Fed telecom market flattens

Telecommunications vendors will have to compete harder for less federal money through
the end of the century, according to a market study by Input, a market research and
consulting company in Vienna, Va.

 "The declining federal budget and workforce are reducing both the money
available and the requirement for some telecommunications services," the report
concluded.

 Input predicted that federal spending on telecom hardware and services will grow at
a compound annual rate of 4 percent through 2001, from $5.1 billion in 1996 up to $6
billion. That will make telecom a shrinking segment of the overall federal IT budget,
which is expected to grow at 4.5 percent annually during the same period.

 One General Services Administration official, who agreed with the driving factors,
nevertheless disagreed with Input's conclusions.

 "Communications is one of the things that are going to allow government to
operate more efficiently," said Robert Wayne Brady, director of telecommunications
planning at GSA headquarters. "It's an explosive area. With the Clinton
administration being re-elected, you are going to see a greater emphasis on electronic
government."  


The bright spot in telecom spending should be the civilian side, which is expected to
outstrip Defense Department spending over the next five years. As DOD's communications
spending maintains a growth rate of 2 percent a year, civilian agencies are predicted to
spend an average 5 percent more each year.

 Besides the economic driver of a shrinking government, regulatory changes in the
telecom industry and in federal procurement will increase competition among vendors. Lines
between industry segments are blurring after deregulation, and federal buyers have more
latitude in structuring acquisitions and making choices.

 Despite this growing freedom, Input expects GSA's importance in the market to grow.

 "GSA is aggressively expanding the functionality of the Multiple-Award
Schedule, emphasizing electronic purchasing on GSA Advantage," the report said.

 By October, all multiple-award schedules are expected to be posted electronically on
GSA Advantage. 

New vehicles such as blanket purchasing agreements will let agencies make arrangements
with specific schedule vendors to fulfill recurring needs. 

GSA contractors also can team up under the schedules.

 Brady agreed with Input about the growing influence of GSA's multiple-award
schedules in the federal telecom market.

 "With the thresholds rising and new rules that have been established, it will
be more attractive for agencies," he said.  


Input predicted that GSA's current FTS 2000 contracts will remain powerhouses, despite
restructuring of the post-FTS 2000 strategy, which will delay the award of comprehensive
long-distance and local telephone service contracts until the next century.


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