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5/31/2007
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Big Carriers Chosen In Federal Telecom Networx Award

The award means that the five chosen companies are eligible to offer their services on a competitive basis to the 135-odd federal entities.

Completing the award of what will probably be the richest set of telecommunications contracts in history, the federal General Services Administration Thursday chose two of the Big 3 U.S. wireless carriers, AT&T and Sprint Nextel, along with three other providers as contractors for its Networx Enterprise program to provide advanced telecom services to federal agencies. The other companies chosen today are Level 3 Communications, MCI Communications Services, and Qwest Government Services.

Projected to be worth $20 billion over 10 years, the Networx Enterprise award comes two months after the potentially even larger Networx Universal, which went to AT&T, Qwest, and Verizon Business. While Qwest and AT&T are the only companies chosen in both contracts, the big winner in today's announcement is Sprint, which was the only one of the Big 3 shut out of the Universal contracts.

Federal agencies can choose between the Networx Universal or Networx Enterprise services, and between providers within each of the two groups. Inclusion among today's winners simply means that the five chosen companies are eligible to offer their services on a competitive basis to the 135-odd federal entities expected to purchase telecommunications services through Networx Enterprise.

The Networx initiative is the successor to FTS-2001, the umbrella contract under which telecom companies provided services to the federal government. Combined, the new contracts could be worth up to $68 billion over the next decade.

While Networx Universal was designed to cover conventional, existing, and legacy forms of telecom services such as PBXs, "The Networx Enterprise competition was specifically created to provide alternative sources that could meet government needs for newer technology solutions," according to a GSA FAQ on the program released today.

That was a plus for Sprint, which has focused on building next-generation wireless networks, including a nationwide WiMax system set to go live in selected cities later this year.

"Networx Enterprise is more forward-looking, and that's what Sprint is about," said Tony D'Agata, VP of Sprint's federal government/public sector arm, in an interview. "It's a platform for next-generation IP services, security, wireless, converged devices, and managed network services, all things that are core to us."

Lagging behind its two main rivals in subscriber growth and still plagued with network integration issues from the 2004 merger with Nextel, Sprint definitely needed a win. Though federal government revenue makes up a small fraction of Sprint's overall business, the Networx win is seen as a market validator and a valuable testing ground for new services, such as WiMax.

Total business volume in 2006 from the FTS-2001 contracts, which expired at the beginning of this year, was more than $900 million, with Verizon Business taking almost 45% of that. Sprint, which has 35% of the total, is "the largest provider of wireless to the federal government," D'Agata asserted.

The other providers are just as eager to promote the significance of the Networx Enterprise contracts.

Qwest, for example, has had contracts with some 50 federal agencies and the firm's presence in the federal contract landscape will help it land new business, said Diana Gowen, senior VP of Qwest's government services division, in an interview. For instance, Qwest is already the incumbent network provider for the Department of the Treasury and believes it is well positioned to increase its business with the Department of Homeland Security.

"This is still a very competitive environment," Gowen said. "But the fact that we've already done business with 50 agencies is very helpful."

"Our company has changed a lot in the last three to four years," said Don Herring, senior VP of AT&T's government solutions group, in an interview. "Our product portfolio goes across BellSouth, SBC, Cingular, and AT&T with a variety of services in voice, data, IP, video, and wireless."

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