Optical/IP Networks

5 Carriers Win Networx Enterprise Contracts

Five carriers applied for the U.S. federal government's $20.1 billion Networx Enterprise contract RFP, and all five were awarded spots. AT&T Inc. (NYSE: T), Verizon Communications Inc. (NYSE: VZ), Qwest Communications International Inc. (NYSE: Q), Sprint Corp. (NYSE: S), and Level 3 Communications Inc. (NYSE: LVLT) have each now earned the right to bid to provide telecommunications services to individual government agencies.

This is the second multibillion-dollar contract handed out by the General Services Administration this year. [Motto: "We administer general services!"] The first was the Networx Universal contract, which is currently worth $20 billion but is capped at $48 billion should the terms of the contract ever need to be reworked. (See Networx Numbers Big for VZ, AT&T, Qwest.)

The Universal contract had been awarded to AT&T, Verizon, and Qwest and had rejected a bid by Sprint. The decision puzzled some since Sprint was an incumbent government contractor. But now, Sprint once again has the opportunity to bid on government business.

This Enterprise decision is also a boost to Qwest, whose inclusion in the first Networx contract was a big deal for the carrier. Qwest has not received much government revenue in the past -- only $10.3 million in 2006 -- so the potential to bring in billions in new revenue is good news for a carrier that has returned to profitability mainly by cutting costs instead of gaining new business.

The contract carries a minimum of $50 million in revenue to be split equally among all the awardees. After that, all five carriers must bid against each other on each individual government agency involved with Networx for the right to provide services. The services are similar to those outlined in the Universal contract but have fewer requirements and cover a smaller geographic area.

— Raymond McConville, Reporter, Light Reading

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