FTS rules vex vendors

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New rules governing how telecommunications vendors can begin to offer services in metropolitan areas have frustrated contractors and could prevent agencies from cashing in on savings, some telecom experts say.

The General Services Administration's Federal Technology Service released crossover instructions Aug. 17 for vendors holding local and long-distance GSA contracts that want to expand into new markets. The instructions make it possible for telecom firms to move into seven cities. The instructions also, for the first time, open the FTS 2001 long-distance contract to companies holding local Metropolitan Area Acquisition (MAA) contracts, including AT&T, which lost its bid for an FTS 2001 contract, and Qwest Communications International Inc., which has long expressed interest in FTS 2001.

Before GSA releasedthe instructions, Sprint and WorldCom Inc., the current FTS 2001 contractors, requested that any new offerors be held to the same standards for service and technical capability, such as special billing systems and national coverage. The requirements forced Sprint and WorldCom to heavily invest in FTS 2001 services. In return, FTS guaranteed the companies $750 million in revenue.

The instructions, however, do not require that new vendors offer their services in every area of the country, which Sprint and WorldCom were required to do. Competitors "can select a profitable product; they can select a limited geographic area for the offering," said Tony D'Agata, vice president and general manager of Sprint's Government Systems Division. "It doesn't seem to us like it translates to a level playing field."

But vendors that want to join the FTS 2001 contract also have complaints. Under the instructions, if the vendors want to offer basic and more lucrative services such as voice, they must meet the technical and management standards that Sprint and WorldCom agreed to, such as quality of the voice service, the speed in which data is transmitted, and quick processing of orders.

By maintaining the costly requirements for basic service, GSA is pushing potential vendors away from offering basic services in favor of providing"additional offerings," such as satellite services and Digital Subscriber Line access, said Jim Payne, senior vice president of Qwest's Government Systems Division.

GSA adopted the crossover instructions in reaction to vendor concerns. But "by doing that, [FTS officials] tried to throw a bone to both sides, and I think they've avoided the tough issues," said Warren Suss, presidentof Suss Consulting Inc.

WorldCom and Sprint will not meet their minimum revenue guarantees until 2003 and 2004, respectively, according to the General Accounting Office. Payne said he questions whether GSA wants new competition on FTS 2001 because of the guarantees and GSA's apparent lack of interest in new offerings forbasic services.

"The burden after we submit [a proposal] to GSA this week is for GSA to demonstrate that they are really interested in opening to competition," he said.

Each proposal will be considered on a case-by-case basis, and there is no way to draw a general outline of what vendors should expect, said Joe Romanelli, director of the FTS Center for Technology Acquisition Support. "Before they actually propose something to us, [vendors should] come in and talk to us about it."

Meanwhile, Suss said, it is the agencies that may lose. "If FTS holds the line on some of these requirements, they will virtually close out newcompetition," he said. "This does not go far enough to allow the newcomers to make the case to go after the business."

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