A Review of the Organization and Management of State Telecommunications

-199- government and without that a "business as usual" approach will be both costly and ineffective in providing State programs the technologies they need to serve the public well. Thus, we recommend to the Legislature and to the Administration that the means and oversight needed to accomplish the following tasks be developed so their implementation begins no later than January 1, 1986. Without reorganization, we believe the Administration and the Legislature will have to take special steps to assure accountability and progress in carrying out these tasks, as we have observed more than a little confusion over who is responsible for what. PLANNING Recommendation 119. A thorough strategic plan for each user agency and department should be developed in conjunction with the Office of Telecommunications. This plan should identify the role of information management in the user's programs and assess needs for telecommunications and information technology to utilize information management in a productive, efficient manner. Virtually none of the departments of the State have analyzed their telecommunications needs or have connected of technology to a strategic analysis of mission. of Telecommunications should put muscle behind its their use The Office -20~- interest in replacing rented customer premise equipment with purchased equipment by organizing a department by department needs assessment program. The Office should be permitted to direct the department to zero-base its communications and data communications budgets where a fundamental examination is in order. As a result of systematic assessment, the Office of Telecommunications will be able to define specific objectives for better managing facilities utilized by departments, including customer premise equipment, dedicated data communications, etc. network access, Recommendation to implement '20. The State should develop a tactical plan the network concept presented in A Telecommunications Strategy fQ£ State Government. The State conceptualized by Government through plan to do so. should proceed to implement the network A Telecommunications Strategy fQL State development of a comprehensive tactical Delays in implementing an integrated, high-capacity network at least $10 million traffic. for voice and data will cost the State annually at current volumes of data Recommendation '21. The tactical plan for a network should be developed by a special project planning task group outside of the Department of General Services as proposed by the major telecommunications users of the State. ~ -201- The Administration should resubmit a Strategy BCP to the Legislature and outline the resources required to design, purchase or lease, and operate such a network. However, we believe that the modifications to the Strategic Report imposed on it by the Strategy BCP submitted by the Office of Telecommunications demonstrate that an independent planning unit within the State and Consumer Services Agency is needed to assure the integrity and focus of this project. We are not convinced that an appropriation for planning of the network to the Office of Telecommunications will, in fact, produce implementation of the strategic policy developed in the Report. After a tactical plan is developed and let for competitive bid, the Administration can consider shifting the project personnel to the Office of Telecommunications to meet its ongoing operational demands; however, we caution against an expectation that ongoing network responsibilities will be so minimal as to allow this personnel group to assume after twelve months "policy, planning and research functions" within the Office of Telecommunications as assumed by the Strategy BCP last year. The Office of Telecommunications should submit a separate proposal to expand its functional complement in policy, planning, and research. We certainly agree that such a group would be needed by the Office of Telecommunications. The Commission suggests, however, that the Department of General Services, Office of Telecommunications, be requested -204- been based on rigorous analysis, and contradicts expert opinions, including those of Office of Telecommunications engineering staff and experts at Pacific Bell. It is a consensus of experts and also of the Telecommunications Strategy that customer premise equipment, including switching services such as Centrex and PBX installations, should be analyzed on a case by case basis, user by user and locale by locale. Current policies have the effect of discouraging and even prohibiting the engagement of the competitive marketplace. The Office of Telecommunications should encourage and assist every user department to explore fully its options for customer-premise equipment. Recommendation develop, in 124. The Office of Telecommunications should conjunction with the Governor's Office of Emergency Services, a comprehensive plan for the use of voice, data and radio communications in the event of an emergency. The people of California are not presently assured of effective communications in the event of a disaster. Certain regions of the State have no emergency communication plan. The effect of divestiture on the provision of emergency communications has not been analyzed. Emergency communications -- and the coordination of public safety forces it makes possible in a major disaster -- is a key public resource. New technologies have expanded the versatility of emergency radio communications, but their costs and benefits -205- have not been analyzed for the State of California. State agencies responsible for public safety and security are members of an emergency communications advisory committee that has not met in two years. In some instances, emergency communications plans for potential disaster areas are entirely informal