penalties on States?

Nowhere does FirstNet’s enabling legislation authorize FirstNet to levy spectrum lease fees, termination fees or minimum subscription penalties on States or prohibit their operation of in-state cores. The statute (47 U.S.C. 1428(a)) specifically authorizes FirstNet to assess and collect only the following fees:

• Network user fees – defined as a “user or subscription fee from each entity . . . that seeks access to or use of the nationwide public safety broadband network.”

• Lease fees related to network capacity – defined as “a fee from an entity that seeks to enter into covered leasing agreement,” which is a “public private arrangement to construct, manage, and operate the nationwide public safety broadband network between [FirstNet] and [the] secondary user . . . .”

• Lease fees related to network equipment and infrastructure constructed or owned by FirstNet “resulting from a public-private arrangement to construct, manage and operate the nationwide public safety broadband network.”

Spectrum lease fees, termination fees and minimum subscription penalties imposed on states do not fall into any of these three categories. FirstNet may claim that it can levy these fees as part of ensuring “cost-effectiveness,” see 80 Fed. Reg. at 63506, but the statute places the duty to ensure “cost-effectiveness” on NTIA, not on FirstNet. See 47 U.S.C. 1442(e)(3)(D). Any spectrum lease fee should be strictly administrative.

If spectrum lease fees are to ensure that “profitable” states won’t make FirstNet financially unsustainable if they opt out, would FirstNet collect spectrum lease fees from all 56 states and territories if everyone opted out? Are there any states where AT&T’s payments are offset by cost savings from the state opting out?

In FirstNet Facts, FirstNet asserts that it must collect fees from opt-out states that equal the payments that FirstNet would have received from AT&T, in order to be self-funding. But this is false. An opt-out state denies FirstNet revenue from AT&T, but also reduces AT&T’s and FirstNet’s costs.

Consider: If half the country opted out, but FirstNet still received $18 billion from AT&T and opt-out states, it would have the same pool of money, but half as many states in which to invest it in the network. FirstNet has given no indication that opt-out states would be eligible to tap that money in the future.

In 2015, FirstNet hypothesized that spectrum lease fees could be necessary particularly if the value of the spectrum in high density states exceeded the network’s costs. See 80 Fed. Reg. 13336, 13348 (2015). But it is not apparent whether FirstNet has actually followed that reasoning here because it has not made public the lease fees proposed for each state and in total. While there can be reasonable economic justifications for some spectrum lease fees assessed on some states or territories, FirstNet has not explained how the fees it actually proposed align with any theoretical justifications.

What is the calculated basis for FirstNet’s termination penalties to States in the SMLA?

It has been reported that FirstNet proposed termination liability penalties of up to $173 million for Vermont, up to $2.9 billion in Massachusetts and up to $15 billion for California.

FirstNet has never explained how it calculated those fees, whether it had taken into account deployed assetsfrom the State that could be used to complete the deployment and operation of the RAN in that state, or whether it had accounted for the additional revenue that its commercial contractor would now gain from access to Band 14 spectrum in that state.

FirstNet Facts still does not answer these questions or present any factual basis from which to judge the reasonableness or unreasonableness of FirstNet’s demands. It is highly unlikely that FirstNet would suffer actual damages that even approach its termination liability demands.

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