Many Questions Remain for FirstNet as Build Gets Underway

Among big question marks, APCO attendees told us, is procurement. Many public safety agencies don’t choose their communications provider, with that choice made at another level of government. Another hurdle is that agencies have longstanding ties to other carriers, particularly Verizon, know how their networks work and are reluctant to make a change, APCO members said.

Jonathan Chaplin, analyst at New Street Research, said AT&T probably doesn’t much care whether FirstNet grows quickly or slowly. “Investors aren’t expecting much, other than the reimbursement for the capital expenditure required to deploy the network,” Chaplin told us. “If public safety usage is low and AT&T can use the capacity for their core mobile users, that is probably fine.” AT&T is evolving and trying to refashion itself as a “modern media company,” he said. “Management’s focus is shifting, and the revenue base is getting more diverse. FirstNet was a big deal five years ago, but it has been drowned out by the push to 5G and all of the other things going on in the business and the industry more broadly.”

But Chaplin also said it would be a "shame" if the network is built and doesn’t get broad use. “This network has been 17 years in the making,” he said. “The magnitude of investment is considerable. The benefits to all of using a single purpose-built network, where all agencies can communicate with each other is obvious. If the agencies fail to use it because of bureaucratic complacency or an unwillingness to evolve, they will be doing themselves and those whose safety they are entrusted with a disservice.”

"The FirstNet team had the opportunity to engage with numerous public safety representatives both at APCO and in the Las Vegas metro area last week,” a spokesperson said. “The overall feedback from our discussions was both positive and constructive. While there is still much work to be done, FirstNet has come a long way in one short year with the buildout kicking off just this March. We are pleased that first responders like those we heard from at APCO are taking advantage of the early benefits of their network. As always, the FirstNet Authority will continue to work directly with public safety to enhance the network and address their feedback.” The contract has incentives requiring AT&T to meet adoption targets and penalties if they aren’t met.

Ray Lehr, former assistant chief at the Baltimore City Fire Department, now a FirstNet consultant, said the network is making progress. Virginia, the first state to opt in, “very wisely” held regional conferences, Lehr said. “The average fire department, police department, [emergency medical system], was like, ‘What does that mean?’” he said. “AT&T went there and they had their salespeople, their engineering people and FirstNet.” They discussed advantages of a secure network only for public safety, Lehr said. “It all comes down to coverage in the initial phase,” he said. “AT&T said, ‘Look, if you’ve got better coverage with the other carrier or a different carrier, stay on that.’”

AT&T stressed all the places it will build antenna sites as part of the FirstNet buildout, Lehr said. He said the reach of the network will be a big advantage in rural areas. “Over the next five years, they have to have up to 99 percent rural coverage,” he said. “There’s no reason why another carrier would do that. It just doesn’t make sense.” A lot of areas today don’t have any coverage, he said. “If you build it, they will come.” Lehr predicted fast deployment, especially with the start of 5G, noting, “AT&T has met all of their milestones ahead of schedule.”

Procurement

Lehr cautioned procurement issues loom large. “Most public safety agencies don’t necessarily control their own procurement,” he said. “This isn’t just a phone anymore. Now it’s an emergency communications device.”

Justin Schreck, a captain in the Beaver Springs, Pennsylvania, Fire Company and early FirstNet adopter, said he faced resistance in his department. The lack of education about the network is an impediment to FirstNet adoption for many small departments, Schreck told us. “They don’t know what it is and maybe they don’t see the potential benefits,” he said. “Resistance to change” is a factor, he said. “Maybe they went with a different carrier for a long time and they’re afraid to change. They don’t know what to expect.”

“AT&T has an opportunity to provide data solutions to public safety, but these prospective customers are likely to continue to use legacy solutions for their mission critical voice applications,” said Walter Piecyk, BTIG analyst. “Even if AT&T is not successful at shifting public safety customers to its network, they have secured access to a valuable chunk of spectrum and secured over $6 billion of government funding for assets that can be used for its commercial customers.”

“The entire public safety community has been showing their support for FirstNet,” said an AT&T spokesperson. “Current users include federal agencies, state national guards, state patrol agencies, tribal public safety agencies, volunteer firefighters and responders and school districts.”

Piecyk cited strong Q2 results by Motorola Solutions, a major supplier of land-mobile radio units to public safety. The company reported sales rose 18 percent from a year ago to $1.8 billion and organic revenue growth was 6 percent. CEO Greg Brown told analysts that Motorola Solutions has low expectations on the sales of FirstNet-ready devices. “FirstNet revenue contribution was virtually zero again for us in Q2 as it was in Q1,” he said. “The kind of subscriber that we were looking for hasn’t materialized there.”

Status Quo

“It does not appear that public safety in the United States has altered its purchase activity much at all,” Piecyk said.

“These are problems that folks saw a mile away,” said Doug Brake, director-spectrum policy at the Information Technology and Innovation Foundation. “It doesn’t mean they aren’t hard issues to navigate, and public safety equipment will probably continue to be expensive. But regardless, FirstNet is doing far, far better than most expected even just a couple years ago. At least the Samsung S9 series supports the Band 14 FirstNet spectrum, and hopefully others will follow and we’ll see cheaper chipsets and other components. AT&T went into this with eyes wide open. I expect they can weather a gradual transition.”

A slow uptake of FirstNet by first responders would be “a mixed blessing for AT&T,” said Roger Entner, analyst at Recon Analytics. “It means slower revenue growth, but also higher data speeds because AT&T can use the unused capacity for retail customers.”