7. ACT NO. 185 (B) Examine private sector alternatives


This section addresses item (B) of ACT NO. 185.

7.1. Overview

The legislation is unclear as to whether the evaluation is for alternatives to what this report characterizes as the Network Administration Group, StateGovNet or Vermont Citizens Access Telecommunications System (VCATS). Therefore, this report assumes that the primary purpose of this topic is to evaluate alternatives to providing Internet access and the related support services that may entail.

• Administration of StateGovNet would require an extensive review, based on the ability of an outside service provider to maintain network uptime, confidentiality and security. Minimum operating characteristics currently do not exist for servicing and supporting the network. However, for the sake of completeness, a brief discussion on alternatives for network administration is included at the end of this section.

• The state has four years remaining on a 10-year contract to provide data lines to StateGovNet. The 10 year contract pre-dates the state-wide telecommunications network. These data lines exist for the support of internal applications (Appendix E). Removing more than 10% of the leased lines would result in financial penalties under the contract.

7.2. Educational Perspective

There is no consensus among educators who were interviewed whether a private service provider is more appropriate for them than the state as an Internet service provider. Schools are not obliged to connect to the Internet through the state. Any school may select a private Internet service provider. It should be noted that some schools have already evaluated private sector alternatives to state access. There does not, however, appear to be a desire by schools to pursue private sector alternatives at this time. The following statement is somewhat representative of the responses received from educators:

We found the yearly costs for the connection were very close. The reason we prefer Govnet [over Sovernet for a 56K connection] is that we didn’t have to buy an internet server, router, and CSU/DSU [ Channel Service Unit / Data Service Unit] . This reduced the cost and time requirements for our schools. We don't have time to spend administering E-Mail addresses, user names, etc. GOVnet provides dial-in access for our teachers when they are not in school, which meant that we didn’t have to add phone lines. We found the Govnet connection has been very reliable.

– Letter from Gary Parzyck, Technology Coordinator, Windham Southeast Supervisory Union, September 1996.

7.3. Issues

When considering private sector alternatives to VCATS two important questions must be considered and answered. First, what specific technology alternatives should be used to provide the required Internet access services? Second, who will be responsible for insuring that the VCATS customer needs are being met in terms of quality and service? Note that this technical discussion does not include technologies used by the Internet providers to aggregate users’ bandwidth requirements and then connect them to the Internet backbone. The technical alternatives are limited to a user’s connection to an Internet service provider.

Technology alternatives for Internet access include dial-up and full-time connections. Dial-up connections can use standard telephone lines with a modem or specially conditioned phone lines known as ISDN (Integrated Services Digital Network). ISDN can be used with an ISDN terminal adapter. The Internet Service Provider (ISP) provides the phone numbers that users dial and then connect these lines to the Internet backbone.

The most common options for full time connections are point-to-point circuits (DDS - Digital Data Services) and frame-relay. Depending on where the user is located, speeds of 56 kbps to T1(1.544 mbps) are available.

The second question is very important in terms of whether the State of Vermont wants to maintain an active interest in providing and promoting Internet use among the K-12 education institutions. The technology options could be provided by the private sector while the state continues to own the network. In this way the state would continue to promote and facilitate the connection of schools and libraries and be a focal point for the use of this resource. Alternatively, the technology choices and all services related to Internet access could be turned over to the private sector, requiring all schools and libraries to achieve connectivity on their own.

7.4. Internet Service Providers

At the time that the State began connecting schools to its network, Vermont had few Internet Service Providers. Since that time, additional providers have emerged. The following list of Internet Service Providers, obtained from the October 1996 issue of ComputerUserVermont, is believed to be reasonably complete. In reviewing this list, note that not all service providers support local telephone calls in every town in the State.

AT&T WorldNet

The Connecticut River Network (CRN)


Internet I-100, Inc.

The Plainfield Bypass

Power Shift Online



Together Networks

ValleyNet, Inc.

Vermont Business Institute at Champlain College

Vtel Internet


7.5. Cost Analysis of Distance Learning

It is first assumed that this review is with regard only to K-12 schools. The state currently prepares RFPs to receive bids from Internet service providers to fulfill its own needs for Internet access. This access can then be made available to schools.

