GSA to test competition in large metropolitan areas
The General Services Administration last month unveiled plans to award by the end of next year the first in a series of contracts designed to spur competition for telecommunications services in large metropolitan areas that have a high concentration of federal users.
GSA's Federal Telecommunications Service posted a document on the agency's World Wide Web page describing its vision for the Metropolitan Area Acquisition (MAA). The project will reform GSA's pricey and unpopular local telecommunications programs by soliciting competition to the regional Bell operating companies (RBOCs) in areas where high levels of traffic and a high degree of deregulation may permit a greater number of companies to compete, GSA officials said. The first pilot program will focus on New York City.
GSA released a request for comments last month for industry feedback on its plans and will hold a conference in New York on Aug. 14 and 15 for government and industry oral presentations.
Keith Jackson, director of the Center for Regional Services Management at FTS, said GSA hopes to cut costs by increasing competition and taking advantage of lower rates offered by alternate service providers and cable companies. "They say they can provide local exchange access at 20 to 30 percent less than the current Bell tariffs," Jackson said.
Consultant Warren Suss, president of Warren H. Suss Associates, Jenkintown, Pa., said he believes the MAA strategy may help GSA reduce its rates and attract the roughly two-thirds of federal users who have opted to bypass GSA and buy their own local services. And he said GSA officials were correct to focus first on large metropolitan areas rather than rolling out a nationwide program.
"Competition is just beginning to emerge," Suss said. "But it does not exist in all markets and will happen unevenly across the country. The real trick will be identifying the markets that will open up quickly. The competitors [to the RBOCs] are going to be putting fiber into these metropolitan areas, and their first challenge will be to fill up that fiber. The government can help them to do that, so those companies will be very aggressive bidders. And of course, the Bell companies will be very protective of their turf."
Jackson said GSA probably would focus next on other large cities, such as Los Angeles, San Francisco, Chicago and Baltimore.
The new local service offerings also will be more accommodating to the varying needs of different users, Jackson said. Unlike previous GSA local telecommunications contracts in which users "either did it GSA's way or didn't do business with us," MAA will allow users to buy end-to-end service from GSA or simply for transport or gaining access to other networks, he said.
Jackson said he could not estimate the value of the contract until GSA obtains more information from agencies as to what extent they would use the network. "When we see what the agencies put on the table, we can come up with a dollar value," he said.
GSA's MAA vision statement said the program will be "a contractual umbrella offering dial-tone, voice and data services and interconnecting Sonet broadband ring access arrangements." MAA contracts will offer services only to federal agencies on a nonmandatory basis, it said.
MAA contracts will be indefinite-delivery, indefinite-quantity deals with minimum revenue guarantees that have not yet been determined. Contracts will span three years with two option years, although the document said GSA still is debating whether to change the duration. Vendors will bid fixed prices based upon usage and may reduce prices at any time after award.
In addition, GSA will require vendors to add new services and features as they become commercially available and will seek to ensure interoperability between MAA services and services offered on other FTS contracts.
MAA will not entirely supplant existing programs, such as the Aggregated Systems Procurement contracts awarded in various regions of the country. For example, ASP vendor Nynex provides local service to agencies in the New York City area under a $68 million contract awarded in 1993. Even after the MAA pilot goes into effect, Nynex will continue to serve agencies in the region but outside New York City. A Nynex spokesman said the company most likely will seek to be a player in the MAA program. "We are certainly a very interested party," he said.
Barbara Connor, president of Bell Atlantic Federal Systems, said she welcomed the prospect of greater competition. "As the market continues to open in response to the new legislation, we recognize that competition will increase, and we will continue to compete aggressively," she said.
The program also has attracted the attention of long-distance carriers seeking entry into the federal local service market. Rick Slifer, director of MCI Government Markets' FTS 2000 program, said his company already has sold local access services via its MCI Metro group and will track MAA closely.
"We look at this project with interest," Slifer said. "Whether we go after it or not depends on how it develops."