oversight

Examination into Possible Savings Through the Use of the Federal Telecommunications System (FTS) Telephone Network by the Department of Defense Installations

Published by the Government Accountability Office on 1971-02-18.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

DEFENSE       DIVISION                                                                                    a7
              B-146864                                                                 FE5 18 1971

              The Honorable
              The Secretary           of Defense

                         Attention:         Assistant   to the       Secretary       of Defense
                                            (Telecommunications)

              Dear Mr.         Secretary:

                     We are examining      into savings
                                                     -       possible        through    the use
              of the Federal .T.e.lecommunLcati~~~~_~~~~~e;li“iF~~~j'.“i~~~~~hone e            net-
                                                                                      ,IWIw,I-*U-,.,
          [   wor'k by -Department    of Defense       (DOD)installati?%.               Our  r-e-                   ?""-
              view is to determine       whether     increased      use of FTS by DOD
              would reduce Government         telecommunications           costs.     This let-
              ter presents     the results      of our review       to date.        We request
              your comments on our findings            and your answers to certain
              questions    concerning     DOD communications          policy,      as we inter-
              pret it.

              COMPARISON OF AUTOVON AND FTS SERVICE

                       The Automatic          Voice Network           (AUTOVON) is the principal
              long-distance            voice communications              network     of DOD. It is de-
              signed       to handle essential             command operations,              intelligence,
              logistics,          and administrative            traffic.        It offers         special
              technical         features,      such as alternate             routing      for increased
              survivability             and multilevel        precedence        service       for priority-
              call     override         of other    calls.        Because AUTOVON is designed                  to
              serve DOD activities,                service      over the system is usually                  con-
              fined      to traffic        between locations             of these activities.               Com-
              pletion        of AUTOVON calls           to nonsubscribers,            off-network,          is
              permitted;          but,    since AUTOVON is limited                to the local-dialing
              areas of existing              AUTOVON switchboards,              many locations            can-
              not be reached.              As a result        we find that commercial                 long-
              distance        facilities       provide      the only means of reaching                    many
              locations         called     by DOD activities.

                         The FTS telephone        network,    which is managed by the Gen-
     'T‘! era1           Services   Administration         (GSA), serves executive  agen-  17
     5 ties              and departments,       including     DOD.


                                            50TH ANNIVERSARY        1921- 1971
B-146864



provide direct dial access         to system subscribers   and also
off-network   completion    to   those locations   not served by the
network.    FTS subscribers      are able to reach most telephones
in the continental     United    States, Hawaii, and Puerto Rico
through. the FTS network.

CURRENTDOD POLICY
        Current DOD policy concerning the use of FTS service by
DOD installations,       as promulgated by an August 6, 1964, mem-
orandum from the Deputy Secretary of Defense, states that,              1
where AUTOVONservice adequately satisfies             the requirements
of a DOD installation,       such service will not be duplicated
by the addition     of FTS service.       The memorandum states fur-
ther that, where it is economical and feasible            to do so, FTS
service may be used in lieu of AUTOVON, but in no case will
DOD installations       become subscribers    to both systems without
approval from the Assistant        Secretary of Defense (Installa-
tions and Logistics).        We understand that this approval au-
thority    has recently    been transferred     to the Assistant    to
the Secretary of Defense (Telecommunications).
       In our opinion,    the above policy emphasizes the use of
either FTS or AUTOVONand discourages            concurrent    use.    In re-
ality,   many DOD installations      have divided communities of in-
terest and cannot be adequately         served by one system alone.
AUTOVONdoes not offer the latitude           of off-network       completion
that is required     to communicate with commercial concerns and
other telephone subscribers        outside the DOD community, and
FTS does not offer the precedence,          survivability     features,
and overseas capability       that are required       for effective     com-
mand and control.

      We have been told by an official      from the Office of the
Assistant  to the Secretary of Defense (Telecommunications)
that, although current DOD policy permits concurrent           use of
AUTOVONand FTS, very few requests have been received--appar-
ently because of the reluctance      of the military     departments
to forward them.   We  believe  that   this   reluctance   is fostered
by the restrictive   context of current DOD policy.          This be-
lief is reinforced  by the fact that only one of the four
                                  2
B-146864


installations   we visited    had made any sustained      effort   to obtain
FTS service.

