'98 shapes up to be doozy for telecom, feds predict

With billions of dollars' worth of federal telecommunications contracts up for grabs,
this year will be a big, if stressful, one for networking and telecommunications
negotiations, top government telecom executives predicted recently.

The government will be ruthless in leveraging its buying power, said Dennis J. Fischer,
commissioner of the General Services Administration's Federal Technology Service, last
month at the 11th annual Federal Telecommunications Conference in McLean, Va.

Telecommunications consultant Warren H. Suss of Jenkintown, Pa., suggested that the
negotiations would be hard on agencies and vendors alike. Suss called price erosion in the
federal market one of the greatest challenges telecom companies face.

GSA's FTS 2001 long-distance contract and the Metropolitan Area Acquisitions (MAA) of
local services still are pending, as is the Seat Management Services procurement that has
been valued at as high as $9 billion.

The Federal Aviation Administration plans to spend nearly $3 billion on its Integrated
Communications System program. The Air Force and Navy each estimates it will outsource
about $600 million worth of telecom and information services. And the Defense Department
expects to spend up to $20 billion on its satellite communications architecture.

Deputy FTS commissioner Sandra Bates said the many delays in awarding FTS 2001 have
brought tremendous pressure from federal users, who are eager to get going on transition
plans from the FTS 2000 long-distance contracts that expire in December.

The successor contracts for long-distance service will be nonmandatory and will
guarantee minimum revenues of $1.6 billion, but industry analysts peg the ultimate value
of the contracts at close to $5 billion.

The MAA contracts have been moving more quickly but less surely, because competition
for local telephone services is so new. If contracts are awarded in the top 30 federal
markets nationwide, the total value could run $200 million a year, Bates said.

GSA next month expects to award Seat Management contracts, which will let agencies
outsource desktop PC computing needs. The program is yet another new type of buying
vehicle, so the revenues are uncertain, GSA officials said.

Bates said FTS itself is the first agency that has committed to using Seat Management.

In other FTS news, Frank E. Lalley, former associate deputy assistant secretary for
telecommunications at the Veterans Affairs Department and outgoing chairman of the
Interagency Management Council, has joined FTS as head of the Service Delivery Office.

Lalley said GSA has had a lock on agencies' long distance and toll-free services, but
as contracts become nonmandatory, GSA will have to compete harder to maintain its

Fischer said he does not believe price pressure from FTS has made telecom contracts
unattractive to vendors, "but there is always that possibility," he said.
"I'm fairly comfortable, particularly on the telecommunications end, that we can
benchmark ourselves."

The government has an obligation to maximize its buying power, Fischer said.
"Frankly, nobody is forced to do business with us," he said.

But Suss said the threat of service erosion from overly aggressive pricing is real.
"You're already hearing grumbling about quality of service where prices are too
low," he said.

About the Author

William Jackson is a Maryland-based freelance writer.

Stay Connected

Sign up for our newsletter.

I agree to this site's Privacy Policy.