CoBank Report Highlights FirstNet’s Effect on Rural America, Carriers
Friday, November 30, 2018 | Comments

A private bank catering to the rural economy said rural wireless providers will likely see short-term benefits from the First Responder Network Authority (FirstNet) but could see long-term competitive challenges from FirstNet partner, AT&T, along with Verizon and Motorola Solutions.

The report from CoBank found that the buildout of the FirstNet nationwide public-safety broadband network will enable rural wireless operators to evolve their business model with AT&T from roaming agreements to infrastructure-based models. The shift is expected to provide a more reliable and predictable revenue stream for local wireless operators.

CoBank’s Knowledge Exchange Division said FirstNet represents a near-term opportunity for rural wireless operators, as AT&T is expected to partner with rural operators for fiber backhaul, tower leasing, site acquisition and construction. However, the long-term competitive threat of AT&T entering new rural markets and building out its distribution presence should not be ignored, the report said.

“AT&T has a lot of work to do in rural America to meet the FirstNet requirements and to have a network footprint that will enable it to acquire first responder customers,” said Jeff Johnston, a lead economist with CoBank. “It stands to reason that AT&T will want to build out coverage to replace the roaming agreements currently in place. Rural operators will need to convince AT&T that it’s better for it to lease space on existing towers owned by rural operators rather than building its own.”

“The agreement between AT&T and FirstNet is confidential and very little is being shared regarding the build plan,” CoBank said. “Although it is known that AT&T is required to use rural network operators for 15 percent of the network coverage.”

An AT&T spokesperson said the carrier is working with rural carriers to provide 700 MHz band 14 in remote areas, as well as other connectivity through roaming agreements.

During an investor presentation Nov. 29, John Donovan, CEO of AT&T Communications, said AT&T is six months ahead of schedule in its FirstNet buildout. AT&T has covered one-third of the square miles that the company is expected to cover contractually.

In the FirstNet RFP, the contractor is required to hit 20 percent of its band 14 coverage in rural areas after a year and 60 percent of the contractor’s proposed band 14 coverage in rural areas after two years.

In August, Jeff Bratcher, FirstNet chief technology and operations officer, said the contract’s task order four requires AT&T to build and operate the radio access network (RAN) in each state and territory and provide certain percentages of band 14 coverage in rural and nonrural areas within certain timeframes of signing the task order. FirstNet will also report any state-specific commitments identified in the state and territory consultation letters. Bratcher said FirstNet is validating band 14 site buildout.

FirstNet has established internal validation and verification processes for task order four coverage deliverables. In addition, the FirstNet request for proposals (RFP) required bidders to demonstrate rural partnerships, a FirstNet spokesperson said.

“FirstNet is committed to ensuring public safety gets coverage where it is needed most,” the FirstNet spokesperson said. “… It is still early in the buildout process, but AT&T has hit the ground running, and we look forward to continuing to work side by side with the public-safety community to ensure FirstNet lives up to its promises.”

To meet the FirstNet coverage mandate, AT&T will deploy more than 1,000 new towers, many of which will be in rural America. “Given that the company has critical network milestones that must be met, it is likely AT&T will partner with existing rural broadband providers for network backhaul,” the report said.

The CoBank report suggested that AT&T will look to partner with companies that have tower assets in place versus building new towers, especially in remote locations. “Rural wireless operators need to convince AT&T that it’s better for it to lease space on existing towers (owned by the rural operators) versus building its own,” the report said.

The short-term impact of FirstNet on rural wireless operators is more predictable than the longer-term competitive impact. Currently, most rural wireless operators consider Verizon as their biggest top-tier competitor, but that could eventually change if AT&T has success with FirstNet and begins to build out its distribution presence in new rural markets.

“AT&T is hungry for growth opportunities and likely sees the infrastructure it’s putting in place for FirstNet and first responders as an opportunity to win business with families of public-safety subscribers,” said Johnston. “This ‘land and expand’ strategy could eventually become a threat to rural wireless operators.”

During the Nov. 29 investor presentation, an AT&T executive said AT&T’s market share with first responders is low, and there is a high correlation between first responders and their families. The company is putting stores in places where it has never had them before.

CoBank noted AT&T’s recent announcement that it has more than 250,000 FirstNet connections, “… but it’s unknown what percent of these are data modem connections, where average revenues are significantly lower than postpaid smartphones,” the report said.

The report offers a pie chart estimating the LMR public-safety market share by vendor. The chart shows Motorola Solutions with 72 percent of the market, JVCKENWOOD with 12 percent and Harris with 10 percent. Other vendors hold the remaining 6 percent of the market, the report estimates based on industry analysis and surveys.

Rural carriers and AT&T will compete with Motorola for the mission-critical push to talk (MCPTT) market once that technology is commercially available.

In the commercial operator space, a chart estimates Verizon with 70 percent of the LTE public-safety market share, followed by AT&T with 20 percent and Sprint/T-Mobile with a combined 10 percent.

“We’re aggressively building out the FirstNet network across the country,” said the AT&T spokesperson. “We’re months ahead of schedule in our band 14 coverage and have already hit our initial coverage milestone from the FirstNet Authority well in advance of the initial timeline. Rural connectivity is one of FirstNet’s top priorities, and we continue to work closely with the public-safety community and state officials to ensure they have connectivity where they need it most. Plus, FirstNet subscribers have access to a nationwide fleet of 72 FirstNet deployables to support their response efforts.”

The full CoBank report is here.

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Comments
On 12/6/18, Leon van der Linde said:
This could hurt the smaller companies badly. Especially if AT&T starts to cut into the small operator customer base. This should be closely monitored.
But this looks all nice and rosy. What happens down the line if AT&T does not win the next contract tender? All the eggs are now in one AT&T basket. Have they thought that AT&T can hold them ransom in the future? This is very scary.
Just wondering.

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