Note: The need for a statewide interconnectivity strategy offering a variety of affordable service options was a major issue throughout the NCIH evaluation activities. A Statewide Connectivity Task Force, formed by the State Controller, is currently developing connectivity strategy recommendations for presentation to the IRMC. The recommendations that will come out of this activity can be used as a guide in assessing policy and funding requests. Pending completion of the Statewide Connectivity Strategy, the recommendations offered for consideration by the 1996 General Assembly are described in the following paragraphs.

Selective and prioritized deployment of a statewide connectivity infrastructure for North Carolina will provide the state the best opportunity to transform government into a more effective servant of the public during a period of severely limited resources.

The major technological changes that frame the new vision for information systems are:

• Vastly increased power of desktop workstations at lower costs.
  
• Explosive growth of the Internet and the world-wide web in all developed countries.
  
• Reduced cost of transporting data via fiber-optic cable.
  
• Complete digitization of information which allows for the storage and transmission of data, sound, images, and video in a common format. This enables a single integrated telecommunications infrastructure and multimedia presentation of information at every workstation.
  
• Ability to store massive amounts of multimedia data at reasonable costs using optical technology.
  
• Emerging maturity of national and international standards that permit interconnectivity and interoperability of a vast array of previously proprietary technologies.

Technology has always served the same fundamental mission: to contain the cost of government and to improve service to citizens. As the use of technology increased and the cost of technology became significant, an additional goal was pursued: to contain the cost of technology itself. However, pursuit of this objective without careful consideration of the benefits may result in a greater opportunity cost. The state’s objective for NCIH deployment should be framed within the context of an overall communications strategy, and should balance the cost of deployment with the opportunities for its use, and to maximize the benefits of this advanced technology through selective funding for high benefit, or high playback applications.

The future deployment of the NCIH and related technologies should be guided by identifying and implementing specific strategic applications that will provide the greatest benefits for the state, as opposed to emphasis on rapid population of NCIH sites. This will require a close partnership and participation across state agencies and departments to identify and prioritize these applications. It will also require a unified effort to bring together the various technological and operational aspects necessary to build a unified state network. Key participants in this process will be the telecommunications equipment manufacturers, applications developers, LEC, and IXC service providers working directly with OSC/SIPS to achieve the objectives set by the state agencies and departments.

Recommendations are grouped into two categories: (1) policy recommendations and (2) funding recommendations.

1. Recommendation: Adopt a statewide interconnectivity strategy that will assure comprehensive and simple electronic access by, and to, all state and local government entities.
   The state, like leading-edge private corporations, must develop and implement a comprehensive communications strategy that addresses issues necessary to achieve an interoperable communications environment. An OSC-appointed Connectivity Steering Committee is developing recommendations for a strategy, with the necessary standards, for review and approval of the IRMC and the General Assembly. The Steering Committee is made up of principle parties for the major users of the NCIH (state government, education, criminal justice, health, local governments, etc.)

   This group will assist in helping OSC determine the aggregate interconnectivity needs of diverse intergovernmental entities and the appropriate infrastructure for meeting those needs. As part of this strategy, the members of the Steering Committee will be charged with development of assessment mechanisms to identify needs, problems, and applications within their own community. They will also be charged with dissemination of the standards developed by the committee, so that member agencies will be suitably informed of appropriate options and opportunities.

   Recommendation: Encourage state agencies to aggressively pursue the use of electronic communications as a way of doing business.

   Electronic commerce will reduce staffing needs, improve state services, and make it easier and simpler for citizens and the private sector to conduct business with state government. The IRMC, when approving new automated applications, should assure adherence to the adopted connectivity strategy, and maximum effective use of electronic commerce. Agencies should seek training for key staff who can help introduce uses of electronic communications into the agency’s business practices.

   To demonstrate the effectiveness of these applications, agencies should be encouraged to document their cost savings in terms of travel, increases in productivity, and time management of administrative personnel.

   Recommendation: To assure that the statewide concept is maintained, that rural areas are offered competitive rates, and that overall state expenditures are optimized, the General Assembly should reaffirm the basic principles of the state’s telecommunications infrastructure.

