GCN INTERVIEW | Jerry Edgerton, driver of MCI WorldCom's FTS 2001 bus

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Jerry Edgerton, senior vice president of government markets for MCI WorldCom
Inc. and its forebear MCI Communications Corp., has overseen work on a broad range of
federal networks, although his company was frozen out of FTS 2000 long-distance business
for the last decade.

In January, MCI WorldCom won a share of the General Services Administration’s FTS
2001, the largest government telecommunications contract ever awarded. MCI will compete
with Sprint Corp. for an estimated $5 billion in government business.

On Edgerton’s watch, MCI has worked on projects for the Federal Aviation
Administration, the National Science Foundation and the Postal Service. MCI also manages
bandwidth for the Defense Information Services Network and runs the Defense
Department’s command and control network for voice, data and video.

Before coming to MCI, Edgerton directed the federal operations group at
Tymnet/McDonnell Douglas Network Systems Co. and managed application design and data
center operations for the Postal Service.

He has a bachelor’s degree in electrical engineering from North Carolina State
University and a master’s in business administration from Pace University.

GCN senior editor William Jackson talked with Edgerton at his McLean, Va., office.

GCN: What steps did MCI
WorldCom Inc. take to win a share of the FTS 2001 contract?

EDGERTON: We have been interested for a long time. When FTS 2000 was awarded, we were
still a young company. The products and services coming to market were still new. We were
not an original bidder in 1988 but a participant with Martin Marietta Corp.

We felt the loss tremendously. We spent a lot of time, 10 years actually, getting ready
for this contract. We were one of the original providers of long-distance services to the
Pentagon.

We provided the Social Security Administration with intelligently routed 800-number
services, and some of the services eventually went to FTS. We had a fairly steep hill to
climb in installing and managing mission-critical networks.

We’ve operated the air traffic control communications network cost-effectively in
partnership with the Federal Aviation Administration since 1993. We recently completed the
conversion of the Defense Department’s command and control network.

We operated the calling services for the architect of the Capitol, which included the
House and Senate. We spent a year helping the Postal Service move to a network-centric
structure.

Communications is no longer just replacing long-distance service but enabling services
to citizens. The FTS 2001 contract focuses on data and on the kind of experiences we have
had. The FTS 2000 incumbents [Sprint Corp. and AT&T Corp.] have basically been
providing switched voice services.

GCN: How did MCI fare during the
lean years of FTS 2000?

EDGERTON: It was a rather timid business, in the teens and lower 20s in terms of
millions of dollars. We built it into a billion-dollar business by focusing on
mission-critical networks. While the incumbents were chasing down the unit price of long
distance, we were building a reputation for converting networks.

GCN: How will you compete with
incumbent Sprint for FTS 2001 business?

EDGERTON: The first targets are the embedded AT&T customers. How do we move them?
They will move because the AT&T contract expires, and, if they want to continue to do
business with AT&T, there would have to be some kind of competitive procurement.
It’s going to be a fairly natural conversion. We’re hot on that trail with
Sprint.

GCN: Does the incumbent have an
advantage, or will everyone start from scratch?

EDGERTON: Incumbents always have an advantage because they have knowledge of the
services and the idiosyncrasies of the installations. But we have not been lying by the
wayside, waiting for this to happen.

When we installed the Defense Information Systems Network, we visited every military
base in the United States. We’ve been to most of the buildings that the General
Services Administration manages.

We’ve been to a lot of post offices in the last 18 months, bringing up a
sophisticated frame relay-over-IP network at the rate of 400 to 500 post offices per
month.

We know the customers. There are some concessions made in the contract, and fees have
been set aside to cover any agency-related conversion costs. The agencies have been
knocking on our door. It has been a great pleasure to work with them because of their
openness and willingness to discuss their requirements. We think there is pent-up demand
for conversion to data networks.

Where they’ve built multiplexed private-line networks, there’s been a
parallel deployment of desktop PCs and workstations. Therefore, there is an opportunity to
take advantage of technology, whether it’s frame or IP or what have you—and to
build out a mission-critical network at the beginning of a contract rather than the end.

GCN: You have expressed an
intention to compete for local as well as long-distance federal business. How long will it
be before you can offer end-to-end service?

EDGERTON: We already do offer local service under a GSA agreement for the Northwest,
and we have been successful in converting some of the agencies there to our local service.
We’ve been successful in pursuing some of the military bases.

There are prohibitions in this contract against linking the two. I think we have to
wait a year before we can go back in and add local service to the contract. But we are
close to doing end-to-end services as we speak.

GCN: You are offering rates of
less than 1 cent a minute in the last year of the FTS 2001 contract. Will voice become
just another commodity transported at a flat rate for network services?

EDGERTON: The simple answer is no. You see voice becoming less and less of the overall
telecom budget because of the increasing data demands. When you look at the underlying
infrastructure required to distribute voice, that is still minute-based, and we still get
bills from the local carriers and competitive local carriers.

There are certain kinds of switching and embedded costs associated with voice services.
There is still a customer requirement for billing. Everyone is skeptical of anything free.

I see voice as an item. It becomes a lesser item, but it’s still pretty far out to
think that we’re simply going to route voice over IP and figure out how to
depacketize it to get it into a traditional handset. We’re beginning to see some
commingling of voice and data capabilities, but that’s a long way from having free
voice. Although I’m sure the IP people would like to believe that, the costs come
when you get down to the end of the circuit and the end of the line.

GCN: Service providers have long
known how to structure prices on voicecentric switched circuit networks to be profitable
and competitive. Has such a model been developed for datacentric packet switched networks?

EDGERTON: Absolutely not. We got into voice thinking about minutes. Ultimately, as
pipes fill up, you need to build more pipes. You can rationalize the capital structure
necessary to do this because the more you use it, the more you pay.

We started down that road in the packet world many years ago, when we charged on a
per-packet basis and charged an attachment fee. It followed the voice model and ran on the
voice network. Then we got into the Internet world, and we were doing a fixed-rate
attachment. That comes from the old National Science Foundation days of encouraging
development of the Internet.

NSF did that by aggressively pricing the attachments. That was OK as long as somebody
was paying for the backbone.

What happens as data needs continue to grow is that the backbone has to be rebuilt. It
is no longer a simple point-to-point circuit; it’s much more complicated.

You get into different ways of increasing the capacity of your backbone. You can do it
by more efficient utilization, not necessarily by building more bandwidth. And you do it
through fast packet or asynchronous transfer mode technology.

I see us attempting to move toward some kind of measured usage. As you fill up the
pipes and need to expand, there is an economic way of doing it, but that’s still
being sorted out. Every now and then somebody will say, I’m going to give you all
this Internet access for $14.95 a month. That’s OK. But when the pipes are full,
there’s no way to expand.