Text: HF02535 Text: HF02537 Text: HF02500 - HF02599 Text: HF Index Bills and Amendments: General Index Bill History: General Index
PAG LIN 1 1 Section 1. SALE OF IOWA COMMUNICATIONS NETWORK ASSETS 1 2 FINDINGS AND PURPOSE AND DEFINITIONS. 1 3 1. FINDINGS AND PURPOSE. The Iowa communications network 1 4 is a valuable state telecommunications asset and has provided 1 5 fair, reasonable, and predictable access to advanced 1 6 telecommunications technology for authorized users for the 1 7 past ten years. With over seven hundred seventy video 1 8 classrooms located statewide and three thousand one hundred 1 9 miles of owned fiber, the more than one thousand two hundred 1 10 authorized users are able to equally access state-of-the-art 1 11 voice, video, data, and internet services at comparable prices 1 12 statewide, regardless of location. At a time when budgets are 1 13 strained and there is a shortage in the availability of 1 14 educators, it is essential that the educational content 1 15 carried over the Iowa communications network be preserved and 1 16 enhanced. It is also vital that secure telecommunications 1 17 services provided by the Iowa communications network to 1 18 homeland security and public defense providers be retained. 1 19 The state desires to remain a credible business partner to all 1 20 current authorized network users. To ensure that the 1 21 utilization of the Iowa communications network resource is 1 22 maximized while minimizing further investment by the state to 1 23 maintain the infrastructure, it is in the best interest of the 1 24 citizens of this state to offer some of the assets of the Iowa 1 25 communications network for sale, while retaining ample 1 26 capacity to provide authorized users required 1 27 telecommunications services now and in the future. Through a 1 28 sale of most of the fiberoptic cable and optronics, or light- 1 29 passing equipment, and retaining capacity through long-term 1 30 indefeasible right-of-use agreements, the state would continue 1 31 to provide telecommunications services and adequate capacity 1 32 into the future. Selling the Iowa communications network 1 33 assets using an intermediary professional agent specializing 1 34 in telecommunications resources to market the assets will 1 35 strengthen the ability of the state to receive a fair price 2 1 for the assets while allowing an impartial third party using 2 2 predetermined sales criteria to determine the most qualified 2 3 buyer. By using the sales proceeds to prepay remaining 2 4 construction debt and provide revenue for an equipment 2 5 replacement fund, state-provided funding for network 2 6 maintenance and upgrade will be minimized. Continued 2 7 provision of the full array of network services will appear 2 8 seamless to current authorized users when the sales process is 2 9 completed. 2 10 2. DEFINITIONS. As used in sections 1 through 6 of this 2 11 Act, unless the context otherwise requires: 2 12 a. "Advanced telecommunications services" means high- 2 13 quality voice, data, graphics, and video telecommunications 2 14 services using any technology with regard to transmission 2 15 media that utilizes high-speed, switched, broadband 2 16 telecommunications capability. 2 17 b. "Authority" means the Iowa communications network sales 2 18 authority established to oversee the sale of backbone assets 2 19 pursuant to this Act. 2 20 c. "Authorized user" means a private or public agency, as 2 21 defined in section 8D.2, except for a public or private agency 2 22 which was required pursuant to section 8D.9, subsection 1, to 2 23 certify to the commission not later than July 1, 1994, the 2 24 agency's intent to become a part of the network and which did 2 25 not provide such certification. Agencies that obtained 2 26 legislative approval to join the network after July 1, 1994, 2 27 will be treated as a public or private agency for purposes of 2 28 this definition and all provisions of chapter 8D. 2 29 d. "Backbone assets" means the backbone fiber comprising 2 30 the five fiber optic rings located outside of the Des Moines 2 31 metropolitan area and the optronic equipment associated with 2 32 those rings. 2 33 e. "Capacity" means the information-carrying ability of a 2 34 telecommunications facility. The measurement of capacity is 2 35 determined by the purpose of the facility. 3 1 f. "Certificates of participation" means the two issuances 3 2 of certificates of participation issued by the state in 1992 3 3 and 1993 to fund the construction of the owned fiber and 3 4 equipment for Parts I and II of the network as defined in 3 5 chapter 8D. 3 6 g. "Commission" means the Iowa telecommunications and 3 7 technology commission as defined in section 8D.2. 3 8 h. "Indefeasible right of use" means an indefeasible right 3 9 to use fiber, including an entire cable or a portion of the 3 10 capacity of a cable, or channels of a given bandwidth for a 3 11 defined period of time. 3 12 i. "Iowa communications network hub" means the 3 13 telecommunications facility located in the joint forces 3 14 headquarters armory, Johnston, Iowa, where the main switching 3 15 and maintenance operations of the network take place. 3 16 j. "Network" means the Iowa communications network. 3 17 k. "Network operations center" means the maintenance and 3 18 network diagnostic equipment that manages the network 3 19 infrastructure. 3 20 l. "Optronics" means the fiberoptic equipment that 3 21 activates the fiber and allows light to traverse. 3 22 m. "Professional agent" means any person having 3 23 specialized expertise required in the process of selling the 3 24 Iowa communications network including but not limited to 3 25 expertise regarding brokerage, contracting, asset valuation, 3 26 sales, or negotiation services. 3 27 n. "Prospective purchaser" means the potential purchaser 3 28 of the network that the professional agent recommends to the 3 29 authority to purchase the network assets, as provided in 3 30 section 3 of this Act. 3 31 o. "Qualified purchaser" means a prospective purchaser 3 32 that has been approved by the governor and qualified in 3 33 accordance with the provisions of section 4 of this Act. 3 34 p. "Right-of-way accommodation agreement" means a twenty- 3 35 year agreement between the network and the department of 4 1 transportation that includes an option to extend the agreement 4 2 for an additional ten years, which is definitive with respect 4 3 to the use of interstate rights-of-way and gives the 4 4 department of transportation the sole right to approve or deny 4 5 other users of the sheath, trench, or any of the ducts. 4 6 q. "Telecommunications facility" means a collection of 4 7 fibers which originates at an access point and ends at the 4 8 fiberoptic termination connector attached to the electronic 4 9 and optronic equipment necessary to transmit voice, video, or 4 10 data transmissions across the fiberoptic network. 4 11 r. "Telecommunications services" means the provision of 4 12 any of the following services: 4 13 (1) Local exchange telephone services. 4 14 (2) Long distance telephone services. 4 15 (3) Internet access services. 4 16 (4) Cable television services. 4 17 Sec. 2. IOWA COMMUNICATIONS NETWORK SALES AUTHORITY 4 18 ESTABLISHED. 