February 12, 1998


Mr. William Blosser, Vice President and General Manager
Data Systems-Worldwide Telecommunications Services
GTE
1940 E. Mariposa
El Segundo, CA 90245-3457

Mr. John Caulfield, Executive Vice President
Fujitsu Business Communications Systems
3190 Miraloma Avenue
Anaheim, CA 92806

Mr. Mark Schwene, Director
Hughes Global Services, Inc.
Loc. SC, Bldg. S10, M/S S379
2260 E. Imperial Highway
El Segundo, CA 90245

Mr. Dave Derry, General Manager
Microsoft-Southern California District
1620 26th Street
Santa Monica, CA 90404

As you know, the California State University has spent the past year in search of a team of industry partners with whom it could jointly leverage assets and create new sources of funds to develop and periodically refresh its technology infrastructure. The search, which was the logical extension of a rigorous three year strategic planning effort, culminated with the selection of the consortium of GTE, Fujitsu, Hughes and Microsoft, known as the California Education Technology Initiative (CETI), by Chancellor Barry Munitz and the 23 CSU campus presidents on September 15, 1997.

As a member of the proposed CETI consortium, and on behalf of the CSU, I would like to take a few moments to thank each of you and your respective staffs for the joint planning efforts over the last five months. I also want to reaffirm CSU's intent to form this public/private partnership as quickly as possible. Our new Chancellor, Charlie Reed, made it very clear last week when he and I met with GTE's Tom Muldoon, Mike Chandler and Dick Martin that putting the CETI partnership into action is one of his and the Board of Trustees highest priorities as he becomes the CEO of this $4.5 billion system. During the month of February, before taking office officially, he is devoting the majority of his time working in Sacramento and around the state promoting the importance of CETI to CSU and all of higher education.

From the outset, CSU has intended to form a partnership in the truest sense of the word. Our goal has been the expansion of opportunity for all involved. Our Board of Trustees and the Executive Leadership recognize that the partnership must be beneficial for each member. As a result, our approach has been based on specific principles and desired outcomes.

The business plan presented to the CSU by CETI in late August was the catalyst for CETI's being selected as our partner. We all recognized that before the partnership could be finalized, significant amounts of work and refinement were required. While much of that work has been completed through our joint efforts, much still needs to be done. However, the stage is now set for us to develop and agree to the terms and conditions of the operating agreement and the master services agreement and the financial pro-forma of the limited liability company (LLC).

Starting next Monday and for the next several days we will jointly negotiate the details of these agreements for the formation of our partnership. While the negotiating sessions will be demanding, I am confident, as I know you are, that we will create a partnership which advances the CSU's educational mission and expands the economic opportunities for all involved.

As a sign of our commitment, let me restate CSU's commitment to the CETI industry partners in the following few sentences:

1. The California State University intends to enter into a joint partnership with the consortium known as the California Education Technology Initiative (CETI). CETI which, as proposed, would be composed of a CSU Auxiliary Organization, GTE, Fujitsu, Microsoft, and Hughes and would operate as a stand alone business entity.

2. The primary purposes of CETI is to:

* Build-out the CSU technology infrastructure to a level consistent with the baseline requirements set forth in the CSU's Minimum Baseline Infrastructure Telecommunications Infrastructure Plan work (TIP) Guidelines and recertified through the individual campus scope of work jointly developed since September.

* Develop a means to keep the infrastructure's design and technology components and designs refreshed and to avoid technological obsolescence.

* Design and implement a means for providing support services such as network management, multi-tier help desk and applications and hardware training to assure each constituent of the CSU student, faculty and staff can access and effectively use utilize the infrastructure.

* Enter into joint business development and revenue generation activities to provide sufficient revenues and returns to cover all costs of the infrastructure and services, as well as, provide market comparable rates of return to the CETI's industry partners.

* Leverage selected assets of the CSU and the industry partners; purchasing power of all the partners; and, the knowledge and skill sets of all members of CETI to expand market opportunities and the economic benefit well being of the partners and the State of California.

Detailed negotiations commence next Monday. I ask that all parties enter these negotiations with the expectation that the agreements will be reached by the end of February. This will enable each of us to advance the plan within our respective organizations for timely approval.

CSU looks forward to meeting during the next several days and working together as partners well into the future.

Regards,
Thomas W. West
Assistant Vice Chancellor
Information Resources and Technology
California State University

cc: Charles B. Reed
     Richard P. West
     Maynard Robinson
     Technology Steering Committee
     Systemwide Internal Partnership Team