One takes the FWTS call, but the other sends busy signals

As federal telecom procurments go, the Federal Wireless Telecommunications Services buy
is puny. The General Services Administration has guaranteed the winning bidder a measly $3
million for the governmentwide indefinite-delivery, indefinite-quantity contract.


When the much-extended deadline finally arrived April 25, I understand there were only
two bidders--AT&T Corp. and GTE Corp. One congressman blasted off a letter charging
GSA with layering too many government requirements on what should have been a
straightforward commercial cellular purchase.


Peanuts or not, FWTS is giving AT&T heartburn. The company has complained about the
ways FWTS will diverge from the reality of the cellular market. AT&T officials would
prefer multiple national requirements contracts that leave customer agencies free to
choose.


No one vendor today provides national cellular coverage. So to meet the GSA
requirements for nationwide service, the bidders had to team up with many large and small
cellular providers--there are about 450 in the United States--giving rivals some
competitive advantage in their markets.


Whatever the difficulties of putting together a bid, GTE officials are nowhere near as
pessimistic about this procurement as AT&T. They even say they were ready to meet the
original Jan. 29 bid deadline.


GTE places about fourth in cellular market population, behind AT&T, Bell Atlantic
Nynex Mobile and Air Touch Communications. For FWTS, GTE teamed with Bell Atlantic Nynex
Mobile, which has a huge footprint from Virginia all the way up the East Coast. Washington
happens to fall within this area.


Also, GTE has an active national accounts program for organizations with scattered
offices. But none of these customers compares in size to the federal government or has
anything like its special requirements. GSA designed FWTS to serve agencies with employees
concentrated in Washington as well as agencies with small field operations spread out in
rural areas.


It's possible that AT&T, which spent $12.5 billion to buy cellular giant McCaw in
1994, hasn't quite managed to integrate McCaw within its overall strategic plans. Maybe
FWTS has just come at a bad time for AT&T.


There's another wrinkle. FWTS initially will accept analog cellular but requires
migration to the higher-capacity digital Personal Communications Services (PCS) when
available--the kind of service now supplied by Sprint Corp.'s Spectrum in the Washington
area.


AT&T put up about $1.7 billion for 21 PCS licenses auctioned last year by the
Federal Communications Commission. A consortium that included Sprint, which didn't bid on
FWTS, spent $2.1 billion for 29 PCS licenses. Building a PCS infrastructure is going to
cost these companies four times what they paid for licenses.


Investment firm Merrill Lynch has estimated that PCS losses will run about $627 million
by 1997, although the industry stands to rake in $790 million by 2004.


That implies AT&T is just going to have to find a way to market both its analog
cellular service and the government's preferred digital cellular service. FWTS customers
might wind up carrying some type of dual-mode wireless phone that would work in PCS and
analog cellular areas.


Yet another disparity: AT&T's and BellSouth's PCS service will follow the Time
Division Multiple Access transmission standard, whereas Sprint, U.S. West and Bell
Atlantic Nynex Mobile will use Code Division Multiple Access technology.


With the wireless industry so new, does FWTS make sense? Becky Diercks, director of
wireless research for Cahners Business Research Group, a sister company of GCN, said
employees of many companies until recently have bought cellular service individually and
been reimbursed for company use. That's changing now as more companies move to FWTS-style
contracts, she said.


But FWTS is non-mandatory. GSA can't twist arms to make agencies buy from it.
Furthermore, it runs for only three years with an additional five years' options. Within
three years, FWTS could have competition from the contracts that will be awarded for the
post-FTS 2000 program.


Frankly, I don't see agencies buying from FWTS if it's loaded with a lot of
non-commercial requirements. GTE, on the other hand, is banking that FWTS will be worth
much more than the $3 million guarantee.


Sam Masud is GCN's senior editor for communications.



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