Jim Lipinski ENP – Accenture Federal ServicesJoel McCamley ENP – 911 Authority LLP

Designing Relevant Funding ModelsJune 18, 2013

Our purpose today

Challenge you to think differently about funding

Explain the importance of alignmentExplore the problems with the models

in current useIllustrate the need to changeProvide guidelines and ideas to

address the problemStart the discussion on alternatives

and next steps

Funding 9-1-1 has always been a problem

When we think we have it right, something new comes upAdvent of wirelessPre-paid wirelessRaids on 9-1-1 fundsThe patchwork quilt of 9-1-1

jurisdictions

Now we have the added complexity of dealing with funding NG9-1-1

The number of potential “users” increases

The complexity of the systems increases

The pressure on the funding models increases

Our funding models couldn’t keep before and now it is even more

difficult

Look at what we have today:Most common current models

Per capita basisDevice purchase

or use basisPoint of saleBill and keepLandline

Wireless – localWireless – state Pre-paidVoIP streamsOthers

…and what it covers

SystemsCPECADMappingLoggingFurnitureNetwork/

telephony

Operating costsPersonnelMaintenance

agreements Service contractsCenter operationRadio, vehicles,

MDT, Command Posts etc.

Given this complexity, how do we ensure adequate funding for our NG-9-1-1

initiatives?Adequate to make the switch to NG9-

1-1Adequate to sustain NG9-1-1Adequate to grow NG9-1-1Adequate for what comes after NG9-

1-1

Move away from funding models that don’t align with your environment

1. Recognize that our current funding models are EOL

2. Stop tweaking what doesn’t work

3. Create new funding models that align with the current environment

FINISH BY

It is EOL because due to today’s trends, it doesn’t capture all the funds that it

should MobilityRapid technological transformationDeclining telecommunication costs

when adjusted for inflation

77% of those working in Arlington County, VA live elsewhere

Cape Cod has 215k year round residents but 665k in the summer

Many college dorms do not provide phones

I pay my USF to VT, but live most of the time in DC

We no longer make the majority of our calls at home

We don’t use our phones exclusively where we pay our phone bill

It doesn’t matter which funding variant (POS Prepaid excepted) is used, in the cases show to the left funds go to the billing jurisdiction

However, Service is usually provided by others

It fails to capture funds in the face of mobility

We have been chasing technology with our funding approach

From the moment new technology comes out until we figure out how to collect on it, we lose that money forever

To keep up, funding needs to be as nimble as technology, or fundamentally changed

It doesn’t keep up with change

The iPhone is not even six years old

Cost of phone service Has held steady as a

percentage of household income since the early 80s

But now includes Internet, more lines, entertainment, etc.

Choice holds down costs Skype vs. International

calls

Cost to run a 9-1-1 system

Costs keep going up

Demands and expectations keep going up

Basic economics work against the many of the current funding models

If the costs which are taxed hold steady, but the costs that the tax covers rise, the tax rate will need to rise as well. This is not sustainable long term

We need to stop tweaking what doesn’t work

Look at all the effort that went into prepaid

What do you do when everyone gets their prepaid phones over the internet?

How will roads be paid for when cars are electric?When/if the time comes, nothing can be done

with a gas tax to adequately fund roads, just as tweaking a hay tax wouldn’t pay for our roads today

Tweaking the existing model won’t work because it is fundamentally broken

It dates back to the 60s when every phone was a landline

It assumes point of billing = point of service

It assumes a telco is the only way to get phone service

To unlock the value of NG9-1-1 you will probably want to partner

You may rely on other jurisdictions to handle your overflow volume

You may end up collaborating with your day to day operations

How will that work with your funding model?

How do you sustain a partnerships if funds don’t follow calls?

Without the partnerships, many of the benefits of NG aren’t attainable

It doesn’t align with Next Generation capabilities Example: collaboration

To create a funding models that align with the current environment, look at

the world we live inIf we started from scratch, would we

build the same funding model we use today?

What would we come up with if reality guided funding model development

To understand what will be successful we need to look at the list of problems

It needs to work with mobility

It needs to work with new technology

It is based on economically sound revenue streams

It needs to support partnerships

Let’s add some long-held core principles

It has broad support by all or most stakeholders

The costs should be borne by those who benefit

Service should be consistent regardless of local limitations (basic level of service everywhere)

We don’t want to discourage the legitimate use of 9-1-1 by directly charging for a 9-1-1 call

And a few new ones

The funding model is transparent and accountable

It is sustainableIt incentivizes system improvement It draws attention to what works well

It works with mobility

It works with new technology

It is based on sound economics

It works with partnerships

It works in the face of change

It has broad support

It is supported by those who benefit

It provides consistent service

It doesn’t rely on charging for a 9-1-1 call

It is transparent & accountable

It is sustainable

It incentivizes improvement

It rewards what works well

An aligned funding model will have the following characteristics; these are our

RFP requirements

What has been done so far?

