Managing Technology

nferris@govexec.com

t a meeting early in 1998, federal agencies' senior telecommunications man- agers are discussing how to wring more concessions out of their long-distance telephone service providers. Can they ask FTS 2001 contractors to provide a certain feature that's not yet standard in the industry?

A woman has the floor. "If they won't give it to us," she says, "we'll cram it down their throats!"

From the rear of the room, a man shouts: "You go, girl!" Cheers erupt.

Washington attorney Henry D. Levine, a telecommunications consultant to the General Services Administration and the nation's largest companies, recalls this as a defining moment in the planning for FTS 2001, the pair of contracts awarded in December and January. "The government has caught the wave" of ruthless, corporate-style business dealings, he says, and "the result has been billions of dollars of savings."

In fact, by 2007, you could be paying less for a one-minute transcontinental phone call from your office than for a one-minute local call. The FTS 2001 contracts will drive agencies' long-distance telephone bills down to less than 1 cent per minute on average at the end of their eight-year terms.

On top of the great prices, Levine says, the government got excellent terms and conditions of service from the FTS 2001 contractors. But there is no gain without pain. With unprecedented flexibility to pick and choose among long-distance providers, agencies will have to make difficult choices and exercise telecommunications management skills they seldom needed before now.

In the bidding for the contracts, incumbent Sprint Corp. hung onto a share of the federal long-distance business and MCI WorldCom Inc. ousted AT&T Corp. from the other slot. GSA officials predict the combined value of the two contracts will exceed $5 billion, but neither company is guaranteed more than $750 million.

Unlike previous FTS contracts, the 2001 program does not obligate federal agencies to use its services. As of Oct. 1, agencies can buy long-haul telecommunications from any supplier, without having to go through GSA. Nor are individual agencies assigned to one FTS 2001 contractor or the other, as they have been in the past. That means they can select Sprint or MCI WorldCom--or perhaps a company not taking part in the program, such as AT&T.

Agencies also can engage in Chinese-menu ordering. An agency could decide, for example, to get regular voice service from MCI WorldCom, certain data services from Sprint and international services from a third company. And they can change providers during the course of the contract.

The companies are free to reduce their prices at any time. "These FTS 2001 prices are ceilings," says Dennis J. Fischer, commissioner of GSA's Federal Technology Service.

GSA plans to enrich this already-heady brew of competition by allowing its local phone service providers in the largest metropolitan areas to take part in the long-distance program, to the extent permitted by telecommunications regulations. MCI WorldCom and Sprint will be allowed to offer local phone services to federal facilities in those areas. So there will be even more competitive pressure in the months to come. Fischer describes the procurement environment as continuous competition.

Breakthrough Prices

"The government in this case is the leader, not the follower," Levine says. He is among those who predict that the breakthrough prices GSA achieved in the FTS 2001 procurement will drive prices down for other long-distance users--big corporations first, then smaller ones and eventually individual households.

Implementation of the new contracts is expected to begin in April and continue through 2000. Agencies have considerable latitude in making their transitions from FTS 2000 to FTS 2001. They can move their offices all at once or gradually. They can move ordinary voice lines now and hold off on other services.

Even for Sprint customers who decide not to change providers and who want essentially the same services, the transition will not be automatic. Billing arrangements, software and other aspects of their service must be modified.

"The transition is a big, big deal," GSA's Fischer says. "It will be the largest such undertaking in U.S. telecommunications history and is larger than the effort required to transition some nations," according to an FTS report. Under the current FTS 2000 contracts, agencies are using 272,000 circuits to connect more than 20,000 locations in 5,000 cities.

Those numbers will swell under the new contracts as services are added. For example, FTS 2001 encompasses international calling services and Internet access, which the FTS organization until now has obtained on agencies' behalf through separate contracts.

Data communications services will be expanded as well, and this is likely to be a major growth area for FTS 2001. Under the predecessor contracts, data links were not priced quite as competitively as voice lines. But Fischer says that in FTS 2001, data services will be substantially less expensive than what agencies are using now.

The new program also allows the contractors to add services much more easily than they could in the past. This was a necessity for a technology contract that will last for eight years. "A year in telecommunications is forever," quips Jim Payne, the assistant vice president in charge of FTS 2001 for Sprint's Government Services Division.

