Homeland Security Act

Posted: 1/2003

special report
To Serve & Protect

Homeland Security Act:
How Will Telecom Benefit?

By Josh Long

The new Homeland Security Act as well as heightened awareness of potential physical and cyber vulnerabilities are creating both obligations and opportunities for telecom service providers, their vendors and channel partners. TWENTY-TWO FEDERAL AGENCIES comprising 170,000 employees will merge under the Department of Homeland Security, representing one of the most massive reorganizations in the history of the United States government.

President Bush signed the Homeland Security Act 14 months after terrorist attacks killed some 3,000 people in New York, Virginia and Pennsylvania. The law grants Homeland Security director Tom Ridge resources to analyze threats, guard the country's borders, coordinate responses to emergencies and protect critical infrastructure, including the more-than-a-century-old public switched telephone network.

"The Department of Homeland Security is the largest reorganization in the federal government since the creation of the Department of Defense in 1947," research firm INPUT wrote in a November analysis of the Homeland Security Act. "The creation of the Department of Homeland Security presents some of the most significant integration challenges facing the U.S. government in more than forty years."

The law could provide somewhat of a boon for the beleaguered IT industry, including the scandal-laden telecommunications sector. However, analysts say the extent to which it could aid technology companies is modest, particularly in the short term.

Eric Paulak, vice president for the telecom group of Gartner Inc., says the Homeland Security Act "won't kick-start the industry." He adds that a robust gross domestic product (GDP) [as the Department of Commerce reported this fall] is more likely to prop up the sector than homeland security.

"It's hardly a blip on the radar. We don't see any real direct impact that is going to help them very substantially," says Paulak, though he adds companies that have contracts with the federal government, such as Telcordia Technologies Inc. and WorldCom Inc., are likely to benefit. Consultants working with the government also should benefit, he says.

The IT sector had its worst year on record last year, recording a growth rate of negative 2.3 percent, reports research firm IDC. However, IDC predicts the $875 billion IT industry to recover in 2003 with a growth rate of at least 5 percent. IT spending within certain industries, including the government sector, grew last year.

Bush has requested roughly $2.13 billion for IT spending in 2003 alone within the Department of Homeland Security -- a figure INPUT forecasts will be even higher. The Homeland Security Department has one year to merge the agencies, says INPUT.

Research firm IDC estimates that less than 5 percent of the Homeland Security Department's $38 billion annual budget will be earmarked for external IT spending for hardware, software and IT security vendors. The research firm reports IT spending would not occur until mid-to-late 2003. Jocelyn Young, program manager for public sector and health care research at IDC, says it will take five to seven years for the government to restructure. How that translates into IT spending is uncertain, she says. "I think there is going to be a lot learned ... from the first 100 days of the department and how agile it is in making its decisions," Young says. "A majority of the Homeland Security spending is not really IT. Whether it's an opportunity to most IT vendors is another question."

Sources say they are not aware that the law places any new demands on service providers. "It's not clear that there actually are any new demands [on the telecom sector]," says Tony Rutkowski, vice president of the NetDiscovery strategy at VeriSign Inc. "It certainly calls for more information sharing between the private sector and the government with respect to vulnerabilities, and establishes a focal point for that."

Among some provisions relevant to the IT and telecom world:

• The Homeland Security Act restricts certain disclosures telecom providers are required to make publicly about their networks under the Freedom of Information Act, an industry source says. The aim of the provision is to hinder terrorists from learning about network vulnerabilities, Rutkowski explains.

• The law includes a measure limiting financial damages arising from claims over the deployment of anti-terrorism technologies, says Shannon Kellogg, vice president of information security programs and policy at the Information Technology Association of America, which represents more than 400 companies, including AT&T Corp. and Microsoft Corp.

The law also increases requirements on government agencies to enhance information security. "We think this kind of provision does bolster focus and spending on government security and could aid the likes of AT&T and WorldCom," Kellogg says.