4 19 1. AUTHORITY ESTABLISHED PURPOSE POWERS. An Iowa 4 20 communications network sales authority is established with the 4 21 sole authority to oversee the sales process regarding transfer 4 22 of ownership of the network's backbone assets to a qualified 4 23 purchaser pursuant to this Act. Subject to final approval of 4 24 the selection of the qualified purchaser and terms of sale by 4 25 the governor, the authority's operation shall not be subject 4 26 to the jurisdiction or control of any other state agency, and 4 27 the authority shall possess full and sole authority over the 4 28 Iowa communications network backbone asset sales process. 4 29 However, the authority is subject to the general operations 4 30 practices and procedures which are generally applicable to 4 31 other state agencies during the period of its operation. The 4 32 authority shall be in existence from the effective date of 4 33 this Act until a qualified purchaser has been approved by the 4 34 governor, and all sales agreements necessary to complete the 4 35 sale have been negotiated and entered into. 5 1 2. MEMBERSHIP. Membership of the authority shall consist 5 2 of the treasurer of state, the auditor of state, two members 5 3 of the Iowa telecommunications and technology commission, and 5 4 one member of the Iowa utilities board. Three members of the 5 5 authority shall constitute a quorum, and the members shall 5 6 elect a chairperson, vice chairperson, secretary, and other 5 7 officers as determined necessary. Meetings of the authority 5 8 shall be held at the call of the chairperson or when a 5 9 majority of the members so requests. The members of the 5 10 authority shall not receive compensation by reason of their 5 11 membership. 5 12 Sec. 3. PROFESSIONAL AGENT RETENTION. The authority shall 5 13 issue a request for proposals to retain a professional agent 5 14 with telecommunications asset sales experience to market and 5 15 coordinate the sales process of the backbone assets. 5 16 The governor, in consultation with the treasurer of state 5 17 and the department of management, shall be authorized to 5 18 negotiate fair and equitable terms of compensation for the 5 19 professional agent. The described backbone assets shall only 5 20 be available for a single private vendor, or a consortium 5 21 acting as a single private vendor, to purchase and the state 5 22 shall retain an indefeasible right of use with respect to 5 23 certain amounts of backbone capacity in optical wavelengths 5 24 for a negotiated period of seven to twenty-five years, and two 5 25 optional renewal periods of ten years each. As part of the 5 26 sale, the purchaser shall enter into indefeasible right-of-use 5 27 agreements with the state in which the purchaser shall grant 5 28 the state an indefeasible right of use with respect to 5 29 backbone capacity and optical wavelengths and Part II 5 30 facilities and the dark fiber connecting various Part III 5 31 aggregation points to network backbone-switching points. 5 32 During the term of an indefeasible right-of-use agreement, the 5 33 state as holder of the indefeasible right of use will have 5 34 complete and total ownership of the fiber or channels 5 35 identified in the indefeasible right-of-use agreement, may use 6 1 the fiber or channels as if they were a physically owned asset 6 2 of the state, and the state's interest in the fiber or 6 3 channels cannot be annulled or made void by the grantor of the 6 4 indefeasible right of use or any other party. At the end of 6 5 the term of an indefeasible right-of-use agreement and any 6 6 renewal periods, title to the equipment and fiber assets and 6 7 optical wavelength capacities covered by the agreement shall 6 8 pass completely to the purchaser. The terms of the sale of 6 9 the assets shall also include provisions committing the 6 10 commission to purchase field services, including maintenance, 6 11 provisioning, and build out, from the purchaser and committing 6 12 the commission to pay a monthly fee for fiber maintenance and 6 13 field services for the assets that are sold. The request for 6 14 proposals shall be issued no later than six months from the 6 15 date of enactment of this Act. The request for proposals may 6 16 include: 6 17 1. A detailed list of the network assets for sale. 6 18 2. A detailed description of the unfettered and 6 19 unrestricted use of specified capacities of optical 6 20 wavelengths occupying a portion of the backbone assets. 6 21 3. A procedure to determine the compensation for the 6 22 successful professional agent. 6 23 4. Parameters surrounding the sale, to be determined by 6 24 the governor, which shall include but not be limited to the 6 25 following: 6 26 a. The amount of time the state would allow the 6 27 professional agent to market the assets. 6 28 b. A provision that the governor or the governor's 6 29 designee shall have the ultimate discretion to accept or 6 30 reject an offer from a prospective purchaser. 6 31 c. A detailed framework for the indefeasible right-of-use 6 32 agreement between the state and the successful purchaser as 6 33 well as indefeasible right-of-use agreements for Part II 6 34 facilities. The indefeasible right-of-use agreements and any 6 35 other agreements necessary to complete the sale shall clearly 7 1 provide that the network and the state shall be held harmless 7 2 in the event the purchaser suffers a loss of revenue due to a 7 3 failure of any assets sold to the purchaser or to a failure of 7 4 any portion of the network being shared by the network. 7 5 d. A detailed process and procedures for routing capacity 7 6 from the backbone termination points in public buildings to 7 7 sites owned by the purchaser and sharing of alternating 7 8 current power, direct current power, and high-voltage 7 9 alternating current power needed to operate the purchaser's 7 10 equipment and related expenses in the public buildings. 7 11 e. A detailed framework for the standards required 7 12 regarding network maintenance. 7 13 f. A requirement that the purchaser offer advanced 7 14 telecommunications services equitably across the state, 7 15 specifically serving areas where those types of services are 7 16 not yet available. 7 17 g. A requirement that the purchaser grant the network the 7 18 right to participate in future upgrades of the backbone 7 19 electronics statewide in the fiberoptic network outside the 7 20 Des Moines metropolitan area. 7 21 h. The criteria to be used as a basis for determining the 7 22 successful purchaser. 7 23 i. An analysis of a prospective purchaser's financial 7 24 stability with particular attention to assessing the 7 25 prospective purchaser's potential vulnerability to bankruptcy. 7 26 j. A requirement that during the negotiations process, the 7 27 prospective purchaser shall offer the state reasonable surety 7 28 of long-term economic viability. Such surety may include a 7 29 requirement of posting bond or some other financial 7 30 compensation to guard against the purchaser's inability to 7 31 meet the financial terms of the agreement. The purchaser 7 32 shall guarantee that the state's indefeasible right-of-use 7 33 agreements shall be protected in the case of the bankruptcy of 7 34 the purchaser. 