Homeland Security Act

Posted: 1/2003

special report
To Serve & Protect

Homeland Security Act:
How Will Telecom Benefit?

By Josh Long

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

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

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

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

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

"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

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

"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.


Security Statistics
170,000 Number of employees within the
new Department of Homeland Security
22 Number of government agencies
that will merge under the department
$2.13 billion Homeland Security’s 2003 IT

Source: INPUT


Alcatel Inc.

AT&T Corp.

Carnegie Mellon University

Cisco Systems Inc.

Department of Commerce

Department of Defense

Department of Homeland Security


Federal Communications Commission

Gartner Inc.


Information Technology Association of



Lucent Technologies Inc.

Microsoft Corp.

National Reliability and Interoperability

National Science Foundation

Science Applications International Corp.

Sprint Corp.

Telcordia Technologies Inc.

VeriSign Inc.

Verizon Communications Inc.

WorldCom Inc.

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