Text: HSB00644 Text: HSB00646 Text: HSB00600 - HSB00699 Text: HSB 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 investment banker specializing in 1 34 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. "Authorized user" means a private or public agency, as 2 18 defined in section 8D.2, except for a public or private agency 2 19 which was required pursuant to section 8D.9, subsection 1, to 2 20 certify to the commission not later than July 1, 1994, the 2 21 agency's intent to become a part of the network and which did 2 22 not provide such certification. Agencies that obtained 2 23 legislative approval to join the network after July 1, 1994, 2 24 will be treated as a public or private agency for purposes of 2 25 this definition and all provisions of chapter 8D. 2 26 c. "Capacity" means the information-carrying ability of a 2 27 telecommunications facility. The measurement of capacity is 2 28 determined by the purpose of the facility. 2 29 d. "Certificates of participation" means the two issuances 2 30 of certificates of participation issued by the state in 1992 2 31 and 1993 to fund the construction of the owned fiber and 2 32 equipment for Parts I and II of the network as defined in 2 33 chapter 8D. 2 34 e. "Commission" means the Iowa telecommunications and 2 35 technology commission as defined in section 8D.2. 3 1 f. "Indefeasible right of use" means an indefeasible right 3 2 to use fiber, including an entire cable or a portion of the 3 3 capacity of a cable, or channels of a given bandwidth for a 3 4 defined period of time. 3 5 g. "Investment banker" means a financial services firm 3 6 that assists companies and governments in issuing securities, 3 7 assists investors in purchasing securities, manages financial 3 8 assets, trades securities, and provides financial advice. 3 9 h. "Iowa communications network hub" means the 3 10 telecommunications facility located in the joint forces 3 11 headquarters armory, Johnston, Iowa, where the main switching 3 12 and maintenance operations of the network take place. 3 13 i. "Network" means the Iowa communications network. 3 14 j. "Network operations center" means the maintenance and 3 15 network diagnostic equipment that manages the network 3 16 infrastructure. 3 17 k. "Optronics" means the fiberoptic equipment that 3 18 activates the fiber and allows light to traverse. 3 19 l. "Prospective purchaser" means the potential purchaser 3 20 of the network that the investment banker recommends to the 3 21 state to purchase the network assets, as provided in section 3 3 22 of this Act. 3 23 m. "Qualified purchaser" means a prospective purchaser 3 24 that has been approved by the governor and qualified in 3 25 accordance with the provisions of section 4 of this Act. 3 26 o. "Right-of-way accommodation agreement" means a twenty- 3 27 year agreement between the network and the department of 3 28 transportation that includes an option to extend the agreement 3 29 for an additional ten years, which is definitive with respect 3 30 to the use of interstate rights-of-way and gives the 3 31 department of transportation the sole right to approve or deny 3 32 other users of the sheath, trench, or any of the ducts. 3 33 p. "Telecommunications facility" means a collection of 3 34 fibers which originates at an access point and ends at the 3 35 fiberoptic termination connector attached to the electronic 4 1 and optronic equipment necessary to transmit voice, video, or 4 2 data transmissions across the fiberoptic network. 4 3 Sec. 2. INVESTMENT BANKER RETENTION. The commission, in 4 4 collaboration with the treasurer of state, shall issue a 4 5 request for proposals to retain an investment banker with 4 6 telecommunications asset sales experience to market and 4 7 coordinate the sales process of the backbone fiber comprising 4 8 the five fiberoptic rings located outside the Des Moines 4 9 metropolitan area and the optronic equipment associated with 4 10 these backbone rings. 4 11 The governor, in consultation with the treasurer of state 4 12 and the department of management, shall be authorized to 4 13 negotiate fair and equitable terms of compensation for the 4 14 investment banker. The described backbone assets shall only 4 15 be available for a single private vendor to purchase and the 4 16 state shall retain an indefeasible right of use with respect 4 17 to certain amounts of backbone capacity in optical wavelengths 4 18 for a negotiated period of years, which shall not be less than 4 19 twenty-five years and two optional renewal periods of ten 4 20 years. As part of the sale, the purchaser shall enter into 4 21 indefeasible right-of-use agreements with the state in which 4 22 the purchaser shall grant the state an indefeasible right of 4 23 use with respect to backbone capacity and optical wavelengths 4 24 and Part II facilities and the dark fiber connecting various 4 25 Part III aggregation points to network backbone-switching 4 26 points. During the term of an indefeasible right-of-use 4 27 agreement, the state as holder of the indefeasible right of 4 28 use will have complete and total ownership of the fiber or 4 29 channels identified in the indefeasible right-of-use 4 30 agreement, may use the fiber or channels as if they were a 4 31 physically owned asset of the state, and the state's interest 4 32 in the fiber or channels cannot be annulled or made void by 4 33 the grantor of the indefeasible right of use or any other 4 34 party. At the end of the term of an indefeasible right-of-use 4 35 agreement