WASHINGTON-Despite interest in steering Iraq reconstruction business to American companies through competitive bidding and White House reluctance to meddle in wireless rebuilding in the war-torn country, the Bush administration has awarded what appears to be a no-bid GSM mobile-phone contract to a troubled U.S. telecom firm that subcontracted with a vendor from a European country absent from the U.S.-led coalition.
U.S. wireless firms, which for weeks have been scrambling in frustration to position themselves for business opportunities in Iraq, were taken by surprise to learn last week that MCI (formerly WorldCom Inc.) received a contract from the Pentagon to install a mobile-phone system in Baghdad. More surprising still was the revelation that L.M. Erisson, Sweden’s mobile-phone giant, had teamed up with MCI.
But it is unclear whether the Pentagon-MCI contract will even stand.
Last Wednesday, the House Armed Services Committee passed a defense authorization bill requiring government justification for non-competitive Iraq reconstruction contracts. The measure covers contracts dating back to Oct. 1, 2002. The bill is headed to the House floor this week. Senate lawmakers are pushing a similar measure.
“Yes, we have been awarded the contract, and we are scheduled for implementation in June,” said Natasha Haubold, an MCI spokeswoman.
Haubold declined to give details about the deal, but Pentagon officials said the MCI contract is capped at $34 million and covers up to 10,000 phones.
Navy Lt. Dan Hetlage, a Department of Defense spokesman, said L.M. Ericsson is one of the subcontractors. Hetlage said Ericsson would supply 2,000 phones.
Michelle French, an Ericsson spokeswoman, refused to say whether the firm was an MCI subcontractor.
“We don’t have any direct knowledge of this,” said Norm Sander, director of global strategic issues at Motorola Inc.
Motorola, the top U.S. wireless manufacturer, wants to compete for mobile-phone and police radio business in Iraq. Late last week, there was an indication Motorola’s quest for a public-safety radio contract in Iraq is moving forward. Motorola makes mobile phones based on U.S.-developed CDMA and European-engineered GSM technologies.
Qualcomm Inc., the San Diego firm that owns most CDMA patents, declined to comment.
Rep. Darrell Issa (R-Calif.) attracted criticism after sponsoring a bill in March to reserve wireless reconstruction contracts in Iraq for U.S. companies.
Last week’s revelations about the DoD-MCI wireless contract represent yet another confusing chapter in reconstruction efforts in Iraq-made all the more challenging by looting and lawlessness-which already have led to a shakeup of top U.S. personnel in Baghdad.
The Bush administration recently decided not to award a major mobile-phone contract as part of efforts to rebuild Iraq, despite strong evidence that military leaders, U.S. contractors, humanitarian workers and Iraqi government officials are in desperate need of communications.
Has administration policy on Iraq wireless reconstruction changed?
“We needed something quick,” said Air Force Lt. Col. Kenneth McClellan. “Our purpose is to get some towers up and working. … This is not the basis for long-term, national coverage in Iraq.”
The State Department did not return a call for comment.
It is unclear whether the contract was handled by the Pentagon’s Office of Reconstruction and Humanitarian Assistance.
MCI’s Haubold referred all questions on the contract to DoD’s Linton Wells II. Wells is principal deputy assistant secretary of defense for command, control, communications and intelligence. Wells is temporarily assuming oversight of military spectrum policy until a replacement is found for Steven Price, who resigned as Pentagon spectrum czar earlier this month.
“It is critical to have communications if Iraq is going to get on its feet quickly,” said Joe Nordgaard, managing director of Spectral Advantage L.L.C., a wireless consulting firm that has worked with U.S. officials on Iraq reconstruction. Nordgaard, a strong CDMA proponent, previously worked at Lucent Technologies Inc.
MCI, a long-time government contractor that last November admitted to improper accounting and overstating $9 billion in earnings in a settlement with the Securities and Exchange Commission, is set to emerge from Chapter 11 bankruptcy protection later this year. MCI was a top paging and mobile-phone reseller before exiting the wireless business.
Last year, MCI teamed with Afghan Wireless Communications Co.-a unit of New York-based Telephone Systems-to expand GSM mobile-phone service in Afghanistan, following U.S. bombing in the aftermath of the Sept. 11, 2001, terrorist attacks against the United States. The Pentagon was not involved in that contract.
Some industry sources speculated the MCI wireless network could have operational limitations. They said roaming beyond Baghdad might not be possible because the MCI wireless network will operate on GSM radio frequencies-1900 MHz-different than 900 MHz and 1800 MHz used in surrounding countries.
Not so, responded Richard Fogg, of the Reading, United Kingdom-based public relations firm Companycare Communications Ltd., which represents the GSM Association.
“No matter which frequency MCI’s network operates on, the Iraqi people will be able to roam in any neighboring countries that use GSM,” said Fogg.
The GSM Association said “the award of a contract to MCI clearly reflects recognition by the U.S. government of the value of GSM to Iraq’s integration with the rest of the region and the world.” GSM is used by 195 countries worldwide.
Interwave Communications International Ltd., which this month announced plans to open an office in Baghdad to address pressing wireless needs in the Iraqi capital, declined to say whether it is assisting MCI to provide stop-gap wireless service in Baghdad.
“We’re pursuing a number of opportunities for the marketplace,” said Cal Hoagland, chief financial officer of Interwave.