   • Universal Service - Network access to all parts of North Carolina.
     A role of government is to ensure fair access to government services and resources regardless of geography. This is true with network access as well. The state’s connectivity infrastructure must be ubiquitous and affordable, enabling all citizens and businesses in the state to be both consumers and producers of the state’s information resources. This infrastructure must offer convenient access for all individuals regardless of their geographic location.

     Equalized Rates - Same usage rates regardless of geographic location.

     Fair access to government services is facilitated by establishing equal rates for those services. It has been a long standing policy to provide access to the state’s telecommunications services at an equal rate regardless of geographic location. Funds are normally distributed without regard to an agency’s proximity to Raleigh (e.g. per capita funding). Therefore, those agencies located in the far corners of the state would be unduly penalized if they had to pay distance sensitive rates for communication services.

     In addition, as more competition is introduced into the communications industry, providers will focus their market efforts on the urban areas of the state further widening the gap between available services and costs of services for remote and rural areas. Broadband connections in rural areas can cost twice as much as the same connection in a non-rural area. Therefore, the state’s concept of Universal Service and Equalized Rates provides access to an advanced communications network at a lower cost than they would otherwise obtain.

     Shared Resources - Elimination of duplication and assurance of interoperability.

     Resource sharing is the most cost-effective method of acquiring communication services. North Carolina telecommunication service rates are among the lowest in the nation. By combining the state’s telecommunication requirements, especially for wide area networking, agencies are able to significantly reduce the cost of communicating due to the bulk purchase of transport and the shared operation, maintenance and management of the complex resources.

     The state’s communication infrastructure provides local and wide area networking accessibility to all state agencies for data, voice and video communication. This shared infrastructure is not just telecommunications. It includes hardware, software and the staff that maintains it. The shared resource concept makes data resources, program products and services available to all agencies that connect to the network and have appropriate access authorization.

     Equally important, the shared resource concept facilitates compatibility and interoperability. The interoperability of all state government systems is absolutely necessary. As the communications infrastructure becomes increasingly sophisticated and interconnectivity and interoperability is achieved, the distribution of data critical to the enterprise becomes possible and practical.

     This infrastructure is required to enable multiple agency computing devices and databases to interoperate. This interoperability makes statewide applications such as the State Accounting System, Criminal Justice Information System, Automated Collection and Tracking System (for child support), etc. possible and cost-effective. In the future, the delivery of other statewide services will be enabled by the effective use of infrastructure. All of these applications rely on access and transmission of vast amounts of information from and to the desktop of the state worker and to computers and workstations operating throughout North Carolina, the nation and the world.

     This is increasingly important as our high-speed telecommunications enables applications such as interactive video, the transmission of images, maps and massive databases, and the electronic interfacing of agency-to agency users.

     Public/Private Partnership - Capital outlay is made by the private sector and the usage base is provided by the state.

     The private sector must have primary responsibility for providing the basic transport facilities for the state’s communications services. This will minimize the capital expenditures for the state as well as assuring the on-going availability of ubiquity and capacity of current, cost-effective technological services and products. The private sector providers can spread their development and operational costs over a longer time period and a larger user base consisting of both public and private enterprises. By using its bulk buying power through a competitive procurement process, and by serving as an ‘anchor tenant’ for large network initiatives the state can influence the development and deployment of new technologies offered by the private sector.

   Recommendation: Continue utilization and deployment of telecommunications infrastructures, including SONET/ATM, that meets the following requirements:

   • Provides services to all areas of the state with equity of access.
     
   • Provides reliable, cost effective connectivity in accordance with the state’s requirements.
     
   • Provides the potential to reduce cost or provide required capabilities existing technologies do not offer.
     
   • Supports the development of community networks that can be interconnected via the statewide broadband network.

   North Carolina should not spend money on technology for the sake of technology. We should work to ensure that the state’s telecommunications infrastructure accommodates existing and future requirements. ATM technology is considered to be a technology that possesses the potential to provide existing functions at a lower cost and address requirements traditional technology cannot accommodate. In our opinion there is no other scaleable high bandwidth alternatives to ATM for wide area transport, therefore, the state should reaffirm its commitment to this technology.

