Telecommunications: Costs Reported by Federal Organizations for Fiscal
Year 1995 (Letter Report, 06/17/96, GAO/AIMD-96-105).

In a May 1996 report (GAO/AIMD-96-95), GAO identified agencies that are
using the Federal Telecommunications System (FTS) 2000 and compared
telecommunications costs between agencies that used FTS 2000 and those
that did not. This report provides additional information on
governmentwide telecommunications costs. GAO surveyed 42 federal
agencies and totaled their fiscal year 1995 telecommunications costs,
broken out by the following five categories: FTS 2000 services, non-FTS
2000 long-distance services, local telecommunications services, wireless
services, and telecommunications support contract services. GAO also
discusses reported local access costs generally associated with FTS 2000
telephone calls and the government's reported fiscal year 1995 costs for
the Purchase of Telecommunications and Services.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  AIMD-96-105
     TITLE:  Telecommunications: Costs Reported by Federal Organizations 
             for Fiscal Year 1995
      DATE:  06/17/96
   SUBJECT:  Telephone
             Contract costs
             Service contracts
             Cost analysis
             Data transmission
             Telecommunication
IDENTIFIER:  Federal Telecommunications System 2000
             FTS 2000
             
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Cover
================================================================ COVER


Report to the Subcommittee on Treasury, Postal Service, and General
Government, Senate Committee on Appropriations

June 1996

TELECOMMUNICATIONS - COSTS
REPORTED BY FEDERAL ORGANIZATIONS
FOR FISCAL YEAR 1995

GAO/AIMD-96-105

Government Telecommunications Costs

(511095)


Abbreviations
=============================================================== ABBREV

  CIA - Central Intelligence Agency
  FEMA - Federal Emergency Management Agency
  FTS - Federal Telecommunications System
  GAO - General Accounting Office
  GSA - General Services Administration
  POTS - Purchase of Telecommunications and Services
  OMB - Office of Management and Budget
  SDIS - Switched Digital Integrated Services

Letter
=============================================================== LETTER


B-271967

June 17, 1996

The Honorable Richard C.  Shelby
Chairman
The Honorable J.  Robert Kerrey
Ranking Minority Member
Subcommittee on Treasury, Postal
  Service, and General Government
Committee on Appropriations
United States Senate

Section 629(c) of Public Law 104-52, the Fiscal Year 1996 Treasury,
Postal Service, and General Government Appropriations Act, requires
us to deliver a comprehensive analysis of the cost of certain federal
agency telecommunications services.  As required, on May 31, 1996, we
provided you with our report identifying which agencies are using the
Federal Telecommunications System (FTS 2000) and comparing
telecommunications costs between selected agencies that use FTS 2000
and those that do not.\1 This report provides additional information
you requested on governmentwide telecommunications costs. 
Specifically, as agreed with your offices, we surveyed 42 executive
branch departments and government agencies (hereafter referred to as
federal organizations) to identify total fiscal year 1995
telecommunications costs, broken out by the following five
categories:  FTS 2000 services,\2 non-FTS 2000 long-distance
services, local telecommunications services, wireless services, and
telecommunications support contract services. 

This report also provides information that you requested on reported
local access costs generally associated with FTS 2000 telephone calls
and the government's reported fiscal year 1995 costs for the Purchase
of Telecommunications and Services (POTS).\3

As agreed with your offices, because of the short time frame for
responding to this request, we did not independently verify the
accuracy of the cost information provided by federal organizations
during our review. 


--------------------
\1 Telecommunications:  FTS 2000 Cost Comparison (GAO/AIMD-96-95, May
31, 1996). 

\2 The FTS 2000 program is managed by the General Services
Administration (GSA). 

\3 POTS contracts cover the purchase, installation, maintenance,
repair, removal, and relocation of new and used telephone equipment. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

The 41 federal organizations that responded to our survey\4

reported that they spent about $2.4 billion for telecommunications
services in fiscal year 1995.  In many cases, federal organizations
provided estimates of fiscal year 1995 telecommunications costs
because actual costs were unknown.  Furthermore, the total costs
reported are understated because some organizations did not report
complete cost information.  We also found differences to exist
between the FTS 2000 costs reported by federal organizations and GSA. 
We attempted to reconcile these differences where we could. 