and any renewal periods, title to the equipment and 5 1 fiber assets and optical wavelength capacities covered by the 5 2 agreement shall pass completely to the purchaser. The terms 5 3 of the sale of the assets shall also include provisions 5 4 committing the commission to purchase field services, 5 5 including maintenance, provisioning, and build out, from the 5 6 purchaser and committing the commission to pay a monthly fee 5 7 for fiber maintenance and field services for the assets that 5 8 are sold. The request for proposals shall be issued no later 5 9 than six months from the date of enactment of this Act. The 5 10 request for proposals may include: 5 11 1. A detailed list of the network assets for sale. 5 12 2. A detailed description of the unfettered and 5 13 unrestricted use of specified capacities of optical 5 14 wavelengths occupying a portion of the fiber backbone asset 5 15 relating to the five fiberoptic rings located outside the Des 5 16 Moines metropolitan area. 5 17 3. A procedure to determine the compensation for the 5 18 successful investment banker. 5 19 4. Parameters surrounding the sale, to be determined by 5 20 the governor, which shall include but not be limited to the 5 21 following: 5 22 a. The amount of time the state would allow the investment 5 23 banker to market the assets. 5 24 b. A provision that the governor or the governor's 5 25 designee shall have the ultimate discretion to accept or 5 26 reject an offer from a prospective purchaser. 5 27 c. A detailed framework for the indefeasible right-of-use 5 28 agreement between the state and the successful purchaser as 5 29 well as indefeasible right-of-use agreements for Part II 5 30 facilities. The indefeasible right-of-use agreements and any 5 31 other agreements necessary to complete the sale shall clearly 5 32 provide that the network and the state shall be held harmless 5 33 in the event the purchaser suffers a loss of revenue due to a 5 34 failure of any assets sold to the purchaser or to a failure of 5 35 any portion of the network being shared by the network. 6 1 d. A detailed process and procedures for routing capacity 6 2 from the backbone termination points in public buildings to 6 3 sites owned by the purchaser and sharing of alternating 6 4 current power, direct current power, and high-voltage 6 5 alternating current power needed to operate the purchaser's 6 6 equipment and related expenses in the public buildings. 6 7 e. A detailed framework for the standards required 6 8 regarding network maintenance. 6 9 f. A requirement that the purchaser offer advanced 6 10 telecommunications services equitably across the state, 6 11 specifically serving areas where those types of services are 6 12 not yet available. 6 13 g. A requirement that the purchaser grant the network the 6 14 right to participate in future upgrades of the backbone 6 15 electronics statewide in the fiberoptic network outside the 6 16 Des Moines metropolitan area. 6 17 h. The criteria to be used as a basis for determining the 6 18 successful purchaser. 6 19 i. An analysis of a prospective purchaser's financial 6 20 stability with particular attention to assessing the 6 21 prospective purchaser's potential vulnerability to bankruptcy. 6 22 The commission, in consultation with the treasurer of 6 23 state, shall select the investment banker submitting the 6 24 proposal that provides the best overall value to the state. 6 25 The public interest requires that the commission's ability to 6 26 enter into a contract with an investment banker not be 6 27 delayed; therefore, the decision of the commission, in 6 28 consultation with the treasurer of state, shall be final. 6 29 Notwithstanding the provisions of chapter 17A or the 6 30 commission's administrative rules, an investment banker not 6 31 selected by the commission shall not be entitled to a 6 32 contested case hearing or to otherwise challenge the decision 6 33 of the commission. 6 34 Sec. 3. MARKETING OF THE NETWORK ASSETS. Using the 6 35 parameters included in the request for proposals, the selected 7 1 investment banker shall develop a process to market and sell 7 2 the assets designed to maximize the state's proceeds from the 7 3 sale. At the conclusion of the marketing period, using the 7 4 predetermined parameters, including meeting financial 7 5 qualifications, the investment banker shall either recommend a 7 6 prospective purchaser of the network assets to the commission 7 7 and the treasurer of state or report to the commission and the 7 8 treasurer of state that the investment banker was unable to 7 9 identify a prospective purchaser. If the investment banker is 7 10 unable to identify a prospective purchaser, the report shall 7 11 include an explanation of the reasons supporting this 7 12 conclusion. The commission, in consultation with the 7 13 treasurer of state, shall make a recommendation regarding a 7 14 purchaser and the terms of sale to the governor. The governor 7 15 shall have the right of final approval of the purchaser and 7 16 the terms of sale, subject to verification of the purchaser's 7 17 ability to adequately operate and maintain the backbone 7 18 network. 7 19 Sec. 4. QUALIFICATION OF PURCHASER. Once the governor has 7 20 approved a purchaser and the terms of sale, the investment 7 21 banker shall verify the purchaser's ability to adequately 7 22 operate and maintain the backbone network. This verification 7 23 shall include the following: 7 24 1. Verifying that the purchaser has proven experience 7 25 operating a telecommunications network. 