7 35 The authority shall select the professional agent 8 1 submitting the proposal that provides the best overall value 8 2 to the state. The public interest requires that the 8 3 authority's ability to enter into a contract with a 8 4 professional agent not be delayed; therefore, the decision of 8 5 the authority shall be final. Notwithstanding the provisions 8 6 of chapter 17A a professional agent not selected by the 8 7 authority shall not be entitled to a contested case hearing or 8 8 to otherwise challenge the decision of the authority. 8 9 Sec. 4. MARKETING OF THE NETWORK ASSETS. Using the 8 10 parameters included in the request for proposals, the selected 8 11 professional agent shall develop a process to market and sell 8 12 the assets designed to maximize the state's proceeds from the 8 13 sale. During the marketing period, using the predetermined 8 14 parameters, including meeting financial qualifications, the 8 15 professional agent shall identify a prospective purchaser and 8 16 submit the prospective purchaser to a qualification process 8 17 designed to verify the purchaser's ability to adequately 8 18 operate and maintain the backbone network. This verification 8 19 process shall include the following: 8 20 1. Verifying that the purchaser has proven experience 8 21 operating a telecommunications network. 8 22 2. Verifying that the purchaser has the ability to 8 23 purchase the network outright or has the collateral to secure 8 24 financing of a loan to purchase the network. 8 25 3. Other criteria as established by the general assembly 8 26 or the governor. 8 27 4. Verifying that the purchaser agrees to the requirement 8 28 that other telecommunications companies providing services 8 29 since January 2, 2004, be allowed to enter into a buyers 8 30 consortium and share in the purchased assets or facilities in 8 31 proportion to terms established in the consortium agreement 8 32 which shall guarantee or result in equal opportunity for 8 33 access by consortium members. 8 34 5. Verifying that the purchaser is an entity that agrees 8 35 to guarantee equal access to the purchased assets to any 9 1 telecommunications company that has been providing services to 9 2 Iowa customers since January 1, 2004. Such equal access means 9 3 that the purchaser shall not do any of the following regarding 9 4 a telecommunications company providing services to Iowa 9 5 customers since January 1, 2004: 9 6 a. Discriminate by refusing or delaying access to the 9 7 purchased assets. 9 8 b. Degrade the quality of access or service provided. 9 9 c. Fail to disclose in a timely manner, upon reasonable 9 10 request and pursuant to a protective agreement concerning 9 11 proprietary information, all information reasonably necessary 9 12 for the design of network interface equipment, network 9 13 interface services, or software that will meet the 9 14 specifications of the purchaser. 9 15 d. Unreasonably refuse or delay interconnections or 9 16 provide inferior interconnections. 9 17 e. Discriminate in favor of itself or an affiliate in the 9 18 provision and pricing of, or extension of credit for, any 9 19 service. 9 20 6. Any telecommunications company as described in 9 21 subsection 5 may file a written complaint at any time with the 9 22 utilities board established in chapter 476 requesting the 9 23 board to determine compliance by the purchaser with the 9 24 provisions of this section or any board rules implementing 9 25 this section. Upon the filing of such complaint, the board 9 26 may promptly initiate a formal complaint proceeding and give 9 27 notice of the proceeding and the opportunity for hearing. The 9 28 formal complaint proceeding may be initiated at any time by 9 29 the board on its own motion. The board shall render a 9 30 decision in the proceeding within ninety days after the date 9 31 the written complaint was filed. 9 32 Upon verification by the professional agent of the 9 33 purchaser's ability to adequately operate and maintain the 9 34 backbone network, the authority shall make a recommendation 9 35 regarding a purchaser and the terms of sale to the governor. 10 1 The governor shall have the right of final approval of the 10 2 purchaser and the terms of sale. 10 3 If the professional agent is unable to identify a 10 4 prospective purchaser able to adequately operate and maintain 10 5 the backbone network, the professional agent shall submit a 10 6 report to the authority explaining the reasons supporting this 10 7 conclusion. 10 8 Sec. 5. POSTSELECTION PROCEDURES. 10 9 1. Once the governor has approved a purchaser and the 10 10 terms of sale, the authority shall enter into a contract with 10 11 the purchaser for sale of the assets. The authority shall 10 12 enter into a memorandum of understanding regarding procedures 10 13 for operation of the network until the sale is finalized with 10 14 the proposed purchaser. The memorandum shall indicate that 10 15 the purchaser, in good faith, intends to finalize the purchase 10 16 and shall pay a termination penalty if the purchaser does not 10 17 finalize the purchase. 10 18 2. Any outstanding debt or liens upon the network assets, 10 19 including the certificates of participation, shall be 10 20 discharged out of the state's proceeds of closing, so that the 10 21 purchaser receives marketable title to the assets. Prepayment 10 22 of the certificates of participation shall be made prior to 10 23 closing the sale of assets or as part of closing the sale, and 10 24 shall be accomplished in a way that does not jeopardize the 10 25 tax-exempt status of the certificates of participation. 10 26 3. The state and the purchaser shall also negotiate their 10 27 relevant interest in right-of-way accommodation agreements and 10 28 leases and easements for uses of rights-of-way. The 10 29 negotiations may specify that the purchaser shall have the 10 30 option of paying the entire sale price in a single lump sum 10 31 payment at the time that the sale is finalized, or 10 32 alternatively may pay for the backbone assets at the time that 10 33 the sale is finalized and make an annual payment for use of 10 34 the rights-of-way. 10 35 4. The purchaser shall immediately establish points of 11 1 presence near the existing network switching centers and 11 2 establish fiber extensions and connectivity between them. The 11 3 purchaser shall physically locate in the vicinity of the joint 11 4 forces headquarters armory in Johnston, Iowa, and establish 11 5 fiber connectivity between the network hub and the vendor's 11 6 location. Duplicate racks of backbone core equipment shall be 11 7 provided by the purchaser and installed by the network to 11 8 carry traffic while the network backbone is transferred to the 11 9 purchaser. The purchaser shall purchase the equipment 11 10 required in this process for the network and pay any and all 11 11 related expenses associated with this conversion effort. 11 12 5. The authority shall enter into indefeasible right-of- 11 13 use agreements with the purchaser in which the purchaser shall 11 14 grant the state an indefeasible right of use with respect to 11 15 the backbone optical wavelengths and Part II facilities and 11 16 the dark fiber connecting various Part III aggregation points 11 17 to network backbone-switching points. The indefeasible right- 11 18 of-use agreements and any other agreements necessary to 11 19 complete the sale shall clearly provide that the network and 11 20 the state shall not be held liable in any manner in the event 11 21 the purchaser suffers a loss of revenue due to a failure of 11 22 any portion of the network being shared by the network. 