Deciding the future of telecom

Federal telecommunications users face daunting choices at the turn of the next century. They will no longer be required to use the General Services Administration's long-distance telecom services and they will probably be deluged with calls from vendors and even other agencies touting alternatives to traditional centralized contracts.

Users will have to choose from a greater number of vendors as telecommunications reform legislation kicks in opening markets to companies that had previously been denied entrance. And a dizzying array of new technologies will change the landscape of what agencies can do with their networks.

Although these developments will offer users more freedom to tailor their telecom solutions to best achieve their missions they will also present a number of tough choices.

Should agencies invest internal resources to buy and manage their own networks or should they leave well enough alone and continue to leave that work to GSA? Can telecom services be purchased more quickly and efficiently through schedule contracts or other governmentwide vehicles? Will potential savings promised by new vendors and contracts justify the headaches of switching networks from one provider to another? The answers to these questions will depend on GSA's ability to award FTS 2000 follow-on contracts that will be acceptable to vendors and federal users.

When they began planning the FTS 2001 project more than two years ago agency officials expected to be close to awarding the contracts by now. Instead they are just issuing the final request for proposals. But regardless of the merits of the FTS 2001 contracts observers from government and industry agree that GSA will no longer cast the long shadow it did only a few years ago and more responsibility for managing telecommunications will fall to the users themselves.

"I think there has been a significant shift of responsibility to the agencies " said analyst Warren Suss president of Warren H. Suss Associates. "[GSA's] Federal Technology Service (FTS) sees itself as serving the agencies who will in the end determine the usefulness and effectiveness of the services. We have come to the point where GSA does not make decisions without achieving buy-in from user representatives."

Frank Lalley associate deputy assistant secretary for telecommunications at the Department of Veterans Affairs said he believes most agencies will continue to use GSA's long-distance contracts to obtain inexpensive switched-voice service. He said he doubts agencies will get a better price on their own. But he said opportunities loom for agencies that want to piggyback on each other's data networks.

"I think GSA has captured about 25 percent of the data market " Lalley said "so if other agencies have attractive products the other 75 percent could move in that direction."

Although officials from GSA's Federal Supply Service declined to speak on the record sources at the organization have said they hope to expand their telecom schedules program giving agencies yet another vehicle from which to choose. Lalley said many of his colleagues have been meeting with FSS personnel to discuss the expansion of telecom schedule contracts. Lalley said he would like to hear more on how schedules can meet his needs.

"I need to be sold on it " he said. "There are a lot of advantages to having a long-term partnership with someone who knows your organization. Schedules are more geared to commodities."

John Doherty vice president of FTS 2000 and civilian markets at AT&T Government Markets said procurement reform legislation that has taken effect in the last couple of years helped shift the balance to agency users and change the way they buy services.

"I think GSA plays a central role in providing agencies with an ability to manage a significant piece of their telecommunications requirements and I believe that will be an avenue agencies can take advantage of if they so desire " Doherty said. "But with procurement reform agencies are going to look at other options. They will decide whether or not that [service] might be something they could go out on their own and procure. At the same time they will look at other governmentwide contracts to see if there are services or capabilities that exist there."

Although FTS will no longer be the only game in town Suss and others believe the agency will continue to play an essential role in federal telecommunications. They believe agencies already in the midst of decreasing their personnel may need GSA to perform administrative tasks such as billing and network management.

FTS commissioner Bob Woods who plans to leave GSA in December to become president of Federal Sources Inc. pointed out that GSA personnel have abilities often lacking within most agencies. "I could probably knit a sweater if I wanted to but I would have to learn a whole lot to do that " Woods said. "What's the likelihood I'd want to learn all of that? Zero. By the same token an agency has to decide if it wants to develop these [network administration] skills or if it wants to buy them. And I think we are in a pretty good position to sell. "There are still some customers out there who would rather go anywhere but GSA " Woods acknowledged. "We will lose some of those. But an agency that goes some-where else runs a fairly big risk. First of all they've got to match [GSA's] price."

