Coordinate State Telecommunications Improvements

The state should coordinate the Texas Department of Transportation s telecommunications planning and purchasing with state government s TEX-AN III network improvements.


Background
A window of opportunity now exists to save tax dollars by coordinating the Texas Department of Transportation s (TxDOT) plans for new telecommunications equipment on the state s highways with state government s new telecommunications network (TEX-AN III). If properly planned and executed, this new link between the two systems planners could save the state millions of dollars and improve the state s telecommunications systems.

IBM recently recommended in a state-sponsored report that the state move toward state-owned fiber optic cable whenever feasible for the TEX-AN III system. At the same time, TxDOT is placing greater emphasis on traffic mana gement and is proposing traffic management systems in six urban districts (Austin, Dallas, El Paso, Fort Worth, Houston and San Antonio). 1 These TxDOT systems also will require laying fiber optic cable and using computer-controlled systems that are key to TxDOT s drive toward smart highways and an intelligent vehicle environment.

The systems will enable TxDOT and local governments to better perform traffic management activities such as: monitoring traffic congestion, providing alternate traffic routing , real-time changing of traffic signals and message signs, charging user fees via electronic toll and traffic management systems during peak congestion traffic, and traffic safety.

Intelligent vehicle-highway systems (IVHS) are also essential for reducing energy consumption and air pollution in Texas. The state has several urban areas that are near or above EPA standards for air quality. Finally, IVHS is expected to enhance economic productivity through better transportation, particularly important since a North American trade agreement with Mexico and Canada is expected to greatly expand international freight traffic through Texas.

Increased impetus for sophisticated traffic management systems came last year with the passage of the National Intelligent Vehicle-Highway Systems (IVHS) program, part of the Intermodal Surface Transportation Efficiency Act (ISTEA) of 1991. IVHS is also kn own as smart highways. Among other provisions, the IVHS program provides grants to state and local governments for feasibility and planning studies to develop and implement intelligent vehicle and highway systems. These federal funds will amount to $660 million nationally over six years, and much of this funding is for research and development before much larger federal and state funds are invested. 2

According to federal and state experts, IVHS is not a faddish, futuristic concept but one in which most of the technology is available now. According to Texas A&M s Texas Transportation Institute, IVHS may in the long run be l arger than the $100 billion interstate highway system. 3

The new ISTEA and its emphasis on intermodal coordination is expediting TxDOT s move toward sophisticated traffic management systems. For example, TxDOT already has plans to place 25 to 30 miles of fiber optic cable in Houston over the next two to three ye ars. San Antonio is now letting contracts for about 25 miles of fiber cable. Similar plans are under consideration in other Texas metro areas. 4 Fiber placement is significant because it has enormo us capacity to carry data transmission, voice communications and video signals at high rates of speed.

Under current plans, as fiber optic cable is installed, TxDOT places spare fiber for its own planned future use in traffic management systems. This also presents the opportunity to cheaply install additional fiber capacity to serve the future needs of many other state agencies. This opportunity is also recognized in a recent IBM consulting report prepared for the state. 5

Initially, TxDOT will concentrat e its fiber installation in urban areas, where most traffic congestion and air pollution problems exist. Each urban area will require its own telecommunications infrastructure. For the short term, communications will be relatively light between urban areas. But it is in the metro areas where the state s communications costs are highest. A rough estimate is that 65 percent of the state s communication costs are paid to the local telephone companies, while 35 percent goes to long-distance carriers. 6 A stro ng coordination effort between TEX-AN III planners and TxDOT planners would allow leveraging of fiber optic cable capacity to reduce local telecommunications costs with low additional incremental investment of state funds.

Fiber prices have come down dramatically over the last few years, costing as low as $2 per linear foot installed, depending on the size of the fiber and location factors. 7 The rate to install 48-strand fiber on state-owned right of way is roughly $16,000 per mile, or $3 per linear foot. These costs can be funded with federal ISTEA and state-dedicated highway matching funds.