   The ATM technology is just beginning its life cycle as the dominant technology for switched networking. What North Carolina builds today using this technology will not have to be rebuilt in a few years as would be the case if the state had chosen a traditional technology. This advantage coupled with the fact that there are no other scaleable high bandwidth alternatives to ATM for wide area transport, the state should reaffirm its commitment to this technology. However, the emphasis on the technology chosen (SONET/ATM) to implement the state’s telecommunication infrastructure is secondary to assuring that the state has a cost-effective, high capacity transport capability in place that accommodates dynamically altering speeds and bandwidth use on demand. The current NCIH meets these requirements.

   Recommendation: Allow private colleges to utilize the volume discounts provided by OSC/SIPS to establish statewide connectivity to other state agencies and public institutions.

   Private colleges should provide a vital role in educating North Carolina citizens. The system of public and private institutions of higher education have traditionally served as a resource to all citizens, communities and students across North Carolina. The precedent set by the General Assembly to fund NC students in the 37 private colleges in the form of tuition subsidies would indicate the need to support connectivity plans which would include those institutions. A second precedent would be the existing collaborative and reciprocal agreements with the NC Public Libraries and the private institutions across North Carolina.

   Allowing these schools to participate the state networks could enable exchange of courses among public and private schools and increase the number of educational outreach programs available to citizens.

1. Recommendation: To ensure statewide benefits of the NCIH are utilized and that rural and poor counties are not excluded, the General Assembly should fund inter-LATA long distance costs (IXC) on an ongoing basis.
   Maintaining a statewide network concept is essential to assure affordable access by all areas of the state. Under current telephone regulations, local telephone companies are not allowed to provide services that cross designated coverage areas (LATAs). Long distance carriers (IXC) are required to provide this service. Currently, nearly one-half (46%) of the minimum monthly charge for NCIH sites is for the statewide connection (IXC) fee. This acts as a disincentive for local school systems to provide access to their courses outside of their local LATA. It is also an incentive to buy or build local or regional networks that over time would result in both a greater overall cost to state and local government, and result in a lack of interoperability when trying to connect disparate networks.

   Even at the current IXC rates, existing capacities are constrained. For the state to realize the full potential of video teleconferencing as well as the educational delivery opportunities, capacity must be provided. Funding at the state level for statewide connectivity benefits the complete range of users of this service. These facilities will also supply a common transmission backbone for the state’s voice, data, and video services.

   Recommendation: Connect the remaining Community College institutions to the NCIH to establish interconnected, statewide geographically dispersed multi-function video centers.

   Connecting all 59 community colleges (including the Textile Center) on NCIH will establish a nearby point of presence of an NCIH site all across the state. Because of their geographic disbursement, there is a community college within a 30 minute drive of all North Carolina citizens. These multi-function centers can service a variety of needs, including:

   • Statewide teleconferencing centers
     
   • Continuing education
     
   • Business and industry training sites
     
   • Geographically dispersed state training centers (e.g. training prison guards, highway patrolmen, etc.)

   An eight-year funding proposal will be submitted to provide funding for these sites. This will entail full funding for the first four years, followed by declining funding for the last four years. At the end of the eighth year, the state portion of the funding will equal 50% of the network service charges.

   Recommendation: Provide funds to establish remote network concentration hubs (Points- of-Presence--PoPs) to be located in each of seven LATAs in the state.

   The telecommunications circuits that OSC/SIPS buys from the local telephone companies are priced according to the distance from the terminating location to the telephone company facility serving the location. OSC/SIPS must pay based on mileage for every circuit used in the network. By establishing remote concentration hubs (PoPs) in each of the 7 LATAs in North Carolina, OSC/SIPS can simultaneously increase the capacity of the network and reduce the cost for circuits outside of the Raleigh area. Because the NCIH network has significant capacity for data service that is not used for video service, and is not priced according to distance, it is the best solution for extending the network backbone statewide. The SONET/ATM technology employed by the NCIH also make it possible to add redundancy and disaster recovery features to the network at nominal cost. OSC/SIPS charges clients based on the total costs for each service. Funding the PoPs will help to reduce the overall rates for data service statewide and help provide economical access to state and local government information, as well as the Internet.

   Recommendation: Research more cost-effective alternatives to delivering two-way interactive video services, both intra and interstate.

