FirstNet Payments to AT&T Dependent on Number of Opt-In States
Tuesday, November 21, 2017 | Comments
The payments that AT&T will receive from the First Responder Network Authority (FirstNet) are solely based on the number of states and territories that opt in to the nationwide public-safety broadband network (NPSBN).

“The way the contract works is if we get all 56 states and territories, we will get a $6.5 billion investment from the FirstNet funds to build out our network over the next years and to put into service 20 megahertz of 700 MHz in a specific band,” AT&T Chief Financial Officer (CFO) John Stephens said at the Morgan Stanley European Technology, Media and Telecom Conference in Barcelona Nov. 16.

An AT&T spokesman confirmed the payments from FirstNet are based on the number of states that opt in to the NPSBN. So far, 33 states and territories have opted in to the network, and no states have opted out.

States have until Dec. 28 to make a decision on whether to opt in to the network. If a state does not make a decision by that deadline, it will automatically opt in to the network.

“Many of them are just going to let the time expire and automatically opt in,” Stephens said. “Many of the states and territorial governments have some more important things to do. Just think of the people in Houston, the people in Florida or the people in Puerto Rico.

“We’ve had a lot of natural disasters in the United States recently, and those governments are focusing on what they should and taking care of the people, so they may not react to the FirstNet opt-in process. They may choose to just automatically be opted in on Dec. 28.”

In its most recent quarterly report filed Nov. 3, AT&T said that it expects to spend $40 billion, some of which is recoverable from the $6.5 billion in FirstNet funding, called “success-based payments” in the report, during the life of the 25-year contract to build, operate and maintain the nationwide network.

Under the contract, AT&T will be required to make sustainability payments to FirstNet. “Sustainability payments are required to be used for the operating expenses of FirstNet and to fund network improvements included in our $40 billion estimate,” the filing said.

In its quarterly report, AT&T said it expects FirstNet annual operating expenses to be between $75 million and $100 million per year and in about the $3 billion range during the length of the 25-year contract. The carrier also said it expects that around $15 billion will be reinvested in the network after operating expenses are covered.

“As of Nov. 2, 2017, 30 states and territories have opted in to the program, representing 38 percent, or approximately $6.9 billion, of this total sustainability payment commitment,” the filing said. “The actual reach of the network and our investment over the 25-year period will be determined by the number of individual states and territories electing to participate in FirstNet.”

Those numbers put the total sustainability payments from AT&T to FirstNet at around $18.16 billion.

AT&T has been working with opt-in states on build plans.

“Our engineering team, our networking team, our FirstNet team have been working extremely hard to have all that ready,” Stephens said. “We believe we’ll be ready to go in January with a much bigger build and a great start on that effort.”

At another conference in early November, Stephens said AT&T expects work orders for the FirstNet build to come out in early January. Stephens reiterated that timeframe at the Barcelona conference.

So far, AT&T has spent about $200 million on the FirstNet effort and will likely spend more in the fourth quarter. The company hasn’t yet disclosed how much it will spend on FirstNet in the quarter, Stephens said.

Once the buildout begins and AT&T meets certain coverage milestones, it will begin receiving payments worth up to $6.5 billion from FirstNet.

In addition, AT&T sees FirstNet as an opportunity to expand into the first responder market it currently underserves, but also as an opportunity to build its government customer base, Stephens said.

“And quite frankly, when you’re talking to the fire chief, or the chief of police or the people running the emergency medical services, it’s pretty easy to then go to the mayor or county commissioner and say, how about we do smart cities for you, how about we help you with your traffic problem, how about we help you with conserving water and power because we can put these monitors and sensors in at the same time we’re building out all of this capacity for the FirstNet network,” Stephens said.

Stephens also touched briefly on AT&T’s agreement with Verizon and Tillman Infrastructure to build hundreds of cell towers. That agreement will benefit the FirstNet buildout and will help the company cost effectively and efficiently build out towers, he said.

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