Microsoft-CSU deal shaky

A ten-year deal that would make the world's largest university system a business partner with four technology companies, including Microsoft (MSFT), is on shaky ground this week.

The final business plan for the limited liability corporation was slated for release by April 1, a deadline calculated to give lawmakers and the California State University 45 days to review the controversial plan before the CSU Board of Trustees votes on the agreement at its May meeting.

But CSU officials doubt that the plan will be ready in time because no agreement has been made for splitting up the $3.8 billion in revenue that the partnership is projected to generate. Also, the potential partners can't agree on who will be responsible for the corporation's debt.

The plan has been criticized by lawmakers, students, university staff, and competitors of the four companies who say the deal will limit choice and is being steamrolled into adoption. The plan originally was scheduled to be signed in January, but the California State Assembly called a hearing that generated hundreds of questions about how the companies were chosen, who would control the corporation, and whether other high-tech firms would be locked out of CSU contracts.

A status report presented during a CSU trustees meeting Tuesday presented an unfavorable view on the deal's progress, especially because the board meets so infrequently.

"They are getting down to the bottom line where they are negotiating the revenue and how the equity risk will be determined," said Ken Swisher, a spokesman for CSU chancellor Charles Reed. "There are 18 items being negotiated, and 16 of them are completed."

Microsoft, GTE, Fujitsu, and Hughes Electronics were chosen by CSU to carry out the creation of the so-called California Education Technology Initiative, or CETI.

As reported in November, the California State University has turned to private industry for a cash infusion to retrofit its 23 campuses with new computers and Net connections by the year 2000.

In return for financing the $300 million upgrade, the selected companies will develop and pitch new products and telecommunications services to CSU's staff and students--as well as the rest of the state.

CSU has long held that the deal will not limit choice and that other companies' products will still be purchased. But opponents say the partners will have premium access to the CSU campuses and surrounding areas.

For example, one revenue stream in the works is to essentially start up a CSU telephone company. Distance learning products also were listed in the original proposals, though that idea quickly drew fire.

Faculty said any such plan would infringe on their academic freedom and could violate their intellectual property rights if materials they posted online were picked up and made available to some sort of CSU-wide network.

Despite the delays, when the final business plan is submitted, state legislators still want an additional 45 days to mull it over.

"Whenever they release a proposal, we want a good two months to have this thing reviewed," said Paul Smith, a spokesman for Rep. Ted Lempert of Palo Alto, who called the hearing in January. "We want that window open to hold a hearing and public discussion on the deal."