Falling prices, transition delays squeeze FTS 2001 revenue predictions

Falling prices, transition delays squeeze FTS 2001 revenue predictions

By William Jackson

GCN Staff

APRIL 17—Expected revenue from the General Services Administration's FTS 2001 long-haul telecommunications program-$5 billion when the contracts were awarded more than a year ago-has dropped by half to $2.3 billion, according to a General Accounting Office report released today.

The report, "GSA's Estimates of FTS 2001 Revenues are Reasonable," said falling prices and delays in agency transitions to the new contracts have reduced revenue expectations, despite growing demand for services. GSA promised contractors Sprint Corp. and MCI WorldCom Inc. that they would split $1.5 billion in minimum revenue. The guarantees now amount to two-thirds of total expected revenue and will not be met until the sixth year of the eight-year contracts.

A wild card in GAO and GSA estimates is the admission of new competitors into FTS 2001. Contractors in the Federal Technology Service's Metropolitan Area Acquisition local service program can enter FTS 2001, but further competition could slash prices and cut demand for the Sprint and MCI WorldCom services, GAO warned.

No decision has been made on AT&T Corp.'s request to modify its MAA contracts to enter the FTS 2001 program. A key factor in the decision will be GSA's ability to pay Sprint and MCI WorldCom their minimum guaranteed revenues.

GAO conducted the study at the request of Rep. Dan Burton (R-Ind.), chairman of the House Government Reform Committee.

Stay Connected

Sign up for our newsletter.

I agree to this site's Privacy Policy.