An important fact, however, is that the incremental costs to double the fiber at the time of installation is only about 10-15 percent, since labor costs do not vary much with the size of the fiber cable. 8 Based on an original cost of $3 per linear foot for 48 strands, the capacity can be doubled for only $.30 to $.45 more per linear foot, allowing the state a cost-effective opportunity to meet its growing communica tions needs. With the proper amount of planning and coordination, the state can therefore piggy-back at a low cost on the TxDOT s efforts to develop IVHS. For example, in locations where it would make sense, the state could pay the additional incremental costs to double, triple, or quadruple the fiber cable capacity at very low cost.

Savings opportunities also exist in non-metro areas. The Texas highway system reaches about 95 percent of locations requiring communications services. As the highway system is built and repaired, TxDOT could install conduit, hand holes for pull boxes, and manholes for splicing in the right of way. The installation cost to place two 4-inch conduits with the requisite handholes and manholes is about $8,500 per mile. 9 Fiber could be placed any time to serve the state s communications needs.

Owning the right of way is a major cost advantage for the state. Placing additional fiber capacity can produce significant savings for future state communications needs. Again, this would require close long-term planning among state agencies.

In addition to fiber installation, TxDOT has still another asset which can be used in the TEX-AN III system. At more than 300 locations around the state, TxDOT has installed PBX s and large telephone key systems hooked to high-capacity telephone lines. Some of these locations can be converted to tandem switches to handle TEX-AN III traffic. 10

Another compelling reason to consider TxDOT s communication infrastructure for TEX-AN III use is the need for emergency alternate communications paths. Alternate paths for critical circuits in the case of a disaster is imperative. With state-owned alternate paths, the state is in a better position to negotiate better rates.

Finally, installing excess fiber offers the state an opportunity to gain additional revenue. As installation plans are being made, the state can negotiate with common carriers that could elect to lease excess capacity from the state. Leasing of this type g ives carriers options to augment or replace their own lines and provide protection in major outages.

SB 352, adopted in 1991, directed TxDOT to develop a program to enhance existing sources of revenue. It provides for: (1) managing revenue generation from existing department real estate and other assets; (2) increasing the role of the private sector and p ublic-private projects in the leasing of real estate and other assets in the development of highway projects; and (3) setting annual revenue enhancement goals for this program. 11

Leasing excess capacity to carriers also can be integrated with TxDOT s current efforts. Savings that result from the state using excess fiber capacity can only be determined on a case-by-case basis. However, if just 10 percent of the state communications costs could be saved, it would amount to as much as $10 million annually. 12 In addition, it is not unreasonable to assume the state could realize $5-10 million in additional revenues per year when the state network is more fully developed.


Recommendations
A. State law should require that TEX-AN III and Texas Department of Transportation (TxDOT) planners establish an ongoing coordination and planning group to meet the state s long-term telecommunications needs. The law also should require this group to submit a report to the Legislature with a long-term plan, along with goals and recommendations, by May 1, 1994.

TEX-AN III plans should be shared with TxDOT, and conversely, TxDOT s plans should be shared with the TEX-AN planning group. Specific routes and location s should be targeted for TxDOT to install fiber sufficient to meet TEX-AN III needs, not only for the next few years, but for the 10- to 20-year outlook. High-level agency management should be involved throughout this process; semi-annual reports to the L egislature also should be required. Telecommunications and transportation experts from Texas universities also should participate in the planning process.

B. State law should authorize Texas Department of Transportation (TxDOT) to develop a program to mar ket any excess fiber capacity. State law should also authorize TxDOT to develop marketing expertise, either internally or through interagency agreements or outside consultants to accomplish this program.

TxDOT should: (1) determine where excess fiber capacity will be available to offer to carriers; (2) notify common carriers that this excess capacity is available to lease, at fair market prices, and on a first come, first served basis; (3) manage the proc ess, from sales to billing/collecting; and (4) report progress in TxDOT s annual report. Carriers would have to look closely at the desirability of leasing excess state capacity since TxDOT plans call for fiber placement only for its own use. For example, a carrier may have needs for a fiber ring aroun d a metro area, whereas TxDOT s plans include only a portion of the area. Only specific discussions with carriers will answer this concern.


Implications
Several possible barriers exist to leasing additional capacity to carriers that need to be researched by the planning group recommended above. First, the state could be viewed as a competitor with certain carriers. For example, some companies are known as carriers carriers ; they lease telecommunications capacity to small carriers who cannot afford to build their own networks. They also provide capacity for certain routes to larger carriers. These carriers carrier companies may allege that the state is becoming a carrier itself. Also, local access carriers such as Southwestern Bell may view state leasing as a threat, since it could accelerate bypassing Bell s network. As leasing increases, the potential of intervention from companies like these also increases.

