Snags, Snafus And A Whole Lot Of Static

For the winners, it was supposed to be a 10-year, $25 billion version of Dialing for Dollars. Analysts predicted that the contract to provide the world's largest phone customer, Uncle Sam, with a state-of-the-art telecommunications system would be a lucrative showcase for American Telephone & Telegraph Co. and U. S. Sprint Communications Co.

Alas, 16 months into the project, known as FTS-2000, it isn't working out that way. Under terms of the contract, the lowest bidder, AT&T, was to have gotten 60% of the traffic. But AT&T is furious that it's getting far less. And both AT&T and Sprint claim that the General Services Administration is crimping sales by tacking on a 10% management fee to FTS-2000 phone bills. So many snafus and complaints plague the project that many government agencies want out, claiming they can save money that way. And Congress is investigating.

Now, rival MCI Communications Corp. is adding insult to injury. MCI lost the bidding but still wants government business. So on Feb. 6, it announced plans to charge agencies 40% less for voice calls than they'd pay under FTS-2000 and other government phone contracts. Although AT&T and Sprint say MCI's service isn't comparable to theirs--Sprint dubs it an "apples-to-Spam" comparison--the companies may have to match MCI's prices, shaving already-thin margins. And what was supposed to be the largest non-military government contract in U. S. history may end up as a big disappointment.

Much of the blame for the system's woes is leveled at the GSA. Congress is upset that the agency has granted more than 100 requests by various government offices to opt off of the network. Such departures could undermine the system, which needs high volume.

The GSA says the project is not in trouble and denies charges that it has been mismanaged. Michael L. Corrigan, the GSA's assistant commissioner for telecommunications services, acknowledges that some agencies bypass the network but says they do so only if FTS-2000 can't provide specific services. Corrigan says that so far, FTS-2000 "has performed excellently."

Indeed, some agencies agree. For instance, the Veterans Administration says FTS-2000 has helped it slice its annual bill for voice calls from $62 million to $42 million. Several other agencies are also impressed by the system's performance, including the Internal Revenue Service and the FBI.

The trouble is, too many of FTS-2000's other customers tell a different story. They gripe that many high-tech services, such as caller identification, aren't yet available or just aren't effective. AT&T's videoconferencing system and Sprint's don't work together, and government employees complain that they cannot easily communicate from FTS-2000 to outside electronic-mail networks. "Nobody thought of it when they wrote the specifications," moans Donald E. Scott, the Energy Dept.'s director of information management.

Another agency beef is uncompetitive pricing for some FTS-2000 services. When the Interior Dept. wanted to set up a private data line between two offices last September, the FTS-2000 monthly charge was $685, not including the GSA's fee. MCI offered the same data service for 14% less.

UNFAIR SHARE. AT&T's complaint--that it isn't getting its fair share of the business--is being investigated by the House Government Operations Committee, which estimates that AT&T has only gotten 47% of the system's revenues--about $268 million in all so far. Under scrutiny is how the GSA assigned agencies to each carrier to come up with the proper mix. "We wouldn't quibble if the difference were just a few percentage points," says Dennis Roth, the AT&T vice-president in charge of FTS-2000. "But this is a lot more than that." The GSA's Corrigan says Sprint gained by selling harder to its allocated agencies and terms the 60-40 split only a "goal," not a mandate.

While the squabble continues, the federal government is still waiting for the advanced, low-cost phone system it set out to buy. And unless FTS-2000 turns around, it won't give the phone companies the financial lift or the technological edge the project promised.

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