MERC

MERC Board of Director’s Meeting

Feb. 15, 2006, 9:30 a.m - Noon

Attendees

Don Doucette, Rita Gulstad, Russell Helm, Bob McGlasson, Bob Paulson, George Rickerson (MOBIUS), Theresa Rogers, Chad Shepherd, Robert Stein, Greg Wirth

MOREnet Staff: Chip Byers, Jennifer Doll, Bill Giddings, Nancy Piringer

NGN Update - Chip Byers, Director of New Initiatives

Byers began by outlining the four options for the Next Generation network:

1. Dark Fiber: MOREnet has been working with representatives from the University and the MOREnet membership to understand needs. An RFP is ready to go out within a few weeks. Market research has been done to understand the costs before the RFP goes out. Once the RFP is released, vendors cannot be contacted about the project. A legal consultant has been hired, Linnea Simons, to help with dark fiber acquisition. She has assisted several regional optical networks and state networks similar to Missouri. Simons is knowledgeable about the University procurement process, and she is a former corporate counsel for US West and Quest.
2. MoDOT Fiber: Byers reported that he and Bill Mitchell are meeting with the MoDOT CIO and CFO on March 6th. The discussion will focus on MOREnet’s interest in one pair of the three pair that MoDOT received as part of granting LightCore access to the right-of-way. There is some concern at this stage about MOREnet using a third of a relatively scarce resource. Byers added that MOREnet has worked to inform everyone involved about the amount of bandwidth that is available through a pair of fiber, the resource is not as scarce as it seems.
3. Traditional Managed Transport: MOREnet is finishing up conversations with vendors. An RFP will go out and an understanding of available bandwidth speeds, along with associated costs will be developed. The RFP will likely be for OC48, OC192, and the gigabit Ethernet sizes: 1Gb, 2.4Gb, and 10Gb. A concern with continuing the traditional vendor-managed transport is that the more bandwidth consumed, the greater the cost. With the dark fiber option generally costs are limited to equipment purchases when more bandwidth is needed.
4. Virtual Dark Fiber: Byers explained that this is a managed service that behaves like dark fiber. There is only one organization that has this scenario in their business plan. There are several who have something similar, which is a Lambda or wavelength-based offering.

Byers summarized by stating that all the options are reviewed by an Oversight Committee that is composed of Joel LaReau (Ozark Technical Community College), representatives from the membership, the State, and the University. The next step after outlining all the options will be to choose between them, Ben Colley (MOREnet) will be leading that group.

Gulstad asked about advantages/disadvantages to the various options. Byers responded that dark fiber, whether from MoDOT or another vendor, is an advantage because ongoing costs will be stabilized. When more bandwidth is needed the costs will be limited to equipment upgrades.

Gulstad followed up her question by asking about the start up costs associated with dark fiber. Byers replied that the costs would include the IRU, which will allow access to the fiber for twenty years. Current routing equipment could still be used, but additional optical equipment would need to be purchased.

Stein asked about possible disadvantages to any of the options. Byers stated that a downside to the dark fiber options is the up front cost at a time when the University is being asked to cut expenses. It is difficult to make an investment that mitigates increasing ongoing costs. Managed service costs are difficult to predict in future years, bandwidth costs could increase or decrease. There are many changes in the market occurring now and future opportunities are difficult to ascertain.

HELIX Update - Nancy Piringer, Higher Education Program Manager

Nancy Piringer reported that HELIX Conference registration opened on January 27, 2006. As of February 14 there were 53 individuals registered. E-mail announcements and reminders will be sent out shortly. Piringer reminded the Board of their approval to provide one free seat at the conference to each MERC institution. Piringer estimated that she had heard from about 25 people who were planning to take advantage of the free seat.

Piringer reported that the HELIX Conference keynote speaker will be Paul Hagner from Educause. Mr. Hagner’s travel expenses will be paid for from the conference budget, but he has agreed to do the presentation at no charge.

Piringer reported that the HELIX Conference will share several sessions with the Spring Technical Conference. The Missouri Higher Education Web Developers group’s web development track is full. MoTec has provided a lot of assistance with the Teaching, Learning, and Technology track which is also looking good. The target for attendance is between 250-300 people. Last year there were about 200 attendees. The cutoff to register at the $175.00 rate is March 10. After March 10, the rate will be $200.00. Registration for the Spring Technology Conference stands at about 150 people as of February 14.

MERC Financial Report, MOREnet Cost Allocation Overview, New Draft MERC Participation Fee Schedule - Jennifer Doll, Director of Fiscal and Contractual Services

Doll began by reviewing the MERC Financial Report, which is current through December 31, 2005. YTD revenues are stable. The transfer to the HELIX conference budget has not occurred and will be made after the HELIX conference has been held and a determination for the amount of funding needed has been made. The MERC Board had budgeted and approved up to $20,000 in support of HELIX.