There have been several studies that looked at funding2007 – Next Gen Partners2007 – iCERT2012 – Vermont Legislature

All reached the conclusion that we need to redo funding and there were many common recommendations

NENA Next Gen Partners Funding Report 2007

Completed in 2007 - Major Findings NG9-1-1 envisions a system with shared costs amongst all

participants in the NG9-1-1 system

Relying on the current patchwork 9-1-1 funding model is not sufficient to maintain the current 9-1-1 system, let alone provide for the essential evolution to NG9-1-1

Maintaining the status quo, for the 9-1-1 system architecture or the methods that fund it, is simply not an option

NENA Next Gen Partners Funding Report Cont…

7 Principles for Funding1. Funds collected must be used for their intended purpose - No

raiding for non-9-1-1/emergency communications purposes2. Funding from all access methods – Any communications device in

which the public has an expectation to receive emergency services3. Technology and competitively neutral4. Equitable allocation of revenues5. Constantly evolving system focused on improving level of service6. Efficient, accountable operations7. Coordination, cooperation and collaboration amongst all industry

players and government entities

NENA Next Gen Partners Funding Report Cont…

6 Models Identified1. Fixed amount surcharge on all calling services2. Surcharge on access infrastructure provider

(AIP)3. Universal Statewide Communications Surcharge

(ex. VA)4. Universal Federal Communications Surcharge5. User (incident) fee6. General Fund Tax Revenue (federal, state and

local)

iCERT Report on the Health of the 911 System

Completed in 2007 - Major Findings 9-1-1 is a Public Good and Innovation Should Be Promoted

Citizens expect uniform and reliable 9-1-1 service across jurisdictional boundaries, across communication devices, and across different communication services

Incumbent 9-1-1 service providers (“9-1-1 SPs”) are unlikely to champion an upgrade absent regulatory change

iCERT Report on the Health of the 911 System

Four stages of 9-1-1 funding

2. Remittance Stage: service provider remits

collected amounts to relevant local or state agency

3. Allocation Stage: agency to which funds are remitted

distributes funds to other 9-1-1-

related agencies and/or cost recovery to

service

Local State Service Provider

(cost recovery)

1. Collection Stage: 9-1-1 funds collected by service provider;

common inputs collected include end-

user surcharges on wireline, wireless,

and/or VoIP access lines

4. Usage Stage: agencies make purchases with

9-1-1 funds; funds may be

supplemented with

providers CPE general revenue funds and/or

grants (including federal monies)

iCERT Report on the Health of the 911 System

Five Policy Recommendations for 9-1-1 Funding1. 9-1-1 Services Must Be Better Aligned With the Expectations and

Demands of Consumers and Citizens

2. Responsible Policymakers Must Have a Viable Funding Strategy for Achieving Next Generation 9-1-1

3. The Public Good Nature of 9-1-1 Today Suggests That 9-1-1 Funding Models Should Be Augmented by Financing That Facilitate Capital Expenditures

4. Greater Oversight Should Be Used to Monitor Fund Collection, Deter 9-1-1 Funding Raids and Ensure that 9-1-1 Purchases Reflect Sound Judgment

5. 9-1-1 Surcharges Should Be Assessed in a Principled Manner That Promotes Competition

An innovative model was presented in a report to the Vermont Legislature, but

has not been implemented9-1-1 agencies publish a per call rateCarriers are charged for delivering

calls to 9-1-1Carriers recover the charges by

spreading them across their subscriber base

Funds follow the callCarriers are compensated for their

service

http://www.leg.state.vt.us/reports/2012ExternalReports/274190.pdf

Our purpose is not to push a specific model, rather illustrate the urgency to

develop a new approachEverything points to continuing

difficulties if funding models are not aligned with the current environment

We’re not going to fix this problem in this room today

It is time to turn up the heat on this conversation

We need to put everything on the table

Leadership is needed

The way forward:

Begin the conversation at your levelNENA/NASNA Committee on funding

modelsInvolve all stakeholdersEspecially the carriersDevelop model legislationCreate a legislation agenda

References for the 9-1-1 Funding Discussion

Federal Communications Commission, Communications Security, Reliability and Interoperability Council, Working Group 4B. (2011, March). Transition to Next Generation 9- 1- 1 Final Report. Washington, DC: Author. http://transition.fcc.gov/pshs/docs/csric/CSRIC- WG4B- Final- Report.pdf 

NENA NG Partner Program. (2010, March). Next Generation 9- 1- 1Transition Policy Implementation Handbook. Arlington, VA: National Emergency Number Association. http://www.nena.org/?NGPPPolicyTransHndbk

NENA NG Partner Program. (2007, March). Funding 9- 1- 1 Into the Next Generation: An Overview of NG9- 1- 1 Funding Model Options for Consideration. Arlington, VA: National Emergency Number Association. http://www.nena.org/?NGPP_911FundingRpt

9- 1- 1 Office. (2009, February). NG9- 1- 1 Transition Plan. Washington, DC: Department of Transportation. http://www.its.dot.gov/ng911/pdf/NG911_Transition_PlanFinal.pdf

Weiser, P., Hatfield, D., & Bernthal, B. (2008). “The Future of 9- 1- 1: New Technologies and the Need for Reform” Journal of Telecommunications and High Technology Law. Vol. 6, No 2, pp. 213- 292. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1146803

Questions/Discussion

Thank you

James.r.lipinski@accenturefederal.comJoel@911authority.com