and oral. Recommendation 125. Funding for emergency communications planning should be provided by a more efficient administration of the 9-1-1 emergency calling fund. Staff should be provided to realize the estimated cost-savings of more efficient administration. The Commission believes that the estimated savings realized by this recommendation, at least $1.8 million annually, would be appropriately used for emergency communications planning. If statutory adjustments to the Warren Emergency Communication Act are needed for this purpose, they should be implemented. Recommendation 126. The Legislature should review the statutory basis of emergency preparedness, and in particular, emergency communications planning, to see whether adequate delineation of authority and responsibility has been accomplished. The Commission is vitally concerned that such an important area should be so vague as to lead and responsible agencies. -206- Recommendation 127. The Office of Telecommunications should undertake a rigorous analysis of the social impact of State telecommunications strategies and recommend appropriate policies to the Administration and to the Legislature. The State of California is currently operating on the basis of ad hoc theories of social impact which may not accurately reflect either the new telecommunications environment or the actual practice of the State. Given the State's impact on the marketplace and on the cost and pricing of regulated telecommunications, the State should be empirically clear about its impact and what policies appropriately follow that impact. Recommendation 128. develop a budget planning resources The Office of Telecommunications should change proposal for telecommunications in addition to those needed for implementation of the network strategy. The Office of Telecommunications has not, in our view, distinguished between planning requirements of network services and other planning requirements of the State. For example, the Office (and users) have a strong interest in developing local area networks. This type of activity requires planning capability additional to and distinct from network design and implementation for long-distance communication. -207- Recommendation 129. As the lead telecommunications agency, the Office of Telecommunications should have an advisory structure through which All State users can express their views. At present, the Office advisory committee of of the Telecommunications State's largest only has an users of telecommunications, which represent a expenditures for telecommunications and programs. minority of total a minority of State Recommendation 130. The Office of Telecommunications, in lieu of reorganization, should take the lead in the development of telecommunications policies through its planning and analytical efforts on behalf of government. The Commission believes the absence of a unit of government responsible for the development of policy threatens State interests and may be adverse to the public interest. The Administration and the Legislature require the service of an agency equipped to identify, analyze and present major policy issues for adoption. OPERATIONS Recommendation undertake a capabilities appropriate salary ranges -208- 131. The Office of Teleco .. unicatioDs should thorough assessment of the State's staff in telecommunications management, and define classifications, user management structures, and the viability of exempt positions for acquiring resident telecommunications expertise. There is consensus among State telecommunications managers, experts in high technology recruitment, and vendors that the State needs greater expertise in telecommunications but that it faces difficulty in competing with the the private sector in recruiting experts. Users have recommended expansion of existing telecommunications management positions, but no assessment is available to confirm or question the adequacy of this proposal. Indeed, the tasks identified by users may require more elaborate revisions to current professional job descriptions. The Office of Telecommunications itself may need to expand human resources in ways not facilitated by current State classifications and salaries. The Office of Telecommunications should develop a comprehensive approach for the State to best meet its staff needs in telecommunications management. -209- Recommendation 131. The Office of Telecommunications should develop workload standards for the retention of consulting expertise, guidelines for their effective management, and a clear statement of consulting and support services it is able to provide user agencies and departments. Apart from general personnel rules governing the retention of consultants, the State does not have policies or guidelines for the appropriate use of specialist consultants. Consulting contracts for telecommunications appear in some instances to be sUbstitutes for regular employees and to undercut needed, long-term resident expertise. In other instances, criteria for the effective management of telecommunications consultants has not been developed. Since consulting expertise to develop State will be a frequent component in programs telecommunications, the Office of Telecommunications should analyze how consulting support can be both appropriate and productive. There expert is not clarity at support that the present about the consulting and Office of Telecommunications can provide to user departments. In many instances, the Office of Telecommunications has lacked sufficient staff to support user departments in a timely fashion. The Office of Telecommunications should clarify its support services to user departments, and if necessary, request an augmentation of its budget for that purpose. -210- Recommendation '32. The Office of Telecommunications should be responsible for the design and implementation of training