In the Dark

Can we believe Anything they say?

February 9, 1998 Here's the latest: Chancellor-designate Reed had some doubts about the numbers the education bureaucrats are using. So in late January out went a memo to all campus presidents asking them to certify the benefits from CETI. The accounting is so bizarre that any business corporation that certified its numbers this way would find its executives in court for securities fraud! See for yourself. Take a look at the spreadsheet they are using.

Column 1, "infrastructure investment" looks like a list of how much each campus will get. Indeed, even the astute President Robert Corrigan of San Francisco State was fooled into writing on February 2nd that:

"The newest figures show that SFSU's allocation for the first stage of the infrastructure buildout would be almost $16 million."

Surprise! Column 1 just divides the total estimated amount that will be paid to GTE ($300 million) among the CSU campuses, using some hidden formula. GTE's own cost figures (buried on page 11-5 of its August Business plan) show that over half the cost goes for the main voice and data links up and down the Central Valley -- the trunk line cables that will be deliberately overbuilt so GTE can sell capacity to other corporations. (A mere 4%, just a piddling $12 million, goes to GTE for project management). This money doesn't come anywhere near the SF State Campus.

Column 2, debt service cost, is a routine spreadsheet calculation how much you have to pay each year at 6.5% interest to pay off a loan in ten years. To pay back the $300 million CETI loan will take about $42 million a year, or $442 million over ten years, and the mystery formula just divides this among all the campuses.

The official financial plan on the CSU website since January 9th only called for $33.8 million per year, (ll. 72 and 91) and it allowed for an 8% interest rate. What's the difference? $104,000,000 more that CETI will now need to get from profits on selling to the CSU, to students and faculty, and to the community.

Column 3 is the "refresh investment" -- not a cola drink on a hot day, but the share of the hypothetical profits (25% of profit, but not to exceed $15 million per year, with nothing for the first three years) that is used to buy desktop computers for faculty and staff and cover the wear and tear and technological obsolesence on the CETI project.

According to the January 9 financial plan (ll.88 and 92), it will become obsolete pretty quickly -- after four years, refresh depreciation and refresh investment are equal, at $15 million per year.

Infrastructure Support? Col. 4? What's that?

"Extended warranties/operational support for the new expanded infrastructure to mitigate future anticipated support costs and potential unfunded liabilities for the CSU in this area." Seems to be taken from the "operating cost" number in the financial plan. But what are those "unfunded liabilities"?

Column 5: The CSU already runs C4 net, which connects campuses and community colleges. The spreadsheet plucks a $56 million cost over ten years out of the air, and divides it equally amoung the campuses. The tiny Channel Islands campus gets the same $236,350 put next to its name as does mighty San Diego State. Similarly, the $1 million per year projected to pay for a central help desk is added to the $1.7 million which will be spent training CSU technical staff, and that amount also is divided equally.

A helpful footnote points out that: "Actual benefits by campus might differ." To which we might add "Your milage may vary, the check is in the mail, and I'll respect you in the morning."

C4Net currently brings in $8.7 million a year and costs $8.3 million to operate. CETI won't make it any better, according to the Network build-out plan: "Dedicated Internet and video teleconferencing services for the California Community Colleges and other subscribers (libraries, county offices of education, etc.) commonly known as "4CNET" services will remain intact with no direct improvements from the CETI program."

But (per lines 23 and 49 of the financial plan) CETI plans to make about $50 million in profit from C4Net over ten years. I hope someone tells the Community Colleges and High Schools what a wonderful deal CETI will be for them.

Column for 1996 Reported Expenditures. It seems that nobody in the chancellor's office knows what the 23 campuses really do. In August, 1997 the education bureaucrats surveyed all the campuses to see what was being spent on computers and communications. (Of course, it was during summer, the people who knew the answers were on vacation, everyone interpreted "scope" differently, etc.)

Where the Money Goes, Maybe
Telecom operations	$37.2 million
"BATS" Baseline Access Training & Support	$10 million
User Training and Support	$ 6.8 million
Schools and Colleges	$25.6 million
Instructional Media	$ 3.7 million
Other	$11.2 million

The survey details have never been posted, but they are being used for the claim that CSU spends $95 million on computers and telephones each year. The financial plan calls for the CSU to give this $95 million to CETI.

The memo the education bureaucrats sent with the survey delicately refers to "An understanding that the CSU will commit to a certain level of expenditures each year ($95 million plus or minus some variation), and the assumption that while it will be a CSU commitment and not a campus commitment, campus expenditure participation is assumed as part of the agreement.", which is a bureaucrat's way of saying that "It's coming out of your hide"

CETI will then perform sleight of hand It will spend only $68 million a year for the equipment and services that it will sell CSU for the $95 million, all the while offering CSU the best prices around. This $27 million annual profit is the key to being able to pay off the debt and "refresh" the equipment, and there has never been any clear explanation where it will come from.

Crazy Eddie the Ceti-man says: "I lose money on every one I sell, but I make it up on volume"

Okay, folks. Ready for the clincher?

Now add up all the columns. That's the net annual benefit to each campus.

Huh? "Campus benefit" equals:

• an arbitrary share of the amount paid on the loan,

• plus a sliver of the profit from CSU selling to itself at a 40% markup,

• plus money that has to be spent on product warranties and avoiding unfunded liabilities later,

• plus "actual benefits by campus might differ",

• plus the money that was spent before CETI came along that's going to be taken away and given to CETI.

You mean that if the interest rate went up (so the debt service cost more) that would mean a *bigger* campus benefit? You mean the more you used to spend, the more money gets taken away and the *bigger* the campus benefit? It's just like the car salesman said:

"Add up the money you're spending on your new car and the money you used to spend on the old car, and that's your benefit, so buy one right away."

The Folks in Fresno have some reservations about the numbers, too.

But at San Francisco State, there's been no information. No stocking stuffers, no e-mail, no web posting. The President has told Vice-President Scoble to share new information immediately, but as far as anyone can tell, we're still in the dark.

 

It's all part of a pattern. The education bureaucrats behind CETI seem to view "campus consultation" merely as the opportunity to manufacture consent. They don't want anything standing between them and those plum jobs running the CETI auxillary and the Limited Liability Company.

Last September they set up an e-mail server -- and didn't subscribe or read the comments. When the discussion turned negative they said they wouldn't respond, because these were issues of "local concern".

In December, Professor Kenneth Peter, Chair of the Academic Senate at San Jose State, caught them offering to ghostwrite letters to the editor for faculty to copy and sign.

The main CETI web page at the CSU Chancellor's Office is way out of date and lacks many important documents.

Sharp observers scour the Fresno State page -- for example, they posted the version of the plan with the revenue estimates back in December -- when for weeks the official page just said (as it still does) "Financial Plan: Under Development"

The campus benefits spreadsheet came from the Fresno page. (I hope they don't get in trouble for leaking state secrets.)

You'd never guess from the articles in the CSU CETI Newsroom that the San Francisco Chronical called CETI a "dicey high-tech deal". Or that the Sacramento Bee spoke of the uproar over a high-tech monopoly. Or learn about any of the other media coverage that Brian Mahan at Chico State has collected on his big page of links.

Most of the official campus web pages just repeat the propaganda line, and link only to the CSU's main page (or to each other.) San Francisco State's Information page is particularly pathetic -- three links, all to the main CETI site, and no changes since the page was posted on November 17th. See for yourself: and HURRY RIGHT BACK.

 

Build Date 2/9/98      Robert H. Daniels     Back to Anti-Ceti