Australian firm eyes DOD telecom pact

In what observers say is a first for the Defense Department, an Australian carrier plans to compete as a prime contractor against large U.S. telecommunications companies for DOD's $2 billion Pacific, South American and Caribbean telecommunications network.

Telstra, which is partially owned by the Australian government, intends to bid as a prime on DOD's contract for an expanded Pacific network, which would provide wideband, high-speed and secure multimedia transmission to points throughout Asia, the Pacific, Central and South America and the Carib-bean region.

David Shires, director of corporate affairs for Telstra, said the Sydney, Australia-based company considered bidding on the Defense Information Systems Network Transmission Services-Pacific (DTS-P) procurement "with interest.... We've been talking with a lot of people."

But Shires said Telstra has concerns about U.S. regulations on the participation of foreign-owned companies in bids for classified U.S. government contracts. A spokeswoman for the Defense Information Systems Agency, which is managing DTS-P, said a foreign government-owned corporation would be allowed to bid on the contract and could be awarded the contract if approved by the U.S. secretary of Defense.

In the DTS-P request for proposals due for release this week, DOD is expected to request the most advanced telecommunications technology available, including Asynchronous Transfer Mode transmission. The new Pacific network will become a key component of the globe-girdling Defense Information Systems Network, which serves as the central nervous system for the U.S. armed forces worldwide. A source familiar with DOD telecommunications said the large number of delivery points for DISN in Asia and the Pacific region makes the Australian firm "a natural bidder because the Pacific is their pond.''

The Australian government intends to privatize Telstra but recently canceled a public offering. Legal experts and industry analysts said foreign-ownership rules should not deter a Telstra bid even if the firm does go private.

The scope of the expanded Pacific network— which covers more than half of the globe— will require participation by foreign carriers at service delivery points at the overseas ends of the net.

Carl Peckinpaugh, a member of the government contracts section in the law firm Winston & Strawn, Washington, D.C., and an FCW columnist, said agencies have a "high degree of discretion" in deciding whether there is a security risk in tapping a foreign contractor to operate a classified network. Australia's status as a U.S. ally should help mitigate concerns about a security risk posed by Telstra. If Telstra won the contract, it could further ease concerns by designating U.S. nationals to act as proxies on security matters or set up a separate board and voting trust, as British Telecom and MCI intended to do before their merger plans fell apart this year.

Warren Suss, a Jenkintown, Pa., telecommunications analyst who specializes in the federal market, said he does not see foreign ownership "as an insurmountable barrier to bidding. In fact, from the DISA view, I believe the more competition they can attract, the happier they will be.... DISA wants to make this a commodity buy.''

Diana Gowen, executive director for Defense in the MCI Government Markets division, cautioned that because DISA wants wideband fiber-optic cable service— at speeds up to 155 megabits/sec— to as many service delivery points as possible, that service will come at a premium. "Fiber facilities are always priced at a premium for bandwidth that could be positioned on a satellite," she said.

While the DTS-P architecture will not be known until DISA releases its request for proposals Aug. 21, Gowen expects the agency wants to use fiber "for 80 percent of its requirements and satellite for the other 20 percent.''

DISA launched its Pacific procurement two years ago and expanded its scope to include the Caribbean region and Central and South America. Gowen said the requirement to serve South America will account for a large portion of the satellite capacity.

Gowen has few doubts that Telstra will bid. "Telstra would like to prime this," Gowen said.

Though representatives at AT&T and Sprint declined to be interviewed for this article, industry sources said they expect both companies to compete for what one called "an essential piece of business for any carrier wanting to do business with DOD."

This executive added that DISA also would welcome competition from Telstra to help hold down pricing on a technically demanding job. "Their service requirements far exceed commercial industry standards," the source said. "They could really save money if they eased up on them, but DISA says it needs such exacting requirements in order to serve users with [encryption] requirements," which do not tolerate bit errors well.

Besides the four primary prime bidders, industry sources said they expect Cable and Wireless Ltd., which has a vast network in the Pacific, to play a key subcontracting role to a number of delivery points, including the U.S. resupply and B-52 base on Diego Garcia in the Indian Ocean. Satellite subcontractors looking for a piece of DTS-P include Comsat Corp., Orion and Hughes Corp., industry sources said.

-- Mason is a journalist with Computerworld Australia.