MASTER OF THE MEGAPROJECT

Not long after Cingular Wireless decided last fall that it was going to upgrade its network to 3G, it came to another important decision: It couldn't handle the migration on its own.

The carrier's transition to enhanced data rates for global evolution (EDGE) involved the installation of general packet radio service (GPRS) and GSM voice technologies over Cingular's existing TDMA and analog networks.

“It is a huge project, and a lot of work,” said Tom Keathley, Cingular's executive director of supply chain management. “Some of the projects were getting too big for us to manage on our own.”

Typically, Cingular would assume the role of project manager for its infrastructure buildouts, doling out the work and overseeing the efforts of various equipment vendors, engineering firms and construction subcontractors. However, in March the carrier turned to Bechtel Corp., a 104-year-old engineering firm with considerable experience overseeing extremely large projects.

Cingular isn't alone. AT&T Wireless and Sprint also have turned to Bechtel for infrastructure buildouts. Currently, Bechtel is managing infrastructure builds in 70 cities combined for Cingular and AT&T Wireless and 17 cities for Sprint, according to the company. The AT&T project calls for Bechtel to build or upgrade more than 10,000 cell sites.

Among Bechtel's major accomplishments was the construction of the San Francisco Bay Area Rapid Transit (BART) system, the 32-mile undersea Channel Tunnel that connects England and France, and Hoover Dam, the largest civil engineering project in U.S. history. Keathley said it was that type of experience that drew him to Bechtel. “They're very skilled at this,” he said. “Plus, their size and scope allows them to deliver a much better total package and economies of scale that result in better pricing.”

According to Chuck Adams, director of implementation services for AT&T Wireless, Bechtel's size allows the carrier to adjust quickly to fluctuations in its growth plans. “They give us the ability to rapidly scale up or down,” he said.

That carriers are looking to outsource mega projects to companies such as Bechtel doesn't surprise Andrew Cole, head of the wireless practice for Adventis. “This is a very important trend that extends beyond wireless,” Cole said. “Carriers are getting beaten up by Wall Street, and they're looking to outsource high-cost operations.”

Adams agreed: “Outsourcing allows our employees to focus on our core competencies, which is to manage and maintain a high-quality network.”

George Conniff, president of Bechtel's telecom and industrial unit, said he began to see a role for his company in the mid-'90s, when carriers started to turn to their equipment vendors to handle their buildouts for them. The reason was simple: Vendors were providing much, if not all, of the financing for these projects.

That logic turned out to be flawed. According to Conniff, vendors typically lacked the core competencies to see mega projects through from start to finish. While it would be difficult to find fault with the quality of the vendors' equipment, that's where their expertise ended, Conniff said. Consequently, they all too often were unable to carefully integrate all of the crucial aspects of a project, from site selection to construction to testing.

That opened a door for Bechtel.

“We recognized that carriers needed a comprehensive solution,” Conniff said. “These are very capital-intensive projects, and carriers need to start generating revenue right away,” Conniff said.

Bechtel got its first contract in 1996 and has steadily built this aspect of its business ever since.

The demise of the competitive carrier market over the past couple of years has helped to accelerate Bechtel's penetration into the carrier infrastructure deployment market. “Vendors lost a lot [of money] when the CLECs collapsed, and they can no longer provide financing. That leveled the playing field,” Conniff said.

Specifically, once carriers had to search out more traditional forms of financing, they were no longer beholden to the equipment vendors and could search out other types of firms to handle the buildouts.

Nevertheless, Conniff recognized early on that Bechtel would need to develop its own telecom competency if it wanted to sustain growth. To achieve this competency, Bechtel earnestly hired telecom engineers and built a laboratory in which it tests vendor equipment.

“We don't pretend to be Bell Labs, but we're capable of objectively telling a customer where it needs to go and how to get there,” Conniff said.

Because Bechtel doesn't sell telecom equipment, it has the luxury of being technology-agnostic when recommending solutions, an approach its customers find appealing, said Conniff. “Since we don't have a stake in the equipment, we don't feel the need to make false promises or statements,” he said.

Another approach that Cingular has found appealing, according to Conniff, is Bechtel's development of a single set of standards and tools to manage its project.

Bechtel is hoping to add to its telecom portfolio by leveraging its experience with Cingular, AT&T Wireless and Sprint. Conniff also is hoping to get business from equipment vendors. “Lucent and Nortel have laid off their implementation people because they, too, have discovered that it's more efficient to outsource this activity,” he said.

While it is less likely that carriers would outsource the overall operation of their networks, there are some instances in which it might make sense, according to Philip Marshall, program manager of wireless mobile technologies for The Yankee Group.

One such instance would be when a carrier has transitioned to a new technology and no longer wishes to deal with its legacy equipment. For example, a TDMA carrier that is overlaying GSM — such as Cingular — might be inclined to outsource the operations of the TDMA network in order to focus on GSM. However, Marshall doesn't believe a carrier would turn to a firm such as Bechtel for that kind of work. He also hinted that Bechtel would be wise to get as much business as it can right now because the window of opportunity could slam shut at any time.

“Transitional migrations by AT&T and Cingular are creating a great deal of additional opportunity for outsourced services. But once these migrations have been completed, we will see a decline in opportunities for companies like Bechtel.”

Not so, according to AT&T's Adams. “Bechtel can do a range of things for us beyond building new cell sites, such as site modifications and upgrades. So there should be a recurring role for them.”