        Our review revealed that, prior to the request,           the one
installation      that requested FTS service--the        San Francisco
Procurement Agency of the Army Materiel            Command--was using
both FTS and AUTOVONservices through a GSA-operated manual
switchboard.       When the switchboard      was converted by GSA in
January 1969 to a direct        in-and-out    dial Centrex system, the
installation      was informed orally      by its major command that
direct     access to both FTS and AUTOVONwas prohibited           by DOD
policy and that use of one of the systems would have to stop.
Nevertheless,       the agency submitted,     through channels, a for-
mal request for approval to retain the use of both systems,
on the grounds that the loss of FTS would result             in a sub-
stantial     increase in telephone costs.
      The request was approved by the installation's major
command and forwarded to the Department of the Army for sub-
mission to DOD. The request was denied at this level,   how-
ever,  and returned with the  following explanation,

      "Your request for approval *** to have access to
      both the AUTOVONand FTS systems was discussed in
      the Office of Telecommunications     Policy, ASD (IGL).
      During discussions  it became apparent that the re-
      quest would not be favorably    considered   if submit-
      ted."
The subsequent loss of FTS service resulted           in an increase in
the agency's average commercial toll costs          from under $100 to
about $4,900 a month.

SAVINGS AVAILABLE THROUGHUSE OF FTS
         Our review at four DOD installations,     representing   each
of the military        services, showed that the AUTOVONsystem alone
did not satisfy        the voice communications requirements    of many
DOD activities.         We found that a relatively   large number of of-
ficial      calls were being completed over commercial long-distance
facilities,       because the locations   called could not be reached
through the AUTOVONsystem.
                                      3
B-146864



       To determine whether these commercial toll calls could
have been placed over the FTS at a lower cost to the Govern-
ment, we examined into 100 percent of the toll calls for a
3-month period at each installation          visited.      Nonofficial
calls and those calls not eligible          for FTS (calls with a toll
of 204 or less, collect     calls,    credit-card      calls,  third-party
calls,   calls outside of the continental          United States, and
message-unit    calls)  were eliminated.        The remaining calls
were considered     to be FTS eligible      and were used in our eco-
nomic analysis.

        To determine the cost to the Government of providing           DOD
installations     with sufficient      trunk capacities     to handle cur-
rent commercial-call      volume over the FTS, we used a GSA anal-
ysis procedure prescribed         by the Assistant    Commissioner,
Transportation      and Communications Service.         This procedure is
based on the following       assumptions.

      1. The average FTS call requires   two access facilities
         and one interswitch  (or backbone) facility.

      2. The average total cost per FTS call           is $0.905     (based
         on GSA FY 1971 estimated costs).

      3. The average overall   interswitch       facility    costs   are
         equal for each location     studied.

      4. The FTS interswitch facility         cost factor    is $0.30 a       .
         call (based on GSA estimated         costs).

       The estimated monthly recurring  cost of providing   FTS
service at the locations    reviewed was determined as follows:

      1. The cost of FTS access facilities,       such as the cir-
         cuits and termination     equipment required    to carry each
         installation's  potential     call volume, was computed us-
         ing current Public Utility      Commission-approved    tariff
         rates.


                                    4
B-146864



       2. The potential      call volume was increased   by 20 percent
          as a minimum stimulation       factor to account     for in-
          creased     system usage when the commercial     tolls   were
          eliminated.

       3. The estimated          call   volume was multiplied             by the inter-
          switch   facility         cost factor  to determine             the inter-
          switch   cost.

       4. The .sum of the access facility           and interswitch      costs
          was used to represent         the total    monthly   recurring
          first-year     cost of providing        FTS service.      Any other
          rental     or purchase   costs incidental       to the installa-
          tion of FTS would be paid by GSA and would be re-
          flected     in the interswitch      cost factor.        (See apps. I
          through     IV for FTS analysis      work sheets.)

       Our review        at the four DOD installations                 showed that,       on
the basis of these determinations,                  the projected          annual call
volume indicated           in table   I could have been placed               over the
FTS system at an estimated              cost to the Government              of only
$147,000.        Since present       commercial       services      cost about
$366,000,      this    difference     represents        a potential        saving of
about $219,000         a year,     or about 60 percent.             We recognize        that
the estimated         saving     of $219,000      comprises      total     governmental
savings . GSA bills            its customers       at its average cost for a
call   whether      or not the cost to service              a particular        customer
is more or less than average.                 In this      case, we estimated           that
DOD would pay about $185,680               (on the basis of 170,976              calls,
times the $0.905 a call             GSA billing       rate,    times the stimula-
tion   factor--1.20))          or a saving      of about $180,128           annually
from our projection            of annual costs of about $366,000.
B-146864



