MCI-Sprint deal adds up to single FTS 2001 vendor

MCI-Sprint deal adds up to single FTS 2001 vendor

By Thomas R. Temin and William Jackson

GCN Staff

A merger between FTS 2001 contractors MCI WorldCom Inc. and Sprint Corp. would not cripple
federal telecommunications competition, said Dennis J. Fischer, commissioner of the Federal Technology Service.

'Our long-term strategy is to continually introduce competition,' Fischer said. 'A merger will take time. So we think we will have more offers.'

Even if no other vendors entered the FTS 2001 program, competition would continue, MCI WorldCom spokesman Greg Blankenship said.

'Under the terms of the solicitation, a single company could have won both contracts,' he said. 'Since either Sprint or MCI WorldCom could have won both, and rates already have been competitively set for the life of the program, we do not anticipate any adverse effect on the program's competitive nature.'

The FTS 2001 program is nonmandatory, and users can go outside it to find providers. But FTS makes money by administering the contracts, so it wants to keep agencies interested in its offerings.

The most likely source for new long-distance competitors is FTS' Metropolitan Area Acquisitions, a series of contracts for local telephone service whose contractors can enter FTS 2001 starting in December.

Former FTS 2000 contractor AT&T Corp., which won the first three MAA contracts for New York, Chicago and San Francisco, plans to get into FTS 2001 soon. Fischer said Qwest Communications International Inc. of Denver has a chance to win the Minneapolis MAA later this year, which would add another company to the mix.

Qwest and US West Inc. of Englewood, Colo., have announced plans to merge, and shareholders will meet to vote on the deal Nov. 2.

MCI WorldCom last week agreed to acquire Sprint through a $108 billion stock swap. The Federal Communications Commission and the Justice Department must approve the deal, which likely will not be consummated until late next year.

'For the time being, our customers will notice no change,' Sprint spokesman James W. Fisher said. Until the merger is completed, Sprint will continue to compete for its share of the market 'full speed ahead, business as usual,' he said.

How FTS 2001 business divides up

Sprint customers

' Defense Department: frame relay

' Education Department: calling cards

' Energy Department: data

' Environmental Protection Agency: all services

' Justice Department: all services

' Labor Department: data

' State Department: frame relay, X.25 and private lines

' Treasury Department: all services

' Veterans Affairs Department: all services

MCI WorldCom customers

' Agriculture Department: all services

' Commerce Department: all services

' Defense Department: voice

' Education Department: all services

' Energy Department: voice

' Health and Human Services Department: all services

' Interior Department: all services

' Labor Department: voice

' Social Security Administration: all services

' State Department: voice and some data

Some important questions about FTS' dealings with the combined company are still to be answered. Under the terms of the FTS 2001 contracts, the two vendors split evenly a minimum of $1.5 billion in guaranteed revenue.

Fischer said he is checking with attorneys to see whether the combined company is entitled to the entire $1.5 billion or half of it.

'If you run the numbers, reaching $1.5 billion streams out into the life of the contract' because rates will fall over that term, he said.

And speaking of rates, 'the bigger question is, whose rates prevail?' said former FTS commissioner Robert J. Woods, now president of ACS Government Solutions Group Inc. of Rockville, Md.

Sprint's prices start out lower, but MCI WorldCom ends up lower with long-distance voice service priced at less than 1 cent a minute in the final year of FTS 2001.

'So I'd take Sprint now and MCI later,' Woods said.

Woods predicted that AT&T, which had the bulk of FTS 2000 long-distance business, will end up with half the federal market, and the rest will go to MCI WorldCom and Sprint.


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