Why AT&T Wants to Build a Wireless Network for the Police

By Ryan Knutson Markets Dow Jones Newswires

Chcago, USA - April 26, 2011: A group of Chicago's Finest are seen here patrolling the area around the historic Water Tower and John Hancock building. With over 13500 sworn officers and dating back to 1837, the Chicago Police Department is one of the ... largest and oldest in the nation. (RiverNorthPhotography)

For first responders and law enforcement, the benefits of the dedicated nationwide network announced on Thursday are obvious. 

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The network, to be called FirstNet, will prioritize data traffic from police officers, firefighters and other emergency responders, so they won't be subject to the same network congestion consumers face. That is crucial in a disaster, when citizens often rush to their phones all at once. The network will also operate in very rural areas and across jurisdictions, so that if police from a neighboring town arrive to help, their devices will still work. 

But what's in it for AT&T Inc., which won the 25-year contract to build FirstNet? 

The second-largest U.S. wireless carrier by subscribers gets two things: a large swath of wireless airwaves, known as spectrum; and $6.5 billion over five years for construction. AT&T will be allowed to use the 20 megahertz of spectrum in its commercial network, which is about 13% of its current holdings. That means AT&T wireless consumers will receive faster connections thanks to the extra capacity, which AT&T hopes will entice new customers. 

AT&T says it will spend $40 billion over the 25-year contract to build and maintain the network, which it says will create 10,000 jobs. It expects to generate revenue by selling subscriptions to public safety agencies and selling the extra capacity to commercial customers. 

While AT&T won the national contract, it now must compete at the state level. Each state has the ability to opt out of AT&T's network and instead build one of its own, which it may want to do if it believes it can develop a better network with another provider, offering, for example, more rural coverage. If a state opts out, AT&T would lose access to the airwaves in that state. 

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A startup called Rivada Mercury LLC says it will try to pick off some states. Five of them, Colorado, New Hampshire, Alabama, Arizona and Michigan, have issued requests for proposals to explore their options. 

Rivada's business model is to use the 20 megahertz to build a brand new network and resell the capacity to wireless carriers or any other company that wants connectivity, such as a trucking firm that wants to track its rigs, for instance. 

Because populous areas subsidize more rural ones, experts worry that the entire project could be harmed if too many large states opt out. Another risk would be public safety agencies not switching from their existing wireless carriers to FirstNet.

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