Social Security to get new phone system

HIGH PRICE FOR DIALING HIGH-TECH

March 20, 1991|By Leslie Cauley

When the Social Security Administration in Woodlawn transfers to the federal government's new-age FTS 2000 phone network this fall, the agency will have immediate access to the latest in state-of-the-art communications.

The network's all-digital, fiber optic backbone will allow SSA's 3,700 telephone representatives to efficiently handle the more than 300,000 calls that flood the agency's toll-free 800 lines each day. And that should translate into better service for the agency's 150 million customers, who include the nation's elderly, handicapped and needy.

All that added convenience is going to come at a steep cost to taxpayers.

According to Renato "Renny" A. DiPentima, deputy commissioner of systems, Social Security's phone bills are going to rise about 24 percent as a result of moving over to FTS 2000.

And he's not too happy about that, especially since FTS 2000 was supposed to help agencies lower -- not raise -- their communication costs. "It's more expensive by a large margin," said Mr. Renato, who currently spends about $100 million a year to meet Social Security's communication needs. "I think somebody needs to look at the pricing."

That view is apparently shared by Congress, which is scheduled today to hold the first of several hearings on FTS 2000, the 10-year, $25 billion contract that was awarded to the American Telephone & Telegraph Co. and US Sprint in 1988.

Pricing will be one of several topics explored at a public hearing before the Senate Governmental Affairs Committee today. The House Government Operations Committee is expected to hold a similar public hearing on FTS 2000 later this year.

At issue is "levelized pricing," a mechanism dreamed up by the General Services Administration to balance out the prices of the two vendors. The idea was to equalize the pricing of the two vendors so agencies assigned to their respective networks don't feel shortchanged and try to switch vendors.

In their raw form, Sprint's prices are in some instances as much as 40 percent higher than AT&T's. But levelization masks that difference, effectively raising AT&T's prices and lowering Sprint's. The net result: In some cases AT&T's prices wind up being higher than Sprint's.

Not surprisingly, agencies assigned to AT&T's network, including Social Security, aren't too thrilled with the prospect of moving over to a system that's going to cost substantially more.

"We have the lowest prices, but we cannot market those prices on a levelized basis," said Richard Lombardi, vice president for federal systems at AT&T. "It creates a disadvantaged perception, and agencies are simply unwilling to come on to FTS 2000. It's a legitimate marketing impediment for us."

That's apparently what happened at Social Security.

When AT&T went calling last summer at Social Security, the agency took one look at AT&T's levelized prices and went into sticker shock. Combined with a general uncertainty about AT&T's ability to pull off a switch to FTS 2000 on short notice, the agency wound up sticking with an incumbent, MCI Communications Corp., to provide 800 services, Mr. Renato said.

According to Mr. Renato, AT&T's raw prices were slightly lower than MCI's. Padded by levelization, however, AT&T's prices will wind up being 24 percent higher than MCI's current rates.

Social Security is not alone in its concerns over FTS 2000 pricing. According to AT&T, the Air Force, Army, Pentagon, Agriculture Department and Postal Service have expressed varying degrees concern about AT&T's FTS prices.

Then there's the management issue.

AT&T contends GSA has been unfairly favoring Sprint, assigning agencies to AT&T's system that aren't ready or willing to move over to FTS 2000. As a result, AT&T contends it isn't getting anywhere near the 60 percent share of the contract it was guaranteed.

An angry AT&T recently hauled GSA into court, accusing its customer of cutting a secret deal to favor Sprint and of mismanaging the FTS 2000 contract. GSA has denied AT&T's allegations.

None of these problems have been experienced by Sprint, which seems to have hit pay dirt in the FTS 2000 arena.

According to Christopher Rooney, Sprint's head of government systems, the company is continuing to sign up agencies for FTS 2000 services in rapid succession. The company recently signed a cellular phone deal with GSA, which is assigned to its network, as well as a teleconferencing deal. That's in addition to the dozens of regular FTS phone and data customers that have signed up.

"We have no problem with GSA's management or pricing," Mr. Rooney said.

According to GSA, Sprint is currently receiving 57 percent of revenues from FTS, while AT&T is making about 43 percent. That's a flip-flop from contract language, which guarantees AT&T a 60 percent share of FTS 2000 business.

GSA, for its part, contends it never promised AT&T a free ride on FTS 2000. The agency says the company is going to have to do more than "just take orders" if it wants to reap the full financial rewards of FTS 2000.

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