Consolidation of public safety wireless networks: An options-based economic analysis of numerous scenarios

The Korean National Emergency Management Agency proposed to replace existing public safety wireless networks of 46 agencies with a nation-wide consolidated network. This study compares the public-private partnership alternative of sharing a network with the conventional alternative of building a government autonomous network. Using exploratory modeling and real option analysis which compute path-dependent values (including network effects and switching costs) of all the plausible sequential incremental investments against a wide range of future states, this study has designed adaptive investment strategies (“start robust, then adapt”) which start in the highest pay-off area, and then make investment decisions about whether to expand or switch to lower pay-off areas, based on an updated information of technology prospects and the previous-stage performances of inter-agency operational effectiveness and public-private partnership. This case study has demonstrated that well-designed adaptive investments will enhance long-term values and reduce downfalls arising from public-private partnership.