7 26 2. Verifying that the purchaser has the ability to 7 27 purchase the network outright or has the collateral to secure 7 28 financing of a loan. 7 29 3. Other criteria as established by the general assembly 7 30 or the governor. 7 31 Upon verification by the investment banker of the 7 32 purchaser's ability to adequately operate and maintain the 7 33 backbone network, the commission shall enter into a contract 7 34 with the purchaser for sale of the assets. 7 35 Sec. 5. POSTSELECTION PROCEDURES. 8 1 1. Once the purchaser has been qualified in accordance 8 2 with the provisions of section 4 of this Act, the commission 8 3 shall enter into a memorandum of understanding regarding 8 4 procedures for operation of the network until the sale is 8 5 finalized with the proposed purchaser. The memorandum shall 8 6 indicate that the purchaser, in good faith, intends to 8 7 finalize the purchase and shall pay a termination penalty if 8 8 the purchaser does not finalize the purchase. 8 9 2. Any outstanding debt or liens upon the network assets, 8 10 including the certificates of participation, shall be 8 11 discharged out of the state's proceeds of closing, so that the 8 12 purchaser receives marketable title to the assets. Prepayment 8 13 of the certificates of participation shall be made prior to 8 14 closing the sale of assets or as part of closing the sale, and 8 15 shall be accomplished in a way that does not jeopardize the 8 16 tax-exempt status of the certificates of participation. 8 17 3. The state and the purchaser shall also negotiate their 8 18 relevant interest in right-of-way accommodation agreements and 8 19 leases and easements for uses of rights-of-way. 8 20 4. The purchaser shall immediately establish points of 8 21 presence near the existing network switching centers and 8 22 establish fiber extensions and connectivity between them. The 8 23 purchaser shall physically locate in the vicinity of the joint 8 24 forces headquarters armory in Johnston, Iowa, and establish 8 25 fiber connectivity between the network hub and the vendor's 8 26 location. Duplicate racks of backbone core equipment shall be 8 27 provided by the purchaser and installed by the network to 8 28 carry traffic while the network backbone is transferred to the 8 29 purchaser. The purchaser shall purchase the equipment 8 30 required in this process for the network and pay any and all 8 31 related expenses associated with this conversion effort. 8 32 5. The commission shall enter into indefeasible right-of- 8 33 use agreements with the purchaser in which the purchaser shall 8 34 grant the state an indefeasible right of use with respect to 8 35 the backbone optical wavelengths and Part II facilities and 9 1 the dark fiber connecting various Part III aggregation points 9 2 to network backbone-switching points. The indefeasible right- 9 3 of-use agreements and any other agreements necessary to 9 4 complete the sale shall clearly provide that the network and 9 5 the state shall not be held liable in any manner in the event 9 6 the purchaser suffers a loss of revenue due to a failure of 9 7 any portion of the network being shared by the network. 9 8 6. The commission shall enter into any other agreements 9 9 necessary to complete the sale, including agreements 9 10 committing the commission to purchase field services, 9 11 including maintenance provisioning, and build out, from the 9 12 purchaser and committing the commission to pay a monthly fee 9 13 for fiber maintenance and field services for the assets that 9 14 are sold. The request for proposals shall be issued no later 9 15 than six months from the date of enactment of this Act. 9 16 Sec. 6. Section 8D.2, Code Supplement 2003, is amended by 9 17 adding the following new subsection: 9 18 NEW SUBSECTION. 2A. "Indefeasible right of use" means an 9 19 indefeasible right to use fiber, including an entire cable or 9 20 a portion of the capacity of a cable, or channels of a given 9 21 bandwidth for a defined period of time. 9 22 Sec. 7. Section 8D.3, subsection 3, paragraph i, Code 9 23 Supplement 2003, is amended to read as follows: 9 24 i. Evaluate existing and projected rates for use of the 9 25 system and ensure that rates are sufficient to pay for the 9 26 operation and required equipment upgrade and replacement of 9 27 the system excluding the cost of construction and lease costs 9 28 for Parts I, II, and III. The commission shall establish all 9 29 hourly rates to be charged to all authorized users for the use 9 30 of the network. A fee established by the commission to be 9 31 charged to a hospital licensed pursuant to chapter 135B, a 9 32 physician clinic, or the federal government shall be at an 9 33 appropriate rate so that, at a minimum, there is no state 9 34 subsidy related to the costs of the connection or use of the 9 35 network related to such user. 10 1 Sec. 8. Section 8D.11, subsection 1, Code 2003, is amended 10 2 to read as follows: 10 3 1. The commission may purchase, lease, and improve 10 4 property, equipment, and services for telecommunications for 10 5 public and private agencies and may dispose of property and 10 6 equipment when not necessary for its purposes.However, the10 7commission shall not enter into a contract for the purchase,10 8lease, or improvement of property, equipment, or services for10 9telecommunications pursuant to this subsection in an amount10 10greater than one million dollars without prior authorization10 11by a constitutional majority of each