Under the initial five-year, $250 million contract, AT&T's outsourcing unit will build and manage an 18-node hybrid frame relay-asynchronous transfer mode network to replace the network of private lines, and provide a variety of AT&T network services. The contract is valued at as much as $1 billion over 10 years; Texas officials expect to save at least $10 million a year under the deal.

"Our overarching goal is to provide every user with choice and not have them confined," says Steve Parker, telecom director for the state commission. "Instead of designing the network and taking it to the user community, the commission asked users for their requirements and let AT&T design the network. We received 1,200 requirements that extended the services list to include paging and cellular services."

In all, 39 companies, including MCI WorldCom, Qwest Communications International, and SBC Communications, bid on the project, according to Parker. He says AT&T Solutions was selected after a multiagency evaluation committee agreed that the outsourcer's proposal "was the most qualified response."

AT&T plans to provide state and local government agencies with a portfolio of services that include frame relay, ATM, hosting, business long-distance, and private-line. The project is designed to provide a centralized network serving 250 state agencies and 4,500 sites, including municipalities and counties. The undertaking, which will provide integrated access to voice, data, video, and Internet services, should prove attractive to the business sector.

Texas is spending $3 million a year with AT&T to develop unspecified "advanced networking services," Parker says. The two will co-develop optional premium network- management services with varying capabilities because "one service level doesn't fit all."