programs targeted to and differentiating among (a) telecommunications and data processing specialists in State service; (b) executive management of departments and agencies; (c) users of telecommunications and information technology; (d) individuals responsible for the acquisition, accounting and custody of information technology assets and related expenditures. Recommendation '33. The Department of Finance should revise uniform accounting principles to enable users to properly reflect their telecommunications and information technology expenditures, and to provide the Legislature and the Administration accurate information about the level of information technology expenditures. At present, the State does not know precisely how much it spends on telecommunications. This is due, according to the Auditor General, to divergencies in the way users account for their telecommunications and information technology expenditures. Without clear accounting of telecommunications expenditures, management is less able to change telecommunications practices to achieve greater economies. -211- Recommendation 134. The Office of Telecommunications voice and data activities should be funded by direct appropriation rather than by reimbursements embedded in ATSS billings. At present, to finance all Office of Telecommunications voice and data activities, the adds a 1.50% surcharge on ATSS chargebacks to user departments. The Commission recommends that users pay actual telephone charges for ATSS use and that the Office of Telecommunications be funded by direct appropriation. Given the many demands on the Office of Telecommunications in the post-divestiture period, that Office should be given the opportunity to represent its needs for resources directly, rather than mixing those needs with the charges for long-distance telephone calls. Furthermore, voice and data communications are capabilities involving all of government. Users need assurance that adequate management resources are available, and are not subject to artificial constraints of minimization by the Department of General Services for policy reasons unrelated to telecommunications. Furthermore, in order to provide the ATSS billings, the Office of service of Telecommunications needs the Centrex-based billing Pacific Bell; PBX's no longer have the technical features needed to incorporate them into this billing system. Thus, the current reimbursement system ties the Office of Telecommunications to switching services that may not be, in all cases, the most cost beneficial. -212- Recommendation Department of currency of Administrative technology. 135. The Office of Telecommunications and the Finance should assume responsibility for the State publications, reports and the State Manual in those areas related to infoDaation Recommendation 136. The Department of General Services should revise contracts with principal vendors such as Pacific Bell to reflect and to define the current provision of services and associated management and technical support. Recommendation 136. should establish and opportunities, rights sector in its vending State. The Department of General Services promulgate formal rules regarding the and responsibilities of the private of information technologies to the The contract with Pacific Bell has not been revised since 1977 when it was executed with pre-divestiture Pacific Telephone and Telegraph. As a result, it does not define precisely that vendor provides the State of California and under what terms. As a result, the State has no legal instrument accurately governing expenditures which are in excess of $60 million annually. The Commission found significant differences in the ways in ~ • -213- which vendors are able to market their telecommunications products to the State. There exists significant confusion regarding the purpose of requests-for-information, letters of inquiry, letters of agreement and other instrumentalities (except for the competitive bid process) which define the marketing and transaction relationships between vendors and the State in the acquisition of telecommunications goods and services. In the deregulated marketplace, vendors should be clear about their marketing and competitive opportunities to do business with the State. EVALUATION Recommendation 138. The Office of Telecommunications should establish a comprehensive management suitable to its responsibilities and Administration and the Legislature for State programs and operations • information system to the needs of the proper oversight of Recommendation Auditor-General consulting firm an independent 139. In lieu of reorganization, the should retain, through competitive bid, a expert in microwave communications to conduct appraisal of the State's microwave system, its uses and rate of utilization, and funding structure and make recommendations for its future use, management, maintenance and financing. -214- Both the capabilities and incapacities of the State microwave system have their advocates. Its low level of utilization and nondigital system led the Strategic Report to recommend serious consideration of the system's abandonment or of its operation by a third party. For several years, the Office of the Legislative Analyst has raised questions about the system's efficiency, overhead, and accessibility to users on a reasonable cost basis. Although proposals have been made over the years to expand the system's use for inexpensive telephone communications, they have never been presented to the Legislature. At the same time, the system provided the critical link of communications during the Coalinga earthquake. It's net value to the State remains unclear. However, the Office of Telecommunications deleted review and appraisal last year of this system from the Strategy BCP it submitted (to implement the recommendations of the Strategic Report), and in current