1. Policy Committee Meeting Fiscal Year 2004 Budget Considerations: Dark Fiber November 13, 2002

2. 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?

3. 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

4. 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.

5. 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.

6. 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

7. 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

8. 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.

9. 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 million Central and regional staff and all other operating costs Other Costs Administrative Expenses Cost Recovery: $ 1.2 million Benefit Bandwidth Provided For Primary Constituents Does not include bandwidth purchased above baseline allocation $3.0 million Access 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. I nternet NETWORK Constituent Sites 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 million Estimate of costs for constituent-paid access circuits $11.15 million Estimate of costs for constituent-paid equipment Estimated Constituent Expenditures $4.9 million Internet & Internet2 -Transit -Transport $18.0 million Backbone Network: ICN POP Facility & Equipment: ($6.8 million) Backbone Circuits: ($11.2 million)

15. 4,223 K-12 Schools and Administrative Offices

16. 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.

17. 477 Libraries

18. 25 Museums (some with multiple locations)

19. K-12 Higher Ed Libraries Museums

20. 214 Municipal Governments ranging in size from Benton to Chicago

21. 45 Hospitals

22. 235 Other Institutions

23. K-12 Schools Higher Ed. Libraries Museums Mun. Gov’t Hospitals Other Almost 6,000 connected institutions!

24. 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.