Policy Committee Meeting

Fiscal Year 2004 Budget Considerations: Dark Fiber

November 13, 2002

Economics in One Lesson by Henry Hazlitt

1. What are the long-term effects versus the short-term effects?

2. What are the unintended consequences versus the intended consequences?

3. What is the impact on the many versus the few?

Long term vs. Short term Effects

• Short term effects – Internet2 Access for all Illinois Education– Lower cost connectivity – Lower cost equipment – Higher reliability/more robust network– Lower cost filtering solutions

Long term vs. Short term Effects

• Long term effects – I2: Exposure and adoption of cutting edge pedagogy

tools and learning models that allow Illinois education to be more effective and compete globally.

– Lower cost connectivity: Allows the purchase of more bandwidth and the provision of connectivity and services that will prepare students to compete with their peers across the state and the nation.

– Lower cost equipment: Allows reallocation of funds for training and modernization of internal networks and equipment.

Long term vs. Short term Effects

• Long term effects – Higher reliability/More robust network: Fosters

reliance by education and use by other entities such as healthcare and law enforcement ultimately driving costs lower for everyone.

– Low cost filtering solutions: Opens the door for K-12 schools without technical or economic resources to “turn on filtering” instantaneously and become eligible for federal e-rate funds bringing more federal dollars into the state.

• Approximately 44% of private and 56% of public schools received e-rate funding totaling almost $170 million in fiscal year 2000.

Unintended Consequences vs. Intended Consequences

• Intended Consequences– Greater access for education– Increased opportunities for educational delivery– Aggregate benefits of participation in a

singular, large scale network

Unintended Consequences vs. Intended Consequences

• Unintended Consequences– Dramatic changes in telecommunications price

structures in Illinois

– Access to cutting edge applications and methods

– An advocacy role

– An expertise role

– Maintaining an environment that invites opportunity

– National leadership and recognition

The Impact on the Many vs. the Few

• Educational use and bandwidth demand continues to grow at rates of 30% to 433% on individual links.

• Aggregate growth in utilization network-wide is approximately 150%.

• For the price of one 16 ounce soft drink per student, per month, the state has built the nation’s premier education network.

• Truly a case where the ICN expenditure is a win-win and the aggregate network reduces overall expenses statewide.

Summary

Direct ICN Expenditures: $31.9 million

Estimated Constituent Expenditures: $41.5 million

(Access and equipment costs)

Fiscal Year 2003, Based on current utilization

Total Cost of Network (All Sources) $74.6 million

$6.0 millionCentral and regional staff and all other operating costs 

Other Costs

Administrative Expenses

Cost Recovery: $ 1.2 million

BenefitBandwidth Provided For Primary Constituents

Does not include bandwidth purchased above

baseline allocation

$3.0 millionAccess Circuits:

Grooming / Last

Mile:

($1.4 million)

CT3 Local Loops: ($1.6 million)

Utilized primarily by K-12 schools (80-89%) to decrease access costs.

Internet NETWORK

ConstituentSites

K-12 Schools

Higher Education

Libraries

Museums

4,352 Connections

7,080 Mbps Provided

216 Connections

1,216 Mbps Provided

467 Connections

726 Mbps Provided

24 Connections

48 Mbps Provided

$30.03 millionEstimate of costs for constituent-paid access circuits

$11.15 millionEstimate of costs for constituent-paid equipment

Estimated Constituent Expenditures

$4.9 millionInternet & Internet2 -Transit -Transport

$18.0 millionBackbone Network:

ICN POP Facility

& Equipment:

($6.8 million)

Backbone Circuits:

($11.2 million)

4,223 K-12 Schools and

Administrative Offices

277 Higher Education Institutions

A recent study revealed that the

55 private institutions save approximately $1,319,000 per year including

bandwidth, connections, and

equipment.

477 Libraries

25 Museums (some with

multiple locations)

K-12

Higher Ed

Libraries

Museums

214 Municipal

Governments ranging in size from Benton to Chicago

45 Hospitals

235 Other Institutions

K-12 Schools

Higher Ed.

Libraries

Museums

Mun. Gov’t

Hospitals

Other

Almost 6,000 connected institutions!

Dark Fiber Implementation

• With level funding and internal reallocations, the ICN can “light up” the primary ring (Chicago-Peoria-Springfield-Collinsville-Champaign-Chicago).

• We estimate that we will need an additional $1-2 million to implement the Northwestern and Western legs in fiscal year 2004 (Chicago-DeKalb and Peoria-Macomb).

• As the circuits are turned up, staff estimates that continued cost recovery and other opportunities will allow implementation of other routes with minimal additional funding, if any.

• Dark fiber does not save today’s dollars.• Dark fiber provides increased capacity for the same

money.