The States Swing Into I Way Construction

This past spring, a group of eighth-graders in Mount Ayr, Iowa, were comparing the benefits of manned vs. unmanned space flight. They wanted to pick the brain of a nearby legend: astrophysicist James Van Allen, a professor emeritus at the University of Iowa at Iowa City. But the 80-year-old Van Allen, who discovered the radiation belt around the earth that bears his name, wasn't up to making the 200-mile trek to the tiny farm town.

So Mount Ayr turned to a simpler solution: Iowa's state-owned $100 million fiber-optic network, which connects hundreds of schools, hospitals, and public offices. Van Allen ambled down to a videoconferencing room at the university that is linked to a similar room at Mount Ayr High School. The one-hour interview session cost the school $10, compared with $500 for a commercial hookup.

"GREAT LABS." Iowa's glitzy Information Highway system is one that other states view with great envy--and fear. Governors worry that to attract industry and jobs, they must begin building similar state-of-the-art communications infrastructures. So legislatures are pouring millions of dollars into new high-capacity, intragovernment networks, often designed and run by local telephone companies.

These systems, which carry voice, video, and data, are meant simultaneously to improve state services and save money (table). According to a National Governors' Assn. report issued in July, more than a dozen states have Information Superhighway projects under way. "The states are all elbowing each other out of the way to be in the lead," says one New York State official.

The efforts are getting kudos, and funding, from Washington. "The states are great laboratories for us," says Robert M. Pepper, chief of the Federal Communications Commission's Office of Plans & Policy. But they also are getting a fair amount of static. Some legislators grouse about the tens of millions of dollars these systems can cost. And experts wonder whether the networks can deliver on their promise of economic development. While "these projects can be helpful, it gets overplayed," says Eli M. Noam, a Columbia University economics professor.

The skepticism isn't stopping states from plunging ahead with their plans. Iowa's system, which went on-line in November, 1993, is the first and also the largest. Planning for the project, built by Omaha-based MFS Network Technologies Corp., started during the farm crisis in the mid-1980s, when rural communities were going bust. The original aim was to link all of Iowa's public schools, providing them with access to universities and to professors such as Van Allen.

BIG-HOUSE CALLS. The hope was that a better-educated workforce could vie for new industry with areas boasting better school systems. "We wanted companies to locate in rural areas, so the schools there needed the opportunity to compete," says Governor Terry E. Branstad. The jury is still out on whether the network will lead to jobs.

But Iowa is not stopping at education. The state is linking all of its armories with the help of a $10 million grant from the Pentagon. And $20 million from the federal Health & Human Services Dept., is helping hospitals to purchase equipment for video linkups between doctors in distant locations.

Other states are starting out small with their network-building, setting up pilot projects that are aimed at improving education or health care. North Carolina is using a video link to slash medical costs for its inmates at Central Prison in Raleigh. Doctors at East Carolina University Medical School in Greenville--more than 100 miles away--can monitor a prisoner's heartbeat as a nurse uses a digital stethoscope. The cost of such video consultations is $70, compared with $750 the state used to pay to transport patients and their guards to Greenville. Since the program started in 1990, the state has saved $211,000 on treatment, while spending only $100,000 on the network. "This is not just a sexy thing to do," says Lowell Christy, a researcher at the hospital. "There are real economic benefits."

Which doesn't mean these projects enjoy clear sailing. In Iowa, Branstad ignited a political firestorm in 1991 when he announced that the network would be competitively bid rather than handed to local phone companies. "It was a very emotional battle," says Robert Eide of MFS, the low bidder.

"DOUBLE WHAMMY." The telephone companies tried to kill the project, arguing that the state had no business owning a network. They also warned that if the state shifted its $7 million in yearly phone traffic to a private operator, rates for other customers would soar. "This is a double whammy for taxpayers," complains Todd Schulz, state director of the Iowa Telephone Assn., which represents local phone companies. "Not only do they have to pay to build it, but they may have to pay higher phone rates, too." In fact, rates have not gone up since the network began operations, but Schulz still insists that hikes are inevitable.

To avoid similar flak, many states are working with their local phone companies. But without competitive bidding, costs can be inflated. That presents other roadblocks, as Maryland Governor William Donald Schaefer found. Last summer, he made a deal with Bell Atlantic Corp. to wire most of the state's schools with videoconferencing equipment so students can watch teachers in distant classrooms. But local cable companies protested to the state attorney general that the contract, which could be worth more than $50 million over 10 years, was issued without opening up the biddingprocess to competition. The state opened the contract to competition but required any bidder to provide switching service--which only the phone company could do. To no one's surprise, Bell Atlantic was the sole bidder. Outraged cable companies have filed a protest.

Most state projects are faring better. But those who think they'll be part of a seamless national information interstate may be disappointed. These networks are more likely to remain high-tech local roads. "There is no coordination" between the states, says Harry M. Trebing, a Michigan State University economics professor. "I'm not sure that's an optimal way to develop a network."

Governors, though, aren't too worried about the big picture. If they can improve services, save money, and create a few jobs, the funds for paving these high-tech roads will seem well spent.


IOWA has the first state network up and running-and the largest (above: the Stark Armory Switching Center)

GEORGIA started up a statewide fiber-optic network in January that links colleges, grade schools, and technical schools

KENTUCKY will issue a contract this fall to develop a communications system to replace the jumble of government networks

LOUISIANA last year launched TeleMed, a program to provide a video linkup between urban hospitals and those in rural areas

SOUTH CAROLINA developed an extensive backup communications network in 1989, after Hurricane Hugo wiped out coastal service

TEXAS is setting up computer kiosks in public spaces to better distribute information about state services


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