While FTS 2000 costs paid by federal organizations include telephone
company charges for local access, these charges are not separately
identified in FTS 2000 vendor pricing information.  The latest
information GSA could provide on local access was based on a 1994
analysis which estimated that, generally, as much as 40 to 50 percent
of the cost of an FTS 2000 telephone call was for local access. 
According to the Assistant Commissioner for Service Development,
Federal Telecommunications Service, since then the cost of switched
voice service on FTS 2000, particularly the cost for network
transport, has dropped significantly.  As a result, GSA's 1994
analysis may not represent current local access costs. 

Government organizations also obtain various types of
telephone-related equipment and services through GSA's POTS contract. 
For fiscal year 1995, GSA reported that government organizations
spent a total of about $41 million under the POTS contract. 


--------------------
\4 The Central Intelligence Agency (CIA) did not provide us with its
telecommunications costs for fiscal year 1995.  The agency reported
that it does not use FTS 2000 services and that the non-FTS 2000
information requested was classified.  The CIA added that it had
recently provided information services costs to the congressional
appropriations committees in its classified budget submissions. 


   BACKGROUND
------------------------------------------------------------ Letter :2

Telecommunications--the electronic transmission of information of any
type, including voice, data, and video--are vital to government
agencies.  Long-distance voice and data communications, provided by
the federal government's FTS 2000 program, as well as other services
provided by hundreds of telephone companies, help government agencies
to carry out various missions and provide service to millions of
customers around the world. 

The FTS 2000 program was established under GSA's leadership to
provide inter-city communications--basic long-distance service--to
federal agencies at a lower cost than regular commercial telephone
service.\5 The government began using FTS 2000 in 1989.  The FTS 2000
network provides basic switched service for voice, packet switched
service for data, video transmission service, and other categories of
services\6

that support almost 1.7 million federal government users
nationwide.\7

Through GSA, federal organizations obtain FTS 2000 services from one
of two contract carriers--AT&T or Sprint.  Federal organizations are
charged a fee for each type of basic long-distance service they use
under the FTS 2000 program.  Among other things, this fee covers the
contract carrier's costs for transporting voice, data, or video over
its network as well as charges the carrier pays other telephone
companies for local access, which is the interconnection of the FTS
2000 network to local telephone company networks.  The fee federal
organizations pay for services they use under the FTS 2000 program
also includes an 8-percent fee to cover GSA's cost to administer the
program. 

In addition to FTS 2000, federal organizations also contract with
private industry for other types of telecommunications services and
support.  Specifically, this includes: 

  -- international communications and domestic long-distance service
     in geographic areas where FTS 2000 is not available or in cases
     where GSA has granted an agency exception to the use of FTS 2000
     services;\8

  -- local telephone and other related services;

  -- wireless services such as cellular phones, paging, and
     satellite; and

  -- support contract services such as maintenance for communications
     equipment. 

Federal organizations also use GSA's POTS contract to obtain
telecommunications services.  This GSA-managed contract allows
federal organizations to purchase and install, maintain, repair,
remove, and relocate new and used telephone equipment.  While
government agencies use POTS to obtain various types of
telecommunications equipment, such as telephones, electronic key
systems, and cable and wiring, POTS is also used to obtain
maintenance and repair services on government-owned telephone
equipment. 


--------------------
\5 International long-distance service is not available under the FTS
2000 program. 

\6 A glossary of telecommunications services is included at the end
of this report. 

\7 With a few exceptions, use of FTS 2000 services is mandatory for
executive branch departments and agencies unless they are granted an
exemption by GSA. 

\8 Federal Information Resources Management Regulation, Part
201-24.001. 


   SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :3

To identify telecommunications services costs, we developed and sent
a questionnaire to 42 federal organizations requesting that they
report fiscal year 1995 costs for FTS 2000 services, non-FTS 2000
long-distance services, local telecommunications services, wireless
services, and telecommunications support contract services.  As
agreed with your offices, our survey included the 14 executive branch
departments and 28 of the government's largest agencies and
organizations--those which employ about 1000 or more full-time
equivalent staff.\9

To validate our questionnaire, we pretested it with GSA and the
Department of the Interior to ensure that it properly defined and
included all telecommunications services cost categories.  We also
obtained information from GSA showing total charges paid by federal
organizations under POTS contracts during fiscal year 1995 and the
estimated percentage of FTS 2000 costs that government agencies are
charged for local access.  As also agreed with your offices, we did
not independently verify the accuracy of the cost information
provided by federal organizations.  However, we discussed the cost
information with each federal organization to confirm that our report
presented the information as they had provided it to us.  We also
consulted with them to confirm our understanding of all responses and
to discuss and clarify questions we had about the information the
organizations provided.  Appendix I provides further details on our
scope and methodology.  Appendix II lists the departments and
agencies we surveyed, and our questionnaire is reproduced in appendix
III. 

We conducted our work from February 1996 through May 1996 in
accordance with generally accepted government auditing standards,
except we did not independently verify the accuracy of the cost
information provided by federal organizations during our review.  We
provided a draft of this report to GSA and the Office of Management
and Budget (OMB) for comment.  We have incorporated comments as
appropriate. 


--------------------
\9 Forty-one federal organizations provided cost information in
response to our survey.  As noted earlier, the CIA did not provide
its telecommunications costs for fiscal year 1995. 


   AGENCY REPORTED FISCAL YEAR
   1995
   COSTS FOR TELECOMMUNICATIONS
   SERVICES
------------------------------------------------------------ Letter :4

Federal organizations we surveyed reported that they spent about $2.4
billion in fiscal year 1995 for telecommunications services. 
Telecommunications costs reported by the organizations included about
$761 million for FTS 2000 services, $379 million for non-FTS 2000
long-distance services, $700 million for local services, $33 million
for wireless services, and $511 million for support contract
services.  Figure 1 provides agency reported costs for each category
of service. 

   Figure 1:  Fiscal Year 1995
   Telecommunications Costs by
   Federal Organization

   (See figure in printed
   edition.)



   (See figure in printed
   edition.)

It is important to note that about 50 percent of the federal
organizations responding to our survey had to estimate costs for at
least one category of service because actual costs were unknown. 
Moreover, because organizations did not include complete information
in some cases, cost estimates understate actual costs.  For example,
estimated costs given by the Department of Transportation are
understated because these costs do not include operational
communications costs paid by the Federal Aviation Administration. 
Similarly, the Department of Agriculture's cost estimates also
understate actual costs because the Department did not include
comprehensive cost figures for all the telecommunications services
used by some agencies, including the Forest Service and the Food
Safety and Inspection Service. 

We also obtained fiscal year 1995 FTS 2000 cost information from GSA
and compared this with cost information provided by the federal
organizations in our survey.  According to our survey, 40 federal
organizations reported spending a total of about $761 million on FTS
2000 services.\10 In comparison, GSA information showed that the same
40 federal organizations spent about $720 million for FTS 2000
services.  Our analysis of these differences showed that more than
half of these organizations reported different FTS 2000 costs than
GSA.  In this regard, 18 organizations reported the same FTS 2000
costs as GSA or costs that differed with GSA by less than 1 percent. 
Another 11 organizations reported costs that differed with GSA by up
to 10 percent and 11 more organizations reported cost differences
greater than 10 percent. 

Of the 11 organizations that reported having differences greater than
10 percent, 3 organizations--including the Federal Emergency
Management Agency (FEMA), the Panama Canal Commission, and the
Department of Transportation--reported FTS 2000 costs totaling more
than twice what GSA reported.  The Panama Canal Commission and FEMA
were unable to explain the reason for these differences.  The
Department of Transportation attributed most of the differences to
FTS 2000 charges that are billed through the Department of Defense. 

Appendix IV shows overall telecommunications costs reported by all
federal organizations we surveyed for each one of the five categories
of service, and appendix V provides details on each federal
organization's response to our survey and GSA's reported costs for
FTS 2000 services. 


--------------------
\10 The Federal Reserve System does not use FTS 2000 and the CIA did
not provide FTS 2000 cost information. 


