FirstNet questioned Rivada's finances, business model, court docs show

FirstNet banner (monica alleven)
The U.S. Department of Commerce granted AT&T the FirstNet contract last week, giving the carrier access to FirstNet’s 20 MHz of 700 MHz low-band spectrum and $6.5 billion for designing and operating the nationwide network for federal, state and local authorities, with the right to sell excess capacity on the system.

AT&T was awarded the contract to build the nation’s first LTE network for first responders after FirstNet determined Rivada Mercury’s proposal and business model were simply too risky, according to documents released late Friday by the U.S. Court of Federal Claims.

The U.S. Department of Commerce granted AT&T the FirstNet contract last week, giving the carrier access to FirstNet’s 20 MHz of 700 MHz low-band spectrum and $6.5 billion for designing and operating the nationwide network for federal, state and local authorities, with the right to sell excess capacity on the system. AT&T will spend roughly $40 billion over the life of the 25-year contract to deploy and maintain the network, the Department of Commerce said, integrating its network assets with FirstNet's.

FirstNet had wanted to award the contract before the end of last year, but one of the bidders, Rivada, said it was wrongly removed from the list of potential contractors. The federal claims court rejected that argument.

The ruling had been sealed initially, but was released Friday after Rivada and AT&T were submitted proposed redactions. FirstNet’s Source Selection Agency (SSA), which was tasked with analyzing the proposals, found Rivada’s lacking on several fronts.

“The SSA noted that ‘(a)lthough the number of strengths, weaknesses, and/or deficiencies (was) not controlling, Rivada’s proposed approach contain(ed) deficiencies and/or (a) combination of significant weaknesses that, if accepted, would introduce excessive, increase risk’ making successful performance ‘highly unlikely,’” according to the court’s ruling (PDF). The SSA also concluded Rivada’s business model had “inherent risks that could negatively impact its financial stability,” the court said, and expressed concerns Rivada may not be able to build the network unless it could obtain “substantial” debt financing.

“FirstNet is pleased the court was able to quickly release the reasoning of its decision,” FirstNet CEO Mike Poth said in prepared remarks. “It clearly validates our thorough and quality acquisition process, which was designed and implemented to provide FirstNet and public safety with the best value, most sustainable and lowest risk approach to deploying the nationwide public safety broadband network.”

Rivada has indicated it will appeal the ruling and is moving forward with plans to work with states individually to build dedicated networks for public safety. Indeed, Rivada has said it is already working with New Hampshire on an alternative plan for that state should it decide to opt out.

Regardless, awarding the contract to AT&T provides a significant lift for a tower market that has languished in recent months amid speculation of looming consolidation among U.S. carriers.

“Simply stated, doing FirstNet together with AWS-3 and WCS will require one tower climb rather than two,” Nick Del Deo of MoffettNathanson wrote in a recent note to investors. “AT&T is the industry’s biggest single customer and its retrenchment over the past couple years has been the primary factor behind the slowdown in domestic leasing activity … The tight build timeframe associated with FirstNet—60% coverage within two years, 80% within three years, and so on—all but forces AT&T to utilize existing tower infrastructure and limits its negotiating leverage since it can’t afford to wait (the economics of leveraging its existing network also means existing sites will get amended, and the towers will benefit in proportion to the share of AT&T’s network that each hosts).”