Stakes huge in Qwest bid for Networx traffic
By Ross Wehner, Staff Writer
Denver Post
Monday, August 8, 2005


Qwest lost the battle for MCI, but it still has Networx.

Winning a chunk of the 10-year, $20 billion federal government contract - believed to be the largest communications contract in history - would allow Qwest to solve a key dilemma:  a shortage of traffic on its money-losing, national fiber-optic network.

"Qwest's network has to be fed, nurtured and watered every day whether you are using it or not," said Rich Nespola, chief executive of the Kansas-based TMNG consulting firm.  "Qwest has no downside.  If they are losing money, any incremental traffic they put on their network is like finding money."

Qwest is racing with the operators of other major networks such as AT&T, Sprint and MCI and dozens of other telecom companies to submit a bid by early September, though the deadline will likely be extended.

The contract, due to be awarded by mid-2006, will be doled out to various companies.  It calls for a huge array of advanced phone, wireless, computer and Internet-related services for most agencies of the federal government.

Qwest's government services division already rakes in $400 million per year.  Its top clients are the Department of Defense and undisclosed intelligence agencies, followed by Treasury and the Department of Energy's Los Alamos lab in New Mexico.  The division employs 400 workers, mostly in Washington, D.C., followed by Denver and Los Alamos.

In May, Qwest replaced Jim Payne, a longtime Capitol Hill veteran who is credited with building Qwest's government services division, with Diana Gowen.  Her 25-year telecom career includes managing a Networx-like contract for MCI.

Some people say Gowen may be handicapped by her short time on the job.  Gowen "is a seasoned, experienced player in our space, and she knows her way around the marketplace, (but) I don't see a big impact to Qwest," Tony D'Agata, the head of Sprint's government services division, told trade magazine Washington Technology.

But Gowen is feisty.

"Maybe Tony underestimates me a little bit," she said.  "Or maybe he is saying, in a very complimentary fashion, that the Qwest government group had its act together and all I have to do is continue to guide the ship."

Gowen said Qwest will bid on both parts of Networx: the large "universal" contracts, which cover nearly every communications service imaginable, and the more niche-oriented "enterprise" side, which calls for innovative solutions for specific agencies.

The stakes for Qwest are huge.

Nespola was on the team in the late 1980s that helped Sprint win FTS2000, a precursor to Networx.  "It transformed the company," he said.

"This is a perfect contract to bring more business onto the Qwest backbone," Gowen said.  "Almost anything you could think of that smells like communications will be possible through the contract."

Even if Qwest loses the race for one of the large "universal" contracts, it will probably end up with some chunk of Networx.  Denver-based Level 3 also is evaluating Networx opportunities, said company spokesman Arthur Hodges.

"Everyone can have a piece of this," Nespola said.  "There's usually lead dogs and a whole bunch of very capable contractors."

Staff writer Ross Wehner can be reached at 303-820-1503 or rwehner@denverpost.com.

http://denverpost.com/business/ci_2922097