house of the general10 12assembly, or approval by the legislative council if the10 13general assembly is not in session.The commission may use 10 14 indefeasible right-of-use agreements to acquire and dispose of 10 15 property, equipment, and services. The commission shall not 10 16 issue any bonding or other long-term financing arrangements as 10 17 defined in section 12.30, subsection 1, paragraph "b". Real 10 18 or personal property to be purchased by the commission through 10 19 the use of a financing agreement shall be done in accordance 10 20 with the provisions of section 12.28, provided, however, that10 21the commission shall not purchase property, equipment, or10 22services for telecommunications pursuant to this subsection in10 23an amount greater than one million dollars without prior10 24authorization by a constitutional majority of each house of10 25the general assembly, or approval by the legislative council10 26if the general assembly is not in session. 10 27 Sec. 9. Section 8D.13, subsection 2, Code Supplement 2003, 10 28 is amended to read as follows: 10 29 2. For purposes of this section, unless the context 10 30 otherwise requires: 10 31 a. "Part I" means the communications connectionsbetween10 32 to central switching and institutions under the control of the 10 33 board of regents, nonprofit institutions of higher education 10 34 eligible for tuition grants, and the regional switching 10 35 centers for the remainder of the network. 11 1 b. "Part II" means the communications connectionsbetween11 2 to the regional switching centers and the secondary switching 11 3 centers. 11 4 c. "Part III" means the communications connectionbetween11 5 to the secondary switching centers and the agencies defined in 11 6 section 8D.2, subsections 4 and 5, excluding state agencies, 11 7 institutions under the control of the board of regents, 11 8 nonprofit institutions of higher education eligible for 11 9 tuition grants, and the judicial branch, judicial district 11 10 departments of correctional services, hospitals and physician 11 11 clinics, agencies of the federal government, and post offices. 11 12 Sec. 10. Section 8D.13, subsection 3, Code Supplement 11 13 2003, is amended to read as follows: 11 14 3. The financing for the procurement costs for the 11 15 entirety of Part I except for the communications connections 11 16betweento central switching and institutions under the 11 17 control of the board of regents, and nonprofit institutions of 11 18 higher education eligible for tuition grants, and for the 11 19 video, data, and voice capacity for state agencies and for 11 20 Part II and Part III, shall be provided by the state. The 11 21 financing for the procurement and maintenance costs for Part 11 22 III shall be provided by the state.A local school board,11 23governing authority of a nonpublic school, or an area11 24education agency board may elect to provide one hundred11 25percent of the financing for the procurement and maintenance11 26costs for Part III to become part of the network. The basis11 27for the amount of state financing is one hundred percent of a11 28single interactive audio and interactive video connection for11 29Part III, and such data and voice capacity as is necessary.11 30 If a school board, governing authority of a nonpublic school, 11 31 or area education agency board elects to provide one hundred 11 32 percent of the financing for the leasing costs for Part III, 11 33 the school district or area education agency may become part 11 34 of the network as soon as the network can reasonably connect 11 35 the district or agency. A local school board, governing 12 1 authority of a nonpublic school, or an area education agency 12 2 board may also elect not to become part of the network. 12 3 Construction of Part III, related to a school board, governing 12 4 authority of a nonpublic school, or area education agency 12 5 board which provides one hundred percent of the financing for 12 6 the leasing costs for Part III, may proceed as determined by 12 7 the commission and consistent with the purpose of this 12 8 chapter. 12 9 Sec. 11. Section 8D.13, Code Supplement 2003, is amended 12 10 by adding the following new subsection: 12 11 NEW SUBSECTION. 3A. If the state sells assets of the 12 12 network pursuant to sections 1 through 5 of this Act, and 12 13 retains backbone capacity from another telecommunications 12 14 provider, publicly owned facilities that house primary and 12 15 secondary switching facilities shall provide access to that 12 16 provider in the geographical area to the primary and secondary 12 17 switching facilities housing the fiberoptics termination 12 18 equipment by means of established fiber entry ducts, and to 12 19 the building grounding system. The provider's access to the 12 20 primary and secondary switching facilities shall be 12 21 coordinated through the network's staff. 