year, the Office is requesting more than three million dollars for the system, the second largest budget request for FYl985-86 in State telecommunications. The Office of Telecommunications is analyzing new applications of the system which may render it a more useful communications tool. However, at present, the Office of Telecommunications is not prepared at this time to undertake a critical, assumption-free examination of the future of this system. The Chief of the Office reports that 80% of his time is spent on related radio communications, and the lion's share of staff , • -215- and management in central State telecommunications is devoted to maintaining the system. The Office of Telecommunications has a large investment of resources in the present management and technical approach to radio communications. Given the major questions about the microwave system, the interest of the Office of Telecommunications, and the system's substantial demands on limited management resources, the Commission believes an independent, objective analysis is long overdue. This should be accomplished through the Auditor-GeneralIs retention of a consulting firm with freedom to reach independent conclusions. The work of the firm should be presented to the Administration and to the Legislature for their consideration and action . ., 'I • NOTES TO CHAPTERS CHAPTER I. 1. Arthur Anderson, Inc., -New Directions in Telecommunications,- a proprietary study, 1984. 2. John Gantz, -Life After Divestiture,· Telecommunications Products and Technology, January 1984, page 4. 3. Ibid, page 6 • CHAPTER II. 1. James Lyons, Approaches tQ 79. nAn Overview of Systems Analysis,n Communications Planning, UNESCO, 1979, P. 2. Interview with Robert Traylor, Vice-President, Management Analysis Corporation, January 16, 1985. 3 • 4. 5. 6 . 7 . 8. 9. 10. "Telecommunications and Variables,n Proceedings, 1984. Robert Traylor, Ope cit. Business Strategy: Basic National Computer Conference, Interview with Dr. M. U. Ayres, Boeing Computer Services, October 4, 1984. Ibid. Ibid. Little Hoover Commission, npublic Hearing on State Telecommunications,n Los Angeles, October 30, 1984. Office of Telecommunications, Department of General Services, nTelecommunications Budget Change Proposal, Fiscal Year 1985,n p. 3 • "Telecommunications Strategy for State Government," Office of Information Technology, Department of Finance, April 1, 1984. 11. nManagement: State of Direction (Draft),n Office of Telecommunications, DGS, March 21, 1984, pp. 3-4. 12. nTelecommunications OPe cit. -217- Strategy for State Government," 13. "Telecommunications Budget Change Proposal, Fiscal Year 1985,n OPe cit., p. 3. 14. Ibid. 15. Interview with [name deleted], Analyst, Office of Telecommunications, October, 1984. 16. Interview with Allan Tolman, Deputy Director for the Office of Telecommunications, DGS, December 6, 1984. 17. Interview with John Lord, Pacific Bell, September 10, 1984. 18. Letter from Allan Tolman, Richard Mahan, Executive Commission, December 4, 1984. Deputy Director, DGS, to Director, Little Hoover 19. Interview with Larry Rowe, Senior Engineer, Office of Telecommunications, DGS, January 15, 1985. 20. Interview with James Fraylich, Supervising Engineer for Voice and Data, Office of Telecommunications, DGS, November 28, 1985. 21. Peter Keen, Business Without Bounds: Telecommunications gnQ Business Strategy, unpublished manuscript, 1984, Chapter VI, page 22. Quoted by permission. 22. Memorandum, Employment Development Department, nField Office Upgrade Project,n June 6, 1984. 23. Interview with Allan Tolman, Deputy Director, DGS, March 22, 1985. 24. Interview with [name deleted], Engineer, Office of Telecommunications, [date deleted] • 25. John Gantz, OPe cit., p. 9. 26. Interview with Don Braun, AT&T Communications, November 12, 1984. 27. Interview with Jean Operations, California February 20, 1985. King, Analyst, Department of Construction Corrections, 28. Interview with Phillip Laudenschlarger, Data Specialist, Office of Telecommunications, DGS, September 13, 1984. • -218- 29. Interview with James Fraylich, Office of Telecommunications, November 28, 1984. 30. Interview with Allan Tolman, Deputy Director, DGS, December 6, 1984. 31. Interview with Larry Rowe, Ope cit., January 15, 1985. 32. 33. Interview Planning, 23, 1984. with Duncan Wyse, Director of Policy and California Public Utilities Commission, August Bulletin, nConsolidated Exchange Services," Office of Telecommunications, DGS, December 28, 1984. 34. Interview with [name deleted], Analyst, Office of Telecommunications, [date deleted]. 35. Interview with James Fraylich, OPe cit. 36. Interview with Robert Andrest, Governmental Relations, General Telephone Company of California, November 13, 1984. 37. Interview with Larry Rowe, Ope cit. 38. Letter from Richard West, Assistant Vice-President for Information Systems and Services, University of California Systemwide, to Joel Kugelmass, Consultant, Little Hoover Commission, January 24, 1985. 39. IlTelecommunications Budget Change Proposal FY1985," Ope cit., p. 1. 40. "Private Lines Used to Bypass Local Telephone Rates,n Computerworld, December 24, 1984, p. 14. 41. Interview with Peter Wazenried, Supervising Engineer, Office of Telecommunications, DGS, November 5, 1984. 42. James Fraylich, Ope cit. 43. Interview with Robert Madzelan, Governor's Office of Emergency Services, November 29, 1984 • 44. Peter Wazenried, Ope cit. 45. nTelecommunications Draft, Office of pp. 1-12. Budget Change Proposal FY1985,n Telecommunications, DGS, May 8, 1984, -219- CHAPTER III. 1. Arthur Anderson, "New Directions ••• ," OPe cit. p. 3. 2. Interview with James Heralek, Accounts Manager, Pacific Bell, September 5, 1984. 3. Interview with Allan Tolman, OPe cit. 4. Interview with Alan Tolman, OPe cit. 5. Interview with David Gregory, Pacific Bell, August 21, 1985. 