Arrowhead win signals telecom changes

Field of competition is expanding beyond traditional carriers

The selection of Arrowhead Global Solutions to provide circuits for a core Defense Department voice, video and data network is a harbinger of future federal telecommunications procurements, analysts say.

Arrowhead is an integrator that graduated from its small-business status only three years ago. It beat several larger traditional telephone carriers to win the contract alongside AT&T and Qwest Communications International. Arrowhead will provide circuits in the Northeast and Southeast, while AT&T and Qwest will supply the Midwest, Southwest and Western service areas.

Arrowhead won its portion of the $3 billion Defense Information Systems Network Access Transport Services (DATS) contract with a network pieced together from a variety of sources, “including dark fiber, cable company networks, competitive local exchange carriers and some company-owned circuits,” said Mark Ritter, Arrowhead’s vice president for telecom services.

The telecom provider, based in Falls Church, Va., will use these circuits to build a private network that will connect DOD installations to the Defense Information Systems Agency’s nationwide Global Information Grid (GIG) fiber-optic backbone, Ritter said. He declined to provide pricing details.

Mary Ann Elliott, chairman and president of Arrowhead, said the company won the DATS bid because of its ability to deliver quality solutions at a lower cost than some of the competitors. Arrowhead expects its 2006 revenues to exceed $100 million, according to the company’s Web site.

Warren Suss, president of Suss Consulting, said Arrowhead must have undercut the two carriers on circuit costs to win a piece of the contract. “That fits with the agency’s push to commoditize circuit buys,” he said.

Bernie Skoch, a consultant at Suss who worked for DISA as director of customer advocacy, said federal customers no longer care about pedigree. “They are interested only in the end result: best value for their money combined with a high degree of reliability,” he said.

He predicted that future federal telecom contracts will go to bidders outside the pool of local carriers such as Verizon and Qwest.

Jeff Kagan, a telecom analyst based in Atlanta, agreed with Skoch, adding that the telecom industry has changed so much in the past few years that other companies can now compete with the traditional carriers on their own turf.

At least one of the former Baby Bells considered such an approach for DATS and looked at creating a bid outside its territory using the same playbook that Arrowhead did. But officials of the carrier declined to talk on the record for competitive reasons.

Kagan said any private network built by nontraditional carriers must offer the same security, stability and reliability that the established companies do — a must for the DATS contract.

DISA intends to use the DATS contract to connect 1,500 DOD locations in the United States to the GIG backbone. DISA estimates that total circuit orders could reach 5,000. They will include everything from low-bandwidth voice circuits to broadband data connections operating at 10 gigabits/sec or higher.

The DATS contract also has options for winning bidders to install circuits and network equipment on bases, which DISA officials said could mean a fair amount of business.

The DATS contract will replace circuits provided by AT&T under the Defense Information Systems Network Transmission Services-Continental U.S. Extension contract, awarded in March, and an earlier continental U.S. transmission contract.
Arrowhead much wooed, not ready for the altarShortly after Arrowhead Global Solutions won a share of the Defense Information Systems Agency’s $3 billion Defense Information Systems Network Access Transport Services (DATS) contract, rumors started to circulate that the company was for sale.

Not so, said Mary Ann Elliott, Arrowhead president and chairman, who said the company received as many as five unsolicited offers a day after winning the DATS contract.

Despite those offers, Elliot said, “Arrowhead is not for sale and the company is focused on its business.” Besides DATS, that business includes a recently awarded contract to provide the Navy and other customers with portable satellite terminals.

— Bob Brewin


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