Mar 22, 2016
During the past year, we’ve used this column space on several occasions to outline the difficult challenges that a state or territory will face, if its governor decides that the jurisdiction should “opt out” of—a choice that could be a little more than a year away, based on the timelines in the FirstNet request for proposal (RFP).
In its legal interpretations, FirstNet has been clear that it plans to have each of the 56 states and territories contribute its fair share of the cost for the proposed nationwide public-safety broadband network (NPSBN). And a “fair share” should not to be confused with an ‘equal share.” The shares will be different, based on the financial opportunity that FirstNet’s selected contractor perceives is available in the state or territory.
Some states and territories that are more densely populated are expected to generate more revenue from public-safety users and secondary commercial customers than it will cost to build and operate the first-respondernetwork within the jurisdiction. For the purpose of this discussion, many people call these the “plus” states and territories. The District of Columbia (D.C.) is the easiest jurisdiction to identify in the “plus” category, and New Jersey is the most densely populated state.
On the other hand, there are states and territories where the revenue generated from users will not match the cost to build and operate the network. These are known as “minus” states, for the purposes of this FirstNet financial conversation (i.e., this is not a reflection on the states as places to live or anything else). With its massive, challenging geography and sparse population, Alaska is the poster child of the “minus” states, while several states in the western U.S. also fit the description.
Conceptually speaking, the “excess” revenues generated in the “plus” states will be used to help offset the costs in the “minus” states.
There is considerable debate within the industry about how many “plus” states exist. Some early FirstNet documents indicated that there might be only a handful, while others in the industry have said that about half of the states and territories meet the definition. (Note: Much of this input was received when there was an expectation that the FirstNet deal would be in the 10-year or 15-year range. Now that the RFP has designated this as a 25-year deal, the number of “plus” states and territories could have changed.)
It is important to remember that a governor’s “opt-out” decision does not mean the state or territory is not participating in FirstNet, it just means that FirstNet will not build and operate the radio access network (RAN) in the jurisdiction. Under the opt-out provisions, an opt-out state has to pay to build and maintain the RAN within its borders, while mirroring all nationwide FirstNet upgrade schedules, software updates and security procedures.
With this in mind, no one expects the governor of a “minus” state to choose the opt-out alternative, because the state would not get enough revenue from the endeavor to cover the cost of the network, which means it could become a money pit for the state forever. In these states, it makes more sense for the governor to agree to the plan proposed by FirstNet (with considerable help from the selected contractor), which takes the state off the financial hook completely for delivering FirstNet services within its boundaries.