6. Interview with Larry Rowe, OPe cit. 7 • Interview with the Office of 1984. Andrew Hesse, former Deputy Director of Information Technology, DOF, October 24, 8. Interview with John Lord, OPe cit. 9. Letter from Richard West, Ope cit. 10. Report to the Board of Supervisors, County of Sacramento, Exhibit D, "Award of Contract for a Telecommunications System," November 19, 1984. 11. Letter from Allan Tolman to Richard Mahan, OPe cit. 12. IFB MPA 4040, Office of Procurement, DGS, May 5, 1984, PVI-l. 13. Declination Letter on IFB Communications Systems, Inc., Procurement, October 25, 1984. MPA 4042, PacTel to the Office of 14. Interview with James Fraylich, Supervising Engineer, Office of Telecommunications, DGS, March 6, 1985. 15. Interview with Allan Tolman, Ope cit., December 6, 1984. 16. Interview with Don Lloyd, State Accounts Manager, AT&T Communications, November 1, 1984. 17. Interview with James Fraylich, OPe cit. 18. Ibid. 19. Interview with Don Lloyd, OPe cit. 20. Ibid. 21. Ibid. • -220- 22. Study Report on Telecommunications Personnel Classifications, State Management and Radio Users Subcommittee Advisory to the Office of Telecommunications, September 13, 1984. 24. Interview with Pete Wazenried, OPe cit. 25. Interview with Robert Traylor, OPe cit. 26. Standard Agreement with Arthur Anderson, Inc., a contract with the Office of Telecommunications, Department of General Services, January 31, 1984. 27. Interview with [name deleted] on [date deleted], Analyst, Office of Telecommunications, DGS. 28. nTelecommunications Budget Change Proposal FY1985,n first draft, May, 1984, Exhibit D. 29. Robert Traylor, OPe cit. 30. Interview with James Fraylich, OPe cit. 31. Interview with Don Lloyd, Ope cit. CHAPTER IV. 1. Interview with Allan Tolman, Ope cit., December 6, 1984. CHAPTER V. 1. Interview with James Fraylich, OPe cit. 2. Donald A. Marchand and John C. Kresslein, ·South Carolina No Longer a State of Information Confusion,n Cornputerworld, June 4, 1984. 3 • Little Hoover Commission, Ope cit., p. 4. 4. M. U. Ayres, General Manager, Network Services Group, Boeing Company, Seattle, Washington, "Divestiture -- Its Impact on Boeing,n May 17, 1984. Little Hoover Commission, "Public Hearing on State Telecommunications,n San Francisco, July 31, 1984. 5. Arthur Anderson, Inc., nTelecommunications Strategic Plan, Draft Report,n March 9, 1984. -221- APPENDIX A. 1. Legislative Analyst, ftThe Utilization and Management of Information Processing Technology in California State Government,ft April, 1983, p. 85. 2. Auditor-General, December 1, 1984. ftReport on Telecommunications,· • APPENDIX A OVERVIEW OF STATE TELECOMMUNICATIONS MANAGEMENT For three decades, the California Legislature has sought to perfect a direction for the management of State telecommunications. After establishing communications management in the Department of General Services in 1953, laws on this subject have been infrequently adopted. They consider in the main (1) the economics of telecommunications, primarily achieved through avoiding duplication; (2) the procurement of telecommunications goods and services; (3) the technologies of telecommunications; and (4) the organization of telecommuni- cations management. Noteworthy actions by the Legislature have occurred throughout the past 30 years. The concept of a State telecommunications policy was first introduced ten years ago by a special joint legislative telecommunications committee. It was not until 1983 that telecommunications was identified as a specific management problem. During that year, the Office of the Legislative Analyst stated: n ••• we develop one planning future." believe that it is essential that the state a unified approach to telecommunications that retains flexibility with respect to for the state's telecommunications [emphasis added, 1] Implicit in this Report and later explicit in Chapter 1327, Statutes of 1983, was the view that telecommunications gnd A-2 data processing are two sides of the same coin. It was also in 1983 that legislation began to respond to developments brought on by deregulation and divestiture. In Chapter 791 of the Statues of 1983, the Legislature found and declared that, " ••• with the advent of deregulation in the telecommunications realized by the industry, substantial cost savings can be state through the specialized evaluation and procurement of alternative telecommunications systems." Thus, the management of telecommunications was seen for the first time to involve decisions about acquisition alternatives the State might consider for the same service. In the area of telecommunications technology, the State has evolved away from specific, named technological systems, such to as "teletype" or "microwave," towards generic references "data communications," "information technology," or "telecommunications." The abundance of technological choices would have made specific references a virtual impossibility. Generic approaches to technology led the Legislature to consider the relation between data processing technology and telecommunications technology, since sorting out their manaoement implied In the words of an analysis of their technical intertwine. Chapter 1327 of the Statutes of 1983, " ••• a need exists and planning to consolidate and integrate the state's policy functions with regard to information technology to ensure coordination of the state's information technology needs, [where] 'information technology' means all -, • A-3 computerized ••• information handling ••• [and] voice, video, and data communications ••• " The Organization of State Telecommunications Responsibilities As the findings will discuss, the organizational table of State telecommunications responsibilities is complex and provides there are overlapping functions. Formally speaking, however, four levels to the organizational table, each with its own principal mission: (1) the Department of Telecommunications [OT/DGS]; General (2 ) Services, Office of Office of Information Technology the Department of Finance, [OIT/DOF]; (3) Teale Data Center and the departments, postsecondary California and Health and Welfare Data Center; (4) State agencies, boards, commissions, and the education systems of the University of the California State University System. We consider each in turn. The Office of Telecommunications (Department of General Services) is responsible for all centralized operating systems of State telecommunications. This includes the statewide microwave system used for public safety applications, the ATSS network for telephone and some data communications, the ATSS/DS network for data communications, and specialized technologies such as pocket pagers, car telephones and the like. A-4 The Office of Telecommunications is also responsible for the approval of central and user acquisitions from telecommunications vendors in terms of their technical specifications. Typically, this responsibility is conducted in conjunction with the Office of Procurement, Department of General Services, where a competitive bid process is required. However, equipment and service orders to local telephone companies, which are not handled competitively, also flow through the Office of Telecommunications. Where the State procures or acquires telecommunications services on a centralized, shared basis, the Office of Telecommunications is the purchasing agent for the State. The Office of Telecommunications approves user level telecommunications facilities and equipment such as data networks, customer premise switching devices, telephone receivers and so forth. The Office of Telecommunications has been granted policy that "tactical" responsibility to implement strategic was to have been developed by the Office of Technology. In the absence of such a policy, the Telecommunications has developed its own policy (See Chapter II, Finding 14.) Information Office of outlooks. The Office of Information Technology (Department of Finance) is responsible primarily for reviewing budgetary and expenditure-related planning and proposal documents such as the annual Information System Plan and the Feasibility Study • " .. A-5 Report. These documents and their attending review processes allow users to submit budget change proposals or expend funds already appropriated for information technology projects. The Office of Information Technology has been granted, as mentioned above, strategic policy authority. However, as we discuss below, the State of California has never developed a comprehensive strategic plan and a corresponding information policy to guide its technology development. As a result, the State does not have a strategic policy that connects its goals as government to its introduction or use of technology. The data centers establish data communications links with users they serve, and are delegated by the Office of Telecommunications the authority to do so. DeLJartff,ent[:;, Agencj es, Boards gnQ Commissions: These units of government are responsible for planning and operating all telecommunications systems unique to them, e.g., systems whose only purpose is to support their particular mission. Units initiate proposals by submitting them to the Office of Telecommunications and to the Department of Finance. Depending on the amount of expenditure proposed and whether or not a new appropriation is needed, one control agency or both become involved in project approval. Implementation schemes are as varied as State government itself • Operating units of State government also provide telecommunications services to one another on a reimbursement basis. They advise the Office of Telecommunications and the A-6 Office of Information Technology, through various user based committees such as the Radio Users Committee (which advises the Office of Telecommunications on a broad range of telecommunications issues not limited to radio) and the California Information Technology Forum (which advises the Office of Information Technology). Finally, as fiscally responsible units, users are responsible for the review and internal approval of their telecommunications expenditures, monitoring and enforcement of telephone abuse, etc. Expenditure approvals mayor may not further involve Agency approval. Postsecondary Institutions: The University of California, as a constitutionally established public trust, enjoys autonomous telecommunications management, although it was obliged to join the ATSS network and may share other centralized, operating systems such as the microwave network. The California State University system, on the other hand, is subject to the authority of the Office of Telecommunications, for expenditures greater than $100,000. Less expenditures are statutorily delegated. Both of these systems employ management and management in their activities, according to internal responsibility. telecommunications hierarchies of Certain specialized areas of telecommunications have been assigned to other branches of government. For example, the Governor's Office of Emergency Services is responsible for : • , - A-7 emergency communications; it draws upon the resources of Office of Telecommunications on a project by project basis. The Department of Justice operates the law enforcement communications network, and ties into related Federal systems. The Department of the Military coordinates with and implements requirements of the U.S. Department of Defense. The Supreme Court, the Legislature and legislative offices like the University of California make specific decisions autonomously, use central services such as the ATSS network. State Telecommunications Resources and Budget The resources for telecommunications that are subject to "management" are extensive. The State is said to use approximately 200,000 