                                        Table I
                                            Estimate of
                                         commercial calls
                                          which would be               Estimated    Savings
                                            placed over                  cost       through
                                          FTS--per month                 using      use of
                                                  Commercial           FTS- -per   FTS- -per
                                        Number       cost                month       month
Presidio of San Francisco                  2,255       $ 4,917         $   1,251   $   3,666
Mare Island Naval Shipyard                 3,607         10 ,556a          3,316       7,240
San Francisco Procurement Agency           2,435          5,275            1,994       3,281
McClellan Air Force Base                   5,951          9,736b           5,664       4,072
    Monthly total                       -14.241        $30.484         $J2.22~     $ 18.2%
    Projected   annual total            170.976        $265.808        $146.70?    $_219.1,9&
aIncludes charges of $4,494 for 1,730 calls via Interstate   WATS (Wide Area
 Telephone Service),  a service offered by A.T. & T. (American Telephone and
 Telegraph Company) which provides a special line allowing the subscriber to
 make unlimited calls to any location in a specific  geographical zone for a
 flat monthly charge.
bIncludes   charges of $9,500 for   5,820 Interstate      WATScalls.

ACCESSTO FTS
       Discussions with GSA officials     at both the Washington and
the local administrative    levels revealed that GSA was willing
and able to handle DOD telephone traffic          over FTS. GSA offi-
cials said that FTS currently      had facilities     to handle traffic
for a large number of DOD installations          and anticipated  that
this traffic  would affect,    only slightly,      the present total
average cost a call.
       GSA told us that methods for providing         DOD installations
with access to FTS were simple and readily           available.      The
switchboards     of DOD installations     would interface     with FTS at
the nearest FTS switching         center.  The interface     would be
provided by.means of leased feeder circuits           connecting     the
two points;    the cost would be paid by GSA.

       Installations currently receiving  local-only   telephone
service from GSA switchboards   would be provided with access
to FTS through simple rewiring    of the switchboards.
                                           6
B-146864



CONTROLOVER UNAUTHORIZEDACCESSTO FTS
        We have been informed that several means of controlling
unauthorized      use of FTS are available.           For example, admin-
istrative     instructions      and educational      programs may provide
adequate control        in many instances.        If  more control    is re-
quired, both mechanical and manual controls                are available      to
restrict    the unauthorized       use of FTS. Mechanically,          tele-
phone switchboards          can be wired to limit the number of tele-
phone instruments         that are able to dial FTS circuits.             In
this manner only parties with official               need and prior ap-
proval would be able to use FTS. For manual control,                    tele-
phone switchboards          can be wired in such a manner that the
only way to obtain an FTS circuit             would be through the
switchboard      operators.      This  method    provides tight control
over the use of FTS circuits,           but it is costly in terms of
operator time and switchboard           efficiency.

        We believe that these methods are adequate for control-
ling the unauthorized     use of the FTS system by DOD users.
AUTOVONcan continue to serve as the primary means of commu-
nication    between DOD activities,   and FTS can provide a less
expensive means, in lieu of commercial telephone service,        for
DOD activities     to communicate with commercial organizations,
civilian    agencies, and other telephone subscribers.
      We believe that dual access to AUTOVONand FTS could                     re-
sult in substantial  reductions  in commercial long-distance
telephone costs at selected DOD installations.
        We recognize that savings would be available        only at in-
stallations     where the community of interest      extends beyond
the military     establishment;   for example, at installations
with supply- and procurement-type        missions.    However, with
hundreds of DOD installations        in the United States as poten-
tial users of FTS, savings could be substantial.            We recog-
nize that the question of consolidating          FTS and AUTOVONnet-
works into a common communications         system is currently    under
consideration      by DOD as well as by other Government activi-
ties.     It appears to us, however, that economy through
                                        7
B-146864



expanded use of FTS in lieu      of commercial     service   should be
effected    until such time as the larger      question    of consoli-
dating   these networks   has been resolved.

        Although       current    DOD policy   provides     approval      procedures
for the use of both AUTOVON and FTS at the same facility,                          we
believe       that the retention        of approval     authority      at the DOD
level,      the impression        conveyed by the Deputy Secretary's              mem-
orandum of August 6, 1964, and the informal                     discouragement       of
dual access as displayed              in the San Francisco         Procurement
Agency!s        request,     deter potential    users from initiating            ac-
tion to obtain           dual access.

     For us to properly           evaluate    current DOD policy             regarding
the use of FTS facilities,            we would appreciate    your            answers
to each of the following           questions.

       1.   Is the current policy      intended   to discourage concur-
            rent use by DOD activities        of both AUTOVON and FTS
            facilities?

