CSU, High-Tech Firms Drop Plan for Consortium

Citing intractable financial problems, California State University and two high-tech corporate partners--including GTE Corp.--pulled the plug Friday on the ambitious and controversial project that would have provided funding for computer and phone system upgrades on CSU’s 22 campuses.

Officials said the breakup of the public-private partnership, called the California Educational Technology Initiative--or CETI--was not political.

“This was a financial decision, a financial problem,” said CSU Chancellor Charles B. Reed. “There was too much debt to carry and too little [projected] revenue.”

In addition to phone company GTE, the partnership, forged last year, originally included software giant Microsoft Corp., Hughes Electronics and computer maker Fujitsu. Microsoft and Hughes dropped out of the project in April.

The consortium had planned to issue about $250 million in bonds with the money to be used over three years to install fiber-optic, high-speed computer and video networks and other technology throughout the CSU system.

Reed said CSU still wants to add more technology to its campuses and will spend the next few weeks reviewing other funding options.

CSU will have to consider adding money for upgrades to its 1999 budget, a move that could ultimately mean taking money from other programs, he said.

“The problem has not gone away, and the problem is finding the money to build out the technological infrastructure that a university system this size needs,” Reed said. “We’ll continue to do it a little bit at a time.”

The decision to dissolve the partnership was made jointly.

“This was not political at all,” said Larry Cox, a spokesman for GTE. “What this came down to was just trying to work out a financial situation that was realistic for both parties.”

Cox said GTE wants to stay involved. “We’re saying we’ve done this with our best expertise, the best of intentions, so let’s look for other ways to work with CSU to make this work,” he said.

Reed said the former partner companies--or possibly other firms--could still end up working with CSU, but it would be under a different kind of arrangement.

Fujitsu officials could not be reached for comment Friday.

CSU officials, arguing that higher education cannot thrive without cutting-edge communications and technology, formed CETI after it became clear that state government would not provide the funds needed for the upgrades.

But from the start, the project was dogged by critics who chaffed at the idea of educators making deals with private enterprise.

Although there were suggestions that political pressures led to Microsoft’s departure in April, CSU officials said both Microsoft and Hughes withdrew for financial reasons.

On Friday, Reed said the remaining partners could not make the project work financially.

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Karen Kaplan contributed to this report.