In a keynote speech before INPUT's annual FedFocus conference in October 2002, Jim Flyzik, senior advisor to Ridge, outlined technologies used to support the Homeland Security Department's objectives. They include consolidating the criminal and terrorist watch lists, creating a Homeland Security Department portal, establishing secure video and Web conferencing and promoting secure Internet expansion to facilitate information sharing between local, state and federal authorities.

Flyzik notes the Homeland Security Department also must integrate databases that are not mutually accessible and replace wireless technology that either is old or incompatible across spectrum, reports INPUT.

One industry person says the act could spawn a bidding war between AT&T and WorldCom, which have some of the most lucrative contracts with the federal government. WorldCom came under fire this fall by public groups for continuing to hold valuable federal contracts despite its multibillion-dollar accounting scandal.

WorldCom did not return a phone call seeking comment on the Homeland Security Act. An AT&T spokesman says, "We don't view it as [having] a major impact on us." Many of the AT&T executives covering public policy were not immediately available to comment.

Sprint Corp. spokesman John Polivka says the law "absolutely" creates opportunities for partnerships. "Connectivity is going to be crucial as they try to get this department implemented and integrated, and we believe we have got a particularly valuable role as a systems provider, network services provider and connectivity source," Polivka says. Sprint, similar to its long-distance rivals AT&T and WorldCom, provides the Federal Bureau of Investigation, the Immigration and Naturalization Service and the Department of Defense (among other government agencies) with applications and network connectivity.

Lucent Technologies Inc. declined to comment on the Homeland Security Act. A spokesman for Nortel Networks Corp. did not return a phone call seeking comment.

Cisco Systems Inc. has been selling to the government for close to 10 years and has an organization focused on homeland security solutions, a spokeswoman says. "We certainly are focused on working very closely with these organizations, and we understand they view information technology as a priority to solving their problems, and we absolutely want to work with them to help them solve those problems," she says.

David Owen, vice president of government relations at Alcatel Inc., says telecommunications might comprise about a third of the IT budget. "I think IT has got a significant contribution to make to the Homeland Security Department's mission." However, he and other sources warned it could be some time -- possibly a year or more -- before the government is ready to award contracts and begin integrating systems.

"It's going to take a while before they start pulling the trigger on procurement actions," Owen says, but when they do, "I would say they are going to have a real bandwagon effect."

Susan Cavender Butta, a spokeswoman for No. 1 local phone company Verizon Communications Inc., says it is too early to comment on the ramifications of the Homeland Security Act. "There are many decisions that are going to be made months down the road that we won't speculate on at this point," she says.

Owen says broadband could play a crucial role in helping the government fight and respond to terrorism. In a letter to Ridge, the 1,100-member Telecommunications Industry Association says broadband capabilities could enable biometrics screening used to identify someone at U.S. points of entry, improve remote surveillance of borders, airports and train stations, help workers gain fast access to information remotely and support telemedicine at a disaster site, among other functions.

Though vulnerable -- as the Sept. 11 attacks demonstrated in New York -- the public switched telephone network is fairly robust. And the federal government is not starting from scratch. Various agencies have been working for years to integrate network systems and improve security.

"The telecom system is always pretty interoperable," Owen says. "It's not like they are starting with a blank sheet of paper here."

For example, a main objective of the National Reliability and Interoperability Council, which was formed under the Federal Communications Commission, is improved interoperability among telecom networks, Owen says. The council, which gained more visibility after Sept. 11, was scheduled to meet Dec. 6 in Washington.

As of deadline, the NRIC was working on putting together an asset-sharing agreement among operators that would lead to collaboration during a crisis, such as a terrorist attack. That type of collaboration already was evident as Verizon grappled to restore phone service after the Twin Towers collapsed. Alcatel, for instance, ripped out equipment from a lab and carried it to the New York border, where police escorted the equipment to Manhattan.

Source: INPUT