       2. Has DOD issued    any policy       statement   or guidelines     in-
          structing   DOD installations         on the procedures      to be
          followed  in obtaining        dual access to FTS and AUTOVON?

       3. In view of the potential     savings     that exist   through
          dual access to AUTOVON and FTS, are there disadvan-
          tages foreseen    that would deter     issuance    of policy
          statement   or guidelines   encouraging      such use of FTS?

       4. Are the disadvantages,               if     any, of sufficient      import
          and extent  to invalidate                 the potential     economies?

        We would appreciate     receiving,     within   30 days, your an-
swers to the above questions          and any comments or suggestions
you may wish to make.       Information       you provide    will    be eval-
uated along with the information            we are obtaining      during   this
review.     Copies of this    letter     are being sent to the Director,


                                           8
B-146864



Office of Management and Budget; the Director,      Office of
Telecommunications    Policy,  Executive Office of the President;
the Administrator    of General Services;   and the Director, De-
fense Coknunications    Agency.
                                Sincerely   yours,


                                Dire                       n
                                                                                              APPENDIX I


                                        FTS ECONOMIC ANALYSIS


AGENCY--Presidio             of San Francisco

LOCATION--San         Francisco,       California
                                   B
                      Total toil
                    less--message-unit
                                      calls                                                       m>
                                                                                       Person-to-person
                    calls;     tolls   of 20C                                        calls--only      60% of
                      or less; collect,                                              this charge is FTS
        A           credit-card,       third-                    C                           eligible
Toll:   for           party calls;       and            CommeI;cial                                    40% of
  month             calls outside        CONUS       Interstate     WATS               Total           total
   1970               Calls          Charges        Calls       Charges              charge            charge
March and
  April              1,677       $ 4,869.10                                         $217.20           $ 86.88
April   and
  &Y                 2,352         5,093,15              -   .              -        333.85            133.54
May and
  June               2,737         5,160.25          -                  -            375.00            150.00
Total                6,766       $15,122.50          -                  -           $926.02           $370.42

MONTHLY AVERAGE CALLS--&C                = 6,766    f 3 - 2,255
MONTHLY AVERAGE CHARGES--B+C - (40% of D) = $14,752                               f 3 = $4,917

TRTJNKREQUIREMENTS--2,255 calls at 6 minutes average holding      time require
  12 circuits  (including provision for 20-percent stimulation      factor)  at
  grade P.02 (grade P.02 means two of every 100 calls will     not be com-
  pleted).
FTS COSTS:
    1. The average            number of calls a month (2,255) multiplied      by
       a stimulation            factor of 1.20 equals 2,706 projected    calls.
         2. Projected    call volume 2,706 multiplied    by backbone cost
        :   factor    of $0.30 a call equals total    FTS backbone costs                               $   812
        3. Telephone company charges for                 12 circuits,           including     mile-
           age and termination equipment                 costs                                             439
            Total     FTS costs                                                                        $;1,,251
ESTIMATED MONTHLY SAVINGS USING FTS:
    Current   average commercial cost                                                                  $4,917
    Estimated   FTS cost                                                                                1,251
            Estimated        savings                                                                   $3,666-
                                                                               APPENDIX II


                                       FTS ECONOMICANALYSIS

AGENCY--Mare Island        Naval Shipyard

LOCATION--Vallejo,        California

                          B
              Total toil calls                                                     D
             less--message-unit                                        Person-to-person
             calls; tolls of 2OC                                      calls--only     60% of
  ,A          or less; collect,                                       this charge is FTS
Tolls        credit-card,     third-                   C                     eligible
 for          party calls;      and              Commercial                           40% of
month        calls outside CONUS             Interstate   WATS        Total           total
1979         Calls          Charges        Calls         Charges      charge          charge
April        2,274       $ 6,003.05        1,817      $ 4,204.04     $182.20           $ 72.88
&Y           2,412         6,166.OO        1,522        4,916.76      146.90             58.76
June            945        6,217.25        1,851        4,359.80      167.25             66.90
Total        5,631       $18,:86.30        5,190      $13,480.60     $469.35           $198.54
K)NTHLY AVERAGECALLS--B-t-C 10,821 f 3 = 3,607
MONTHLYAVERAGECHARGES--B-K - (40% of D> = $31,668 + 3 = $10,556
TRUNK REQUIREMENTS--3,607 calls at 6 minutes average holding time require
  16 circuits  (including provision for 20-percent stimulation factor) at
  grade P.02 (grade P.02 means two of every 100 calls will not be com-
  pleted).

