In an Orbit All Its Own

The satellite industry is poised for a period of new growth, and the Washington area is likely to be the main beneficiary

P> Satellites orbit around Washington, D.C. But more importantly, so too does the industry that designs, manufactures, services and maintains them.

Manufacturers and designers of spy satellites are based here. Commercial suppliers of satellite imagery call the area home. A slew of grand ventures to blanket the globe with satellites have set up shop around the Beltway -- and they've hired some of the most expensive lobbyists and lawyers in town.

These are little heralded facts -- and ones that will grow in importance now that the industry seems poised for a renewed period of explosive growth following a difficult transition from the halcyon days of the Cold War era.

"The satellite business will probably be more exciting during the next 10 years than it has been over any comparable interval since it all began more than 30 years ago," said David Thompson, president of Orbital Sciences Corp., Dulles, Va. Thompson believes the satellite industry will generate more than a half trillion dollars in the next 10 years.

Even considering Thompson's self-interest, his main point is hard to dispute: The satellite industry is growing. Government policy is opening new markets, increasing competition and decreasing regulation. The Federal Communications Commission's spectrum auctions, which have raised nearly $15 billion for non-satellite projects, are now being made for companies planning global constellations of satellites.

Satellite stocks are at record highs, increasing 100 percent to 200 percent from last year. And the industry itself has undergone a sometimes painful transition from dependence on a few customers -- mostly government -- to a much wider market -- the world's sophisticated consumers, with cell phone in one hand and a laptop in the other.

"The age of consumer satellite services has begun," said Thompson. And chances are the designing, engineering and integration of those systems is taking place somewhere in the sleek, low-slung office buildings that house the Washington area's ever-expanding high-tech community.

It is a familiar story. Just as the burgeoning Internet industry emerged from government-funded work, so too has the $15 billion satellite industry. In both cases, the government's main role was primarily as a consumer and only secondly as a direct developer. The Department of Defense, NASA and the nation's intelligence agencies were some of the largest and earliest adopters of the technologies. Their collective buying power created economies of scale and a concentration of engineering expertise unmatched anywhere else in the world.

This critical mass of consumption and development expertise has made Washington a center for satellite services and technology, just as it has similarly affected the emerging Internet business.

Step back and consider: The birth of commercial satellite communications in Washington dates back to April 6, 1965, when INTELSAT launched Little Early Bird, the first spacecraft in what is the largest and most sophisticated commercial satellite system on earth. Today, INTELSAT is the international leader in launching satellites that provide data, voice and video communications.

The U.S. signatory to INTELSAT, COMSAT, is also located here. It was organized in 1963 by President John F. Kennedy when he signed the Communications Satellite Act. Founded in Washington, the company was headed by Leo Welch, the former chairman of Standard Oil of New Jersey, and Dr. Joseph Charyk, undersecretary of the Air Force in the Kennedy administration. Today, COMSAT operates five satellites, which are more than 20 years old, from its Clarksburg, Md., control center. COMSAT sells satellite service to telecommunications companies, such as AT&T, Basking Ridge, N.J., and Sprint Corp., Kansas City, Mo., that in turn provide service to their customers.

COMSAT can count other major satellite companies among its Washington neighbors, including Motorola's Iridium and more than 50 commercial satellite communication firms. The commercial firms call the Netplex their home for several reasons. Even though they do commercial work, they still do most of their business with the Department of Defense, specifically in areas of remote sensing, mapping and mobile communications.

A large chunk of this money comes from spy agencies, so it is difficult to precisely measure its impact, which is one of the reasons that both the Internet and the satellite industry have clustered around Washington with little notice or fanfare.

In addition, satellite companies also need to stay close to the regulatory agencies, such as the FCC, that play a large role in their livelihood. For example, the FCC provides the licenses and approvals to launch satellites into the congested spectrum of airwaves.

Finally, the area offers a rich resource of high-tech professionals, which makes experienced personnel easy to find. These individuals work in one of the hundreds of large engineering and services firms that do everything from building robotic arms for NASA to designing computer systems for automatic tax filing.

According to Mike Ahan, vice president of Final Analysis Inc. in Greenbelt, Md., when budget cuts rocked NASA and the Department of Defense, satellite companies dependent on government and defense business found out quickly that they needed new business avenues to pursue. "The lack of funds from the major customers in satellite communications converted the industry into the commercial market," he explained. Still, he envisions a critical and continuing role for government. "In this industry, new technology requires a lot of money, and the government has to fuel that."

Combined, all these factors have created a complex symbiosis of government buying, federal regulation, commercial spin-offs and engineering expertise -- a critical combination that could only exist in the Washington area.

This coalescence of factors has spawned activity up and down the satellite industry food chain, from launch services to the processing of data that satellites produce.

Ted Nanz, president of Spot Image Corp. in Reston, Va., said Reston's Sunrise Valley Drive has more people working in the growing geographic information systems and mapping markets than any other place in the world. This industry feeds off the imagery and other data that satellites produce. Spot Image, a leader in the $100 million commercial remote space sensing market, is surrounded by the U.S. Geological Survey, the Defense Mapping Agency and competitor Intergraph Corp., "There are a number of companies that are spending close to $5 billion to get into this industry to compete with us," said Nanz.

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