Fed Telecom On Brink of New Growth

Fed Telecom On Brink of New Growth

Warren Suss

Sandra Bates

Companies that serve the federal telecommunications market are eyeing opportunities to provide new outsourcing services to agencies, now that the transition to FTS2001 vendors is almost complete.

Plans are being laid by telecommunications companies and systems integrators to offer outsourcing solutions for networking, call centers and systems maintenance, along with sophisticated services such as voice over Internet protocols and wireless communications.

That's the view, at least, of many executives who attended the telecommunications and network services conference hosted by the General Services Administration's Federal Technology Service in Las Vegas the week of April 2. The conference highlighted new technologies and solutions available to federal agencies.

The move to new applications couldn't come at a better time for companies trying to sell into the federal telecommunications marketplace. Warren Suss, president of Suss Consulting Inc., a Jenkintown, Pa. telecommunications consulting firm, estimated the size of the federal telecom market at more than $5 billion, but he said revenue growth is no longer coming from voice services.

"The voice side is relatively flat ... and that's because you can buy more for less, especially with the government's economies of scale and extreme competition," Suss said.

Sandra Bates, the FTS commissioner, said voice over IP is one area agencies with dedicated networks are looking to try.

"I do see a lot of interest in high-speed Internet access [and] Web enablement," Bates said, "those steps that agencies need to take for e-government, whatever that means to them."

As for outsourcing, the Social Security Administration and the Internal Revenue Service are two examples of agencies looking for the latest and greatest in call centers, Bates said. The Justice Department is another that has plotted a sound course in implementing its network and bringing all its bureaus together, she said.

Also driving the push for broader telecommunications services: The transition is nearly complete from FTS2000, the old long distance services contract, to the new contract, FTS2001, industry officials said.

"There's a high percentage of completion. Now, the agencies are looking for what can be added to their networks," said Dan Smith, director of government markets for WorldCom Inc., Clinton, Miss., one of the two telecom providers under FTS2001.

"Most of the interest [is] in managed services, which obviously leads to moving from a private-line environment to IP-based networks," he said.

Sprint Communications Co. of Westwood, Kan., is the other FTS2001 contractor. Tony D'Agata, vice president and general manager of the company's government systems division, said Sprint is focusing its growth on managed security services, network security, information assurance and new applications, such as wireless.

Opening the government's telecommunications market to more high-level services also is attracting the attention of systems integrators such as Booz-Allen & Hamilton Inc., Computer Sciences Corp., General Dynamics Corp. and Science Applications International Corp.

The market research firm Input Inc., Vienna, Va., estimates that the market for professional services related to telecommunications will grow to about $1.2 billion in 2004, up from $837 million in 1999.

"We're doing more and more migration toward voice over IP, more effort for wireless solutions to reduce heavy costs" for running wires underground and in buildings, said Gary Dagenhart, director of General Dynamics' infrastructure service center.

Suss agreed the trend is toward outsourcing.

"From everything I can tell, agencies are definitely moving to hand more responsibilities on an end-to-end basis to industry," he said. "Whether that's in the form of network services or more comprehensive outsourcing solutions, that varies from agency to agency."

The headaches agencies encountered making the transition from FTS2000 ? the first governmentwide telecommunications contract, awarded in 1988 to AT&T Corp. and Sprint ? to FTS2001 served as a sales pitch for planning the changes to come, Suss said.

"They didn't give a lot of thought to [transition], but now that it's largely completed, agencies are asking the question they should have asked more than a year ago: From the technical [and] user point of view, where should we go from here?" he said.

So far, the evolution of the government market to sophisticated services and outsourced contracts is in embryonic form but is moving forward.

Denny Groh, GSA's deputy assistant commissioner for service delivery at FTS, said more than 70 contract modifications to FTS2001 have been approved to date, adding a wide variety of new telecommunications services to the contract. Another dozen changes are under negotiation.

Most agencies have not yet issued service orders to incorporate them, but law enforcement, defense and financial agencies are expressing the most interest, Groh said. "They're looking at nontraditional needs," he said.

"These new services are becoming an area of revenue for GSA and its vendors," Groh said, calling the government's voice telecommunications a loss leader. "We have a vested interest in doing this [in a] timely and effective manner."

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