Organization of Public Safety Networks: Spillovers, Interoperability, and Participation

We analyze trade‐offs in the organization of public safety networks when network assets are distributed across districts and a district values network assets in its own and other districts. Comparing centralized, decentralized, and mixed organization forms, we capture two critical properties: interoperability among distributed technology‐based network assets and the ability of districts to opt‐in or opt‐out of the centralized form. We model the provision of public safety networks, where network assets are chosen by each district or by a federal government, where these assets have a positive cross‐district spillover that depends on interoperability, where investments in effort can be made to improve interoperability, and where districts can opt‐in or opt‐out of centralized provision. With the adoption of centralized, decentralized, or mixed provision as a result of districts' opt‐in or opt‐out choices, we identify conditions that determine when the districts deviate from the social optimum and thus regulatory intervention is beneficial to incent the socially optimal organization form. We show how the socially optimal organization form can be achieved through policy instruments such as a sharing rule for the cost of interoperability effort and direct government grants.