Personnel expenses are close to about 50% at the December 31st date. The other expenses are on target. There is an additional expense for T. Stewart Consulting. The consulting group was hired to assist with advocacy efforts.

Doll asked the Board to note that there is no specific line in the budget for the subsidy the MERC Board had approved to use for FY06 participation fees. The subsidy is included in the negative number of $626,982 located in the revenue section under funding shortfall assessment in the budget. Those funds were transferred from the MERC Financials over to the shared network in order to help pay for the shared network. The subsidy of about $230,000 is included in the funding shortfall assessment. This is the driving force behind the budget numbers indicating MERC will end the year with less revenue than expected. Looking at the amount of $188,239 in the revenue less expense category, $230,000 of it is related to MERC’s subsidy. Overall, before the subsidy MERC netted $40,000. If the subsidy hadn’t been dispersed there would have been a positive $40,000 listed in the budget.

Doll moved on to the HELIX conference budget. Because registration opened in January there is no revenue to report.

Doll moved to the next item, which is the budget approved by the Board in the fall of 2005 compared to a re-projected budget. It has been re-projected based on actual expenses so far. Revenues are a little lower than originally projected. Personnel expenses are tracking to be lower than projected, mainly due to savings from staff vacancies. Additional expenses include the costs for T. Stewart Consulting.

Doll states there is still a reserve within the MERC funding of $285,000 even though $230,000 of reserve funds was used in FY06.

New Draft MERC Participation Fee Schedule

Doll began by reminding the Board that they previously approved and provided a subsidy to MERC members for FY06 in total of $230,000. That subsidy amount now becomes an additional fee that will be need to be collected from members. Last year’s charges to member organizations were set as a Participation Fee and an assessment fee based on bandwidth usage.

Doll, Piringer, and Gulstad worked to produce a proposed methodology for FY07 membership fees . They reviewed costs that need to be recovered in order to do two things: pay for the services that MERC receives and pay for the shortfall that is occurring again within the shared network. The proposed state budget will keep funding at the same level as last fiscal year, and so the shortfall will remain the same. Given that information the goal was to build a participation fee schedule so that it would collect enough revenue to equal what was put in last year including the subsidy.

Doll explained that they developed a two part fee schedule, the first is the participation fee based on student FTE data, which is similar to prior years. The lowest level would require members to pay $2,100.00 and would increase from there based on student FTE categories. The second portion of the fee would be a Network Connectivity Charge, the proposed fee would be $875.00 per Mb.

Doll stated that the member participation fees have been lowered when compared with last years fees. Member participation fees were based on a three tier system last year and the proposed new system includes five tiers. Doll reviewed the previous year’s fees per tier compared to the proposed system. Doll explained it has been broken into five tiers in order to make it more equitable based on student FTE. The Network Connectivity Fee last year was placed at $766.00 per Mb, but that amount was subsidized by the Board and so institutions actually paid $452.00 per Mb. The Network Connectivity Fee has increased under the new proposal.

After much discussion it was determined that the draft methodology was not suitable.

Doucette stated he believes the Board should adopt a model this year for use in 2008. Rickerson agrees and states that pricing needs to be finalized by the end of the calendar year. If a new 2008 model was drafted by June, there would time for the Board to share and explain it to the membership. Then the pricing for 2008 would be locked in during December of 2006.

Gulstad stated that the suggestions for variations of the models will be put together and shared on the list within the next several weeks. Gulstad summarized the decision for next years budget, the Board has agreed to use the same shortfall assessment model that was used last year with the same membership fee structure as last year and whatever the balance is that we need to collect between the increases in bandwidth from last year to now or whatever date we use. The shortfall will be spread out across all institutions by bandwidth.

Shepherd motioned to use the approach previously stated by Gulstad in summarizing the plans for the fees of next year. The motion is seconded and carries.

Gulstad asked that the minutes be read back to the Board to confirm the motion.

The minutes reflect the decision as a motion to use the previous year’s shortfall assessment and fee structure. The differential based upon the increases in bandwidth will be shared across all institutions.

A target of April 1st was set for Doll to share draft models for the 2008 fee schedule, one month prior to the next MERC Board meeting scheduled for May 10th.

MERC Reserves

Gulstad stated that the MOREnet Council discussed, as recommended by MOREnet, the establishment of a plant fund with the University of Missouri. Currently the Council is asking MOREnet to review some guiding principals.

Stein stated a decision was made at the MOREnet Council to give approval for MOREnet to put the mechanics in place to establish a plant fund. No money would be put into that fund until there was an opportunity to develop some guiding principals as to what categories would be included in the fund and how money would be added into and removed from the fund. Stein added that the reasoning behind establishing a plant fund is to provide flexibility to MOREnet and allow MOREnet to have dedicated funds and creating a public image with the legislature about reserves that are dedicated to projects that MOREnet may pursue in the future, such as the Next Generation Network. The fund would potentially contain something like a contingency fund. Stein reported there was also discussion among the Council to look at other group’s reserve funds for guidance, such as the REAL program for example. There were some differences of opinion among MOREnet Council members regarding who would own the reserve fund.