11 23 6. The authority shall enter into any other agreements 11 24 necessary to complete the sale, including agreements 11 25 committing the commission to purchase field services, 11 26 including maintenance provisioning, and build out, from the 11 27 purchaser and committing the commission to pay a monthly fee 11 28 for fiber maintenance and field services for the assets that 11 29 are sold. The request for proposals shall be issued no later 11 30 than six months from the date of enactment of this Act. 11 31 Sec. 6. PROGRESS REPORTS. The authority, in consultation 11 32 with the governor, shall submit to the general assembly 11 33 periodic progress reports at three-month intervals from the 11 34 effective date of this Act. The reports shall indicate the 11 35 extent of progress, during the reporting period, in issuing 12 1 the request for proposals; retaining a professional agent; 12 2 marketing efforts by the professional agent; identification, 12 3 qualification, and selection of a purchaser; and the 12 4 postselection process of finalizing the sale, entering into 12 5 indefeasible right of use agreements, and maintaining the 12 6 network. 12 7 Sec. 7. Section 8D.2, Code Supplement 2003, is amended by 12 8 adding the following new subsection: 12 9 NEW SUBSECTION. 2A. "Indefeasible right of use" means an 12 10 indefeasible right to use fiber, including an entire cable or 12 11 a portion of the capacity of a cable, or channels of a given 12 12 bandwidth for a defined period of time. 12 13 Sec. 8. Section 8D.3, subsection 3, paragraph i, Code 12 14 Supplement 2003, is amended to read as follows: 12 15 i. Evaluate existing and projected rates for use of the 12 16 system and ensure that rates are sufficient to pay for the 12 17 operation and required equipment upgrade and replacement of 12 18 the system excluding the cost of construction and lease costs 12 19 for Parts I, II, and III. The commission shall establish all 12 20 hourly rates to be charged to all authorized users for the use 12 21 of the network. A fee established by the commission to be 12 22 charged to a hospital licensed pursuant to chapter 135B, a 12 23 physician clinic, or the federal government shall be at an 12 24 appropriate rate so that, at a minimum, there is no state 12 25 subsidy related to the costs of the connection or use of the 12 26 network related to such user. 12 27 Sec. 9. Section 8D.11, subsection 1, Code 2003, is amended 12 28 to read as follows: 12 29 1. The commission may purchase, lease, and improve 12 30 property, equipment, and services for telecommunications for 12 31 public and private agencies and may dispose of property and 12 32 equipment when not necessary for its purposes.However, the12 33commission shall not enter into a contract for the purchase,12 34lease, or improvement of property, equipment, or services for12 35telecommunications pursuant to this subsection in an amount13 1greater than one million dollars without prior authorization13 2by a constitutional majority of each house of the general13 3assembly, or approval by the legislative council if the13 4general assembly is not in session.The commission may use 13 5 indefeasible right-of-use agreements to acquire and dispose of 13 6 property, equipment, and services. The commission shall not 13 7 issue any bonding or other long-term financing arrangements as 13 8 defined in section 12.30, subsection 1, paragraph "b". Real 13 9 or personal property to be purchased by the commission through 13 10 the use of a financing agreement shall be done in accordance 13 11 with the provisions of section 12.28, provided, however, that13 12the commission shall not purchase property, equipment, or13 13services for telecommunications pursuant to this subsection in13 14an amount greater than one million dollars without prior13 15authorization by a constitutional majority of each house of13 16the general assembly, or approval by the legislative council13 17if the general assembly is not in session. 13 18 Sec. 10. Section 8D.13, subsection 2, Code Supplement 13 19 2003, is amended to read as follows: 13 20 2. For purposes of this section, unless the context 13 21 otherwise requires: 13 22 a. "Part I" means the communications connectionsbetween13 23 to central switching and institutions under the control of the 13 24 board of regents, nonprofit institutions of higher education 13 25 eligible for tuition grants, and the regional switching 13 26 centers for the remainder of the network. 13 27 b. "Part II" means the communications connectionsbetween13 28 to the regional switching centers and the secondary switching 13 29 centers. 13 30 c. "Part III" means the communications connectionbetween13 31 to the secondary switching centers and the agencies defined in 13 32 section 8D.2, subsections 4 and 5, excluding state agencies, 13 33 institutions under the control of the board of regents, 13 34 nonprofit institutions of higher education eligible for 13 35 tuition grants, and the judicial branch, judicial district 14 1 departments of correctional services, hospitals and physician 14 2 clinics, agencies of the federal government, and post offices. 14 3 Sec. 11. Section 8D.13, subsection 3, Code Supplement 14 4 2003, is amended to read as follows: 14 5 3. The financing for the procurement costs for the 14 6 entirety of Part I except for the communications connections 14 7betweento central switching and institutions under the 14 8 control of the board of regents, and nonprofit institutions of 14 9 higher education eligible for tuition grants, and for the 14 10 video, data, and voice capacity for state agencies and for 14 11 Part II and Part III, shall be provided by the state. The 14 12 financing for the procurement and maintenance costs for Part 14 13 III shall be provided by the state.A local school board,14 14governing authority of a nonpublic school, or an area14 15education agency board may elect to provide one hundred14 16percent of the financing for the procurement and maintenance14 17costs for Part III to become part of the network. The basis14 18for the amount of state financing is one hundred percent of a14 19single interactive audio and interactive video connection for14 20Part III, and such data and voice capacity as is necessary.14 21 If a school board, governing authority of a nonpublic school, 14 22 or area education agency board elects to provide one hundred 14 23 percent of the financing for the leasing costs for Part III, 14 24 the school district or area education agency may become part 14 25 of the network as soon as the network can reasonably connect 14 26 the district or agency. A local school board, governing 14 27 authority of a nonpublic school, or an area education agency 14 28 board may also elect not to become part of the network. 14 29 Construction of Part III, related to a school board, governing 14 30 authority of a nonpublic school, or area education agency 14 31 board which provides one hundred percent of the financing for 14 32 the leasing costs for Part III, may proceed as determined by 14 33 the commission and consistent with the purpose of this 14 34 chapter. 