The Federal Agenda: Telecom titan

The federal government is entering a new era for telecommunications services as it embraces competitive market dynamics and a mission focused on security and reliability. This shift is evident in changes to FTS 2001, the government's primary vehicle for purchasing voice and data network services.

Long split between WorldCom and Sprint, the FTS 2001 program was recently opened to Qwest and AT&T. The result is increased competition for government business and speedier technology upgrades, as carriers bolster their FTS 2001 offerings to reflect their commercial product lines.

Additionally, the Sept. 11 attacks have had a ripple effect on FTS 2001, which is trying to reinvent itself as a means for ensuring continuity of agency operations. A slew of managed network services, security tools and alternative transport services are being added to FTS 2001 to accommodate the cybersecurity requirements.

"Sept. 11 was a watershed event for FTS 2001," says Dennis Groh, who oversees the program for the General Services Administration. "It jump-started us into [offering] mobile, wireless and data security services with a vengeance."

The contract supports 18 federal departments, including Agriculture, Justice, and Health and Human Services (HHS). It also serves 14 independent agencies, including the Social Security Administration (SSA). Any one of these federal customers dwarfs most corporations in terms of number of users and amount of traffic.

Annual expenditures on the eight-year program are holding steady at $600 million, even though prices for individual services have dropped an average of 20% per year.

Unlike its predecessor contract FTS 2000, FTS 2001 is optional. Federal network executives can decide whether to use FTS 2001 for voice and data network services, and they can choose which carrier they want. Overwhelmingly, they've chosen WorldCom, which has 66% of the program's revenue to Sprint's 34%, GSA says.

FTS 2001 offers a full suite of voice and data services, including toll-free services, private lines, frame relay, ATM, video teleconferencing and Internet access. Newer offerings include managed network and security services, including VPNs.

The majority of the traffic on FTS 2001 is data, which represents 65% of the expenditures compared with 35% for voice services. Data traffic is growing at about 30% per year.

More than half of the data traffic is frame relay rather than newer IP-based services. ATM is also popular in the federal market, often used as the backbone for frame-relay traffic. Among the agencies using ATM backbones to carry frame-relay traffic are SSA and the Department of the Interior.

Fusion exclusive: FTS 2001 vendors eye GovNet opportunity

SSA used the program to overhaul its network, which links 1,775 sites and 85,000 users.

SSA's old network relied on 56K bit/sec dedicated circuits bridged together in a flat design. Video teleconferencing had to be run on a separate network, and the old ones couldn't support subnetting, which is required for directory services.

The new network, provided by WorldCom, has a DS-3 ATM backbone that links SSA's National Computer Center in Baltimore with six major nodes. The rest of the locations have 128K bit/sec frame-relay circuits.

"It's not that our old network was failing or that it wasn't high-performance, but it didn't have the scalability and it didn't have the ability to integrate voice, video and data like newer technologies," says Jim Preissner, associate commissioner for telecommunications at SSA.

Preissner says SSA spent about $30 million on the upgrade, but that it used $9 million in transition assistance funds available from the GSA. By going with frame relay circuits, SSA saved $50 million vs. the cost of doubling its bandwidth using dedicated circuit technology.

"We had additional discounts and credits from WorldCom that reduced the cost by half," Preissner says. "That made it very economical."

The transition took 18 months and was completed in December. Next year, SSA plans to double the bandwidth again to increase all its frame relay circuits to 256K bit/sec.

"Anything this big has its bumps," Preissner acknowledges. "There were a number of months where we were upgrading 200 sites per month. We had some difficulties getting started because we had to get the core infrastructure in place in the National Computer Center. . . .But it was a very successful network transition given the size and complexity of the network."

Diana Gowen, vice president of government markets at WorldCom, says most agencies seem content with the quality of service and price they're getting for ATM and frame relay. She predicts that when agencies move off high-speed frame offerings, they will migrate to private IP networks.

"We do have agencies looking at private IP networks, including U.S. Geological Survey, NASA and HHS," Gowen says. "They are not moving whole hog into VPNs because . . . of security concerns."

That's not to say that agencies don't have IP traffic. Internet and intranet traffic are growing dramatically for federal agencies, but they tend to keep their mission-critical data traffic on legacy technologies.

"I perceive a wariness of IP because of all the publicity around hackers, worms, viruses and Trojan horses. You never hear that about frame or ATM," says Dave Pragel, manager of FTS 2001 engineering and revenue services at Sprint.

One big shift this year is the addition of two carriers under the FTS 2001 program. Qwest was added to provide Web hosting services, while AT&T will offer its full suite of voice and data services. Neither carrier has a guaranteed minimum level of revenue from the government, as do WorldCom and Sprint, which were each promised $750 million.

"The more partners we have on FTS 2001, the more leverage," Groh says.

The new FTS 2001 providers plan to pursue opportunities such as managed Web hosting initiatives spawned by Sept 11. Sprint has signed up the Department of Labor, the Bureau of Public Debt and the Navy for its Web hosting services. Many other agencies are developing contingency plans for cyberattacks.

"Many federal data centers keep their back-up tapes in the building. They have no redundancy in their staff support," says Jim Payne, senior vice president for government markets at Qwest. "With our Web hosting service . . . on a moment's notice an agency can move its data to California."

The GSA is beefing up its FTS 2001 offerings in several areas, including managed security, land and mobile radios for first responders, and satellite services.

"What we're doing is packaging these services with the [prime contractors], and allowing agencies to buy them by the drink and not by the case," Groh says.

GSA is establishing five levels of security services that it will offer on the FTS 2001 contract later this year.

In addition, GSA is adding new transport mechanisms such as satellite communications so agencies can develop diverse systems that are not dependent solely on terrestrial communications.

GSA's plan for FTS 2001 was to aggregate traffic in a long-term contract to provide agencies with lower prices. By all accounts, the government has done a good job of driving its rates below the drops seen in commercial accounts.

"We have 20% discounts across the board on all services," Groh says. "Our rates have been going down an average of 20% per year, every year."

Long-distance voice rates dropped from 29 cents per minute on FTS 2000 to 2 cents per minute on FTS 2001.

Carriers say they are able to offer these low rates on FTS 2001 because of the volume of traffic and the government's long-term commitment.

"Name a commercial client that will give you an eight-year contract," says Don Teague, vice president of civilian sales for AT&T Government Solutions. "Term is nontrivial when it comes to pricing."

In addition to the low rates, the GSA is stepping up its efforts to improve the quality of service on FTS 2001. That business mentality is trickling down to the FTS 2001 program in several ways:

GSA has slashed the time it takes to modify an FTS 2001 contract from nine months to 40 days.
Provisioning of new services dropped from 90 days to 30 days.
With a new Web-based billing system, customers can access their bills in 45 days instead of 60 days.

"FTS is trying very hard to improve the efficiencies of its processes," says Ray Bjorklund, vice president of consulting services at Federal Sources, a research firm. "Although there's always some grumbling from the carriers about why should it take one month to add a new service instead of two days."

One recent improvement is how quickly the carriers can add new services.

"Our offerings on FTS 2001 are virtually identical to our commercial offerings," Sprint's Pragel says. "We are very, very close to introducing them at the same time they are launched commercially."

Contact Senior Editor Carolyn Duffy Marsan

Telecom titan

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