Gulstad stated that she believed the Board had voted in the past to maintain a six month balance of revenue in the MERC reserves. Gulstad reported that she and Piringer looked through past Board minutes but could not locate the discussion.

Doucette stated he thought a six month reserve was discussed as a guideline, rather than an item the Board had voted on. Doucette stated the reserve fund balance was about $660,000 last year and the year before was about $800,000. Doucette remembered that Greg Burris had some concerns about the high reserve balance and the Board reduced it. Doucette does not recall an actual reserve amount the Board had previously set.

Gulstad replied that past minutes may need to be reviewed further back to find a record of the discussion. Gulstad stated that she thought previous discussion was about keeping a reserve of about 30%. Gulstad recommended that a review of the previous discussion is needed and that if there was no specific statement regarding reserve funds the Board would need to address the issue and discuss how the reserve fund would tie into a plant fund.

Doll reports that a plant fund would allow MOREnet to set aside funding for items such as one-time events that are capitol in nature. These one time expenses would then be isolated outside of MOREnet general operating budget, which would provide a better idea of actual day to day operating costs of MOREnet. There will be discussion at the April council meeting regarding what types of expenses would come out of the plant fund. Each of the sponsor groups have been asked to provide feedback to the council with an idea of what they might like to contribute to the fund. Doll reported that there was discussion among the council as to what will be done with profits from MOREnet’s for-fee services. The question raised is how best to use the funds generated by for-fee services to benefit the MOREnet membership.

In order to provide some context, Stein asked what the reserves for the REAL and TNP programs are. Gulstad responded that reserves in both programs are substantially larger than the MERC reserve. Gulstad stated that this will be a topic for discussion as the MOREnet Council continues to talk about the establishment of a plant fund.

Goals and Activities - Rita Gulstad

Gulstad asked the Board members to look at the Goals and Activities document that was provided with the meeting materials. Gulstad stated that the document originated three or four years ago but was never voted on by Board members. Gulstad stated that the Board has two issues to address. The first issue is that the MOREnet Council has asked the MERC Board to suggest goals that MERC would like to see the MOREnet Council address. The second issue is the question of what MERC perceives it’s goals and activities to be.

Gulstad asked the Board if the general areas highlighted by bold type are still areas the board feels are important. These areas include collaboration, policy/leadership, higher education practices, and services.

Stein asked if advocacy would fall under the policy/leadership area. Gulstad responded that was correct. Gulstad asked for any suggested changes to the general area titles. Stein responded that “public relations” may be added to the heading of policy/leadership. The addition of “public relations” would summarize MERC’s goal of informing members about the services provided by MOREnet. Gulstad asked for any objections to the addition of “public relations”. No objections were voiced.

Gulstad asked the Board if there were objections to any of the other areas or any items that should be added to the document. Rickerson asked about where something like the Next Generation Network would fall, he suspected it may fall under a category not listed, like planning and development. Helm responded that he thought the collaboration heading would be appropriate, given that the network is a collaborative effort. Rickerson then agreed, but brought up the question of if the document addressed MERC goals, would the first bullet under item IV, Services be applicable because it is a MOREnet function, not specifically a MERC activity. Rogers added that “operational support by funding” is the key to the bullet. The Board then agreed that the bullet was listed under the appropriate heading. Gulstad asked the Board to review the sub-bullets and introductory verbiage and consider any possible additions and changes for the next board meeting. In addition Gulstad asked the Board to consider how these goals would relate to the MOREnet council’s request.

Stein added that the council’s request was looking for suggestions that the MOREnet council could consider/follow in order to further MERC’s goals. Gulstad responded that she was thinking about if there really is an integrated statewide plan for technology and education amongst all entities (K-12, higher education, libraries). Stein added that the question brings up the Missouri Learners Network, which was part of a long range plan that, due to funding, dissipated. Gulstad asked if something like that, a statewide educational plan regarding technology in education including libraries might be revisited. Doucette replied that it sounds like a great idea, but questioned the amount of energy that would need to be devoted to it. Rogers brought up that the MERC Board talked in the previous year about making more learner-centric goals and activities. Rogers also added the need should explain MERC goals and activities in terms of providing advantages to students. Gulstad agreed, saying that there are some goals that are not listed on the document that are learner-centric that should be included. Gulstad added that additional thoughts could be posted to the list and discussed. Gulstad asked the Board to review the Goals and Activities by the next meeting and to consider Rogers input regarding learner-centered items.

Gulstad stated the agenda items had been covered and asked the Board members if there were any new items to bring forth. Hearing none, Gulstad asked for a motion to adjourn. Doucette motioned to adjourn the meeting, Rickerson seconded. All were in favor.