October 27, 1997

Mr. Rocky Rushing
Chief of Staff
Office of State Senator Tom Hayden
10951 West Pico Boulevard, Suite 202
Los Angeles, California  90064

Dear Mr. Rushing:

I would like to thank both you and Senator Hayden for your interest in the
California State University (CSU) Integrated Technology Strategy (ITS) and
specifically the ITS-Technology Infrastructure Initiative (TII).  The Integrated
Technology Strategy is intended to serve current CSU students, prepare for
increasing enrollments, and maintain the state's commitment to the Master Plan
for Higher Education.  The CSU is committed to advancing the use of technology
as a means of supporting CSU's historical commitment to access and quality. 

In 1994, the CSU Presidents determined that it was essential for all CSU
faculty, students and staff to have at least baseline access to the appropriate
technology infrastructure by the year 2000, if CSU campuses were to be
competitive and prepared for the 21st Century.  In keeping with this goal, CSU
developed the Integrated Technology Strategy, which would make it possible for
all students, faculty and staff to communicate with one another and to interact
with information resources, independent of time and place.

Faculty, students and staff played an active role in the ITS planning phase and
expressed their basic needs for network connections, access to hardware,
software, training and support.  These basic needs form the baseline
ITS-Technology Infrastructure Initiative.

After undergoing extensive analysis, the CSU recognized it could not rely upon
the State to fund the total capital and operational costs of building and
supporting the baseline infrastructure that is needed to achieve the ITS goals,
in a timely fashion.  In response, last year the CSU initiated the pursuit of a
new and creative public/private partnership to secure funding outside of
traditional state resources.  In addition, the partnership would offer the CSU
additional expertise in developing and maintaining the technology
infrastructure.  This infrastructure effort has been driven by all CSU campuses
represented by the Systemwide Internal Partnership (SIP). 

Proposals from three major corporate teams were considered, and on September 15,
1997, the CSU selected one team with which to partner.  This team, called
"CETI," is made up of GTE, Fujitsu, Hughes Communications and Microsoft. CETI
stands for California Education Technology Initiative.  The team will work with
the CSU to develop implementation plans in consultation with key campus
constituencies, including students, faculty, and staff.  The team is expected to
reach agreement on the formation of the partnership by the end of December or
the first of January 1998.  Implementation planning and campus consultation will
continue throughout the spring.  Actual implementation  of parts of the plan
will commence as early as mid-January and continue throughout most of 1998 .
 

The following provides a brief response to your specific questions.  I welcome
the opportunity to meet with you to answer any further questions you may have,
and to explore these issues more in-depth.  

1.	How specifically will $240 million be raised and in what time frame?

The CETI Corporation (industry partners and CSU) intends to raise the funds from
the investment marketplace as soon as the corporation can be formed. 
Infrastructure buildout across the 22 campuses is projected to take three years,
with refresh of the infrastructure beginning in the fourth year.  

2.	Do your plans include the transfer of ownership of CSU assets to the
partnership? What percentage of the partnership will CSU own and what kind of
control over decision-making will it have?

There is no intent to permanently transfer ownership of CSU assets to the
partnership, even though CSU will be a member of the partnership.  In keeping
with the CSU's culture, the university will maintain a majority controlling
interest in governing the partnership.  CSU identifies a good business
relationship as one that supports and promotes CSU's education mission while
serving the needs of the private sector partners. 

3.	What charges will students and faculty face for using the services that they
now have?

There will be no additional charges for the baseline services that faculty and
students currently are provided by the campuses.  The partnership intends to
enhance these services including providing training for both faculty and staff
as well as a means to keep the hardware, software and network connections
technologically current.  Help desk services also will be available 24 hours,
seven days per week.

4.	Will campuses that have already invested heavily in technology be brought
down to some system-wide "average"?

The TII does not lower the level of service on any individual campus.  To the
contrary, this initiative provides all students, faculty and staff access to the
baseline technological infrastructure.  Some CSU campuses already possess the
infrastructure needed to provide adequate (or better) access, support, or
training to their students, faculty and staff.  But no one campus currently
provides all three adequately.  As a result, the CSU is not making and cannot
make full use of its educational resources.  ITS/TII/CETI will bring access,
support and training to all CSU students, faculty and staff, enhancing the
educational resources of the campuses, both individually and collectively. 

