Commerce Defers to Court on Eosat Decision

he Commerce Department appears to have bowed to pressure from a Lanham, Md. firm in deciding to let a federal judge rule whether the contract to operate America's Landsat satellites should be opened to competition.

Eosat, which admits to having made $80 million off the government's satellites since 1985, argues a federal law protects its rights as the exclusive marketer for images captured by the satellites. But other earth mapping firms say 10 years of a government-granted monopoly is enough and they want a chance to bid on the business.

"Eosat has made $80 million from zero investment, isn't that enough?" asked an industry source. "Opening up the Landsat market would revolutionize the remote sensing business and make the industry take off."

The Commerce Department appeared ready to allow others to bid for the contract when its agreement with Eosat expired on Dec. 31, said a potential Eosat competitor. After receiving a half-dozen requests from firms challenging the extension of Eosat's contract, the agency reportedly realized other firms could manage the satellites under the same terms -- namely, at no cost to the government.

"The Commerce Department expressed strong interest in our submission," said Robert Clemons, manager of commercial remote-sensing systems at Dallas-based E-Systems, one of the firms that told Commerce it may want to compete with Eosat, which is a joint venture between Martin Marietta, Bethesda, Md., and Hughes Aircraft of Los Angeles.

But instead of opening up the contract, the Commerce Department extended Eosat's agreement for two months to allow a federal judge to rule on the issue. "Now it's up to the courts to decide if Eosat gets preferential treatment," said Mike Mignogno, who heads the Landsat commercialization division for Commerce's National Oceanic and Atmospheric Administration.

Eosat filed a motion on Dec. 27 asking the U.S. District Court in Washington to judge whether its contract can be renewed without opening it up for outside bids. But the notion that one firm can say other companies can't compete is absurd, said Clemons. "Imagine if it were possible for everyone to go to court to guarantee exclusive rights to a government contract," he said.

Eosat says it's just following the law -- namely, the Land Remote Sensing Policy Act of 1992, which spokesman Dick Keating says gives the company exclusive rights to market Landsat data. However, Keating said he could not explain how the legislation protects the firm's rights to continue operating Landsat 4 and 5 because the case is under judicial review.

The 1992 law does not mention Eosat by name, although it includes a portion about contract negotiations with the "Landsat 6 contractor," which was Eosat before Landsat 6 disappeared after its Oct. 1993 launch. Landsat 6 was supposed to replace Landsat 4 and 5, which are operating well beyond their three-year design lives.

If the judge rules Eosat has no protection under the law, the contract will be offered up to bidders. An open competition is expected to result in a drop in Landsat data prices.

Eosat will have to decrease the $2,500 to $4,400 price it charges for each Landsat image if others bid on the contract, say industry sources. Lower-cost data would directly benefit the federal government because it is the largest consumer of the earth images.

No one will say how much less Landsat images are likely to cost under a new operator, but the low guess is $200, the amount the U.S. government charges for pictures more than 10 years old. The high cost of Landsat data is stalling development of a commercial industry, said one source.

Today's remote sensing market is worth about $400 million worldwide. By the turn of the century it will grow to more than $2 billion, according to Commerce Department estimates. That includes expected revenues from high-resolution spy-quality images. Low-resolution Landsat images cover wide areas and provide enough detail for most land-use applications, including crop assessment, mineral exploration, and environmental monitoring. The groups using Landsat images range from private companies that employ them for petroleum exploration to non-profit organizations that monitor deforestation around the world by comparing images over time. More than 100 firms buy remote sensing data from Eosat and resell the photos.

Last year, 124-employee Eosat began selling data from the Indian IRS and Japanese JERS 1 satellites, in addition to their core business of Landsat pictures. Eosat would not say what percentage of revenues they expect to earn from distributing non-Landsat images. Taking over the Landsat contract would only be profitable for the five or six firms that have ground systems already in place, said Clemons. It costs $1.4 million to operate the Landsat satellites each month, according to government estimates. But Clemons said allowing others to bid on Eosat's contract would benefit not only the firm that wins the business, "but everyone that uses Landsat data."