12 22 Sec. 12. Section 8D.13, subsection 4, Code Supplement 12 23 2003, is amended to read as follows: 12 24 4. The commissionshall develop the requests for proposals12 25 may enter into contracts and indefeasible right-of-use 12 26 agreements that are needed for the Iowa communications network 12 27 to function with sufficient capacity to serve the video, data, 12 28 and voice requirements of state agencies and for educational 12 29 telecommunications applications.The commission shall develop12 30a request for proposals for each of the systems that will make12 31up the network. The commission may develop a request for12 32proposals for each definitive component of the network or the12 33commission may provide in the request for proposals for each12 34such system that separate contracts may be entered into for12 35each definitive component covered by the request for13 1proposals.Therequests for proposalscontracts entered into 13 2 by the commission may be for the purchase, lease-purchase, or 13 3 lease of the component parts of the network consistent with 13 4 the provisions of this chapter, may require maintenance costs 13 5 to be identified, and the resulting contract may provide for 13 6 maintenance for parts of the network. The master contract may 13 7 provide for electronic classrooms, satellite equipment, 13 8 receiving equipment, studio and production equipment, and 13 9 other associated equipment as required. The indefeasible 13 10 right-of-use agreements entered into by the commission may be 13 11 long-term agreements and may retain the right to use portions 13 12 of capacity of any fiberoptic cable that the commission sells 13 13 to a third party. The indefeasible right-of-use agreements 13 14 may include provisions requiring the commission to contribute 13 15 to the cost of maintenance and upgrades of the network. 13 16 During the term of an indefeasible right-of-use agreement, the 13 17 state as a party to the indefeasible right-of-use agreement 13 18 shall have complete and total ownership of the fiber or 13 19 channels identified in the indefeasible right-of-use 13 20 agreement, may use the fiber or channels as if they were a 13 21 physically owned asset of the state, and the state's interest 13 22 in the fiber or channels cannot be annulled or made void by 13 23 the grantor of the indefeasible right of use or any other 13 24 party. At the end of the term of an indefeasible right-of-use 13 25 agreement and any renewal periods, title to the equipment and 13 26 fiber assets and optical wavelength capacities covered by the 13 27 agreement shall pass completely to the purchaser. 13 28 Sec. 13. Section 8D.13, subsection 5, unnumbered paragraph 13 29 1, Code Supplement 2003, is amended to read as follows: 13 30 The state shall lease all fiberoptic cable facilities or 13 31 facilities with DS-3 capacity for Part III connections for 13 32 which state funding is provided. The state shall lease all 13 33 fiberoptic cable facilities or facilities with DS-3 or DS-1 13 34 capacity for the judicial branch, judicial district department 13 35 of correctional services, and state agency connections for 14 1 which state funding is provided. Such facilities shall be 14 2 leased from qualified providers. The state shall not own such 14 3 facilities, except for those facilities owned by the state as 14 4 of January 1, 1994. Notwithstanding any other provision of 14 5 this section, the state may negotiate the acquisition of a 14 6 Part III connection following the termination of a lease with 14 7 a qualified provider if offered by the vendor for such a Part 14 8 III connection, if the commission determines it to be in the 14 9 best interest of the network. 14 10 Sec. 14. Section 8D.13, subsection 6, Code Supplement 14 11 2003, is amended by striking the subsection. 14 12 Sec. 15. Section 8D.13, subsection 11, Code Supplement 14 13 2003, is amended to read as follows: 14 14 11. The fees charged for use of the networkand state14 15communicationsshall be based on the ongoing operational and 14 16 depreciation costs of the network and of providing state 14 17 communications only. For the services rendered to state 14 18 agencies by the commission, the commission shall prepare a 14 19 statement of services rendered and the agencies shall pay in a 14 20 manner consistent with procedures established by the 14 21 department of administrative services. 14 22 Sec. 16. Section 8D.13, subsection 12, Code Supplement 14 23 2003, is amended to read as follows: 14 24 12. The commission, on its own or as recommended by an 14 25 advisory committee of the commission and approved by the 14 26 commission, shall permit a fee to be charged by a receiving 14 27 site to the originator of the communication provided on the 14 28 network. The fee charged shall be for the purpose of 14 29 recovering the operating costs of a receiving site. The fee 14 30 charged shall be reduced by an amount received by the 14 31 receiving site pursuant to a state appropriation for such 14 32 costs, or federal assistance received for such costs. Fees 14 33 established under this subsection shall be paid by the 14 34 originator of the communication directly to the receiving 14 35 site. In the event that an entity requests a receiving site 15 1 location in a video classroom facility which is authorized by, 15 2 but not funded by, the originator of the communication, the 15 3 requesting entity shall be directly billed by the video 15 4 classroom facility for operating costs relating to the 15 5 communication. For purposes of this section, "operating 15 6 costs" include the costs associated with the management or 15 7 coordination, operations, utilities, classroom, equipment, 15 8 maintenance, and other costs directly related to providing the 15 9 receiving site. 15 10 Sec. 17. Section 8D.14, Code 2003, is amended to read as 15 11 follows: 15 12 8D.14 IOWA COMMUNICATIONS NETWORK FUND. 15 13ThereAn Iowa communications network fund is created in the 15 14 office of the treasurer of statea fund to be known as the15 15Iowa communications network fundunder the control of the Iowa 15 16 telecommunications and technology commission.There shall be15 17deposited into theThe fund shall be comprised of Iowa 15 18 communications network fund proceeds from bonds issued for 15 19 purposes of projects authorized pursuant to section 8D.13, 15 20 funds received from leases pursuant to section 8D.11, and 15 21 other moneys by law credited to or designated by a person for 15 22 deposit into the fund. Interest received by the state as a 15 23 result of investing the contents of the fund shall be credited 15 24 to the fund for use by the commission. 