Compensating Commercial Carriers for Public Safety Use: Pricing Options and the Financial Benefits and Risks

Wireless broadband communication has the potential to revolutionize emergency response. While public safety wireless systems and commercial wireless systems have historically employed incompatible technologies, recent developments make it likely that both will adopt LTE technology, thereby creating a unique opportunity to supplement dedicated public safety infrastructure with roaming access to commercial networks. This was recommended in the FCC‟s 2010 National Broadband Plan but important details have yet to be addressed, including how commercial carriers will be compensated. Thus, this paper develops a cost model which is used to analyze the financial benefits and risks of enabling roaming access from both the perspective of public safety agencies and commercial carriers. It finds significant benefits associated with roaming, and some risks, which can in part be mitigated by the choice of pricing scheme. From public safety‟s perspective, the key financial benefit to priority roaming is the potential to deploy fewer costly cell sites by relying on roaming during periods of peak usage. Public safety agencies, when designing their networks, implicitly decide the worst-case scenario that can be supported. If the worst-case scenario prepared for would result in utilization levels of less than 10% (over the entire multiyear lifetime of the cell site), this paper demonstrates that the net present value (NPV) of total costs can be decreased by paying for more roaming services and deploying less dedicated infrastructure. Thus, the more severe the worst-case scenario planned for, the greater the cost savings roaming capability provides. Depending upon how roaming is structured, there are also potential risks. Enabling priority roaming could potentially lead to problems if public safety agencies have no incentive to use commercial capacity efficiently, or if roaming during unexpected events leads to costs that well exceed annual budgets, or if public safety roaming traffic reduces commercial revenue by displacing commercial subscriber usage and/or leading to increased subscriber churn. However, this paper shows that these risks are small or can be mitigated by choice of pricing scheme and, in particular, that a usage-based pricing scheme has several advantages over a flat-rate scheme. Usage-based prices provide an incentive for public safety agencies to deploy their own infrastructure when doing so is more cost-effective than roaming. If public safety pays commercial usage-based rates, this paper demonstrates that there is limited risk of public safety having to rein in usage due to cost during a serious localized emergency (as roaming costs would be orders of magnitude less than other public safety costs, such as personnel overtime). Furthermore, this paper shows that there is little financial risk to carriers if public safety pays commercial rates, since public safety roaming traffic could only increase carrier usage-based revenue and isn‟t overly likely to increase subscriber churn. * The authors gratefully acknowledge the financial support of the U.S. Department of Education's Graduate Assistance in Areas of National Need. † Ryan Hallahan, Ph.D. in Engineering and Public Policy from Carnegie Mellon University; [email protected] ‡ Jon M. Peha, Professor of Electrical Engineering and Public Policy, Carnegie Mellon University, [email protected], www.ece.cmu.edu/~peha All research presented here was performed at Carnegie Mellon University. Opinions expressed belong to one or both authors, and do not represent any other individual or organization.