Verizon to Move Federal Division Under Larger Unit

By Jennifer Freer, Staff Writer

Although Verizon Communications Inc. is eliminating Verizon Federal Inc. as a separate division, the company has no intention of getting out of the government business, company officials said.

The company plans to make Verizon Federal, formally Bell Atlantic Federal, part of its new Enterprise Solutions Group that was formed to manage the design, operation and maintenance of network solutions for large business and government customers.

New York-based Verizon Communications was formed in July after the merger of Bell Atlantic Corp., New York, and GTE Corp., Irving, Texas.

The Enterprise Solutions Group will consist of 18,000 employees when the integration is complete by the end of November. The new group will be able to offer better service to its customers and take advantage of a national footprint, said Pat Byrne, Verizon's senior vice president of customer services for ESG.

"We want to grow our business with the federal government and having a national scope is one way we see doing that," Byrne said.

Byrne would not disclose the size of its government business. Overall, Verizon had earnings of $7.9 billion on $60.7 billion in 1999 revenue.

The solutions group will swallow five divisions: Bell Atlantic Federal, Bell Atlantic Data Solutions, Bell Atlantic Domestic Wireline (formerly Bell Atlantic Large Business), GTE Communications Corp. and GTE Network Services.

"As part of the ESG, we fall into a group that will focus on global and national customers, which is growth for us," said Randy Lucas, vice president of federal markets for Verizon. "For the last five years, we have been a self-contained business unit, focused on federal business, which has advantages. Now, we will be part of a larger group and have additional resources to tap into."

Verizon's move comes at a time when many companies are forming their own federal divisions to concentrate on government contracts.

"What I gather is that Verizon will focus on the larger corporation, and that just isn't where the federal government is these days," said James Payne, senior vice president of government systems for Qwest Communications International. "There are reasons why you want the federal business to be separate, and I can tell you that companies go down that road [of not having a dedicated federal unit] and come right back."

Qwest has a separate division that is responsible for all of its government business, but areas such as human resources and payroll are handled from the corporate side.

"You will see companies exiting and entering the business according to what works for them," Payne said. "But there are more advantages to being a separate division. Although [not being a separate unit] may work for a while, you don't have the focus."

Warren Suss, a telecommunications analyst in Jenkintown, Pa., agreed with Payne. "I think it's a bad sign," Suss said. Companies have tried to streamline government business, and in most cases the commercial part of the organization has a difficult time addressing the unique needs of the federal customer, he said.

"The federal government is a large enough and important enough customer to command special attention," Suss said. Some of the processes and rules to address government customers' needs are very different than other businesses, which may cause problems for customers and for Verizon.

Verizon, however, thinks its strategy will increase its government business. Verizon Federal is continuing to go after lucrative contracts, such as the General Services Administration's Metropolitan Area Acquisitions, of which the company won the Boston and Buffalo, N.Y., deals. But it plans to go after other large government contracts, Byrne said.

The company wasn't part of the team that won the $10 billion Navy-Marine Corps Intranet contract, but it's awaiting word on the $2 billion Federal Aviation Administration's Telecom Infrastructure contract as part of the Harris Corp. team.

With the integration into the Enterprise Solutions Group, Verizon will be able to offer government customers more, such as better digital subscriber line service, more broadband services and better wireless services, Byrne said.

The company also plans to introduce new services to the government that have not been available before like virtual office solutions. Virtual office solutions provide remote access to network applications, network management and data services.