   FTS 2000 LOCAL ACCESS CHARGES
   AND POTS CONTRACT COSTS
------------------------------------------------------------ Letter :5

Since charges incurred by federal organizations for local access
under the FTS 2000 program are not identified separately in pricing
information by AT&T and Sprint--the government's two FTS 2000 service
providers--we asked GSA for these costs.  The latest information GSA
could provide on local access was based on a 1994 analysis which
estimated that, generally, as much as 40 to 50 percent of the cost of
an FTS 2000 telephone call was for local access.  According to the
Assistant Commissioner for Service Development, Federal
Telecommunications Service, since then the cost of switched voice
service on FTS 2000, particularly the cost for network transport, has
dropped significantly.  As a result, GSA's 1994 analysis may not
represent current local access costs. 

Federal organizations also use GSA's POTS contract to purchase
various types of telephone-related equipment and services.  For
fiscal year 1995, GSA reported that federal organizations spent about
$41 million for telecommunications equipment and services under the
GSA POTS contract.  Figure 2 shows federal organizations' reported
expenditures under the POTS contract during fiscal year 1995. 

   Figure 2:  Purchase of
   Telecommunications and Services
   Contract Costs by Federal
   Organization

   (See figure in printed
   edition.)



   (See figure in printed
   edition.)


   AGENCY COMMENTS
------------------------------------------------------------ Letter :6

We provided a draft of this report to OMB and GSA for comment.  An
OMB official stated that the report contained very useful information
and made a few technical suggestions, which we incorporated as
appropriate.  GSA had no comments. 


---------------------------------------------------------- Letter :6.1

As agreed with your offices, unless you publicly announce the
contents of this report earlier, we will not distribute it until 30
days from its issue date.  At that time we will send copies to the
House Committee on Appropriations; the Administrator, General
Services Administration; the Director, Office of Management and
Budget; all federal departments and agencies included in this report;
and other interested parties.  Copies will also be made available to
others upon request. 

Please contact me at (202) 512-6240 if you or your staff have any
questions.  Major contributors to this report are listed in appendix
VI. 

Jack L.  Brock, Jr.
Director, Information Resources
  Management/General Government Issues


SCOPE AND METHODOLOGY
=========================================================== Appendix I

To identify government agencies' telecommunications services costs,
we surveyed 42 federal organizations about their fiscal year 1995
telecommunications expenditures.  As agreed with the requesters, our
survey included the government's 14 executive branch departments as
well as 28 of the largest agencies and organizations--those which
employ at least 1000 full-time equivalent staff. 

Also as agreed with the requesters, we obtained cost data for five
major categories of telecommunications services, which included FTS
2000 services, non-FTS 2000 long-distance services, local
telecommunications services, wireless services, and
telecommunications support contract services.  Under each category of
service, we asked that cost information be broken out by specific
types of service, such as switched voice and switched data service. 

To ensure that our survey was as comprehensive and complete as
possible, we researched telecommunications-related materials to
identify the specific types of telecommunications services under each
major category.  This included a thorough review of government
telecommunications regulations and guidelines, GSA literature and
published reports describing FTS 2000 and non-FTS 2000 services,
telephone company and vendor information discussing
telecommunications services offered to the federal government,
numerous agency reports, and other telecommunications-related
documentation and materials. 

Based on our research, we prepared a draft questionnaire and a
detailed glossary that defined the key telecommunications terminology
discussed in our questionnaire.  We discussed the content and format
of our draft questionnaire with GSA and made modifications based on
these discussions to ensure that the (1) terminology was unambiguous
and clearly defined and (2) questions included in the questionnaire
were relevant and appropriate.  We conducted pretests with selected
agencies including GSA and the Department of the Interior.  Comments
obtained during the pretests were used to further refine the content
and format of the questionnaire to ensure its effectiveness as a tool
for identifying telecommunications services cost information. 

We also obtained information from GSA to identify agency charges paid
under POTS contracts during fiscal year 1995.  Information was not
available showing actual FTS 2000 local access charges paid during
fiscal year 1995 because FTS 2000 vendors do not distinguish these
charges from others in FTS 2000 pricing information.  We were able to
obtain GSA estimates, based on a 1994 analysis, showing what
percentage of the cost of an FTS 2000 telephone call was for local
access.  According to the Assistant Commissioner for Service
Development, Federal Telecommunications Service, since then the cost
of switched voice service on FTS 2000, particularly the cost for
network transport, has dropped significantly.  As a result, GSA's
1994 analysis may not represent current local access costs. 

