*****APPROVED*****
IHETS Management Committee
April 4, 2005 – 4:00pm
Conference Call

PRESENT
Patrick Alles, Independent Colleges of Indiana
Jim Bottum, Purdue University
Dave Jent, Indiana University
Ed Kinley, Indiana State University
Bill Kramer, Ivy Tech State College
Joe Misciewicz, Indiana Public Broadcasting
Mark Rozewski, University of Southern Indiana
O’Neal Smitherman, Ball State University
Carol Tully

David Hensel, Sommer Barnard (counsel for IHETS)

STAFF
Tim Fisher, Rauf Khalid, Dave King, Tim Ping, Susan Scott, Kevin Siminski, Ed Stockey, Lynn Ward, Julie Wheeler

Chairman Kramer called the meeting to order at 4:05pm

Update on contract with Intelenet
Hensel reported that we have reached agreement on the contract between IHETS and Intelenet. The key parts of the contract are that within 20 days of signing, Intelenet will pay IHETS 50% of the arrearage, which is approximately $2-2.1M. The contract sets up a process for reconciling inventory, past invoices and other issues. The contract envisions that payments for the remaining $1M are to be completed by June 30, 2005. If they are not complete by that time, Intelenet agrees to pay 50% of the remaining amount by June 30 and the final amount by December 2005.

King proposed that Hensel email the contract to the Management Committee with a synopsis of the issues and how they have been resolved. This will allow members of the committee to go through it and pose any questions that they may have and give their approval by next Monday, April 11th. Kramer noted that we have determined that the Management Committee authorization is all that will be necessary to proceed with the contract.

Hensel reported that the external auditors have started and have been assisting Business Services staff respond to requests from the investigators for information about inventory.

Review options for IHETS response to state network RFP
King noted that this set of options is in draft form and is open for suggestions or adjustments. He asked the group to provide input by Wednesday so that it can be sent to the Board for their discussions on April 6th.

King reported that staff went through the RFP and reviewed it for some of the basic questions. Can we respond? Are there certain things that would make it difficult for us to respond? What are the premises that the RFP is built on? What are the issues from our perspective that should be raised? Out of that discussion we have narrowed it down to three options with several versions in each.

King gave his overall perception of the RFP. He stated that the purpose is to privatize the network, so however the response is characterized, it must come from a vendor. There is no perception that it allows for partnerships like we have participated in to this point. King added that in the current review, we don’t see provisions for network users to have any direct impact on network services. The RFP is designed so that users get and pay for precisely what they want rather than the bundles that they are currently getting on ITN.

King reported that we have outlined three options that move from most involved to least. Option 1A would be prime contractor to the state of Indiana with private sector partners or vendors as subcontractors. Overall this response has the most value to the state and would offer the least service disruption. This option also keeps the network together and provides the broadest base for competitive user fees or circuit prices. The concerns listed might be difficult for us to deal with. The first of which is the $1M performance bond needed for a valid bid. We would have to work with Indiana University to see if that was possible. Other issues include IHETS being a vendor not a partner; no guaranteed customer base; continued exposure to the political pressures and controls that we are currently encountering, and a rather significant fiscal liability. Also, the issue about whether our current appropriated activities would continue to be held hostage as a result of higher exposure to political scrutiny. King stated that we have gained a significant amount of value being involved with the network as a partnership to this point. The number of services and the kinds of things that can be done at campuses now exceeds what we could have done over the past few years if we had just remained with INDnet. But none of that value is worth 50% of our appropriated budget. On the fiscal impact of IHETS being the prime contractor, the main issue is the $30-40M over the life of the contract. We have had two instances of the state not paying us, so it questionable whether IU would go for it.

Option 1B - a more likely scenario, where a private sector company would be the prime contractor and IHETS would be a subcontractor and/or partner and provide network operations services. At the Board meeting later this week, we will have at least two presentations from private sector companies that have expressed interest in partnering with us. The concerns listed above are less of an issue with 1B. The main question is whether we really want to be a vendor in this process. We probably have some level of influence over the process of development of new network services but this would be new territory.

Option 1C – a private sector company is the prime contractor, contracts with IHETS as a subcontractor or part to provide network operations. IHETS would recommend that the combination of prime contractor and IHETS bring ENA in to keep the network whole. This option would maintain some level of continuity and in the long run would benefit the state.

Kramer stated that he thinks this option brings IHETS back to the original mission, to provide programmatic support for the educational services that institutions (including K12, libraries, public broadcasting) provide for the citizens of the state. IHETS would be made truer to it’s mission if the K12 entity is brought back in. The option which leaves out the K12, makes us more public but begins to pull us from our original mission.

Option 2 – IHETS does not respond to the RFP, but maintains network service functions

Option 2A - IHETS and ENA, in partnership develop an educational network that includes K12 and higher education. Benefits are not dealing with the state bureaucracy and it focuses more on the core mission. Concerns include reduction in overall operating revenue so we would probably see a reduction in engineering workforce. King noted that there are questions about access to the I-light2 network. The RFP clearly states that there is an expectation that there still should be access by higher education preserved on the I-light2 system no matter who operates it. The foundation of that network should be a fiber-based network that connects all of the campuses back to I-Light2 nodes so that we can create a fiber-based virtual private network with all the higher education campuses. The fiscal impact, could be possibly pushing user fees down somewhat because the breadth of the users that we bring.

King noted that although he does not expect any impact on the I-Light network as it runs from Bloomington, through Indianapolis to West Lafayette, I-light2 is still an issue. The RFP indicates that if someone bids on the RFP and includes the use of I-Light2 as a backbone to provide services around the state, a certain amount of access is to be preserved for higher education. King would expect us to take advantage of that and try to bring all of the higher education connections back to the I-Light2 nodes as we had planned.

Option 2B – Go back to developing INDnet, or the higher education network. Down sides are that it would be difficult to bring down user fees, and the value of the interconnect with K12 is inherent as we look to the future. There is no guarantee that anyone on the existing network will move to the new network.

Option 3 – Would be for us to get out of the network business.

King addressed additional questions from members and he stressed the need to get input from everyone. King stated that we are looking at Option 2A and Options 1B and C as the most attractive as holding the network together might help bring circuit prices down.

Prepare for Board review and decision-
Kramer stated that we should come to a consensus on which option to recommend to the Board of Directors and polled the group about their preference. Although the group still has some questions about the details of each of the options and have not heard from the potential vendors, they indicated preference toward Option 2A.

King asked the members of the Management Committee to respond with their input and he urged the group to consider other ramifications of the options including benefits, disadvantages and concerns. Responses should be sent to King via email by close of business on April 5th in preparation for the joint meeting with the Board of Director and the Management Committee on Wednesday, April 6th.

King added that SBC, AT&T and ENA will make presentations at the Board meeting on Wednesday.

With no further business to discuss, the meeting adjourned at 5:30pm.