Rivada chases deals with states that opt out of FirstNet

When AT&T was awarded the contract to build the FirstNet public safety network, it seemed that the US had finally, after 15 years of disputes and setbacks, achieved its goal of a national, unified system for emergency response. However, individual states do not have to sign up for FirstNet, and some are considering an alternative which is being proposed by Rivada Networks, a safety systems expert, backed by Macquarie Capital.

The two companies said they will cooperate to pursue opt-out states, with Colorado looking likely to be their first sign-up. The state said last week that it had selected Rivada and Macquarie to build and maintain an LTE network specifically for emergency response, should state governor John Hickenlooper decide to opt out of FirstNet.

And Rivada and its partner said they are also “actively pursuing other opportunities” to provide public safety networks and services, and even broader wholesale wireless services. Verizon is also offering an alternative to FirstNet running on its 4G network. Cities and towns in states that opt in do not automatically have to follow suit, but can also choose a rival service.

This is all part of a growing trend for vertical industries with specialized needs to turn to private cellular network providers rather than trusting systems which run over the main MNO network.

But in the case of FirstNet, there will be powerful incentives for governors to join a unified national system. Already, 31 states and two territories have opted into FirstNet, and commissions set up in Georgia and Florida to study the issue recently recommended their governors to opt in too. However, California has issued a request for proposal (RFP) from FirstNet competitors, and New Hampshire governor Chris Sununu has set up an ‘opt-out review committee’ to consider the regulatory and financial risks of opting out. All states have to decide by December 28.

“For states that opt out, our two companies will work together to develop and finance the build-out of their FirstNet opt-out radio access networks,” Nick Butcher, global co-head of Macquarie’s infrastructure and energy business, said in a statement. “We are pleased to have received the conditional award from the Colorado Governor’s Office of Information Technology and look forward to working with the state to develop this exciting project.”

Of course, the economics of building the FirstNet system will work best for AT&T if it can secure all the states. It will spend $40bn over the 25-year contract on the system and will have access to a 20 MHz chunk of 700 MHz spectrum which was set aside to be prioritized for emergency response. The operator is being paid $6.5bn for designing and operating the network for federal, state and local authorities, and can sell excess capacity for retail or wholesale services. AT&T will spend roughly $40bn over the life of the 25-year contract to deploy and maintain the network.

The main objection that some states have to FirstNet is the spectrum manager lease agreement (SMLA) which is included in the terms and conditions, and includes high payments for opting out or terminating the deal if the state cannot meet FirstNet’s technical and operational obligations. That would cost Pennsylvania, for instance, billions of dollars, according to a recent study by Urgent Communications, but the state would pay nearly $1bn over 25 years to lease spectrum from FirstNet if it opted out.

California has said that opting out would require “an unrealistic number of subscriptions/connections” as well as nearly $3bn in spectrum lease payments and more than $15bn in penalties.