As agreed with the requesters, we did not independently verify the
accuracy of the information provided by the federal organizations. 
However, we discussed the cost information with each federal
organization to confirm that our report presented the information as
they provided it to us.  We also consulted with them to confirm our
understanding of all responses and to discuss and clarify questions
we had about the information the organizations had provided. 

Although we asked each federal organization to identify its
telecommunications costs as either actual or estimated, many
organizations did not do so.  Therefore, we contacted representatives
from each organization to obtain additional information and ask them
to describe the cost data they provided in terms of actual costs,
estimated costs, or costs that were either incomplete, unavailable,
or unknown for each of the five types of telecommunications services
covered by our questionnaire.  To assist them in describing their
data, we developed the following list of categories for the
organizations to use.  We also used these categories as footnotes in
appendix V to note how each federal organization described its data. 

a.The totals for this category of telecommunications service and the
breakouts are actual amounts. 

b.The totals for this category of telecommunications service are
actual amounts, but the breakouts are estimates. 

c.The totals for this category of telecommunications service show
estimates and the breakouts are either estimated, unavailable, or
unknown amounts. 

d.The totals for this category of telecommunications service show
actual amounts and the breakouts are either unavailable or unknown
amounts. 

e.Costs are unavailable or unknown. 

In presenting the cost information provided by each department and
agency (see appendix V), we also included footnotes as appropriate to
describe special circumstances that affected the accuracy and
completeness of agency cost data. 

We also compared FTS 2000 costs that federal organizations reported
on our survey with FTS 2000 cost information from GSA, the billing
agent for all the agencies using FTS 2000 services.  In doing so, we
noted some differences between GSA's FTS 2000 costs and FTS 2000
costs reported by federal organizations and attempted to reconcile
these differences with GSA and the respective organizations.  Our
work was performed in Washington, D.C.  We conducted our work from
February 1996 through May 1996 in accordance with generally accepted
government auditing standards except that we did not independently
verify the accuracy of the data that the federal organizations
provided to us.  We provided a draft of this report to GSA and the
Office of Management and Budget for comment.  We have incorporated
comments as appropriate. 


FEDERAL ORGANIZATIONS SURVEYED BY
GAO
========================================================== Appendix II

EXECUTIVE BRANCH DEPARTMENTS

Agriculture
Commerce
Defense
Education
Energy
Health and Human Services
Housing and Urban Development
Interior
Justice
Labor
State
Transportation
Treasury
Veterans Affairs

AGENCIES AND OTHER ORGANIZATIONS

Agency for International Development
Central Intelligence Agency\1
Environmental Protection Agency
Equal Opportunity Employment Commission
Executive Office of the President\2
Federal Communications Commission
Federal Deposit Insurance Corporation
Federal Emergency Management Agency
Federal Reserve System
Federal Trade Commission
General Services Administration
National Aeronautics and Space Administration
National Archives and Records Administration
National Labor Relations Board
National Science Foundation
Nuclear Regulatory Commission
Office of Personnel Management
Panama Canal Commission
Peace Corps
Railroad Retirement Board
Securities and Exchange Commission
Small Business Administration
Smithsonian Institution
Social Security Administration
Tennessee Valley Authority
United States Army Corps of Engineers
United States Information Agency
United States Postal Service


--------------------
\1 As noted earlier, the Central Intelligence Agency reported that it
did not spend any money on FTS 2000 services in fiscal year 1995 and
would not provide us with the amount it spent on non-FTS 2000
telecommunications services because this information was classified. 
The CIA further noted that it had already reported information
services costs to the congressional appropriations committees in the
agency's recent classified budget submissions. 

\2 For this survey, the Executive Office of the President provided
cost information for the following offices:  Council of Economic
Advisers; Office of Policy Development; Office of Administration;
Office of Science and Technology Policy; White House Office; Office
of National Drug Control Policy; Council of Environmental Quality;
National Security Council; Office of Management and Budget; United
States Trade Representative; Office of the Vice President; and the
Vice President's residence. 


GAO SURVEY QUESTIONNAIRE
========================================================= Appendix III



   (See figure in printed
   edition.)



   (See figure in printed
   edition.)



   (See figure in printed
   edition.)


TOTAL TELECOMMUNICATIONS COSTS FOR
FISCAL YEAR 1995 BY CATEGORY OF
SERVICE
========================================================== Appendix IV



   (See figure in printed
   edition.)