Schools take two steps for arranging their own Internet access:

a) Each school needs physical access – either a telephone line (available everywhere) or a leased line (56K most common). Costs for the latter vary depending on location. The state approach equalizes costs for all locations. The technology can be either a point-to-point circuit or a frame relay circuit to get a connection to the Internet.

b) For telephone access, a school needs a phone number to dial and a username and password. For a leased line (i.e. 56K) the circuit would need to be connected to an Internet Service provider.

Often the Internet Service Provider will provide a "full package" including required hardware, software, and phone circuits.

From the school's view it doesn't matter which circuit technology is employed. Internet users should focus on price, performance and support. The state of Vermont's price of $5,000 per year including circuits, hardware and support is competitive compared to published pricing by various ISPs operating in Vermont. It is important to note that if the state put the current "K-12Net" out to bid, the price per connection offered by ISPs could be less than their current published prices due to economies of scale.

7.6. Costs

Three alternatives would affect the costs to schools.

1. Individual schools and towns contract independently for Internet access. This is likely to be the most expensive alternative but requires no state involvement and gives maximum control and flexibility to schools and towns. Some schools have priced private Internet access, and have chosen to retain their access through the state.

2. Aggregate Internet requirements for schools and towns and get statewide pricing. This has the potential to be the lowest-cost alternative with the least amount of state resources dedicated to the effort. However, there are many externalities in this scenario that must be quantified, including the cost of state-wide collaboration, establishment of service levels, administrative overhead, and support functions. Its success depends on the schools working in a collaborative manner to obtain discounts. One feasible scenario for this alternative could be for the Department of Education to accept responsibility for overseeing this effort, with the CIO providing technical and contractual assistance.

3. The state aggregates school requirements onto existing state circuits. This is the current VCATS.

Below are some comparative prices for Internet access in Vermont. Note that these are published retail prices. If a large customer such as the State of Vermont were to contract for Internet access for many locations, ISPs would probably offer discounts in a bid situation. The values below are compared to the state price of $5000 per year for a dedicated 56K leased connection. In providing these prices, several assumptions are made:

1. the state's $5000 includes the telephone charges;

2. the state does not charge for installation and setup.

The other service offered by the state is a dial-up connection for $250 per year, which includes 25 e-mail IDs.


(one- time charge)

Customer premises equipment (Router, CSU/DSU)

Annual Lease (56 kbps dedicated line)

Dial-up access





25 e-mail accounts



Not offered*
(Customer responsible)


one e-mail account

Together Networks


(Customer may acquire equipment separately.)

(Telco charges are extra and vary by location, estimated at $2400)

one e-mail account

* [A 56K CSU/DSU can be purchased for between $300 and $500. A simple access router can be purchased for between $1500 and $2500 (as of 1/3/97).]

7.7. Network Administration

Network administration involves the servicing and support of the physical network, plus the support of the users on the network. These activities are more completely described in Section 5.3 of this report.

A request for information was sent to three in-state telecommunication companies with regard to out-sourcing the state’s wide-area network administration. Specifically, three questions were included in the request:

1. Would you be interested in providing network administration services for the State? (As described in section 5.3 of this report.)

2. Are you able to provide those services?

3. Can you provide the services competitively? Currently, the State spends $230,000/year for network administration personnel.

Two types of responses were received. One company indicated that it would be willing to satisfy the above requests if the state used its network for telecommunications. The other two companies responded affirmatively to all three questions, with one indicating that it would respond to a Request for Proposal or Request for Information should the State decide to outsource these functions.

Section 5.3 describes the network administration activities of the current group. As previously stated, the role of the existing network administration services are not formally established, such as responsibilities for responding to customer service requests, procuring circuits from telephone companies and equipment maintenance. Until that role is well-defined, it will be difficult to conduct reasonable cost comparisons involving private sector alternatives. In addition, it is reasonable in a cost comparison to factor in a charge for administrative overhead in managing a contract with an external service provider.

7.8. Summary of Findings

This portion of the report covers private-sector alternatives and costs for the public portion of the network. The public portion of the network includes equipment, Internet access and support services.

The physical network consists of State-owned fiber optic cables in Montpelier and Waterbury, and leased lines from NYNEX comprising the remainder of the network.

The available private-sector alternatives for network administration and Internet access are becoming increasingly cost competitive with the state’s own service. However, schools or other organizations must evaluate not only price but also the availability and quality of service.

The role of the existing group providing network administration services is not clearly established. Only after the role of the existing group is clearly established will the state be able to fully evaluate the costs, benefits and risks associated with private sector alternatives.