14 35 Sec. 12. Section 8D.13, Code Supplement 2003, is amended 15 1 by adding the following new subsection: 15 2 NEW SUBSECTION. 3A. If the state sells assets of the 15 3 network pursuant to sections 1 through 5 of this Act, and 15 4 retains backbone capacity from another telecommunications 15 5 provider, publicly owned facilities that house primary and 15 6 secondary switching facilities shall provide access to that 15 7 provider in the geographical area to the primary and secondary 15 8 switching facilities housing the fiberoptics termination 15 9 equipment by means of established fiber entry ducts, and to 15 10 the building grounding system. The provider's access to the 15 11 primary and secondary switching facilities shall be 15 12 coordinated through the network's staff. 15 13 Sec. 13. Section 8D.13, subsection 4, Code Supplement 15 14 2003, is amended to read as follows: 15 15 4. The commissionshall develop the requests for proposals15 16 may enter into contracts and indefeasible right-of-use 15 17 agreements that are needed for the Iowa communications network 15 18 to function with sufficient capacity to serve the video, data, 15 19 and voice requirements of state agencies and for educational 15 20 telecommunications applications.The commission shall develop15 21a request for proposals for each of the systems that will make15 22up the network. The commission may develop a request for15 23proposals for each definitive component of the network or the15 24commission may provide in the request for proposals for each15 25such system that separate contracts may be entered into for15 26each definitive component covered by the request for15 27proposals.Therequests for proposalscontracts entered into 15 28 by the commission may be for the purchase, lease-purchase, or 15 29 lease of the component parts of the network consistent with 15 30 the provisions of this chapter, may require maintenance costs 15 31 to be identified, and the resulting contract may provide for 15 32 maintenance for parts of the network. The master contract may 15 33 provide for electronic classrooms, satellite equipment, 15 34 receiving equipment, studio and production equipment, and 15 35 other associated equipment as required. The indefeasible 16 1 right-of-use agreements entered into by the commission may be 16 2 long-term agreements and may retain the right to use portions 16 3 of capacity of any fiberoptic cable that the commission sells 16 4 to a third party. The indefeasible right-of-use agreements 16 5 may include provisions requiring the commission to contribute 16 6 to the cost of maintenance and upgrades of the network. 16 7 During the term of an indefeasible right-of-use agreement, the 16 8 state as a party to the indefeasible right-of-use agreement 16 9 shall have complete and total ownership of the fiber or 16 10 channels identified in the indefeasible right-of-use 16 11 agreement, may use the fiber or channels as if they were a 16 12 physically owned asset of the state, and the state's interest 16 13 in the fiber or channels cannot be annulled or made void by 16 14 the grantor of the indefeasible right of use or any other 16 15 party. At the end of the term of an indefeasible right-of-use 16 16 agreement and any renewal periods, title to the equipment and 16 17 fiber assets and optical wavelength capacities covered by the 16 18 agreement shall pass completely to the purchaser. 16 19 Sec. 14. Section 8D.13, subsection 5, unnumbered paragraph 16 20 1, Code Supplement 2003, is amended to read as follows: 16 21 The state shall lease all fiberoptic cable facilities or 16 22 facilities with DS-3 capacity for Part III connections for 16 23 which state funding is provided. The state shall lease all 16 24 fiberoptic cable facilities or facilities with DS-3 or DS-1 16 25 capacity for the judicial branch, judicial district department 16 26 of correctional services, and state agency connections for 16 27 which state funding is provided. Such facilities shall be 16 28 leased from qualified providers. The state shall not own such 16 29 facilities, except for those facilities owned by the state as 16 30 of January 1, 1994. Notwithstanding any other provision of 16 31 this section, the state may negotiate the acquisition of a 16 32 Part III connection following the termination of a lease with 16 33 a qualified provider if offered by the vendor for such a Part 16 34 III connection, if the commission determines it to be in the 16 35 best interest of the network. 17 1 Sec. 15. Section 8D.13, subsection 6, Code Supplement 17 2 2003, is amended by striking the subsection. 17 3 Sec. 16. Section 8D.13, subsection 11, Code Supplement 17 4 2003, is amended to read as follows: 17 5 11. The fees charged for use of the networkand state17 6communicationsshall be based on the ongoing operational and 17 7 depreciation costs of the network and of providing state 17 8 communications only. For the services rendered to state 17 9 agencies by the commission, the commission shall prepare a 17 10 statement of services rendered and the agencies shall pay in a 17 11 manner consistent with procedures established by the 17 12 department of administrative services. 17 13 Sec. 17. Section 8D.13, subsection 12, Code Supplement 17 14 2003, is amended to read as follows: 17 15 12. The commission, on its own or as recommended by an 17 16 advisory committee of the commission and approved by the 17 17 commission, shall permit a fee to be charged by a receiving 17 18 site to the originator of the communication provided on the 17 19 network. The fee charged shall be for the purpose of 17 20 recovering the operating costs of a receiving site. The fee 17 21 charged shall be reduced by an amount received by the 17 22 receiving site pursuant to a state appropriation for such 17 23 costs, or federal assistance received for such costs. Fees 17 24 established under this subsection shall be paid by the 17 25 originator of the communication directly to the receiving 17 26 site. In the event that an entity requests a receiving site 17 27 location in a video classroom facility which is authorized by, 17 28 but not funded by, the originator of the communication, the 17 29 requesting entity shall be directly billed by the video 17 30 classroom facility for operating costs relating to the 17 31 communication. For purposes of this section, "operating 17 32 costs" include the costs associated with the management or 17 33 coordination, operations, utilities, classroom, equipment, 17 34 maintenance, and other costs directly related to providing the 17 35 receiving site. 18 1 Sec. 18. Section 8D.14, Code 2003, is amended to read as 18 2 follows: 18 3 8D.14 IOWA COMMUNICATIONS NETWORK FUND. 18 4ThereAn Iowa communications network fund is created in the 18 5 office of the treasurer of statea fund to be known as the18 6Iowa communications network fundunder the control of the Iowa 18 7 telecommunications and technology commission.There shall be18 8deposited into theThe fund shall be comprised of Iowa 18 9 communications network fund proceeds from bonds issued for 18 10 purposes of projects authorized pursuant to section 8D.13, 18 11 funds received from leases pursuant to section 8D.11, and 18 12 other moneys by law credited to or designated by a person for 18 13 deposit into the fund. Interest received by the state as a 18 14 result of investing the contents of the fund shall be credited 18 15 to the fund for use by the commission. 