GSA line-charge reduction on horizon

The General Services Administration is poised to reach its fiscal 1996 goal of bringing local telecommunications charges under $20 per line a move that many observers believe will lead to even bigger cuts through competitive pressures on local phone companies.

Cuts in Overhead Save the Day

The reductions in GSA's rates have been attributed solely to cuts in the agency's overhead charges to users. GSA reduced its overhead by 30 percent this fiscal year resulting in a rate decrease from $24 to less than $21 said Margaret Binns assistant commissioner for field operations at GSA's Federal Telecommunications Service (FTS). GSA likely will reduce overhead by another 90 cents by the end of the fiscal year she said bringing line charges down to an average of $19.97.

Candace Hardesty assistant director for strategic planning and program administration at the Treasury Department said the decrease will give her a strong reason to consider GSA's services when installing telecom lines throughout the country.

"If GSA is lowering its rates we would give them our business if they are the most advantageous service provider for us " Hardesty said.

Treasury and other major telecom users have been giving most of their local service to their own contractors who have undercut GSA's pricing.

Consultant Warren Suss president of Warren H. Suss Associates Inc. said GSA's overhead reductions put the agency in a strong position to demand similar concessions from regional Bell operating companies (RBOCs) which traditionally have charged high rates on GSA contracts and have done little to improve them in the past year.

"GSA has shown a willingness to do what they can [to reduce rates] but that is not enough " Suss said. "They will now turn with a vengeance to the marketplace to drive costs down dramatically - enough to attract the two-thirds of federal users not [using] GSA local services."

Not everyone is yet convinced however. Wushow "Bill" Chou deputy assistant secretary for information systems at Treasury believes the prices the department obtains through its own contracts beat those offered by GSA even with the latest decreases.

Suss however predicted that agencies such as Treasury may be won over if GSA can extract lower prices from the RBOCs.

GSA took its first giant step in that direction this month at an industry briefing in New York City at which FTS personnel told local service providers that the RBOCs would lose GSA's business to alternate access providers if they did not bring their rates down. GSA invited vendors to comment on the new Metropolitan Area Architecture program to allow vendors to compete for federal business in 10 cities beginning with New York.

Binns said the RBOCs declined to offer their comments at the meeting although alternate carriers such as MFS Telecom and Teleport Communications Group were extremely supportive of GSA's strategy.