Bandwidth on Demand, Pennsylvania-Style

By Steve LeSueur, Staff WriterSome of the leading companies in information technology and telecommunications have formed two powerful consortia that will compete to provide a wide array of telecommunications services to the state of Pennsylvania.The state's planned five-year contract, scheduled for award in March 2000, will be worth about $80 million annually.While it is not the first state to ask a business consortium to supply a host of telecommunications services traditionally awarded as separate contracts to individual companies, Pennsylvania's procurement has a new twist: The winning team must establish broadband networks that can be used by individuals and businesses as well as the state."We're asking for these services to be put together in public switches and network arrangements rather than in dedicated networks for the state government only," said Nick Giordano, project director for the acquisition effort. "What we're attempting to do is use the state's buying power to encourage private investment in the infrastructure."By making networks accessible to the public, the state hopes to jump-start telecommunications in places where private sector ventures might not otherwise survive, he said.On Feb. 9, Pennsylvania officials announced that two consortia, one headed by Bell Atlantic Corp., New York, and the other by Hyperion Communications Inc., Coudersport, Pa., have submitted general proposals to compete for the work. If their so-called business cases meet with approval, the consortia will be asked to prepare detailed proposals, which will be due by the end of June, state officials said. Each consortium would then refine their proposals until best and final proposals are submitted in December.Among the 34 members on Bell Atlantic's team, known as the Pennsylvania Advanced Communications Alliance, are Science Applications International Corp., San Diego; AT&T Corp., Basking Ridge, N.J.; and Cisco Systems Inc., San Jose, Calif. The Hyperion consortium, called the PA Team, has 10 members. They include Electronic Data Systems Corp., Plano, Texas; Lucent Technologies Inc., Murray Hill, N.J.; and Qwest Communications International Inc. of Denver.Many states are trying to determine to what extent they should own their telecommunications networks, said Thomas Davies, senior vice president of Federal Sources Inc., McLean, Va.Some states, like Iowa and North Carolina, have made substantial investments of state resources in networks, while others plan to rely more on the private sector and existing networks.Tennessee, for example, is soliciting proposals for a consortium to consolidate and manage the state's telecommunications infrastructure. Officials are asking bidders to consider purchasing the existing networks from the state and then leasing them back to the government agencies, universities and other state users."It is our opinion that we could be in a better financial position if we leased rather than owned the networks," said Norris Hoover, telecommunications director in Tennessee's Office for Information Resources.Said Davies: "All the states have the same vision: bandwidth on demand. But they're following different paths to get there depending on their individual situations."Pennsylvania had up to 22 separate contracts with various suppliers to provide its government a wide range of capabilities, including local and long distance phone service, videoconferencing, wide area networks and broadband backbone communication links throughout the state.To reduce costs and simplify management, state officials want a consortium of vendors to provide all of these services. Municipal governments and schools also would be able to buy telecommunications services from the winning team, something that could not be done in the past, said Giordano.Another objective of the procurement is to encourage competition among local exchange carriers. Although the Telecommunications Act of 1996 was designed to spur competition through deregulation, that has not happened as quickly as state and federal officials had expected. Giordano said Pennsylvania officials made local voice phone service part of the contract as an incentive to newer companies entering the competition. "We wanted to appeal to those who are getting into the local telephone market," he said.A major challenge to Pennsylvania officials will be evaluating the relative merits of the proposals submitted by the two consortia. Not only will officials be looking at the relative costs and services provided to the state government, but also at the expected benefits to the entire state.The state government might be willing to pay a little more for a particular service if it sees that local schools or residents would reap significant benefits. "We are going to be evaluating on value as opposed to cost," said Giordano.