Wiring the Future

f you work in the 50 percent of federal agencies that use the government's most popular telecommunications contract, the General Services Administration and some very anxious telecom executives have a message: Change is coming.

FTS 2001, the biggest contract for long-distance telephone, Internet and data services, expires in 2006. GSA's Federal Technology Service is busy preparing its replacement, called Networx, and getting an earful on how-and how not-to construct the future deal. Above all, telecom executives, federal managers and lawmakers want agencies to have access to cutting-edge technology at low prices. Some fear, however, that Networx won't do the job.

In testimony before the House Government Reform Committee in February, Drew Ladner, the Treasury Department's chief information officer, said any telecom contract should include basic goals such as "relying on marketplace innovation," "identifying and adopting innovation" and "simplifying business structures."

In plain English, that means letting the private sector do the hard work of developing technology, and then buying the hottest products. Easier said than done? Maybe. But critics note that FTS 2001 hasn't come very close to the vision Ladner is aiming for. The contract delivers rock-bottom prices for long distance-most agencies pay less than 2 cents per minute-but requires companies to meet strict specifications. In essence, critics say, FTS 2001 doesn't give industry enough room to innovate; it tells the experts how to build the government a better mousetrap.

FTS 2001 can be modified to add products and services. But that's happened 229 times, making lawmakers wonder whether the cost of changing course in midstream outweighs the benefits accrued from new services. Innovation will increase as telecom moves to Internet-based platforms. Networx has no provisions for modifications. Critics say the contract should be more capable of exploiting market innovation, not less.

Quite a few companies also frown on GSA's plan to divide Networx into two procurements, potentially limiting agencies' choices. The first contract, Networx Universal, will require companies to serve agencies in all parts of the country and provide 14 types of services. The only companies qualified to do that, however, are long-distance giants such as Sprint and MCI (formerly WorldCom), the two FTS 2001 incumbents. AT&T also falls into this category.

The second Networx procurement, called Select, will arrive nine months after Universal. It won't have the geographic and service requirements, which will allow small and regional companies to play, but after so much time has passed, there won't be many government customers left to compete for, says Shelley Murphy, president of Verizon Federal Inc., which opposes a two-pronged strategy.

Executives from eight companies testified before Congress in February and their response to Networx was overwhelming and largely critical. So why isn't FTS getting hip to the changing telecom environment and building a flexible contract that lets many companies compete? Because the agency is terrified of repeating past mistakes.

The migration more than three years ago to FTS 2001 from its predecessor, FTS 2000, was a nightmare. The transition fell months behind schedule, went over budget and prompted outrage on Capitol Hill. FTS can't afford to replay history. Networx Universal is likely to provide some cover. Since it favors the FTS 2001 incumbents, many agencies won't have to transition at all-they'll cruise along with the same vendors under the new agreement.

That's not such a bad idea. Prices on FTS 2001 are superb. But eventually, agencies will have to worry not only about switching voice services-as they did with FTS 2001-but also about merging their entire data networks onto Internet-based technologies.

When that happens, small and regional companies say, agencies will be desperate for choices. That's when the government won't want to be stuck with a few big companies, especially if one or more goes under. As recent history shows, bankruptcies and burnouts are par for the course in the telecom market.

For their part, FTS officials are listening to customers as well as vendors, and proceeding cautiously.

These are difficult days at GSA, with Administrator Stephen Perry talking about reorganization, and an ongoing inspector general investigation uncovering contracting abuse and mismanagement throughout FTS in its nontelecom business. The last thing the agency needs is another situation like the FTS 2001 transition.

But change is coming, in more ways than one. Savvy tech officials, like Ladner, and many in the industry, think FTS should keep a close ear to what they have to say. It may be the agency's best hope for success.