that it scored a ten-year contract with the U.S. government worth up to $430
Under the terms of the agreement, Qwest--which has been building a
high-tech network to transmit voice, data,
and video--will provide the
government with the fiber, hardware, engineering, communications services,
and network management that make up a custom Virtual Private Network (VPN)
"The federal government is an enormous business opportunity with
significant critical networking and communications requirements, and Qwest
is pleased to make a bold entrance into this market by providing a custom
VPN to the nation's largest employer," Joseph P. Nacchio, president
and CEO of Qwest, said in a statement.
Today's announcement marks the first large government contract secured by
the multimedia communications company's newly created Government Systems
Division, which was announced in February to provide data, multimedia, and
voice communications services to the federal marketplace. The new division
is located in the Washington D.C. area.
Qwest's planned domestic 16,285 mile network will serve more than 125
cities upon its scheduled completion in the second quarter of 1999.
Currently, more than 5,400 miles are activated from California to New York,
from Dallas to Houston, and from Phoenix to Austin, Texas. Qwest is also
extending its network 1,400 miles into Mexico with completion slated for
late third quarter 1998.
Qwest and other Internet telephony companies like ICG Communications and Level 3 Communications may eventually face regulation
from the Federal Communications
Commission. Earlier this month, the government agency said in a report
to Congress that would be premature to impose fees on Internet telephony
companies immediately, but noted that many of them appear to be no
different from traditional analog phone carriers.
That report renewed fears that the government may impose regulatory fees on
companies that provide long distance and other telephone services using
Internet technology. While traditional phone companies such as AT&T and GTE
must pay so-called access fees and universal service fees, Internet
telephony companies have so far been exempt.
In recent months, Qwest has been on the acquisition path.
In March, Qwest agreed to buy LCI International (LCI) in a $4.4 billion
stock deal, creating the fourth-largest long-distance phone company in the
United States. The merger combines Qwest's fiber-optic network with LCI's
sales and marketing efforts, distribution channels, and billing system.
Qwest also bought Netherlands-based Internet service provider EUnet
International for about $154.4 million in stock and cash, giving it a
foothold in the European data transmission market through EUnet's network
of operating units in 13 countries.
The company also recently completed the acquisition of Phoenix Network of
Golden, Colorado, a reseller of long distance services, a deal valued at
about $27 million in stock.
Since its initial public offering last June, the company?s stock has surged
more than 160 percent to Friday's close of 37-1/2.