Local phone competition hangs up

Local phone competition hangs up


Delays in moving agencies' local telephone lines to the General Services Administration's Metropolitan Area Acquisition program could jeopardize targeted savings of $1.1 billion over eight years, witnesses told a congressional panel this month.

Bringing large-scale competition into the local phone market has proved to be more complex than anticipated, said Linda Koontz, director of information management issues at the General Accounting Office. Testifying before the House Government Reform Subcommittee on Technology and Procurement Policy, Koontz said GSA had fallen far behind in its goal of moving millions of local lines in 38 metropolitan areas to the new contracts.

But Federal Technology Service commissioner Sandra Bates countered: 'We really are plowing new ground. Competition in the local market is new.'

Rep. Tom Davis (R-Va.), the subcommittee's chairman, said GSA overextended itself with the MAA program.

'I think one of the problems we've had is that we've set unrealistically high expectations and time schedules,' Davis said.

MAA contractors are unhappy not only that local phone business has been slower than expected, but also that they have not been allowed to cross over to provide long-distance service under the FTS 2001 program as GSA promised.

'This is not the deal Qwest signed up for,' said James F.X. Payne, senior vice president for government systems for Qwest Communications International Inc. of Denver.

Transition under way

In the last two years, GSA has awarded 38 contracts for local phone service in 21 metropolitan areas, including the Washington Interagency Telecommunications System.

Transition to these contracts had begun in 15 markets outside Washington as of June 1, and it is complete only in Buffalo, N.Y., and Cincinnati, GAO found. In Atlanta, 0.1 percent of the expected lines have been transferred.

'Our experience has shown that carriers will contest last-mile issues down to the last inch.'
'FTS commissioner Sandra Bates
In the first three cities where contracts were awarded more than two years ago, AT&T Corp. has taken over 12 percent of the lines it expected to acquire in New York, 43 percent in Chicago and 66 percent in San Francisco.

Bates said about 380,000 lines have been transferred, at an estimated savings of $4 million a month in line charges. Most of that'363,000 lines and $3.7 million in monthly savings'is in the Washington area under WITS.

Bates acknowledged some of the problems are in the MAA program itself. Initiating contracts, evaluating contractor plans and convincing agencies to use the contracts are taking longer than expected, she said.

But she also blamed regulatory challenges in the local markets. Incumbent local exchange carriers have no incentive to give up control over the infrastructure.

'Our experience has shown that carriers will continue to contest last-mile issues down to the last inch,' Bates said.

Number portability'the ability to keep the same number when switching carriers'has been another problem. It requires coordinated database changes by the agency, the old and new local providers, the long-distance carrier and the private-sector Number Portability Administration Center.

Satisfied customers

Despite the problems, some agencies that have taken advantage of the new contracts have been pleased.

Louis DeFalaise, acting director of the Justice Department's Executive Office for U.S. Attorneys, said there were some problems in moving to a new provider, but nothing 'unusual in terms of what we've experienced in the past.' The monthly per-line charge dropped from $35 to $12. 'We've been very pleased with the outcome,' he said.

The Coast Guard is saving about $150,000 a year in its New England region, said Cmdr. Robert Day, who heads the Coast Guard Electronic Support group in Boston.

'The pricing was extremely attractive,' Day said. 'We did have some problems,' including a major outage in April of last year. But there was good communication and 'within two days all the problems were resolved,' he said.

Although the customer agencies seemed satisfied, the contractors complained that business is not coming to them fast enough.

Winstar Communications Inc. of New York, which has filed for Chapter 11 bankruptcy protection, holds the most MAA contracts: 12.

Jerry Hogge, Winstar vice president for government solutions, said MAA was a big part of their business plan. But so far Winstar has received service orders for only 5 percent of the lines it expected.

Representatives of AT&T, BellSouth Corp. of Atlanta, Qwest and Verizon Communications Inc. of New York complained they were not being allowed to compete for long-distance business. They said they were being held hostage to FTS 2001.

GSA has delayed bringing more competition into the long-distance program until it is on track for meeting minimum revenue guarantees to contractors Sprint Corp. and WorldCom Inc. By June 28, GSA will explain to carriers its plans for bringing new contractors into FTS 2001, Bates said.

At the hearing, GAO also criticized GSA for fees it charges to MAA customers. The fees range from $2.50 to $6 per line, or from 25 percent to 80 percent of the line cost.

Bates said the percentages were high because of drastic reductions in line charges, and that fees have dropped by 30 percent in the last five years.

Koontz argued that because the fees are embedded in bills, customer agencies do not have adequate information to evaluate GSA's services. Bates said that although the fees were embedded, there is no effort to hide them.


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