Carriers mobilize for $24B

Carriers mobilize for $24B in military telecom contracts
AT&T, Verizon and others target four DoD contracts expected in 2008
Source: Fedsources

It’s the high-tech spoils of war: The U.S. military plans to award telecommunications contracts worth as much as $24 billion, and the top-tier carriers are signing up to get a piece of the action.

The U.S. Department of Defense is working on six major telecom contracts, and four of them are expected to be awarded in 2008. All of the nation’s largest carriers -- AT&T, Qwest Communications, Sprint Nextel and Verizon Business -- are planning to bid on these megadeals.

"Over the next two-year period, there are going to be some pretty significant awards made," says Ray Bjorklund, senior vice president of FedSources, a market research firm that tracks military telecom spending.

"These contracts are important to chase because they are big plums, but you have to eat those plums one bite at a time," Bjorklund adds. "The Defense Department is not going to be spending that money all at once. They’re making big investments in telecom by buying 10 years' worth of service today."


Lowdown on DTS-P II
The first military telecom deal expected to be awarded is dubbed "DTS-P II," for Defense Information Systems Network Transmission Services Pacific II. With an estimated value of $4 billion over 10 years, DTS-P II will provide data services to military bases in the Pacific including those in Hawaii and Guam.

Verizon Business (formerly MCI) is the incumbent contractor. The DTS-P II award is expected in March 2008.

"DTS-P II will be worth at least a couple billion dollars," says Susan Zeleniak, vice president of Verizon Federal. "Right now, that’s focused on a single winner."

DTS-P II is a "huge Chinese menu of private lines, from the lowest speeds you can think of to megawaves throughout the Pacific into the Middle East, Latin America and Alaska," says Diana Gowen, senior vice president and general manager of Qwest Government Services.

Also expected to be awarded in the March-April time frame is Uni-Comm, a contract to provide, support and maintain PBXes and other communications gear at Air Force Space Command bases around the United States. The six-year Uni-Comm contract has an estimated value of $383 million.

"Uni-Comm is the consolidation of many base-level contracts for communications services," FedSources' Bjorklund says, adding that one Uni-Comm winner is expected.

Also in 2008, the Defense Department is expected to place billion-dollar orders for voice and data services through Networx, a telecommunications services contract open to all federal agencies. (See related story, "Carriers brace for federal buying spree".) Carriers on Networx include AT&T, Level 3 Communications, Qwest, Sprint Nextel and Verizon Business.

"DoD has issued questions to all of us and given us time to respond. They’ve met with all five Networx carriers," Qwest Government Services' Gowen says. "They are on the trajectory to make at least a voice decision early next year. . . . They’re projecting midyear on making their data decisions."

In the fall of 2008, the U.S. Air Force is expected to issue an RFP for its NETCENTS II program. This will be a recompetition of its Network-Centric Solutions (NETCENTS) contract, which provides the Air Force and other military agencies with networking equipment and services including integration; installation; and operations and maintenance of voice, data, and video hardware and software.

Expected to be awarded in the fall of 2009, NETCENTS II is a five-year contract worth as much as $9 billion. The first NETCENTS contract was awarded to eight multivendor teams led by such systems integrators as General Dynamics, Booz Allen Hamilton and Telos.

"NETCENTS II will offer a wide variety of communications and professional services," Verizon Federal's Zeleniak says. Verizon Business was on the Booz Allen Hamilton team for the first NETCENTS.

The U.S. Navy’s plan
Further out on the horizon is the Navy’s Next Generation Enterprise Network (NGEN), which will provide computing and communications services to all Navy and Marine Corps. users worldwide. NGEN is a 10-year contract with an estimated value of $8.8 billion. The NGEN RFP is expected out in the fall of 2008, although an award is not expected until 2010.

"NGEN is a follow-on to the Navy-Marine Corps intranet, which is run by EDS," FedSources' Bjorklund says. He says NGEN will include computing and communications services outside the scope of the EDS contract, which operates in the United States. "The Navy is trying to consolidate its whole communications infrastructure in NGEN," he says. NGEN will have "everything but the kitchen sink," Zeleniak adds.

U.S. military plans to put Internet router in space

Bjorklund says the common theme in most of these DoD telecom buys is consolidation. "The DoD has a real big focus on consolidation of its existing contracts," he says. "NGEN is like that. Uni-Comm is like that. It makes good sense business-wise, but the bigger these procurements become, the more challenging it is to effectively and efficiently prepare the solicitations. They have to be all-encompassing and forward-looking, and then you have to successfully make an award. There’s so much at stake for the vendors that you’re at greater risk for a protest after award. The more consolidation you have, the fewer crumbs for the vendors."

