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MOREnet Council Meeting Minutes - April 30, 2010

TIME: 1:30 p.m. – 3:30 p.m.
PLACE: Telepresence – select meeting on phone display

Friday Videoconference – dial 46986

April 30, 2010 Teleconference – dial (573) 884-5101

Members present: Tim Gallimore, Chair, Margaret Cline attended for Gary Allen, Margaret Conroy, Dave Doennig, John Gillispie, Leigh Ann Grant-Engle, Debbie Hughes, Craig Klimczak, Mark Mabe attended for Rita Gulstad, Waller McGuire, Deborah Sutton attended for Russ Brock

Alternates present: Barbara Reading, Bill Rodgers, Mike Roling

MOREnet staff present: Natasha Angell, Chip Byers, Sherry Loyd, Hank Niederhelm, Debbie Rodman

Chair Tim Gallimore called the MOREnet Council meeting to order. Those who were in attendance are listed above.

ACTION ITEMS/INFORMATION ITEMS

Minutes of the March 11, 2010 MOREnet Council Meeting – Approval

Chair Gallimore asked for a motion to approve the meeting minutes. Craig Klimczak moved to approve the March 11, 2010 minutes as distributed. Margaret Conroy seconded the motion and it passed unanimously.

Chair Gallimore asked for a follow up to a question posed last meeting regarding USF reimbursement to the University of Missouri if MOREnet were to shut down. John Gillispie reported that in the event of a shut-down the USF would be required to reimburse owed receivables as long as someone filed the necessary forms on MOREnet’s behalf.

FY11 Minimum Operating Reserve (MOR)/Fiscal Exigency Reserve (FER) Update – Approval

The UM Board of Curators approved a UM Transition Assistance Program which increases MOREnet’s shutdown liabilities by $1.0M; if a termination date of July 1, 2010 is assumed. Other FER adjustments related to
FY11 budget updates increase the total FY11 FER requirement another $0.2M, for a total of $4.71M, slightly more than the $4.616M initially estimated for 60 days of working capital.

Conroy moved to approve meeting the FY11 MOR requirement through the following combination of actions: 1) Each program should increase program MOR targets 50% annually until the goal of 60 days working capital is met; 2) All reserves in the Affiliate and For-Fee-Service areas should be used to meet the overall organizational MOR target: 3) Previously accumulated Shared Network E-rate funds should be used to cover the remaining need to meet the overall organizational MOR target. Klimczak seconded the motion and it passed unanimously.

Program Participation Network Connection Policy – Revisited

The current policy was implemented last July and staff asked the Council to revisit that decision. With state funding decreasing, it is becoming increasingly difficult to meet the bandwidth needs for program-funded network circuits. Staff recommended that Council members consider alternate connectivity for accessing the network and membership services.

Today, all members have a MOREnet connection. A few institutions do not use the MOREnet circuit as their primary connection or at all in some cases.

The rational for approving the policy last July was to try to subsidize access for the small school districts in high cost areas. However, with declining state funding, this point is quickly becoming moot. Mabe reminded everyone that the premise for requiring members to have a MOREnet connection was to use the averaging of the connectivity costs to drive costs down for all members. Some members do pay more, but overall it works out for the entire program group. The incentive for those having to pay higher costs is that the member services offered are significantly better than what could be procured on their own. Moving away from this philosophy, if urban members choose to procure connectivity services directly, this could cause the cost to be driven up for members in locations where connectivity costs are higher. Angell added that some sort of network connectivity fee would be required for those members directly accessing the backbone for services, which would offset this increase in
costs. She doesn’t foresee a negative revenue position due to loss of membership fees and the more members MOREnet can accumulate, the lower the costs will be for all members.

Currently, members who decide to terminate their MOREnet connection do not directly incur the termination costs; the appropriate program is responsible. This is due to MOREnet’s inability to transfer the liability for the early termination to the member as the member is not a party to the contract. At the next Council meeting, staff will provide details on early termination penalties and a proposal for modifying the process to move this liability away from the program and to each member.

The Council would like staff to conduct a survey of the members to determine the expected outcome of this policy change. The elimination of the policy will not go into effect until survey results are in and approval of the membership fee structure occurs at the July 30 meeting.

Doennig moved to approve the elimination of the current service policy that requires a MOREnet network connection to be eligible for program participation. Conroy seconded and it passed with the following vote, 6 yes, 3 no, 1 abstained.

Conroy – yes
Doennig – yes
Gallimore – abstained
Grant-Engle – no
Hughes – no
Klimczak – yes
McGuire – yes
Cline for Allen – yes
Mabe for Gulstad – yes
Sutton for Brock – no

DISCUSSION/INFORMATION ITEMS

FY12 HB3 Appropriations Requests

Rodman reported that MOREnet expects to submit two FY12 HB3 appropriation increase requests. 1) A Cost to Continue request will be submitted by the UM System to support increased costs for staff benefits and inflationary increases in other expenses. UM Budget and Planning prepares these requests and the MOREnet request will be consistent with requests for all of UM. The exact amount has yet to be finalized. 2) A request has been prepared to restore the MOREnet base budget to initial FY10 funding, based on the final FY11 amount. The UM Board of Curators will vote in July on these requests.

FY11 Budget Projection Update

Rodman reviewed the updated FY11 budget projection, which reflects the additional cut in revenues, totaling 46.5%, the preliminary FY11 member fee levels, and updated expenses. The largest expense reductions include router maintenance savings and capital expenses now being budgeted from the Plant Fund.

Gillispie expects there will be a shortfall of $180M in the state budget that is coming out of the House. Line item vetoes and additional withholds are expected early in FY11. He is concerned that TNP has a $640K deficit in FY11 with all other programs managing a surplus.

Chair Gallimore requested an update on the circuit termination penalties. Gillispie and Hank Niederhelm responded that as a consortium, the liabilities associated with early circuit termination penalties are
allocated back to MOREnet. This total liability is around $6.5M. MOREnet enters into telecommunications contracts of 1, 3, and 5 year terms with each carrier having a different termination policy on each circuit. The circuit termination policy needs to be revisited so that members become liable for the termination penalties. The fear is that members will choose the shorter contract terms which will then raise the cost of running MOREnet.

Chair Gallimore suggests announcing both the Program Participation Network Connection Policy change and the addition of a Circuit Termination Policy at the same time to ensure members have a clear understanding of both. Klimczak encourages creating a new policy and creating new membership
agreements that cover the circuit termination liability in order to protect MOREnet. Gillispie foresees doing both upon circuit contract renewals and ensuring members are involved in the decision.

Digital Subscriber Line (DSL)/Cable Modem Impact

Hank Niederhelm reported that staff is looking at alternative technology for possible cost savings. Some members have a DSL as a back up or for disaster recovery but do not use it as their primary connection.
Savings might be realized by those higher cost circuits if DSL was used as the primary connection. Staff has more work to do on this option but wanted to make the Council aware of its investigations. Conroy thanked staff for looking out for the members.

Klimczak asked about peering with the DSLs to get access to their traffic faster. Staff has found that most carriers have a cost to peer. Niederhelm said that 90% of the traffic now goes to the Internet. Using DSL
and Cable Modem technologies would reduce that percentage and buffer MOREnet’s need to purchase more Internet1 access.

Strategic Planning Session – July 30

Due to the significant consortium issues that need to be discussed, Gillispie would like to incorporate adequate time during the July 30 meeting to do strategic planning. He asked that all Council members do their best to attend.

Meeting adjourned at 3:28 p.m.
Respectfully Submitted by Sherry Loyd