UPDATE: AT&T, Verizon Business and Qwest win $20B federal telecom deal

AT&T, Verizon Business and Qwest hit the jackpot this week, winning a 10-year, $20 billion telecommunications contract with the U.S. federal government that is the largest of its kind in the world.

Sprint Nextel wasn’t so lucky. The carrier which has held both predecessor contracts, FTS 2001 and FTS 2000, served the U.S. federal government as a telecommunications provider for 18 years but lost out on the so-called Networx Universal contract.

The U.S. General Services Administration (GSA) announced the Networx Universal winners at a press conference in Washington D.C. on Thursday.

John Johnson, Assistant Commissioner for Integrated Technology Services with the GSA’s Federal Acquisition Service, wouldn’t comment on why Sprint Nextel lost the massive deal.

“The three [companies] that we awarded to addressed the objectives of our program more readily,” Johnson said.

Networx Universal will provide domestic and international voice, data, video and wireless services to federal agencies for the next decade. It features 50 services ranging from legacy frame-relay and ATM to cutting-edge VPNs and VoIP.

Networx “will transform the current federal telecommunications system to a secure, worldwide IP and MPLS-based network compliant with Internet Protocol version 6 and other major technological advances,” according to a GSA statement.

A companion contract, called Networx Enterprise, will provide emerging IP and wireless services. Networx Enterprise is due for award in May.

Taken together, Networx Universal and Networx Enterprise represent the largest federal telecommunications acquisition ever completed. The two contracts will support 135 agencies across 191 countries.

GSA can spend up to $48.1 billion on Networx Universal and $20.1 billion on Networx Enterprise. But agency officials estimate they will spend $20 billion total on the two contracts over the next decade.

“Twenty billion represents what we anticipate the business volume to be based on current volumes and anticipated growth,” Johnson said.

Networx Universal replaces FTS 2001, which was awarded to Sprint and MCI in 1998 and 1999, respectively. The FTS 2001 contracts won’t expire for another three-plus years to give federal agencies time to transition to the Networx program.

It’s unclear how much revenue each of the Networx Universal winners will earn. That will depend on how well each carrier does in terms of attracting business from the federal agencies that will use the contract.

“The agencies will need to look at each of the service providers and make a determination about who they might choose to be their service providers,” Johnson said. “It’s hard for us to predict. What we wanted to do is create an environment where the agencies could choose between particular service providers.”

Many of the biggest names in the network and IT services industry will share in the Networx Universal prize.

The winning Networx Universal teams feature the following players:

-- AT&T’s team includes Bechtel, Cingular Wireless, Electronic Data Systems, Global Crossing, GTSI, Northrop Grumman and SRA International.