Sprint, Qwest contend for Treasury traffic

In the competition to provide a high-speed telecommunications backbone to the Treasury Department, observers say marketing and customer service rather than technology may determine which firm captures more business: newcomer Qwest Communications International Inc. or established Sprint.

The companies this month were awarded subcontracts to provide Asynchronous Transfer Mode and frame-relay services to Treasury bureaus nationwide under the 4-year-old Treasury Communications System contract held by TRW Inc. Treasury will use the companies' commercial telecommunications networks - a change in strategy for the department, which originally had intended to have TRW build a dedicated backbone for data services.

Although the vendors tout the capabilities of their networks, industry analysts said the two companies are well-matched technologically. "The differentiation on an ongoing basis will have less to do with the technological differences between the two providers and more to do with [their] ability to be effective on the sales and marketing front," said Warren Suss, a Jenkintown, Pa., telecommunications consultant.

Sprint starts with an incumbent's advantage, said John Okay, senior vice president for telecommunications and special studies at Federal Sources Inc. Sprint has worked with Treasury for 10 years as its FTS 2000 service provider, continuing to supply some data services even after Treasury switched to AT&T two years ago. Last month Treasury chose Sprint to be its FTS 2001 contractor.

"They know a lot about Treasury and the telcom managers," Okay said. "Qwest is going to have to prove themselves to find someone who is willing to take a risk and see how it works out."

Qwest runs a network for the intelligence community but otherwise has no government contracts except with Treasury, which is its biggest customer. Qwest plans to sell its track record with Fortune 500 customers and state governments, said Tyler Gronbach, a company spokesman.

The structure of the deals, as competitive indefinite-delivery, indefinite-quantity vehicles, "is a signal ATM and frame relay are commodities," Okay said. In addition to pushing vendors "to be responsive on price and service," he added, the approach presents more opportunities for newcomers to win business.

"TRW and even [Treasury chief information officer] Jim Flyzik are not going to be able to dictate who is going to buy what," said Jim Payne, Sprint's assistant vice president for FTS 2001. "Our real discriminator is going to be service."

Flyzik said, "The telecommunications industry right now is so competitive that it's a real good strategy to keep open as many opportunities as you can in terms of contract vehicles."

Treasury runs the largest civilian data network in the government, with 175,000 users in 6,000 locations across the country. By next year, the department expects to transport more than 700G of data daily. To support this traffic, Treasury needs to upgrade its current router-based network and some legacy X.25 packet-switch technology with a high-speed backbone.

Although TRW started the project, it was postponed last year to debug the network for the Year 2000. Meanwhile, the Treasury bureaus decided it would be less expensive for them to outsource the new backbone, rather than build and maintain it themselves.

Treasury for years has used commercial circuits to carry its data traffic but always maintained its own switches. The Bureau of Alcohol, Tobacco and Firearms and the U.S. Mint set precedents for outsourcing their networks entirely when they ordered frame-relay services from Sprint and AT&T a few years ago.

TRW said the vendors will start migrating from the legacy network by mid-year and complete the transition in 18 months.

Flyzik said the transition will start with several pilot projects, after which he and Treasury bureau CIOs will decide which services are needed and where. "I think what you'll see us doing is moving toward standardized approaches to infrastructure so we can have a lot more interoperability,'' he said, instead of each bureau deciding on its own which capabilities to buy.

Gronbach said Qwest is still discussing with Treasury the speed at which the department's backbone will operate. Payne said Sprint's network operates at T-1 (1.5 megabits/sec) and DS-3 (44 megabits/sec) speeds but could offer speeds of OC-12 (622 megabits/sec) and "potentially even above."

How much revenue either company will earn from the subcontracts is not clear. Although Qwest estimates it can capture $1 billion in business, TRW has not set a value for either of the IDIQ buys.

The ceiling on the entire TCS contract is $1 billion.