18 16 Sec. 19. NEW SECTION. 8D.15 IOWA COMMUNICATIONS NETWORK 18 17 EQUIPMENT UPGRADE AND REPLACEMENT TRUST FUND. 18 18 An Iowa communications network equipment upgrade and 18 19 replacement trust fund is established, separate and apart from 18 20 all other public moneys or funds of the state, under the 18 21 control of the treasurer of state and the department of 18 22 management. The fund shall be comprised of the proceeds from 18 23 the sale of Iowa communications network assets, including 18 24 certain state-owned fiberoptic cable and related equipment 18 25 located outside the Des Moines metropolitan area, and the 18 26 portion of the fees charged to authorized users for 18 27 depreciation. Contents of this fund shall only be used to 18 28 replace failed or obsolete network equipment owned by the 18 29 state and equipment included in indefeasible right-of-use 18 30 agreements in which the network obtains statewide transport 18 31 capacity, and shall not be used for any other purpose. The 18 32 treasurer of state and the department of management shall 18 33 jointly verify an annual estimate by the commission of the 18 34 amount needed for equipment replacement pursuant to this 18 35 section, and releases of moneys pursuant thereto shall require 19 1 an annual appropriation by the general assembly to the 19 2 commission. The commission may solicit or accept gifts, 19 3 including donations and bequests, to be deposited into the 19 4 fund for use in accordance with the purposes of the fund. 19 5 Interest received by the state as a result of investing the 19 6 contents of the fund shall be credited to the fund for use by 19 7 the commission. 19 8 Sec. 20. EFFECTIVE DATE. This Act, being deemed of 19 9 immediate importance, takes effect upon enactment. 19 10 EXPLANATION 19 11 This bill provides a mechanism for the sale of Iowa 19 12 communications network (ICN) assets with specified retained 19 13 rights by the state, and provides for related technical and 19 14 substantive changes to the provisions of Code chapter 8D. 19 15 FINDINGS AND PURPOSE. The bill contains a statement of 19 16 findings and purpose section relating to legislative intent 19 17 regarding the sale, noting that the ICN is a valuable state 19 18 telecommunications asset, that it provides equal access to 19 19 users of state-of-the-art voice, video, data, and internet 19 20 services at comparable prices statewide, and that it is 19 21 essential that the educational content it carries, and the 19 22 public defense functions it serves, be retained. The bill 19 23 provides that in order to ensure that ICN utilization is 19 24 maximized while minimizing further investment by the state to 19 25 maintain infrastructure, it is in the best interest of the 19 26 citizens of the state to offer some ICN assets for sale, while 19 27 retaining the capacity to provide services to users. The bill 19 28 provides that this would be accomplished through the sale of 19 29 most of the fiberoptic cable and optronics, or light-passing 19 30 equipment, while retaining capacity through long-term 19 31 indefeasible right-of-use agreements, thereby continuing to 19 32 provide telecommunications services and adequate capacity into 19 33 the future. 19 34 DEFINITIONS. The bill provides a definitions section. 19 35 Included among the defined terms are definitions of 20 1 "authority" as referring to an Iowa communications network 20 2 sales authority established to oversee the sale of the 20 3 backbone assets; "indefeasible right of use" (IRU) as an 20 4 indefeasible right to use fiber, including an entire cable or 20 5 a portion of the capacity of a cable, or channels of a given 20 6 bandwidth for a defined period of time; a "professional agent" 20 7 as a person having specialized expertise required in the 20 8 process of selling the Iowa communications network including 20 9 but not limited to expertise regarding brokerage, contracting, 20 10 asset valuation, sales, or negotiation services; a 20 11 "prospective purchaser" as the potential purchaser of the 20 12 network that the professional agent recommends to the 20 13 authority to purchase the network assets; and a "qualified 20 14 purchaser" as a prospective purchaser that has been approved 20 15 by the governor and qualified in accordance with provisions 20 16 specified in the bill. 20 17 AUTHORITY ESTABLISHED. The bill provides that the Iowa 20 18 communications network sales authority is the sole authority 20 19 to oversee the sales process regarding transfer of ownership 20 20 of the network's backbone assets to a qualified purchaser. 20 21 The bill provides that subject to final approval of the 20 22 selection of the qualified purchaser and the terms of sale by 20 23 the governor, the authority's operation shall not be subject 20 24 to the jurisdiction or control of any other state agency. The 20 25 bill provides, however, that the authority is subject to the 20 26 general operations practices applicable to other state 20 27 agencies during the period of its operation, and that this 20 28 period of operation shall be from the effective date of the 20 29 bill until a qualified purchaser has been approved by the 20 30 governor, and all sales agreements necessary to complete the 20 31 sale have been negotiated and entered into. The bill provides 20 32 that membership of the authority shall consist of the 20 33 treasurer of state, the auditor of state, two members of the 20 34 Iowa telecommunications and technology commission, and one 20 35 member of the Iowa utilities board. 21 1 PROFESSIONAL AGENT RETENTION. The bill provides that the 21 2 authority shall issue a request for proposals to retain a 21 3 professional agent with telecommunications asset sales 21 4 experience to market and coordinate the sales process of the 21 5 backbone assets. The bill provides that the governor, in 21 6 consultation with the treasurer of state and the department of 21 7 management, shall be authorized to negotiate fair and 21 8 equitable terms of compensation for the professional agent. 