Fiber develops, slowly but surely...

The variables controlling the deployment of wired telecommunications infrastructure to businesses and homes are cost, throughput and, ultimately, best guesses on demand. The candidates are fiber, coaxial cable and copper, which is putting up a good fight before being relegated to the dust bin of telecom history.

There are lots of shades of gray among those simple options. AT&T, for instance, stops fiber in the street and uses DSL-enhanced copper to serve small groups of homes. Verizon’s FiOS, meanwhile, brings fiber right to the premises. That’s a more expensive approach, since each home must be provisioned with gear to convert the signals from light to electricity.

One of the key variables in determining what works and what doesn’t is the density of users. The story can be very different in suburban, exurban and rural areas. In rural areas, demand is driven by the need to attract and keep businesses, the relative ease of deployment and, in many cases, a lack of competition.

In Clarksville, Tenn., the energy utility expects to flip the switch next month on a system that will provide video, voice and data services to about 50,000 residences and 5,000 businesses. This Telephony story says this will make it one of the largest municipal fiber-to-the-home (FTTH) builds in the country. Utilities getting into the telecom game have an ulterior motive: A big driver is eliminating costly meter reading. One thousand customers now are connected, with the balance to be hooked up in a year and a half.

The US$55 million project works out to US$1,000 for each premises passed by the fiber. The utility will use equipment from World Wide Packets to offer symmetrical 10 Mbps Internet access, VoIP, digital television (200 channels), high-definition television (16 channels) and video-on-demand. Clarksville appears to have more competition than many rural areas: Charter Communications and AT&T both have a presence.

Fiber seems to be progressing in fits and starts around the globe. Fatpipe looks at the UK market, where regulators and the major carrier, BT, are working through issues centering on the uncertainty about the eventual use of the broadband network. The heart of the piece, though, is a Yankee Group graphic detailing the ways in which consumers reach the Internet in different regions of the world. Cable modems lead in North America and Latin America and DSL in China and India. Fiber is highest in China, where it only has 6.81 percent of the connections.

This post by Om Malik at GigaOm was written in anticipation of a FTTH conference in mid autumn. Products to be introduced at the conference — from Corning and Neophotonics — aim to reduce the cost of FTTH. The comments go off in a decidedly different direction: The respondents get into a debate over the need for the great capacity FTTH will provide. The feeling is that the capacity is not needed now, but valuable applications demanding such bandwidth won’t be developed if such expansive amounts of capacity aren’t made available.

AT&T said this week it is kicking in another US$500 million to its hybrid fiber/DSL U-Verse initiative. That follows an investment of $1.4 billion in late spring. That, according to xchange, puts spending for this year and next between $4.5 and $5 billion. In addition to the extra cash, the company is cutting its homes passed figure from 18 million to 17 million for the year.

A look inside the numbers suggests that increased spending and reduced footprint expansion may actually be good news from fiber proponents’ point of view. The changes seem to reflect an emphasis on the area controlled by recently acquired BellSouth. The story says it had been unclear how the telco would provide services in these areas, and an option was via satellite. The move is suggestive of startup costs, and implies that AT&T feels confident enough about fiber to roll it out in rural areas of which it originally may have been unsure.

There are a variety of ways in which fiber can be leveraged. Ethernet passive optical networks (EPONs) will predominate early in the near future, according to ABI Research. The study says active Ethernet (AE) will gain market share over the forecast period against EPON, broadband passive optical networks (BPONs) and Gigabit passive optical networks (GPONs).

Even in Holland the growth increases.
Amsterdam CV (GNA) started the roll out of its FftH (Fiber from the Home) network in October to about 40,000 adresses in Amsterdam. The shareholders of GNA are the commercial daughters of five Amsterdam housing corporations (33%), investors (33%) and the City of Amsterdam. The building of the network through an European tender has been awarded to by a consortium of BAM/Draka/Van den Berg. BBned, a subsidiary of Telecom Italia won the European selection on the investment and operation as a wholesaler of the active layer of the network.

The nature of the telecommunications infrastructure is fascinating because it involves several variables that all constantly change. However, the biggest variable, demand, seems certain to grow.

IF YOU NEED TO PURCHASE HARDWARE FOR FTTH PROJECTS PLEASE CONTACT ME BY PHONE +31650730710 OR BY MAIL DESIGNFORIT@LIVE.NL