Level 3 Communications (Nasdaq: LVLT) and Sprint (NYSE: S) may be two large players in the U.S. General Services Administration's (GSA) Networx telecom contract, but due to ongoing migration challenges, they are continually being edged out of opportunities by AT&T (NYSE: T), CenturyLink (NYSE: CTL) (formerly Qwest Government Services), and Verizon (NYSE: VZ).

Although U.S. government agencies were required to migrate over to Networx by last June from the former FTS2001 contract, they have instead spent $290 million on "bridge" and "crossover" contracts since the GSA named the primary Networx contractors in 2007 to maintain service during the transition process.

With the majority (83 percent) of the crossover contract work going to Verizon and AT&T, there aren't as many opportunities for Level 3, a holder of the Networx Enterprise contract, to pursue since they weren't a holder of the former FTS2001 contract.  

What's been keeping Level 3 and Sprint out of the running is that unlike AT&T, CenturyLink and Verizon, they won a seat on the smaller Networx Enterprise contract, which shares 44 of the 50 services offered on Universal. In the near-term, agencies have been using the broader Universal contract.  

Under the terms of the two contracts, Universal provides a larger set of services, including legacy long-distance and local voice, while Enterprise mainly focuses on next-gen services such as cloud and VoIP.

Despite what contract segment the carriers sit on, the overall problem with transitioning to Networx, argues Bill White, Sprint's senior vice president of federal sales, is its sheer complexity. To move any service from FTS 2001 to Networx, a government agency has to go through "tens of thousands" of line items.

While the transition to Networx is still ongoing, one that's cost taxpayer dollars, GSA wants to learn from the mistakes and complexity of the contract. GSA has already proposed such changes with its proposed Network Services 2020 (NS2020), the successor vehicle to Networx.  

For more:
- The Washington Post has this article

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