   Just as there are many different transmission speeds for data the same holds true for video. Currently there is no way to efficiently interconnect these other video transmission services together. The NCIH/NCIIN should provide this service for video. If we invest in a central gateway the NCIH/NCIIN could provide this resource as a service to any NCIH site to gateway beyond state boundaries and internationally. By keeping a DS-3 level of transport over the ATM backbone (until MPEGII) as a standard, we can provide an H320 interoperability service at a central location thus reducing the number of redundant underutilized expensive 56 to T-1 speed CODECs out in the field.

   If a site requests a 56 to T-1 local loop video service, OSC/SIPS needs to be prepared to investigate and deploy the most cost effective solution on a site by site basis. This cannot be done until we have the gateway mentioned above.

   Recommendation: Fund connectivity for up to 350 data and/or video public school sites in FY 1996-97 based on need and ability to effectively utilize a statewide connection.

   This will be the first year of a systematic plan to provide connectivity to all North Carolina public schools (K-12). An eight-year funding proposal, when fully implemented, will provide connectivity for all public schools. This will entail full funding for the first four years, followed by declining funding for the last four years. At the end of the eighth year, the state portion of the funding will equal 50% of the network service charges.

   One of the current problems with school connectivity is a lack of critical mass. Adding sites with proven benefits will also increase the overall benefit of the public schools’ connectivity infrastructure. A network increases in value as more users gain access to it. Just as the public telephone network is valuable because almost everyone has a telephone and uses the network, the same is becoming true of computer networks.

   Recommendation: To increase the educational benefits to the existing as well as new NCIH sites, by funding selected educational enrichment sites so that their resources would be available to all educational institutions across NC. An example of these sites could include:

   • A North Carolina Aquarium (one of the three state marine aquaria)
     
   • State Zoological Park (Asheboro)
     
   • North Carolina History Museums (Raleigh)
     
   • Life and Science Museum (Durham)
     
   • Discovery Place (Charlotte)
     
   • Schiel Museum (Gastonia)

   The state’s museums are rich resources on science, technology, and history. On-line access to these resources will enable students, without every leaving their classroom to take electronic "field trips" to the state’s museums and places of learning.

   There are many courses already developed by these institutions which are available for both students and teachers within our school systems. Teacher renewal credits may be obtained by teachers who attend these courses. A video connection would allow these courses to be received across the state, not just in the local area where the museums are physically located.

   The concept of video field trips as a use of these resources would enable local school officials to eliminate travel cost and liability issues often incurred by participating students. Thirdly, teachers would be able to access experts located at the museums to enhance their teaching units.

   Recommendation: Appropriate funds to the Office of the State Controller to reimburse for NCIH start-up costs.

   The OSC/SIPS component of the Office of the State Controller is supported by an internal service fund (i.e. operating revenue is generated by the sale of technology services) rather than general assembly appropriations. Federal regulations (OMB Circular A-87) requires that each service be self-supporting and not be subsidized by revenue from other services. This is to ensure that federally funded programs are not used to subsidize state programs.

   In order to start a large project like the NCIH, funds have to be "borrowed" from cash reserves from other OSC/SIPS services. A separate cost center and/or fund is established to properly track and account for these transfers. These startup costs must be recovered from the early users of this service which in effect penalizes these NCIH sites who have helped make the ‘Information Highway’ a reality.

   A one time recovery of $3,294.51 per site for the first three years has been established. General Assembly funding for the remaining startup cost balances would reduce user one-time charges by $3,294.51 and eliminate early users having to absorb the startup costs that later users will not have to pay.

   Recommendation: Establish a five-year research and development grants to fund assessment of potential high payback NCIIN applications.

   When possible, the value/benefit of new applications should be determined before wide scale deployment. Also applications that have shown to have merit should be populated. Both of these objectives could be facilitated by selective funding for pilot projects for promising communications applications, and to provide incentives for the transfer and training of high payback applications.

   The approval and management of these grants could be administered by either the Information Resource Management Commission or the Grants Advisory Council.

   Determine value/benefit of new applications before wide scale deployment. Populate beneficial applications to appropriate NCIH sites, etc.

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   Funding Impact

   Funding necessary to implement the above recommendations will be approximately $16 million for FY ‘96-97. The Governor’s budget request to the General Assembly will incorporate detail information concerning some of these connectivity strategy recommendations.