21 9 The bill provides that the backbone assets shall only be 21 10 available for a single private vendor, or a consortium acting 21 11 as a single private vendor, to purchase and that the state 21 12 shall retain an indefeasible right of use with respect to 21 13 certain amounts of backbone capacity in optical wavelengths 21 14 for a negotiated period of seven to 25 years, and two optional 21 15 renewal periods of 10 years each. The bill provides that as a 21 16 part of the sale, the purchaser shall enter into indefeasible 21 17 right-of-use agreements with the state in which the purchaser 21 18 shall grant the state an indefeasible right of use with 21 19 respect to backbone capacity and optical wavelengths and Part 21 20 II facilities and the dark fiber connecting various Part III 21 21 aggregation points to network backbone-switching points. The 21 22 bill provides that during the term of an indefeasible right- 21 23 of-use agreement, the state as the holder will have complete 21 24 and total ownership of the fiber or channels identified in the 21 25 indefeasible right-of-use agreement, may use the fiber or 21 26 channels as if they were a physically owned asset of the 21 27 state, and that the state's interest in the fiber or channels 21 28 cannot be annulled or made void by the grantor of the 21 29 indefeasible right of use or any other party. The bill 21 30 provides that at the end of the indefeasible right-of-use 21 31 agreement and any renewal periods, title to the equipment and 21 32 fiber assets and optical wavelength capacities covered by the 21 33 agreement shall pass completely to the purchaser. The bill 21 34 provides that the terms of sale shall include provisions 21 35 committing the commission to purchase field services, 22 1 including maintenance, provisioning, and build out, from the 22 2 purchaser and committing the commission to pay a monthly fee 22 3 for fiber maintenance and field services for the assets that 22 4 are sold. The bill provides that the request for proposals 22 5 shall be issued no later than six months from the bill's date 22 6 of enactment. 22 7 The bill provides a list of potential subject areas for 22 8 incorporation into the request for proposals, including, among 22 9 others, a procedure to determine the compensation for the 22 10 successful professional agent. The bill provides that the 22 11 parameters surrounding the sale, to be determined by the 22 12 governor, shall include, but not be limited to, the amount of 22 13 time the state would allow the professional agent to market 22 14 the assets, a provision that the governor or the governor's 22 15 designee shall have ultimate discretion to accept or reject an 22 16 offer, and a detailed framework for IRU agreements between the 22 17 state and a purchaser, including the provision that the state 22 18 shall be held harmless in the event the purchaser suffers a 22 19 loss of revenue due to a failure of any assets or any portion 22 20 of the network being shared by the network. The bill provides 22 21 that the framework shall also include a process and procedures 22 22 for routing capacity and sharing of power currents needed to 22 23 operate the purchaser's equipment and related expenses, a 22 24 framework for the standards required regarding network 22 25 maintenance, a requirement that the purchaser offer advanced 22 26 telecommunications services equitably across the state and 22 27 specifically serving areas where those types of services are 22 28 not yet available, a requirement that the purchaser grant the 22 29 network the right to participate in future upgrades, purchaser 22 30 selection criteria, an analysis of a prospective purchaser's 22 31 financial stability, and a requirement that during the 22 32 negotiations process, the prospective purchaser shall offer 22 33 the state specified reasonable surety of long-term economic 22 34 viability and shall guarantee that the state's IRUs shall be 22 35 protected in the case of the bankruptcy of the purchaser. 23 1 SELECTION PROCESS FOR QUALIFIED PURCHASER. The bill 23 2 provides that the authority shall select the professional 23 3 agent submitting the proposal that provides the best overall 23 4 value to the state, and that using the parameters included in 23 5 the request for proposals, the selected professional agent 23 6 shall develop a process to market and sell the assets designed 23 7 to maximize the state's proceeds from the sale. The bill 23 8 provides that during the marketing period, using the 23 9 predetermined parameters, the professional agent shall 23 10 identify a prospective purchaser and submit the prospective 23 11 purchaser to a qualification process designed to verify the 23 12 purchaser's ability to adequately operate and maintain the 23 13 backbone network. The bill provides that the verification 23 14 process shall include verifying that the purchaser has proven 23 15 experience operating a telecommunications network, has the 23 16 ability to purchase the network outright collateral to secure 23 17 financing, and additional criteria established by the general 23 18 assembly or the governor. The bill also provides that there 23 19 shall be verification that the purchaser agrees to the 23 20 requirement that other telecommunications companies providing 23 21 services since January 2, 2004, be allowed to enter into a 23 22 buyers consortium and share in the purchased assets or 23 23 facilities in proportion to terms established in the 23 24 consortium agreement which shall guarantee or result in equal 23 25 opportunity for access by a consortium member, and that the 23 26 purchaser is an entity that agrees to guarantee equal access 23 27 to the purchased assets to any telecommunications company that 23 28 has been providing services to Iowa customers since January 1, 23 29 2004. The bill provides that this equal access means that the 23 30 purchaser shall not, with regard to a telecommunications 23 31 company providing services to Iowa customers since January 1, 23 32 2004, discriminate by refusing or delaying access to the 23 33 purchased assets; degrade the quality of access or service 23 34 provided; fail to disclose all information reasonably 23 35 necessary for the design of network interface equipment, 24 1 network interface services, or software that will meet the 24 2 specifications of the purchaser; or unreasonably refuse or 24 3 delay interconnections or provide inferior interconnections, 24 4 discriminate in favor of itself or an affiliate in the 24 5 provision and pricing of, or extension of credit for, any 24 6 service. The bill provides that a telecommunications company 24 7 entering into a consortium may file a written complaint at any 24 8 time with the utilities board established in Code chapter 476 24 9 requesting the board to determine compliance by the purchaser 24 10 with these provisions. 24 11 The bill provides that after verification by the 24 12 professional agent of the purchaser's ability to adequately 24 13 operate and maintain the backbone network is given, the 24 14 authority shall make a recommendation regarding a purchaser 24 15 and the terms of sale to the governor, and that the governor 24 16 has the right of final approval of the purchaser and the terms 24 17 of sale. The bill provides that if the professional agent is 24 18 unable to identify a prospective purchaser able to adequately 24 19 operate and maintain the backbone network, the professional 24 20 agent shall submit a report to the authority explaining the 24 21 reasons supporting this conclusion. 24 22 NETWORK OPERATION PENDING SALE. The bill provides that the 24 23 authority shall enter into a memorandum of understanding 24 24 regarding procedures for operation of the network until the 24 25 sale is finalized with the prospective purchaser, which shall 24 26 include a provision that the purchaser in good faith intends 24 27 to finalize the purchase and shall pay a termination penalty 24 28 if the purchase is not finalized. 