telephones, connected to 150,000 different telephone lines. Of these telephones, approximately 150,000 connect to Pacific Bell and most of the balance to General Telephone. Each month the State spends an aggregate of 2,500 calendar years "on the phone," or about a week per employee. Of course, not all of this is "talk" since it includes data In addition communications transmitted over voice circuits. excess of to telephone 15,000 terminals receivers, the State manages in for computer communications. A relatively small number of departments also use other terminal equipment such as facsimile ("telecopying"). Finally, video communications are used for instructional applications in A-8 postsecondary education institutions, some traffic control systems and for purposes of building security. In addition to the above discussed equipment, the State of California, through the Office of Telecommunications manages systems. an extensive array of transmission devices and Based upon the criteria of cost and usage, the major system which is the "automatic telecommunications switching system,ft has come to be called ATSS. The State leases private lines and the associated switching equipment to comprise a private network with controlled access. In order to use ATSS, one must either employ a telephone line connected through switches to the network or become temporarily switched to it by means of an access code or authorized operator connection. ATSS management functions are distributed among several telephone companies and the State of California. In addition to switching "devices" that route calls as they make their way to their ultimate destination, the State also rents switching "services" for local calls and as intermediaries for network access. These services are called Centrex services, and utilize machinery installed at telephone company offices. Forty one Centrexes are currently serving the State of California (and other users). As an alternative to Centrexes, some agencies have switches on their own premises which they have leased or purchased. These devices are variously called PBX's, PABX's, CBX's and EPABX's depending upon the vendor or the customer. (In this report, • , • A-9 the nomenclature is "PBX.") The State also leases or employing various technologies to rents transmission lines convey voice and/or data, each with its particular pricing, capacity, aggregation of signals and purpose. Private lines for data communications are prolific. One private line system, ATSS/DS, emulates ATSS (voice) in that it offers a consolidated, switched data communications network that would serve a variety of data communicators, independent of one another. ATSS/DS has, however, few users; its principal user, the Department of Motor Vehicles, intends to use an alternative (its own leased private lines) as soon as possible. The State also owns and operates a microwave system applications of which include linkages for mobile communications with base stations, data transport for public safety organizations and a private telephone system sometimes called the "green phone." The geographical spread of this system is impressive, with circuit miles exceeding 65,000. Finally, the State deploys six satellite communication devices for emergency access to the ATSS network. Other specialized including equipment is machinery that deployed for data communications, allows different signals to share a common transmission facility, and moderns to convert computer signals into a form that can travel over ordinary telephone lines. Within the general areas of voice and data A-IO communications, the State of California employs virtually every device available in the marketplace today. The result is an impressive, but awesome diversity of technologies -- and a management challenge second to none. What These Resources Cost There are no absolute figures on how much the State of California Expenditures spends each year for FY1984-85 will on telecommunications. exceed $130 million in reported communications compelling evidence costs only. that actual However, there is telecommunications expenditures may be much greater -- more on the order of $200 $250 million annually. No precise figure is available due to variations in reporting techniques. [2] The Office of Telecommunications expends on the order of $81.2 million, of which $22.2 million reimburses telephone companies for State usage and approximately $40 million reimburses local jurisdictions and telephone companies for 9-1-1 emergency service related expenses. No precise figure is available for data communications since among all telecommunications activities that Report estimated current year. is the most decentralized. data communications at The 1984 Strategy $11 million for Since telecommunications is budgeted solely as an operating expense, personnel expenditures cannot be isolated. • A-II Departmental estimates of their annual personal services (State terminology for personnel costs) for telecommunications range from less than 0.01 person years (the equivalent of three person days) to over 500 person years. APPENDIX B SCOPE AND METHODOLOGY In general, the divisions of labor within the Office of Telecommunications are reflective of broader divisions of State telecommunications activity: voice, data and radio. This study concentrates on the management of voice and data communications, those technologies which incur more than 90% of the State's telecommunications expenditures. The study concerns, in particular, how the State of California manages its responses in a competitive, technologically advanced environment with one foot in the future and one in the present. As a management analysis, this Report is UQt an audit. The Report addresses structure and systerrs for planning, operations, and evaluation; together, these define the management approach the State utilizes in acquiring