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Lottery urged to keep outdated computer code

CHARLESTON, W.Va. -- An organization representing video lottery distributors and retailers is calling on the state Lottery Commission to use its licensing authority to block video slot machine manufacturer IGT from discontinuing the computer protocol that allows nearly 7,000 limited video lottery machines to communicate with the Lottery's central computer.

"We're saying, 'Lottery, you have an obligation to hold their feet to the fire," George Carenbauer, lawyer/lobbyist for West Virginia Amusement & Limited Video Lottery Association, said of requiring IGT to maintain the ICIS protocol through June 30, 2021.

Officials with the Las Vegas-based video slots manufacturer have notified the Lottery that it planned to discontinue the outdated protocol after 2015 -- effectively requiring video lottery operators to replace or upgrade more than 6,800 limited video lottery (LVL) machines in bars and clubs around the state.

After negotiations with the Lottery, IGT agreed to extend that deadline to the end of 2017.

That affects about 92 percent of the LVL machines currently in operation, with costs of upgrading or replacing machines estimated at between $20 million and $100 million.

"We believe that the crisis created by IGT's decision is entirely avoidable," Carenbauer said in a letter to the Lottery Commission. "The Lottery should simply insist that IGT continue the ICIS protocol both as a condition of IGT's continued licensure, and under the Lottery's authority to require any change in hardware of software to be approved in writing by the commission before its implementation."

However, Lottery Director John Musgrave said, under the law, LVL machine manufacturers can make changes to hardware or software, so long as they provide at least two years' advance notice to the Lottery -- as IGT has done.

Musgrave said IGT notified the Lottery late last year that it planned to quit using the outdated protocol -- currently in use only in West Virginia and Louisiana.

Musgrave said the Lottery is not in the position to force IGT to continue the protocol through 2021 -- when the current 10-year LVL permits will expire -- since manufacturer's licenses are renewed annually, and IGT could simply choose to opt out of the West Virginia market.

"If they decide at the end of the year they don't want to operate in West Virginia anymore, and they pull out, there's nothing I can do about it," Musgrave said.

Musgrave said he is in the process of putting together a committee to work with LVL operators to try to come up with a workable solution.

While the expense to upgrade or replace machines is significant, Musgrave noted that distributors and retailers will have four years to absorb the costs.

He also pointed out that those distributors and retailers split about $190 million in annual profits from the LVL machines.

"These guys are doing extremely well," he said. "Yet they want us to step in, in a year when we're having [financial] difficulties, and intervene with their supplier."

Carenbauer said the Lottery has an obligation to take steps to assure that a Nevada company is not enriched at the expense of LVL distributors and retailers, who, by law, are required to be West Virginia residents.

"Both our members and the state are at the mercy of IGT, which is not a good position to be in," Carenbauer said.

Reach Phil Kabler at philk@wvgazette.com or 304-348-1220.


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