Washington's Satellite Connection

The satellite industry is poised for a renewed period of explosive growth after the end of the Cold War

P> Satellites orbit around Washington, D.C. But more importantly, so 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 that will 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 more than $20 billion for non-satellite projects, are now being planned for companies designing global constellations of satellites.

Satellite stocks hit 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 a 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 are taking place somewhere in the 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 has the $15 billion satellite industry. In both cases, the government's role was primarily of 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.

The birth of commercial satellite communications in Washington dates back to April 6, 1965, when INTELSAT launched Little Early Bird, the first spacecraft in the largest and most sophisticated commercial satellite system. 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., which in turn provide service to their customers.

COMSAT, the grandfather of the nation's satellite industry, can count other major satellite companies among its Washington neighbors, including Motorola's Iridium and more than 50 commercial satellite communications firms.

Germantown, Md.-based Hughes Network Systems believes it could hit $1 billion in annual revenues providing commercial satellite and wireless telecommunications services and products.

Lockheed Martin/Loral, the Bethesda, Md.-based aerospace behemoth, is a leading provider of everything from rockets to satellite communications. It is planning a $4 billion, nine-satellite constellation for commercial communications.

Orion Network Systems, Rockville, Md., is assembling a $500 million satellite constellation. It successfully launched Orion 1 to provide global communications.

Orbital Sciences Corp., Dulles, Va., now generates more than $200 million in annual revenues. Founded in 1982, the company pioneered the use of small, relatively cheap rocket launch vehicles -- such as the Pegasus -- to send smaller, cheaper satellites into lower earth orbits. So-called LEO satellite systems promise to provide global wireless communications from orbits far lower than geosynchronous orbit. And that promise has prompted the likes of Motorola, Lockheed Martin/Loral, Orbital and many others to fight regulators for spectrum and design ambitious new satellite systems. These systems -- when they are finally put into place -- will represent the second generation of commercial satellite communications.

Commercial satellite firms call the Washington area their home for several reasons. Even though they do commercial work, they still do much business with NASA and 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. Orbital Sciences, for instance, used money from NASA and the Advanced Research Projects Agency to fund development of its next-generation launch vehicles. Just as ARPA helped launch the Internet, the agency played a key role in funding the enabling technology for the next generation of communication satellites.

Satellite companies also need to stay close to the regulatory agencies 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.

The area also 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."

Daniel Goldin, NASA administrator, said in a recent interview with WT that NASA intends to do just that. He sees NASA essentially becoming the research arm for the commercial space business.

AlliedSignal of Columbia, Md., is one of the major players in the satellite communications industry that still relies heavily on NASA and the Department of Defense. "If it's moving, it has AlliedSignal parts to it," said Rick Heib, manager of AlliedSignal's technical services.

AlliedSignal remains one of NASA's top contractors. "The space program is not quite in the hands of the commercial industry," said Heib. However, Heib is convinced that 10 years from now the commercial sector will eclipse NASA.

Combined, all these factors created a symbiosis of government buying, federal regulation, commercial spin-offs and engineering expertise -- a critical combination that for now only exists 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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