and utilizing telecommunications. Although a question of prominence, the State's telecommunications relations to political subdivisions (cities and countries) or to the public sector as a whole has not been considered. Regardless of whether or not the State should change its relationships to other public sector users, the State is first concerned with whether its own departments, agencies, boards and commissions are enjoying enhanced productivity and other benefits of telecommunications as completely as possible. ------~~~~~~~~~~~---- B-2 To examine how telecommunications is managed in a changing regulatory and technological environment, this study employed a variety of research based methodologies. Virtually all relevant information could be obtained only from original research. Within the State (and without), more effort has gone towards using telecommunications than to studying its use. In order to circumnavigate an information void in a sea of information technology, the following research was conducted: (1) two public hearings were held, with 24 participants from State Government, the private sector, major telecommunications management consulting firms (see below), and departmental level users; (2) a survey was conducted of all State agencies, emphasizing a variety of measures of telecommunications activity, especially as reflected in expenditures; (3) interviews were held (apart from public hearings) with 26 individuals in State service at central management organizations and from user organizations, and in the telecommunications industry; (4) a literature search was conducted regarding the contemporary telecommunications environment and responses to it, with a particular interest in how other states and comparably sized users (to the State of California) are managing telecommunications resources; (5) briefings (apart from public hearings) were held with management and technical consultants familiar with large telecommunications users; • " '" ... B-3 (6) review of selected, internal and published documents related to management functions from the Office of Telecommunications and the Office of Information Technology; (7) case analyses were developed, including: (a) the procurement of telephone receivers by the Department of General Services, (b) the procurement of telephone systems by the Employment Development Department, (c) the planning of PBX installations for ten new State prisons by the Department of Corrections, (d) procedures for telecommunications planning required of State telecommunications users by the Department of General Services and the Department of Finance; (e) the development, especially FY1984-85, of the State's policy on PBX acquisitions; (f) and strategic directions in consolidating data communications networks undertaken by the Office of Telecommunications, particularly in relation to the installation of digital, "backbone" facilities; (8) a review of chaptered law regarding telecommunications management; (9) a Performance Audit conducted concurrently with this project by the Office of the Auditor-General regarding the accounting of and departmental review of telecommunications expenditures in selected departments; (10) extended interviews with marketing and governmental relations staffs of Pacific Bell, General Telephone and AT&T Communications. The focus of research and the ensuing analysis was nlanaoement process, fi.Qi technology; this study does not intend to determine which technological system is preferable in a specific instance or in general. However, in considering processes for decision-making, it was necessary to consider how technology choices were made, and where differences would arise, how those differences were resolved. This in turn required consideration of some technological issues. For example, certain issues developed over technology in the B-4 course of Employment Development Department procurement of telephone systems; the evolution of those issues was an important part of the procurement process overall. As the most prominent feature of the new telecommunications environment in its effect on sharp competition within the marketplace, the State's consideration of acquisition alternatives was of special interest of the Commission. This interest notwithstanding, the Office of Procurement in the Department of General Services was only incidental to the management overview. It is primarily concerned a concern policies. study be with the administration of the procurement function, embedded in the State's overall procurement The Budget Act of 1984 stipulated that a management conducted of the Office of Procurement; in light of tb<.t study, this report restricted itself to specific, case-based telecommunications procurement issues. • APPENDIX C ACKNOWLEDGMENTS The Little appreciation without who to Hoover Commission wishes to express its those many people within State government and contributed their time and viewpoints in the preparation of this report. The following management, accounting, technology, and telecommunications consulting firms provided as a matter of public interest their counsel and analysis to the Commission: Arthur Anderson, Inc.i Boeing Computer Services; Korn Ferry International Management Analysis Corporationi Touche Ross and Company. The following individuals participated in the Commission's two public hearings. Under Commission groundrules, their statements do not necessarily represent the views of their organizations, which are listed for identification (* indicates written testimony only was submitted) : C-2 Hearing 2i. ~ li, il.M (in order of appearance) Steve Barnes, Vice-President for Telecommunications, Bank of America; Hank Taylor, Corporate Telecommunications and Office Systems Manager, Hewlett Packard Corporation; Phillip Mishler, Office of Information Technology, California State Department of Finance;