Second, leasing to common carriers also could reduce the state s flexibility to serve its own communications needs. TEX-AN III planners could be in the position of competing for the excess capacity placed by TxDOT. Priorities need to be set, with a system established to ensure they are met.

Third, leasing to carriers can contribute to a redundancy problem by encouraging carriers to have facilities in the same location as the state s. In the event of a cable cut or other disaster, both the state s and the carrier s lines would be out. This threat is slight except for certain high-volume circuits. Proper planning can mitigate the possibility of its occurrence.

Finally, leasing to common carriers may require the state file with the Federal Communications Commission (FCC) to be a common carrier, if calls originate/terminate outside the state. If required, filing can be done relatively easily.

Fiscal Impact
One question to be addressed is how to pay for the incremental costs to place additional fiber for use by TEX-AN III. The primary costs would be paid for by TxDOT federal and state matching funds to plan and install IVHS fiber lines. The most straightforward way to pay for the incremental costs is to use the Telecommunications Revolving Fund, a clearing fund which is allocated to TEX-AN u sers based on their usage. 13 Revenues associated with leasing excess capacity to carriers should flow back to the Telecommunications Revolving Fund.

Savings and revenue enhancement opportunities cannot be precisely calculated at this time. There are too many contingencies and plausible alternatives to compute a full range of fiscal implications, particularly in the competitive and rapidly changing fiel d of telecommunications. However, the integration of the planning effort will not only be more efficient, but will also provide better service to state telecommunications users.

The bottom line is that the state s telecommunications needs are increasing dramatically at a time of tight fiscal constraints. At the same time, federal laws and policies are driving large investments into IVHS, which will require ever extensive state and local telecommunications lines and facilities. The state cannot afford to miss leveraging all possible options to install a comprehensive, low cost telecommunications system that places the state s and not the individual agencies needs as the top priority. The ISTEA legislation is providing incentives, funding and opportunities for the state to begin coordinating its long-term telecommunications plans.



Endnotes
1 TxDOT Traffic Management draft planning document, provided by Al Kosik, Traffic Engineer, Introduction, May 12, 1992, p. 3.
2 U.S. Department of Transportation, Summary of the Intermodal Surface Transportation Efficiency Act of 1991, January 1992, p. 3.
3 Texas Transportation Institute, IVHS Research, the Future of American Surface Transportation, Takes Center Stage at TTI, Texas Transportation Researcher , Special Edition: Intelligent Vehicle Highway Systems, Summer 1992, pp. 1-2. (Newsletter.)
4 Interview with Al Kosik, Traffic Engineer, Traffic Management section TxDOT (Austin, Texas, November 10, 1992).
5 IBM, Current Network Analysis and Evaluation of Alternatives, Phase II Input to Network Plan, Executive Summary, August 13, 1992, p. 1.
6 Interview with Donna Gessner, Communications Administrator, General Services Commission (Austin, Texas, November 19, 1992).
7 Interview with Troy E. Mathis, Telecommunications Administrator, TxDOT (Austin, Texas, November 10, 1992 and December 2, 1992).
8 Interview with Bill Bard, Telecommunications Engineer, Texas Higher Education Network (Austin, Texas, November 4, 1992).
9 State of Texas Communications Network, proposal by Troy E. Mathis, P.E., Telecommunications Administrator, TxDOT (Austin, Texas, May 15, 1992), pp. 3-4.
10 Interview with Troy E. Mathis, Telecommunications Administrator, TxDOT (Austin, Texas, October 26, 1992).
11 Texas S. B. 352, 73rd Leg., Sec. 4, art. 6663F, May 27, 1991.
12 Interview with Paul Cockreham, Legislative Analyst, Comptroller of Public Accounts (Austin, Texas, November 23, 1992).
13 Interview with Ann Baker, Director of Statewide Telecommunications Planning, Department of Information Resources (Austin, Texas, November 13 and 30, 1992); and Tex. Civ. Stat. Ann. art. 601b, sec. 10.06 (Vernon Supp. 1992).