15 25 Sec. 18. NEW SECTION. 8D.15 IOWA COMMUNICATIONS NETWORK 15 26 EQUIPMENT UPGRADE AND REPLACEMENT FUND. 15 27 An Iowa communications network equipment upgrade and 15 28 replacement fund is created in the office of the treasurer of 15 29 state under the control of the Iowa telecommunications and 15 30 technology commission and the department of management. The 15 31 fund shall be comprised of the proceeds from the sale of Iowa 15 32 communications network assets, including certain state-owned 15 33 fiberoptic cable and related equipment located outside the Des 15 34 Moines metropolitan area, and the portion of the fees charged 15 35 to authorized users for depreciation. Contents of this fund 16 1 shall only be used to replace failed or obsolete network 16 2 equipment owned by the state and equipment included in 16 3 indefeasible right-of-use agreements in which the network 16 4 obtains statewide transport capacity. The department of 16 5 management must authorize all releases of moneys from the fund 16 6 to the commission and such authorization shall only be for the 16 7 purposes designated in this section. The commission may 16 8 solicit or accept gifts, including donations and bequests, to 16 9 be deposited into the fund for use in accordance with the 16 10 purposes of the fund. Interest received by the state as a 16 11 result of investing the contents of the fund shall be credited 16 12 to the fund for use by the commission. 16 13 Sec. 19. EFFECTIVE DATE. This Act, being deemed of 16 14 immediate importance, takes effect upon enactment. 16 15 EXPLANATION 16 16 This bill provides a mechanism for the sale of Iowa 16 17 communications network (ICN) assets with specified retained 16 18 rights by the state, and provides for related technical and 16 19 substantive changes to the provisions of Code chapter 8D. 16 20 FINDINGS AND PURPOSE. The bill contains a statement of 16 21 findings and purpose section relating to legislative intent 16 22 regarding the sale, noting that the ICN is a valuable state 16 23 telecommunications asset, that it provides equal access to 16 24 users of state-of-the-art voice, video, data, and internet 16 25 services at comparable prices statewide, and that it is 16 26 essential that the educational content it carries, and the 16 27 public defense functions it serves, be retained. The bill 16 28 provides that in order to ensure that ICN utilization is 16 29 maximized while minimizing further investment by the state to 16 30 maintain infrastructure, it is in the best interest of the 16 31 citizens of the state to offer some ICN assets for sale, while 16 32 retaining the capacity to provide services to users. The bill 16 33 provides that this would be accomplished through the sale of 16 34 most of the fiberoptic cable and optronics, or light-passing 16 35 equipment, while retaining capacity through long-term 17 1 indefeasible right-of-use agreements, thereby continuing to 17 2 provide telecommunications services and adequate capacity into 17 3 the future. 17 4 DEFINITIONS. The bill provides a definitions section. 17 5 Included among the defined terms are definitions of 17 6 "indefeasible right of use" (IRU) as an indefeasible right to 17 7 use fiber, including an entire cable or a portion of the 17 8 capacity of a cable, or channels of a given bandwidth for a 17 9 defined period of time; an "investment banker" as a financial 17 10 services firm that assists companies and governments in 17 11 issuing securities, assists investors in purchasing 17 12 securities, manages financial assets, trades securities, and 17 13 provides financial advice; a "prospective purchaser" as the 17 14 potential purchaser of the network that the investment banker 17 15 recommends to the state to purchase the network assets; and a 17 16 "qualified purchaser" as a prospective purchaser that has been 17 17 approved by the governor and qualified in accordance with 17 18 provisions specified in the bill. 17 19 INVESTMENT BANKER AND CONDITIONS OF SALE. The bill 17 20 provides that the Iowa telecommunications and technology 17 21 commission, in collaboration with the treasurer of state, 17 22 shall issue a request for proposals to retain an investment 17 23 banker with telecommunications asset sales experience to 17 24 market and coordinate the sales process of the backbone fiber 17 25 comprising the five fiberoptic rings located outside the Des 17 26 Moines metropolitan area and the optronic equipment associated 17 27 with the backbone rings. The bill provides that the assets 17 28 shall only be available to a single private vendor to purchase 17 29 and that the state will retain an indefeasible right of use 17 30 with respect to certain amounts of backbone capacity in 17 31 optical wavelengths for a negotiated period of years, which 17 32 shall not be less than 25 years with two optional 10-year 17 33 renewal periods. The bill provides that IRU agreements will 17 34 involve the purchaser granting the state an indefeasible right 17 35 of use with respect to the backbone capacity and optical 18 1 wavelengths and Part II facilities and the dark fiber 18 2 connecting various Part III aggregation points to network 18 3 backbone-switching points. The bill provides that during the 18 4 term of an IRU agreement, the state as holder of the IRU will 18 5 have complete and total ownership of the fiber or channels 18 6 identified in the IRU agreement, may use the fiber or channels 18 7 as if they were a physically owned asset of the state, and the 18 8 state's interest in the fiber or channels cannot be annulled 18 9 or made void by the grantor of the IRU or any other party. 