FTS COSTS:
    1. The average number of calls a month (3,607) multiplied                  by a stimula-
       tion factor of 1,20equals4,328  projected  calls,

        2. Projected call volume 4,328 multiplied by backbone cost
           factor of $0.30 a call equals total FTS backbone costs                      $ 1,298
        3. Telephone company charges for 16 circuits,          including   mile-
           age and termination equipment costs                                           2,018
            Total    FTS costs                                                         $ 3,316
ESTIMATEDMONTHLYSAVINGS USING FTS:
    Current average commercial cost                                                    $10,556
    Estimated FTS cost                                                                   3,316
            Estimated    savings                                                       $ 7,240
                                                                                     APPENDIX III


                                    FTS ECONOMICANALYSIS



AGENCY--San Francisco             Procurement   Agency

LOCATION--Oakland,          California

                             i!
                Total toll calls                                                       z!
               less--message-unit                                          Person-to-person
               calls:    tolls   of 20C                                  calls--only        60% of
                 or less; collect,                                       this charge is FTS
               credit-card,      third-                    C                     eligible
        A       party calls;       and              Commercial                            40% of
Toll: for      calls outside CONUS               Interstate    WATS        Total          total
  month         Calls          Charges          Calls        Charges     charge           charge

Nov. 1969           2,340   $ 5,508.75            -                                             -
June 1970           3,069 .   6,283.30            -
July   "            1,895     4,032.95           --           -            -                -
Total               7,304     $15,825.00         ;                -            s            -
                                                              -            -
MONTHLYAVERAGECALLS--Bi-C 7,304 f 3 = 2,435
MONTHLYAVERAGECHARGES--BiC - (40% of D) = $15,825 + 3 = $5,275

TRUNR REQUIREMENTS--2,435 calls at 6 minutes average holding time re-
  quire 12 circuits  (including provision for 20-percent stimulation
  factor) at grade P.02 (grade P'.O2 means two of every 100 calls will
  not be completed).
FTS COSTS:
    1. The average number of calls a month (2,435) multiplied      by a
       stimulation factor of 1.20 equals 2,922 projected    calls.

        2. Projected call volume 2,922 multiplied by backbone cost
           factor of $0.30 a call equals total FTS backbone costs                       $       877

        3. Telephone company charges for 12 circuits,                 including
           mileage and termination  equipment costs                                         1,117

            Total      FTS costs                                                        $$,994

ESTIMATEDMONTHLYSAVINGS USING FTS:
    Current average commercial cost                                                     $5,275
    Estimated FTS cost                                                                   1,994

            Estimated       savings
                                                                                   APPENDIX IV


                                     FTS ECONOMIC ANALYSIS


*AGENCY--McClellan       Air     Force    Base

 LOCATION--Sacramento,           California

                            B
               Total toil calls                                                    2
             less--message-unit                                          Person-to-person
             calls;     tolls  of 20C                                  calls--only      60% of
    A          or less; collect,                                       this charge is FTS
 Toils       credit-card,
               party calls;:
                               third-
                                 and
                                                       c
                                                 Commercial
                                                                               eligible
                                                                                          40% of
                                                                                                .
  for
 month     . calls outside       CONUS        Interstate    WATS         Total            total
 1970        Calls            Charges           Calls    Charges       charge             charge

 &Y           109              $274.70         5,905       $ 9,500     $17.40            $ 6.96
 June          99               199.40         6,093         9,500      30.60             12.24
 July          97               265:50         5,551         9; 500     30.90             12.36

 Total        305              $739.60        17,459       $28,500     $78.90            $31.56

 MONTHLY AVERAGE CALLS--B-i-C 17,854              f 3 5 5,951

 MONTHLY AVEWGE CHARGES--B-t-C - (40% of D) = $29,208                   + 3 = $9,736
 TRUNK REQUIREMENTS--5,951 calls at 6 minutes average holding    time re-
   quire 23 circuits  (including provision for 20-percent stimulation
   factor) at grade P.02 (grade P.02 means two of every 100 calls will
   not be completed).

 FTS COSTS:
     1. The average        number of calls a month (5,951) multiplied      by a
        stimulation        factor of 1.20 equals 7,141 projected    calls.
         2; Projected    call volume 7,141 multiplied    by backbone cost
            factor    of $0.30 a call equals total    FTS backbone costs                 $2,142

         3. Telephone company charges for 23 circuits,                including
            mileage and termination  equipment costs                                       3,522

             Total   FTS costs                                                           $5,664

 ESTIMATED MONTHLY SAVINGS USING FTS:
     Current   average commercial cost                                                   $9,736
     Estimated   FTS cost                                                                 5,664

             Estimated   savings