AT&T lands 3 local pacts for telecom

After being shut out of the government's major long-distance telecommunications program, AT&T last week captured the General Services Administration's hotly contested contracts to provide local voice and data telecommunications services to federal agencies in three major metropolitan areas.

The contracts for services in New York, Chicago and San Francisco, the first awarded under the Metropolitan Area Acquisitions (MAA) program, are estimated to be worth as much as $680 million over eight years.

The win could help AT&T jump back into the long-distance market following its failed bid earlier this year on GSA's FTS 2001 long-distance contracts. GSA awarded those contracts, worth about $5 billion combined, to Sprint and MCI WorldCom. The MAA contracts include a provision that could give AT&T, which handled about 75 percent of the traffic on the previous FTS 2000 long-distance contract, an opportunity to again provide long-distance service to agencies as early as December.

GSA officials said last week that they would modify AT&T's contract to allow the company to sell long-distance services only if GSA deems it appropriate based largely on AT&T's performance on the MAA contracts.

John Doherty, vice president for FTS 2000 and civilian markets at AT&T Government Markets, said the contracts represent the company's first large-scale foray into the federal market for local service and are a step forward in AT&T's plan to offer agencies end-to-end solutions that incorporate local and long-haul services.

"Obviously we were aware that winning an MAA would give us an opportunity to offer long distance," Doherty said. "But the driving factor was to implement a strategy to offer end-to-end service to our customers."

Some federal telecommunications managers had expressed reluctance to go with AT&T, even if the company did win an MAA. John Johnson, the Defense Department's FTS 2001 transition manager, said last week that there were "too many ifs" surrounding AT&T's ability to offer long distance. He noted that it remains unclear whether GSA will even permit AT&T to offer long distance.

But Al Olson, assistant commissioner in the GSA Federal Technology Service's Office of Acquisition, said long-distance service offered by AT&T would be subject to the $11.5 billion ceiling associated with the FTS 2001 program.

AT&T beat out the local regional Bell operating company in each city - Ameritech in Chicago, Bell Atlantic in New York and Pacific Bell in San Francisco. WinStar Communications Inc. bid in all three cities as well. Although GSA planned to award multiple contracts in each city, it gave sole awards to AT&T because of the company's highly superior proposals, according to Dennis Fischer, commissioner of FTS.

Fischer said AT&T's pricing will save the government about 66 percent over current rates in those cities. For example, in New York GSA currently pays about $245 million for the same service that AT&T will provide for $95 million.

Jim Payne, assistant vice president for FTS 2000 at Sprint, said he fears that AT&T might use the MAA wins solely as a "back door" through which to enter the government long-distance market. He said AT&T should be held to high standards of service on the MAA contracts before GSA allows the company to compete for federal long-distance business.

Bob Woods, former FTS commissioner, said he was "stunned" at the discounts that GSA was able to obtain, adding that he expects telecommunications users in industry to follow the government's lead and seek out better deals for local service through competition.

"It signals the opening up of the local market," said Woods, who oversaw the creation of the MAA program in 1996. "Corporate America will pay attention to this." Woods is president of Business Applications Solutions Co., a unit of Affiliated Computer Services Inc., Rockville, Md.