Sprint plans to offer a new service late this year. Through FTS 2001, agencies can acquire Sprint's Ion, or integrated on-demand network, services. Ion delivers local and long-distance voice, data, Internet and video communications over one high-speed network backbone.

Starting Over

Even before such integrated services become widely available, agencies should be taking the opportunity to reengineer their networks. Since last year, Federal Technology Service officials have been urging agencies to prepare for the FTS transition by taking inventory of their long-haul circuits and assessing the potential for eliminating and consolidating lines and switches.

"Initial studies of service and access optimization in large metropolitan areas indicate the possibility of saving over 24 percent, almost $2 million per month," GSA's transition strategy document says. This is likely to mean shutdowns of certain federal network centers.

GSA and the FTS 2001 contractors are supposed to be helping agencies review their options. But even Federal Technology Service officials acknowledge the potential pitfalls. "During the course of optimization discussions with the new service provider," their strategy document says, "agencies should be prepared to differentiate between valid recommendations that use new services to optimize existing services and a pure sales pitch."

Agencies may have trouble making that distinction. Some still maintain separate staffs to manage data and voice communications, making it difficult to see the big picture. Even where data and voice are managed by the same organization, few managers have much experience in weighing competing sales pitches, because of the lack of choice in previous FTS programs.

GSA has selected eight technical services companies to help with transition activities. The Technical and Management Support (TMS) contractors can supply analytical, engineering, IT and other services on a task-order basis. GSA will dole out about $14 million to help agencies.

Through this year, agencies will be focusing on year 2000 readiness, and some will defer changes in their telecommunications services until they are confident of a smooth systems changeover to the new century. Agencies also have internal scheduling considerations. For example, the Internal Revenue Service has an annual business cycle that builds up to the peak tax filing season from about Jan. 15 to April 15. The agency avoids making major changes in its systems during the peak months. When scheduling switchovers, GSA is promising to give priority to the most complex FTS transitions and the most time-sensitive, such as the IRS situation.

The timing of transitions may have an impact on budgets. Agencies' FTS 2000 rates are determined partly by the volume of calls. As some large agencies move to the new program, rates for the remaining ones may rise noticeably, giving them an incentive to become FTS 2001 customers faster than they might have wished.

Paralysis by Analysis

Agencies also could spend months evaluating competing proposals and ways to reconfigure networks. To avoid paralysis by analysis, the Interior Department speeded up its evaluation. In early February, four weeks after GSA chose MCI WorldCom as the second FTS 2001 provider, Interior selected the FTS newcomer, becoming the first agency aboard the FTS 2001 bus.

James Dolezal, the department's telecommunications chief, said Interior would move its voice and data services from FTS 2000 provider Sprint to MCI as soon as possible and consider adding other services later. The flexibility of the new contract vehicle makes Interior's approach possible, he said.

Dolezal's management team was briefed by AT&T on the company's intention to stay in the federal market. John Doherty, AT&T's vice president for government markets, told Government Executive the company is confident it can compete.

In the view of Ron Hack, chairman of the interagency telecommunications council, the situation couldn't be better. "We have three world-class vendors offering unprecedented low prices," says Hack, a longtime Commerce Department manager who this year became administrator for computer and telecommunications operations at the Patent and Trademark Office. AT&T's continuing presence will help keep the FTS 2001 contractors on their best behavior, he adds.

Most federal offices won't even notice the FTS 2001 transition. Employees still will dial 1 for a long-distance line. But at an operational level, transition time is nail-biting time. The switchover usually is done during off-hours. There's always the danger that it won't be done fast enough and that long-distance services will be disrupted during normal business hours. If system inventories are inaccurate or user needs are misunderstood, extra installation costs and delays can ensue.

The transition will bring rewards, as well as headaches, for telecom managers. They'll get Web-based management reporting and service orders, new billing options and more up-to-date cost information. The combination of upgraded service and a two-thirds cut in prices has GSA's Fischer beaming. "We figured out how to leverage the buying power of the federal government," he says.

Franklin S. Reeder heads The Reeder Group, a Washington-based consulting firm he founded after more than 35 years in government. His e-mail address is reeder@erols.com.