Telecom Transformation

Before they can make the transition to a huge new contract, agencies must clean house.

Successfully shifting almost the entire government to Networx, the biggest-ever telecommunications contract, will require agencies to purge years' worth of accumulated communications clutter and maybe transform their understanding of how they use telecommunications.

Agencies "need to look at transition as an opportunity, and not necessarily as a like-for-like move from the old to the new," says John Johnson, the General Services Administration's acting assistant commissioner for integrated technology services. GSA's Federal Acquisition Service oversees Networx. Although GSA doesn't plan to award contract slots to large companies until March 2007 (May 2007 for Networx Enterprise, a portion of the contract reserved for medium and small businesses), agencies already should have started planning. Since the last time GSA opened up a new telecom contract-the still active FTS 2001, in June 1999-the landscape has changed drastically. Voice, data and video services all running through the same pipeline have the potential to lower costs while increasing available functions. But getting there requires knowing what telecommunications equipment and capabilities agencies already possess.

Many don't have a grip on their existing services. For example, a June 7, 2005, inspector general audit (OIG-05-A-13) found the Nuclear Regulatory Commission did not know exactly how many telephone circuits it possessed or the exact amount it paid for those connections.

The problem is that many agencies for years had decentralized telecom programs, despite economies of scale to be gained by centralized ordering. But even as agencies have consolidated under pressure from the Office of Management and Budget, they haven't always switched off old services. Plus there's tension between expediency at the local level and central office acquisition. The government does "a very good job at getting very aggressive prices, but in terms of aggregating and working across the different bureaus of any agency, that becomes more problematic," says John Feeney a principal at McLean, Va.-based consultancy Booz Allen Hamilton. Nor are agencies well-positioned to manage the Networx transition workload. "Most are staffed to handle steady state operations," Feeney adds.

But Networx is meant to shake up the status quo by giving agencies "an opportunity to transform their infrastructure to better meet their mission needs," says GSA's Johnson. Voice over Internet Protocol telephony in particular has promise as a breakout technology. It converts voice signals into the same Internet protocol packets used to route data across computer networks. "It's where all the investment is," says Jerry Edgerton, president of Arlington, Va.-based Verizon Federal.

Still, observers say the federal government will be cautious in adopting VoIP. With telephone rates just pennies per minute, agencies "don't necessarily see the compelling reason" to replace their existing voice infrastructure, says Tony D'Agata, general manager of Herndon, Va.-based Sprint government systems division. Not until their existing hardware is due for renewal will agencies likely fully embrace VoIP. And challenges to adoption remain. "It requires careful planning," says Richard Slifer of Richard A. Slifer and Associates, a telecom and IT consultancy in Annapolis, Md. Still, says Edgerton, "The concept of the separate phone system will eventually go away."

Agency transformation doesn't depend just on VoIP, Johnson says, pointing to other aspects of Networx, such as wireless and teleworking technology. "Transformation [means] taking advantage of those opportunities, as well as the opportunities to do business differently via the use of technology," he adds.

At the very least, agencies should take advantage of Networx to become smarter about how they pay for network connections, according to a veteran private sector telecom official who asked not to be named. Agencies should plan for their voice and data pipelines together, rather than separately as they did during the transition to FTS 2001. At that time, many agencies bought handfuls of T1 lines to handle either voice or data. For the same price, they could have bought a T3 line, which has 28 times the transmission capacity of a single T1, the official says.

Sending voice and data signals through the same pipe should alleviate fears about increased voice service prices due to incorrect predictions about local competition, Johnson adds. FTS 2001 voice prices are extremely low. They were negotiated when conventional wisdom held that increased regional competition would reduce the rates local companies charge nationwide carriers for connecting through local infrastructure. That competition, expected after enactment of the 1996 Telecommunications Act, never materialized. As a result, local access charges are higher than predicted-so much so that a few years ago the two FTS 2001 providers, Verizon and Sprint, unsuccessfully petitioned GSA to raise voice prices, the telecom official says. "The access prices that they bid on FTS 2001 were in some cases below [Verizon's and Sprint's] costs," the official adds.

As a result, most industry officials say that under Networx, voice access costs will go up. But Johnson says overall costs should go down when agencies bundle pipelines and take advantage of integrated services. "There's always been a lot of focus on the backbone costs of service," he says. Networx instead will emphasize the overall costs of connectivity. "Cumulative costs are what we're going to be looking at, not necessarily access costs," Johnson adds. Also, wireless technology soon will become a viable alternative to wired infrastructure.

After GSA awards the Networx contracts, agencies will judge which company offers the best deal, a process Johnson estimates will take three to six months.