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   Cost Reduction Possibilities

   Although the rate per unit of bandwidth for the NCIH is significantly lower than other technologies, service charges have been high for the early users of the NCIH. This is because of the newness of the technology, the limited number of available applications, and spreading the startup costs among few users.

   The rates for NCIH services (especially two-way interactive video) have been a concern for both the state and the initial users of the NCIH.

   Because of the newness of the technology used for the NCIH (i.e. SONET/ATM), and the overall rapid changes occurring in the telecommunications industry and service providers, there are both short-term and long-term activities that have the potential to lower the cost and rates for the NCIH. These include:

   • Integration of the State’s Networks - This process is underway. The OSC is currently implementing ATM technologies out in the LATAs that will reduce the cost of WAN connections and provide a foundation for new types of WAN services. This approach has the potential to impact the state’s data network in the near future.

   • Consolidation of Networks - The GPAC recommended a consolidation of the state’s various networks. To date, the UNC LincNet that served universities, community colleges and state and local libraries, has been merged into the central OSC provided network services. There has also been much effort made to increase the sharing and collaboration between the network services provided by the Administrative Office of the Courts and the OSC networks. These initiatives to lower costs and improve services will continue.

   • Increased Usage - Increasing the number of data applications on the NCIH will have a beneficial affect on revenue and usage rates by better utilizing the IXC interlata transport facilities (i.e. ‘stranded bandwidth’). Data applications can often use the unused portion of the bandwidth capacity that is not being used during video sessions.

   • Renegotiation of Telco Contracts - The Special Assembly Agreements (SAAs) with the LECs and the contract with the IXC calls for re-negotiation of contracts at two year intervals. The first two-year interval comes up in August 1996. There is a possibility that cost reductions could be realized through these biennial re-negotiations.

   • MPEG II - MPEG standards are designed to compress video signals and thereby reduce the bandwidth needed to carry these signals. This technology will become available for network use during the next 1-2 years and will provide cost savings in the future.

   • Deregulation and Increased Competition - Because of the recent and sweeping changes to the Federal communications laws by the Congress, as well as legislation passed by the 1995 General Assembly, much of the monopolistic regulations of telecommunications services will be eliminated resulting in the availability of many more options and greatly increased competition. These changes should significantly impact cost as new providers and options become available. The benefits will first occur in urban areas.

   • Expansion/Maturing of ATM Technologies - As with any technology, early users pay higher prices at the beginning of a technology curve. Because North Carolina was the first wide-scale user of the SONET/ATM network technology, equipment costs will decline as ATM technologies continue to evolve and become more widespread in their use. One example: Prices of service multiplexers used on the NCIH have already fallen by approximately 1/3 since 1994.

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     Roles and Responsibilities

     Decisions on policy, applications, technology, and funding for projects the size and scope of the NCIH involves both the Legislative and Executive branches. To provide a general understanding of the roles and responsibilities of the major players the following is offered:

     General Assembly

     The General Assembly is responsible for accepting and adopting a public policy direction for the NCIH for the delivery of defined services. It then funds the initiatives according to its defined direction and anticipated benefits. The 1992 GPAC report can still be used as a guide by the General Assembly.

     Governor’s Office

     The Governor’s Office sets the vision for what the Information Highway can do, and provides the continued advocacy for the project. The Governor’s Office provides its recommendations to the General Assembly.

     Information Resource Management Commission

     The IRMC considers and approves appropriate technology infrastructure, including the NCIH, consistent with the state’s approved technical architecture.

     Office of the State Controller

     In terms of technology resources the OSC has responsibility for both the overall management of the state’s information resources and the delivery of shared central services.

     Networking responsibility includes providing the planning, operation and maintenance of all network transport facilities. The OSC Telecommunications Services section also coordinates and facilitates user needs. These responsibilities and functions apply to the NCIH as well as the entire NCIIN.

     Applications Selection

     In terms of identifying and prioritizing the most beneficial applications for the Information Highway, the using agencies, the OSC, and the Governor’s Office are all involved. The using agencies, however, are ultimately responsible for building the business justification for how this technology can improve their operations and service delivery. The OSC central support staff can assist in the identification and implementation of innovative applications for the agencies.

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