Iowa seeking bids to sell or lease statewide fiber-optics network

Proposal would have private vendors lease network, or buy it outright

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Iowa’s statewide fiber-optics network is going up for sale or lease.

A special committee authorized by Gov. Terry Branstad and the Legislature is formulating bid specifications that will form the parameters by which state officials would solicit offers for the Iowa Communications Network’s (ICN) backbone system and its 8,661 miles of fiber cable by June 30, 2013. The bids will be solicited from private vendors that might be interested in leasing the network or buying it outright.

Branstad said he believes the network, which was built in the 1990s with federal money using public transportation right of way and is based in the Iowa National Guard’s command center, can be transferred into private hands under the right circumstances, and he would entertain any viable offer that might materialize when requests for proposals (RFPs) go out.

“We recognize we need to look to the future and not be blinded by pride of authorship or something like that,” said Branstad, who played a key role in getting the state-of-the-art, two-way audio-video authorized in 1989 primarily to deliver distance learning to Iowa’s public and private K-12 schools and colleges. “We’re going to look at this and see if this is something that makes sense for the taxpayers of Iowa and makes sense for the people who use the ICN system. I believe the ICN is a valuable asset and we want to see what the bidders feel that it’s worth.”

The RFP Implementation Team is slated to get an estimate of the overall ICN investment when it meets next week – a figure likely to range between $300 million and $400 million given that the initial bonding to construct the network topped $200 million to bring one fiber-optic endpoints to all 99 Iowa counties, Iowa’s three state universities, Iowa Public Television and the state Capitol Complex. Also, the federal government invested at least $95 million for features that include homeland security protections coordinated at the Iowa National Guard command center in Johnston and telemedicine capabilities.

“If we do sell it, we should get a fair price for it,” said Rep. Walt Rogers, R-Cedar Falls, an implementation team member who also is a member of the House Republican majority that pushed the idea last session of putting the ICN up for sale or lease estimated the arrangement could save the state about $15 million.

What potential bidders – if there are any – would be willing to pay for a network that David Lingren, executive director with the state’s Telecommunications & Technology Commission, said currently doesn’t have a commercial value is anybody’s guess at this point.

“That’s still the $64,000 question if you will,” said Joe Hrdlicka of Iowa Telecommunications Association, an umbrella group of about 130 small to medium telephone and telecommunications firms around the state. “It’s certainly a pretty major undertaking and a number of people within the industry are interested in what happens in the process.”

Many communication vendors in Iowa have viewed the ICN as unfair government competition and intrusion into the private sector and any sale or lease arrangement would be closely scrutinized to make certain it did not negatively impact existing businesses, said Lingren and Hrdlicka.

The network’s oversight commission has enlisted the help of Cedar Rapids-based Fiberutilities Group to manage the RFP process, which Lingren said is complicated by the fact that the state pays $1 annually for the right-of-way access that likely would carry at least a $3 million yearly price tag for a new owner or lease. Also it’s unclear whether the hub could remain at the Johnston command center if the network was sold. A buyer or lease also would be allowed to use the network only to serve existing authorized users and must continue providing all products at a lower overall long-term cost.

Branstad said the state has derived “significant benefit” from the network over the past 20 years, and his main interest is to make certain ICN users – especially the educational users -- are protected moving forward.

“You buy something new and then you sell it 20 years later, you don’t expect that you’re going to get totally what you paid for it. I think we need to look at it in terms of what is the fair-market value of it at this time, and more importantly is protecting the ongoing users of the system so we’re sure that the original intent to provide the educational services is protected into the future regardless of whether the ownership is with the state or with some other entity,” he said.

“It is a complex process, but it would be worth going through and seeing what the options are and if there is a better way for us to manage it in the future, I think we need to be open to looking at these kinds of options and alternatives,” the governor added.

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