5.	Quite apart from the several possible incentives you list for your potential
partners, what were the specific interests expressed by your chosen
profit-driven partners as revenue generating mechanisms for their companies?

The industry partners' business proposal outlined several potential revenue
generating mechanisms for CETI.  Some of the specific ideas include:  the
provision of Internet services; marketing of certificated education; and
telecommunications products which can be resold through campus bookstores.  Each
of these proposed ideas requires further detailed research and planning and,
ultimately, an agreement to pursue as part of the revenue generation component
of the CETI partnership. 

6.	While we understand that negotiations continue, what are the basic tentative
agreements that have led to your decision to pursue a partnership with the GTE
lead team?  What will they be providing that is in the best interest of CSU and
what will they expect to get in return?

There is no finalized agreement in place.  Negotiations between the CSU and the
industry partners are still in process.  The GTE team met the major criteria
and, most importantly, CSU's requirement to build out the telecommunications
infrastructure at no new net cost to the CSU.  The industry partners will seek
third party funding for the development and maintenance of the corporation, and
for the buildout of the infrastructure.  They also will guarantee any debt.  In
return, the partners anticipate that they will receive a return on their
investment for the joint development of revenue generating opportunities.  These
revenue generating opportunities are expected to benefit both the industry
partners and the CSU to better serve our students and faculty.  

7.	How can the system negotiate about long term technology issues when nobody
knows the future course of high technology?

Two majors tenet of the partnership will be to: 1) follow open systems
standards, and 2) refresh and sustain technical currency.  One mechanism for
assuring this will most likely be through annual revisions of  the master
services agreement between CSU and CETI and more frequent changes to specific
contract provisions for components of this master services agreement, the latter
of which is an area of proficiency for the CSU and the State of California.

8.	If the CSU is tied to this consortium, will the university still be free to
use the market to purchase cheaper or better services?  

Another tenet of this partnership is that CETI will provide goods and services
within the scope of the agreement, which includes the baseline infrastructure,
at better than market prices.  The CSU negotiating principles state that, while
exclusivity for CETI may be enforced for goods and services within the scope of
the partnership agreement, it is not a consideration for goods and services
outside that scope.  

Even exclusivity with CETI within the scope does not mean that CSU will only
acquire the products and services of the partners.  CETI would be obligated to
provide the CSU goods and services, priced competitively, regardless of their
original supplier. The private sector partners must compete with other entities
for the business of providing goods and services to CSU through CETI. 

In addition, the private sector partners must compete with other entities for
the business of providing goods and services which lie outside the scope of the
common environment.  We expect that the convenience of campuses doing business
directly with the CETI partnership will provide a considerable competitive
advantage, but the campuses are free to make different decisions if they wish.

9.	How will the $240 million be used?  If the money is to be disbursed to the
campuses, who will determine how it will be used?

Approximately $200-250 million of the $300 million will be used to develop
campus infrastructure in accordance with each campus' Telecommunications
Infrastructure Master Plans and preliminary workplans.  Detailed implementation
planning is currently underway to determine priorities and scheduling.  A
process and value framework will be designed for appropriating additional funds
based upon program needs.  Funds will not be disbursed directly to the campuses.
 Rather, the CETI corporation, after consultation with each campus, will
subcontract with appropriate businesses to do the required work.

10.	What is the Chancellor's office record in purchasing high technology?  Has
there been any dissatisfaction about its earlier purchases of Cyber and IBM
computers?

The Chancellor's Office has a long history of procuring high technology for
consortia of campuses at extremely competitive prices.  Within the last decade,
these multi-campus purchases have universally been initiated at the request of
one or more participating campuses; other campus participation has been
voluntary.  As with anything as complex as high technology, there are always
individuals on campus who will disagree with procurement decisions.

Again, thank you for your interest in the CSU's Integrated Technology Strategy
and its efforts to fund the Technology Infrastructure Initiative through the
establishment of CETI.  I also look forward to the opportunity to discuss these
initiatives with you and Senator Hayden at your earliest convenience, and will
be contacting your office to set-up an appointment.  

Sincerely,

Thomas W. West
Assistant Vice Chancellor
Information Resources and Technology