The big state contract for local phone service turned out to be a case of call waiting yesterday, as officials asked for bids on a deal much smaller than some of the new local phone players had hoped for.

Officials at the state Department of Budget and Management asked only for proposals to serve new state buildings, small state offices with fewer than 31 phone lines, and offices where phone service or equipment is being replaced.

Preston Dillard, the state's telecommunications director, said the state estimates that about $15 million worth of business will be available over a three-year period. However, that estimate is based on past prices and does not include any assumption about how much competitive bidding might force costs down, he said. The state government spent $15.6 million on local phone service in fiscal 1996.

A local executive of one of the emerging phone companies said the state moved too slowly to open its contracts to the free market. The state has bought virtually all of its local service in the past from Bell Atlantic Corp.

"This is not competition," said Joe Haynes, regional general manager for Teleport Communications Group, one of the leading new local phone companies that have been spawned by telephone deregulation. "I don't know of many state institutions that are growing. More of them are downsizing."

But Dillard said procurement officials faced a difficult decision: They want to reap some of the benefits of emerging competition for taxpayers, but are wary of turning the whole system over to a vendor that has never run a client network anywhere near as big as the state's.

"I have an operational responsibility as well as a responsibility under the procurement law," Dillard said. "I would much rather be answering these questions [about whether the state is moving toward competition too slowly] than answer questions about why you can't get through."

The state asked for proposals by June and plans to award a contract by July.

Deal could grow

The deal can get much bigger over its three-year term in several ways -- if local governments and the University of Maryland system exercise their right to buy from the state's contractor instead of using prices they have negotiated themselves.

The new contractor, if it is a company other than Bell Atlantic Corp., can also get more business by paying off early-cancellation fees built into the state's current deals with Bell Atlantic for serving existing state offices, which run out next year.

The proposal will not affect the state's long-distance calling service, which costs more than $10 million annually and is now provided mostly by AT&T; Corp., or its cellular phone service, which is provided by Cellular One.

Virtually every major company in the local phone business in Maryland, including Bell Atlantic, long-distance companies like AT&T; and MCI Communications Corp., and competitive local exchange carriers like TCG are expected to bid on the deal.

Joan Marshall, who is AT&T;'s top Maryland-based executive, echoed other experts when she said it is too soon to tell how much taxpayers are likely to save. "I haven't even read the details of the request for proposals," she said.

Pub Date: 4/23/97

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