States Still Waiting for SMLA Clarity from FirstNet
Tuesday, December 05, 2017 | Comments

With the Dec. 28 opt-out deadline looming, concerns with draft spectrum manager lease agreements (SMLA) that states that opt out would be required to sign to access the First Responder Network Authority (FirstNet) 700 MHz band 14 spectrum have not been adequately addressed, state officials said. A FirstNet spokesman said the SMLAs are meant to ensure FirstNet's mandated mission and are comparable with AT&T's terms and requirements.

Officials continue to be concerned about the lack of clarity regarding the penalties, rates and benchmarks outlined in the draft SMLAs. In October, FirstNet distributed draft SMLAs to states that requested the information. The SMLAs include proposed termination payments in the millions — and billions in at least two instances — of dollars for some states, along with prohibiting separate core networks and outlining adoption targets and interoperability requirements.

FirstNet has met with all states that have requested meetings on the SMLA and is open to working with states to address issues particular to the state, a FirstNet spokesman said.

Members of the FirstNet Colorado team, the Colorado State Broadband Office and the Colorado Attorney General's (AG) office met with FirstNet representatives in late October to discuss the SMLA. At the time of the meeting, FirstNet stated a reluctance to modify the SMLA, said Brian Shepherd, Colorado’s state single point of contact (SPOC).

California SPOC Pat Mallon said although FirstNet representatives were present at a recent CalFRN board meeting, state officials were not told the SMLA was negotiable and did not receive further clarity regarding the spectrum use fees, justification for adoption benchmarks or rationale for the penalty assessment if the state begins to build its own radio access network (RAN) and later abandons the effort.

“Although discussions related to the SMLA do not need to be undertaken until after the opt-out process is successfully completed, FirstNet anticipates a state that provides statutory notice of its decision to opt out may wish to discuss the SMLA as they develop their alternative plan,” a FirstNet spokesman said. “FirstNet will engage in discussions with the state at that time, or later, as requested by the state.”

During a November House hearing, California Rep. Anna Eshoo asked FirstNet CEO Mike Poth about a $15 billion penalty included in the California SMLA. “There aren’t any penalties right now,” Poth said. “That was FirstNet’s attempt in trying to make sure in our full transparency … if they opt out and they have a problem where they have to default … the estimates could be as high as that number.”

“Mr. Poth told the congressional committee that the penalty assessment for non-completion of a state RAN was based on the cost of a greenfield build of a FirstNet RAN,” said Mallon. “However, assuming that AT&T would undertake the task of a FirstNet RAN in California, it is likely their existing infrastructure would be used for such deployment as set forth in their state plan and at a significantly lower cost than the penalty. Alternatively, assuming the cost of RAN deployment in California is equitable to the penalty assessment proposed by FirstNet, it follows that a similar amount is being dedicated by AT&T to their FirstNet deployment in this state. If that is the case, such a commitment should be transparent.”

During the hearing, Poth said the subscriber adoption targets in the SMLA are comparable to AT&T’s adoption targets.

The spectrum payment amounts for each state were determined through FirstNet’s request for proposals (RFP) process and reflect the market value of the spectrum, the FirstNet spokesman said. “Under the NPSBN contract, FirstNet receives substantial and guaranteed payments from its NPSBN contractor for use of the FirstNet licensed spectrum over the next 25 years,” he said. “Similarly, an opt-out state that seeks to use the FirstNet licensed spectrum is expected to make payments in the amounts that would have been received for use of the spectrum in that state under the NPSBN contract.”

Mallon said California is concerned about the lack of transparency regarding the establishment of rates, benchmarks and penalty assessments in the SMLA. “As for spectrum usage fees, FirstNet should illustrate how the fee was established and demonstrate an evenhanded approach with each state based on population and geography,” he said. “Adoption benchmarks should be based on the actual number of public-safety responders in the state and not some obscure statistic without proper authentication. Any such benchmark must be equitable with the metrics established for AT&T’s deployment. The basis for these benchmarks cannot be shrouded behind the cloud of ‘proprietary contractual’ language.”

Chris Sambar, AT&T senior vice president, said he has seen only a few states’ SMLAs, but the annual spectrum network capacity payments in those SMLAs are in line with AT&T’s sustainability payments to FirstNet, which AT&T pays to FirstNet to use its spectrum. Sambar used New Hampshire as an example, saying the annual spectrum network capacity payments outlined in New Hampshire’s SMLA are about the same as what AT&T would pay if New Hampshire opts in. Sambar said AT&T was not involved in developing the formulas for the fees.

“I don’t know how FirstNet calculated those fees,” Sambar said. “I don’t know what they are predicated on or what they will be in the end.”

“The SMLA includes comparable terms and requirements to those that FirstNet’s network contractor is contractually bound and accountable for in opt-in states,” the “FirstNet Facts” webpage said. “In other words, we are asking no more of an opt-out state than what we are requiring of our NPSBN contractor to ensure the sustainability, interoperability and security of the network for public safety.”

Shepherd said that as currently written, the SMLA is not compliant with the Colorado constitution. “Requirements for multiyear commitments and other contracting specifics are in conflict with elements of TABOR [Colorado’s Taxpayer Bill of Rights] and other constitutional requirements,” he said. “The AG's office is currently reviewing the initial SMLA and working with FirstNet counterparts to discuss the elements that must change to be compliant with the Colorado constitution.”

Mallon said CalFRN’s legal team has not yet completed a thorough review of the SMLA, and the state has not yet received a complete draft of the SMLA.

On Nov. 17, the California Governor’s Office of Emergency Services released a request for proposals (RFP) to provide the state with a public-safety broadband network that will fully interoperate with FirstNet. The award is contingent on the state’s decision to opt in or out of the FirstNet network, and the RFP is not an indication that the state has decided to opt out of FirstNet.

“California continues to evaluate AT&T’s deployment plan and has articulated our concerns with AT&T,” Mallon said.

On Nov. 16, the Colorado committee tasked with reviewing the responses to the state’s RFP for potential FirstNet opt-out partners issued a conditional award to a combined bid from Rivada Networks and Macquarie. The award is contingent on the FirstNet Colorado Governing Body’s (FNCGB) recommendation to the governor and the governor’s ultimate decision to opt in or out of the proposed FirstNet state plan.

On Nov. 28, the National Telecommunications and Information Administration (NTIA) released the application requirements necessary for states that decide to opt out of FirstNet. One of the requirements requires states to provide a letter of intent to FirstNet indicating the state’s willingness to enter into an SMLA and make the payments included in the SMLA.

“The SMLA terms and conditions are intended to ensure the success of FirstNet’s congressionally mandated mission, reflect the requirements of the law and the substantial responsibility of building, operating and maintaining a network that meets the needs of public safety for over two decades, and are in parity with the terms and conditions that FirstNet’s nationwide contractor must meet in opt-in states,” the FirstNet spokesman said.

“We are very concerned at the punitive nature of the SMLA and its impact on the state's ability to exercise the statutory right to opt out of the national plan,” Colorado’s Shepherd said. “FirstNet would not supply supporting documentation for the lease payment amounts, penalties or termination fees so it’s difficult to gauge the validity and potential impact.”

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