Barbara Connor president of Bell Atlantic Federal Systems said issues such as billing could become extremely problematic without a centralized authority like GSA to coordinate things. Connor added that she believes agencies will not object to using GSA contracts because personnel at GSA have become extremely responsive to users' needs and have significantly reduced overhead charges.

"I have never heard any end user complain about the responsiveness of GSA over the past year and a half or so " she asserted. Experts' opinions are divided on whether a centralized contract is necessary to aggregate agencies' requirements to achieve the best volume discounts.

Analyst William Cunnane a former FTS official and now senior vice president for telecommunications technology at Wheat International Communications said too many agencies embarking on their own procurements could "dilute" the government's buying power substantially and could erode its ability to obtain better prices than the country's largest corporations.

But Jerry Edgerton vice president of MCI Government Markets said he believes GSA contracts in the future will appeal mainly to small agencies without the traffic volume funding or expertise to conduct their own procurements. He said "lead agencies" such as the departments of Veterans Affairs and Treasury handle enough traffic on their own to justify their own procurements. "The [FTS 2000] rates they are paying now are basically the best and I don't know how the government can pay any less in the future " Edgerton said. "It's no longer volume-sensitive. Today you can see a small organization negotiating rates that look like what large organizations pay. There's been a change in philosophy and those premises have changed as the industry has changed."

Indeed FTS has discarded the concept of volume discounts for switched-voice service in its forthcoming request for proposals for FTS 2001 GSA's next-generation long-distance network.

"We've come to the conclusion that volume discounting is not useful " Woods said. "The volume-discount curve only means something when your traffic is out in the part that is still decreasing with volume. We believe we are out in the flat part of the curve. When you buy 6 billion minutes of services a year and put half of it on each vendor's network you are still bigger than anybody else in the world. It's not that volume discounts don't count. It's just that we now believe if the government keeps its volume together it is way out on the curve." He added that vendors "play games" with volume discounts - games that can increase costs to customers substantially if volume rates fall even one minute below some established figure.

The trend in government agencies including FTS toward awarding contracts to multiple vendors has led some observers to question whether it might be more efficient to simply create a schedules program for telecom services. Officials from GSA's Federal Supply Service have expressed interest in this idea although their efforts to establish such a program have been blocked by Woods.

Jim Payne assistant vice president for FTS 2000 at Sprint's Government Systems Division said agencies crave the simplicity of schedules. "If these services are not on schedule then FTS at least has to be mindful of the ease of use of schedules " he said. "The moment the contract isn't convenient agencies will do their own thing." Cunnane said agencies may rally around the idea of a telecom schedules program especially if the FTS 2001 RFP experiences further delays. "I think there might be a push for GSA to can the RFP process and go to a schedule " he said. "GSA will be pushed that way anyway by awarding contracts to multiple vendors."

Woods did not totally write off the idea of telecom schedule contracts but he did say they could become problematic in areas where interoperability and integration are a concern. "We buy a lot off the schedules ourselves when we put together solutions for our customers " he said. "But things that require interoperability and aggregation and that require winners and losers competing to offer the best price - those things are not going to operate the best on the schedule. And the telecommunications business requires all of those elements for successful contracts."

The success of GSA's current strategy may hinge on whether the agency is able to award the FTS 2001 contracts without further delays. Observers said the current FTS 2000 contract will most likely be extended for at least a year and potentially longer if many agencies are forced to go through the timely process of switching from one vendor to another.

Cunnane said he believes agencies will become frustrated if there are additional setbacks adding that agencies would embark on their own procurements.

Suss said FTS must comply with industry's request to eliminate all noncommercial aspects from the RFP or risk higher prices that could drive customers away. "If GSA does not do that everybody is in hot water " he said. "Vendors will have to put in place high-priced noncommercial systems that will not be mainstream. And the business cases for bidding will be difficult for vendors to make internally " Suss added.