18 10 The bill provides that at the conclusion of the term of the 18 11 IRU agreement and any renewal periods, title to the equipment 18 12 and fiber assets and optical wavelength capacities covered by 18 13 the agreements passes to the purchaser. The bill provides 18 14 that the terms of the sale shall include provisions committing 18 15 the commission to purchase field services, including 18 16 maintenance, provisioning, and build out, from the purchaser 18 17 and committing the commission to pay a monthly fee for fiber 18 18 maintenance and field services for the assets that are sold. 18 19 The bill provides that the request for proposals shall be 18 20 issued no later than six months from the bill's enactment 18 21 date. 18 22 The bill provides a list of potential subject areas for 18 23 incorporation into the request for proposals, including, among 18 24 others, a procedure to determine investment banker 18 25 compensation. The bill provides that the parameters 18 26 surrounding the sale, to be determined by the governor, shall 18 27 include, but not be limited to, the amount of time the state 18 28 would allow for marketing by the investment banker, the 18 29 provision that the governor or the governor's designee will 18 30 have ultimate discretion to accept or reject an offer, a 18 31 detailed framework for IRU agreements between the state and a 18 32 purchaser, including the provision that the ICN and the state 18 33 shall be held harmless in the event the purchaser suffers a 18 34 loss of revenue due to a failure of any assets or any portion 18 35 of the network being shared by the network. The bill provides 19 1 that the framework shall also include a process and procedure 19 2 for routing capacity and sharing of power currents needed to 19 3 operate the purchaser's equipment and related expenses, a 19 4 framework for the standards required regarding network 19 5 maintenance, a requirement that the purchaser offer advanced 19 6 telecommunications services equitably across the state and 19 7 specifically serving areas where those types of services are 19 8 not yet available, a requirement that the purchaser grant the 19 9 network the right to participate in future upgrades, purchaser 19 10 selection criteria, and an analysis of prospective purchasers' 19 11 financial stability. The bill provides that the decision 19 12 regarding selection of an investment banker shall be final, 19 13 and that an unsuccessful investment banker shall not be 19 14 entitled to a contested case hearing or to otherwise challenge 19 15 the decision. 19 16 SELECTION PROCESS FOR QUALIFIED PURCHASER. The bill 19 17 provides that the selected investment banker shall develop a 19 18 process to market which is designed to maximize the state's 19 19 proceeds from the sale, and that if the investment banker is 19 20 unable to identify a prospective purchaser, an explanation of 19 21 the reasons supporting this conclusion shall be made. The 19 22 bill provides that the commission, in consultation with the 19 23 treasurer of state, shall make a recommendation regarding a 19 24 purchaser and the terms of sale to the governor, and that the 19 25 governor shall have the right of final approval of the 19 26 purchaser and the terms of sale, subject to verification of 19 27 the purchaser's ability to adequately operate and maintain the 19 28 backbone network. The bill provides that once approval by the 19 29 governor has been obtained, the investment banker shall verify 19 30 the purchaser's ability to adequately operate and maintain the 19 31 backbone network, followed by the commission contracting with 19 32 the purchaser for sale of the assets. The bill provides that 19 33 the governor, in consultation with the treasurer of state and 19 34 the department of management, shall be authorized to negotiate 19 35 fair and equitable terms of compensation for the investment 20 1 banker. 20 2 NETWORK OPERATION PENDING SALE. The bill provides the 20 3 commission shall enter into a memorandum of understanding 20 4 regarding procedures for operation of the network with a 20 5 proposed purchaser until the sale is finalized with the 20 6 proposed purchaser, which shall include a provision that the 20 7 purchaser in good faith intends to finalize the purchase and 20 8 shall pay a termination penalty if the purchase is not 20 9 finalized. 