DETAILED SUMMARY OF AGENCY
RESPONSES TO GAO'S SURVEY AND
GSA'S REPORTED COSTS FOR FTS 2000
SERVICES
=========================================================== Appendix V

This appendix presents detailed summaries of the fiscal year 1995
telecommunications cost information reported by each federal
organization in our survey.  Each organization's reported costs are
arranged according to the five major types of services--FTS 2000,
non-FTS 2000, local, wireless, and support contract.  In addition, we
included FTS 2000 costs provided by GSA.  As noted earlier, the
information presented here reflects costs as they were reported by
each federal organization and GSA and we did not verify the accuracy
of any of this information. 



   (See figure in printed
   edition.)



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   edition.)



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MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix VI

ACCOUNTING AND INFORMATION
MANAGEMENT DIVISION, WASHINGTON,
D.C. 

Steve A.  Schwartz, Project Director
Mark D.  Shaw, Project Manager
William D.  Hadesty, Technical Assistant Director
Mirko J.  Dolak, Technical Assistant Director
Franklin W.  Deffer, Assistant Director
Ronald B.  Bageant, Assistant Director
Patricia M.  Macauley, Senior Information Systems Analyst
Brenda A.  James, Senior Information Systems Analyst
Mary T.  Marshall, Information Systems Analyst
Cristina T.  Chaplain, Communications Analyst
James F.  Loschiavo, Technical Assistance Specialist


GLOSSARY
=========================================================== Appendix 0


      ALLOCATED FTS 2000 SERVICE
------------------------------------------------------- Appendix 0:0.1

Switches are owned by GSA and shared by more than one customer
agency.  Telephone numbers and calls are not identifiable; therefore,
GSA prorates the monthly charges to the customer based upon the
number of lines each agency has at that location. 


      DEDICATED TRANSMISSION
      SERVICES
------------------------------------------------------- Appendix 0:0.2

A telecommunications service for which the private line transmission
of voice or data on a dedicated circuit between two or more end
locations is continuously available and from which pricing is not
sensitive to the numbers of minutes or calls. 


      EXCLUSIVE FTS 2000 SERVICE
------------------------------------------------------- Appendix 0:0.3

Agency managed switches owned or leased by a specific agency. 
Telephone numbers and calls are identifiable to the agency user. 


      FEDCARD
------------------------------------------------------- Appendix 0:0.4

Federal telephone calling cards that allow callers to make certain
types of calls from off-net locations. 


      ISDN
------------------------------------------------------- Appendix 0:0.5

Integrated Services Digital Network.  A network that provides
end-to-end connectivity to support a wide range of services,
including voice and nonvoice services not provided by FTS 2000. 


      LOCAL SWITCHED VOICE & DATA
------------------------------------------------------- Appendix 0:0.6

At a minimum, costs under this category should include any line
charges (dial tone), message units (usage), and any enhanced
features, such as call waiting, call forwarding, etc. 


      PACKET SWITCHED SERVICES
------------------------------------------------------- Appendix 0:0.7

A service in which messages are broken down into smaller units called
packets, which are then individually addressed and routed through the
network, including x.25 packet, frame relay, SMDS, and ATM. 


      SWITCHED DATA SERVICE
------------------------------------------------------- Appendix 0:0.8

A circuit switched telecommunications service which has the
capability of transmitting data at rates of 56 to 64 kilobits per
second over conditioned access lines. 


      SWITCHED DIGITAL INTEGRATED
      SERVICES (SDIS)
------------------------------------------------------- Appendix 0:0.9

SDIS provides the capability of integrating voice, data, image, and
video services by means of digital connectivity to FTS 2000 users. 


      SWITCHED VOICE SERVICE
------------------------------------------------------ Appendix 0:0.10

A circuit switched telecommunications service which has the
capability of transmitting voice or data. 


      TELEPHONE CALLING CARDS
------------------------------------------------------ Appendix 0:0.11

Commercial telephone calling cards that allow callers to make certain
types of calls from off-net locations. 


      VOICE MAIL SERVICE
------------------------------------------------------ Appendix 0:0.12

This category includes standalone voice mail services or systems that
are provided separately from local service. 


*** End of document. ***