24 29 ADDITIONAL CONDITIONS OF SALE. The bill provides than any 24 30 outstanding debt or liens upon the network assets shall be 24 31 discharged out of the state's proceeds so that the purchaser 24 32 receives marketable title to the assets, and that prepayment 24 33 of certificates of participation, defined in the bill, shall 24 34 be made prior to closing the sale of assets or as part of 24 35 closing the sale, and accomplished in a manner not 25 1 jeopardizing the certificate's tax-exempt status. The bill 25 2 provides that the state and the purchaser shall negotiate 25 3 their relevant interest in rights-of-way and leases and 25 4 easements for uses of rights-of-way, that the purchaser shall 25 5 have the option of paying the entire sale price in a single 25 6 lump sum payment at the time that the sale if finalized or 25 7 alternatively may pay for the backbone assets at the time that 25 8 the sale is finalized and make an annual payment for use of 25 9 the rights-of-way, and that the purchaser shall immediately 25 10 establish points of presence near the existing network 25 11 switching centers and establish fiber extensions and 25 12 connectivity between them. The bill provides that the 25 13 purchaser shall physically locate in the vicinity of the joint 25 14 forces headquarters armory in Johnston, Iowa, and establish 25 15 fiber connectivity between the ICN hub and the vendor's 25 16 location, and that duplicate racks of backbone core equipment 25 17 shall be provided by the purchaser and installed by the 25 18 network to carry traffic while the network backbone is 25 19 transferred to the purchaser. The bill provides that the 25 20 purchaser shall purchase the equipment required in this 25 21 process for the network and pay any and all related expenses 25 22 associated with the conversion effort. The bill provides that 25 23 the authority, in consultation with the treasurer of state and 25 24 the governor, shall submit to the general assembly periodic 25 25 progress reports at three-month intervals from the effective 25 26 date of the bill indicating progress in issuing the request 25 27 for proposals; retaining a professional agent; marketing 25 28 efforts by the professional agent; identification, 25 29 qualification, and selection of a purchaser; and the 25 30 postselection process of finalizing the sale, entering into 25 31 indefeasible right-of-use agreements, and maintaining the 25 32 network. 25 33 CODE CHAPTER 8D AMENDMENTS. The bill provides for a 25 34 conforming definition and references to IRUs in Code chapter 25 35 8D and conforming terminology changes and provisions regarding 26 1 changes in ownership of the network. 26 2 LEGISLATIVE AUTHORIZATION ELIMINATED. The bill deletes a 26 3 provision that prohibited the commission from entering into a 26 4 contract for the purchase, lease, or improvement of property, 26 5 equipment, or services for telecommunications in an amount 26 6 greater than $1 million without prior authorization by a 26 7 constitutional majority of each house of the general assembly, 26 8 or approval by the legislative council if the general assembly 26 9 is not in session. The bill also deletes outdated language 26 10 regarding a local school board, governing authority of a 26 11 nonpublic school, or area education agency board elections to 26 12 provide financing costs for Part III of the network. 26 13 NETWORK ACQUISITIONS, DISPOSAL, AND ACCESS. The bill adds 26 14 a provision that the commission may use IRU agreements to 26 15 acquire and dispose of property, equipment, and services. The 26 16 bill provides that if the state sells assets of the network 26 17 pursuant to the procedure specified in the bill and retains 26 18 backbone capacity from another telecommunications provider, 26 19 publicly owned facilities that house primary and secondary 26 20 switching facilities shall provide access to that provider in 26 21 the geographic area to the primary and secondary switching 26 22 facilities housing the fiberoptics termination equipment in 26 23 established fiber entry ducts, and to the building grounding 26 24 system. The bill provides that the provider's access to the 26 25 primary and secondary switching facilities will be coordinated 26 26 through the network's staff. The bill provides that the state 26 27 may negotiate the acquisition of a Part III connection 26 28 following the termination of a lease with a qualified provider 26 29 if offered by the vendor for such a Part III connection if the 26 30 commission determines it to be in the best interest of the 26 31 network. 26 32 NETWORK COSTS AND BILLINGS. The bill provides that in 26 33 situations where an entity requests a receiving site location 26 34 in a video classroom facility which is authorized by, but not 26 35 funded by, the originator of the communication, the requesting 27 1 entity shall be directly billed by the video classroom 27 2 facility for operating costs relating to the communication. 27 3 The bill also provides for the inclusion of depreciation costs 27 4 in the determination of rates for use of the system. The bill 27 5 deletes outdated language which had required reports relating 27 6 to the impact of changing technology on potential costs and 27 7 capabilities of the system, and relating to a department of 27 8 education study of new techniques in distant teaching. 27 9 IOWA COMMUNICATIONS NETWORK FUND INTEREST AND UPGRADE AND 27 10 REPLACEMENT TRUST FUND. The bill further provides for the 27 11 retention of interest received by the state from the Iowa 27 12 communications network fund established in Code section 8D.14, 27 13 and for the establishment of an Iowa communications network 27 14 equipment upgrade and replacement trust fund. The bill 27 15 provides that the new trust fund shall be separate and apart 27 16 from all other public moneys or funds of the state, and shall 27 17 be under the control of the treasurer of state and the 27 18 department of management. The bill provides that the trust 27 19 fund will be comprised of the proceeds from the sale of ICN 27 20 assets, including certain state-owned fiberoptic cable and 27 21 related equipment located outside the Des Moines metropolitan 27 22 area, and the portion of the fees charged to authorized users 27 23 for depreciation. The bill provides that contents of the fund 27 24 shall only be used to replace failed or obsolete network 27 25 equipment owned by the state and equipment included in IRU 27 26 agreements in which the network obtains statewide transport 27 27 capacity. The bill provides that the treasurer of state and 27 28 the department of management shall jointly verify an annual 27 29 estimate by the commission of the amount needed for equipment 27 30 replacement pursuant to new Code section 8D.15, and that 27 31 releases of moneys pursuant to the estimate shall require an 27 32 annual appropriation by the general assembly to the 27 33 commission. The bill provides that the commission may solicit 27 34 or accept gifts, including donations and bequests, to be 27 35 deposited into the fund for use in accordance with the 28 1 purposes of the fund, and that interest received by the state 28 2 as a result of investing the contents of the fund shall be 28 3 credited to the fund for use by the commission. 28 4 The bill takes effect upon enactment. 28 5 LSB 5450HV 80 28 6 rn/pj/5
Text: HF02535 Text: HF02537 Text: HF02500 - HF02599 Text: HF Index Bills and Amendments: General Index Bill History: General Index
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