20 10 ADDITIONAL CONDITIONS OF SALE. The bill provides that any 20 11 outstanding debt or liens upon network assets shall be 20 12 discharged out of the state's proceeds so that the purchaser 20 13 receives marketable title to the assets, and that prepayment 20 14 of certificates of participation, defined in the bill, shall 20 15 be made prior to closing the sale of assets or as part of 20 16 closing the sale, and accomplished in a manner not 20 17 jeopardizing the certificate's tax-exempt status. The bill 20 18 provides that the state and the purchaser shall negotiate 20 19 their relevant interest in rights-of-way and leases and 20 20 easements for uses of rights-of-way, and that the purchaser 20 21 shall immediately establish points of presence near the 20 22 existing network switching centers and establish fiber 20 23 extensions and connectivity between them. The bill provides 20 24 that the purchaser shall physically locate in the vicinity of 20 25 the joint forces headquarters armory in Johnston, Iowa, and 20 26 establish fiber connectivity between the ICN hub and the 20 27 vendor's location, and that duplicate racks of backbone core 20 28 equipment shall be provided by the purchaser and installed by 20 29 the network to carry traffic while the network backbone is 20 30 transferred to the purchaser. The bill provides that the 20 31 purchaser shall purchase the equipment required in this 20 32 process for the network and pay any and all related expenses 20 33 associated with the conversion effort. 20 34 CODE CHAPTER 8D AMENDMENTS. The bill provides for a 20 35 conforming definition and references to IRUs in Code chapter 21 1 8D and conforming terminology changes and provisions regarding 21 2 changes in ownership of the network. 21 3 LEGISLATIVE AUTHORIZATION ELIMINATED. The bill deletes a 21 4 provision that prohibited the commission from entering into a 21 5 contract for the purchase, lease, or improvement of property, 21 6 equipment, or services for telecommunications in an amount 21 7 greater than $1 million without prior authorization by a 21 8 constitutional majority of each house of the general assembly, 21 9 or approval by the legislative council if the general assembly 21 10 is not in session. The bill also deletes outdated language 21 11 regarding a local school board, governing authority of a 21 12 nonpublic school, or area education agency board elections to 21 13 provide financing costs for Part III of the network. 21 14 NETWORK ACQUISITIONS, DISPOSAL, AND ACCESS. The bill adds 21 15 a provision that the commission may use IRU agreements to 21 16 acquire and dispose of property, equipment, and services. The 21 17 bill provides that if the state sells assets of the network 21 18 pursuant to the procedure specified in the bill and retains 21 19 backbone capacity from another telecommunications provider, 21 20 publicly owned facilities that house primary and secondary 21 21 switching facilities shall provide access to that provider in 21 22 the geographic area to the primary and secondary switching 21 23 facilities housing the fiberoptics termination equipment in 21 24 established fiber entry ducts, and to the building grounding 21 25 system. The bill provides that the provider's access to the 21 26 primary and secondary switching facilities will be coordinated 21 27 through the network's staff. The bill provides that the state 21 28 may negotiate the acquisition of a Part III connection 21 29 following the termination of a lease with a qualified provider 21 30 if offered by the vendor for such a Part III connection if the 21 31 commission determines it to be in the best interest of the 21 32 network. 21 33 NETWORK COSTS AND BILLINGS. The bill provides that in 21 34 situations where an entity requests a receiving site location 21 35 in a video classroom facility which is authorized by, but not 22 1 funded by, the originator of the communication, the requesting 22 2 entity shall be directly billed by the video classroom 22 3 facility for operating costs relating to the communication. 22 4 The bill also provides for the inclusion of depreciation costs 22 5 in the determination of rates for use of the system. The bill 22 6 deletes outdated language which had required reports relating 22 7 to the impact of changing technology on potential costs and 22 8 capabilities of the system, and relating to a department of 22 9 education study of new techniques in distant teaching. 22 10 IOWA COMMUNICATIONS NETWORK FUND INTEREST AND UPGRADE AND 22 11 REPLACEMENT FUND. The bill further provides for the retention 22 12 of interest received by the state from the Iowa communications 22 13 network fund established in Code section 8D.14, and for the 22 14 establishment of an Iowa communications network equipment 22 15 upgrade and replacement fund. The bill provides that the new 22 16 fund will be comprised of the proceeds from the sale of ICN 22 17 assets, including certain state-owned fiberoptic cable and 22 18 related equipment located outside the Des Moines metropolitan 22 19 area, the portion of the fees charged to authorized users for 22 20 depreciation, and interest received by the state as a result 22 21 of investing the contents of the fund. The bill provides that 22 22 contents of the fund shall only be used to replace failed or 22 23 obsolete network equipment owned by the state and equipment 22 24 included in IRU agreements in which the network obtains 22 25 statewide transport capacity. 22 26 The bill takes effect upon enactment. 22 27 LSB 5450HC 80 22 28 rn/pj/5
Text: HSB00644 Text: HSB00646 Text: HSB00600 - HSB00699 Text: HSB Index Bills and Amendments: General Index Bill History: General Index
© 2004 Cornell College and League of Women Voters of Iowa
Comments about this site or page?
webmaster@legis.iowa.gov.
Please remember that the person listed above does not vote on bills. Direct all comments concerning legislation to State Legislators.
Last update: Wed Feb 18 03:30:47 CST 2004
URL: /DOCS/GA/80GA/Legislation/HSB/00600/HSB00645/040217.html
jhf