The U.S. government is expected to release in April an RFP for a 10-year, $20 billion telecom services buy that is thought to be the largest pending network deal in the world.

The so-called Networx program will provide legacy and leading-edge voice, data and video services to all U.S. federal agencies. Every major U.S. telecom carrier - AT&T, MCI, SBC, Sprint, Qwest and Verizon - is expected to bid on it.

Networx is so huge and so important to the overall financial health of U.S. carriers that it is attracting an unprecedented level of interest from telecom industry executives, CEOs and directors.

"If you accept that it's worth $20 billion, Networx is the largest deal that's out there right now," says Jim Payne, senior vice president and general manager of Qwest Government Services Division. "Even if you look at it conservatively and say it's worth $3 billion or $4 billion, it's still the largest deal."

Payne says the Networx bid is getting "a lot of attention" from Qwest's corporate headquarters. "They have reviewed Networx at the senior executive level a half-dozen times, and we are regularly briefing them on it," he says.

Networx is "a very, very high priority within AT&T," says Bob Collet, vice president of engineering at AT&T Government Solutions. "We've had some very senior management attention to Networx . . . If you look at AT&T's revenue of $36 billion a year, Networx is meaningful."

Networx also is attracting interest on Capitol Hill. The House Committee on Government Reform held its third hearing on the program in March.

Committee Chairman Rep. Tom Davis (R-Va.) said Networx has the "potential to be both the largest telecommunications procurement ever as well as the one that creates the federal government's first digital, government-wide interoperable communications network."

Davis isn't the only one keeping tabs on Networx. The whole telecom industry is watching to see which companies snare this mega-deal.

Run by the General Services Administration (GSA), Networx will replace an expiring series of contracts known as FTS2001. Sprint and MCI hold the main FTS2001 contracts, but Qwest, AT&T, SBC and other rivals hold what are called crossover contracts that let them bid on federal network jobs.

The FTS2001 contracts expire in 2007. To replace FTS2001, the GSA plans to award seven contracts under its Networx program, which is divided into two parts: Universal and Enterprise.

With Networx Universal, service providers will offer domestic and international telecom services ranging from older frame relay and ATM to cutting-edge IP VPNs and VoIP. Universal encompasses 37 services including Web hosting, messaging, managed security, wireless and satellite. GSA expects to award two Universal contracts.

The Networx Enterprise contracts are geared toward smaller, specialized carriers that can't meet the Universal requirements. Carriers must bid a core set of nine IP and wireless services, but other capabilities are optional. GSA says it expects to award five Enterprise contracts.

The GSA released a draft RFP for Networx in October 2004, and it plans to issue the final RFP on April 1. Bids are expected to be due in July, with an award date planned for April 2006.

Dozens of telecom and network companies are angling for a piece of Networx. So far, 40 companies - including service providers, systems integrators and small businesses - have submitted comments to the GSA regarding this program.

Traditional carriers including AT&T, MCI, Sprint, Qwest and SBC are likely bidders on Networx Universal and also are expected to bid on Networx Enterprise.

"It's fairly well understood for companies like AT&T, MCI and Sprint that they have to bid on Universal as the prime contractor," AT&T's Collet says. "If you bid on Universal, the incremental effort to bid on Enterprise is pretty small. God forbid you lose on Universal. Enterprise is your alternative."

Networx Enterprise is expected to attract Verizon and specialized carriers such as Level 3 Communications, WilTel Communications, IDT and Broadwing Communications. Systems integrators including Electronic Data Systems and Computer Sciences also are interested in Enterprise.

"The systems integrators are starting to play a much stronger role in the federal telecom market," says Ray Bjorklund, senior vice president at Federal Sources, a government market research firm. "The systems integrators are picking up capabilities in long-haul and IP-type solutions and integrating them with functional solutions such as supply-chain management and financial management."

The reason so many service providers and systems integrators are interested in Networx is because its predecessor contracts have been so lucrative to the winners. Incumbents MCI and Sprint have racked up revenues of about $3 billion each on FTS2001, industry insiders say.

Sprint, for example, has served federal agencies for 16 years under FTS2001 and its predecessor FTS2000.

"We have over $800 million a year in revenue in the government space, and it grows at a very nice rate for us," says Tony D'Agata, vice president and general manager for Sprint's Government Systems Division. "In 2004, we grew at 24%, which is nice growth compared to the rest of the market."

Networx represents a huge amount of revenue and long-term commitment from a stable customer, which is unusual given the turnover on commercial deals.