Federal long-distance costs to drop under new contract

The federal government's long-distance telecommunications costs will fall to under one cent per minute on average, under a new contract the General Services Administration awarded to MCI WorldCom Tuesday.

Under the award, prices will start at an average of four cents per minute and drop to less than a penny per minute by the end of the eight-year FTS 2001 telecommunications contract, said Dennis Fischer, commissioner of GSA's Federal Technology Service. Under the current FTS 2000 contracts, the government pays an average of 5.5 cents per minute.

"We think we've achieved the lowest prices in history," Fischer said.

The award to MCI WorldCom follows an award GSA made to Sprint in December under the same FTS 2001 contract. Though MCI WorldCom's bid was about ten percent lower than Sprint's, the two companies will compete for agencies' business and can adjust their prices to win task order awards from agencies.

AT&T also bid on the contracts, but did not win. That doesn't mean, however, that AT&T is out of the federal market. The new FTS 2001 contracts, unlike the current FTS 2000 contracts, are not mandatory. AT&T currently handles about 72 percent of federal long-distance telecommunications business.

GSA guaranteed Sprint and MCI WorldCom a minimum of $750 million each under the new contracts. The estimated value of the FTS 2001 contract is more than $5 billion over eight years. The government will save more than $4 billion during the life of the contract, averaging more than 65 percent savings over current long-distance prices, GSA estimated.

In addition to long-distance service, Sprint and MCI WorldCom will offer the following services under FTS 2001:

• Toll-free and 900 voice services
• Internet- and intranet-based services
• Data communications services, including asynchronous transfer mode and frame relay
• High-availability circuits
• International services
• State-of-the-art ordering, billing, network troubleshooting and repair services

GSA Administrator David Barram said the new contracts offer agencies an opportunity to review their telecommunications strategies.

"I don't think we're using technology and telecommunications services in a very sophisticated way throughout the government," Barram said.

Agencies will begin switching long-distance carriers in the next three to four months, Fischer said, though some may decide to hold off until after they have dealt with the year 2000 computer problem.

GSA is preparing to award contracts for local phone service in major metropolitan areas beginning this spring. GSA expects to award contracts for the New York City area in April, followed by Chicago and San Francisco. Under GSA's long-term strategy, the long-distance companies and local companies eventually could compete for each other's business.