More than three-quarters of the U.S. government’s satellite images don’t come from government satellites. They’re provided by two companies, GeoEye and DigitalGlobe. So alarms began to ring in Washington in February, when those two companies started talk to become one, forming a monopoly in space and radically altering the economics of the commercial satellite industry and how we see the Earth from above.
Months of friendly merger talks were sparked by fears of military budget cuts that made both companies think of joining forces to avoid huge losses. On May 6 DigitalGlobe turned down a surprise $792 million hostile takeover bid from GeoEye. But talks continued … until now, it seems. According to an industry official familiar with the negotiations, the chances of the two companies combining are growing slim, in large part because key congressional panels won’t allow the satellite budget to get cut. “It appears that Congress is being receptive to the importance of having two companies in space,” the official tells Danger Room.
DigitalGlobe’s and GeoEye’s high-resolution images of the Earth are employed for military purposes, including intelligence gathering and disaster relief. They’re also used for popular applications like Google Earth – oh, and to help track down warlord Joseph Kony, too. Nevertheless, the industry is in turmoil. In January, the Department of Defense announced there would be “significant reductions” in the budget for commercial satellite imagery, as part of the military-funding cuts that the Obama administration has announced to help meet deficit reduction requirements. The administration proposed to slash GeoEye’s and DigitalGlobe’s next year’s contracts from $540 million to $250 million.
AOL Defense reported on Monday that the White House is going to review its “Commercial Remote Sensing Space Policy,” which requires the U.S. Government to “rely to the maximum practical extent on U.S. Commercial remote sensing space capabilities,” instead of military spy satellites. Without the government mandate, there may not be enough of a market for both companies. One or both might not survive in that case.
But those budget cuts and policy changes won’t happen, if the Senate Armed Services Committee has its way. On May 25, the committee publicly announced that it was reinstating $125 million to theEnhancedView program – a 10-year contract totaling $7 billion awarded to both companies – for the the upcoming fiscal year. According to Andrea James, an industry analyst with Minneapolis-based Dougherty & Co, the fact that the announcement was made public with a press release, “shows that the Senate wanted to specifically highlight the importance of this program.”
“Even though the budget faces pressure, I don’t think that Congress will approve of any funding decision that costs the U.S. its lead in the commercial satellite imagery space,” James tells Danger Room.
And just as Congress made its public announcement of support for the spysat companies, talks of a merger seemed to have cooled.
Commercial satellites don’t take quite as detailed images as their classified, government-owned counterparts. But they do have several advantages. For starters, they are cheaper and considerablynewer. Government satellites are so dated that “some are old enough to vote and some are old enough to drink,” an industry official tells Danger Room. What’s more, commercial satellite data is unclassified and easy to share with U.S. allies.
So the government’s reliance on GeoEye and DigitalGlobe’s eyes in the sky is unlikely to end anytime soon, especially as their technology continuous to improve. GeoEye is going to launch its newest satellite in less than a year. Circling the earth from 680km away, the GeoEye-2 will be capable of taking pictures with a ground resolution of 34 cm — current satellites’ pixels only reach 41 cm. And their technology will only get better with time and eventually get closer to that of classified spy satellites, which can get images with a resolution as good as 4 to 6 cm. “You can count golf balls with it,” said Tim Brown, a senior fellow at GlobalSecurity.org and an expert in commercial satellite imagery.
But, he warns, “if the money is cut it’s going to be difficult or impossible for the two companies to launch the next generation.”
After months of turmoil, a rumored alliance and takeover attempts, it seems like GeoEye and DigitalGlobe may be back to business as usual — battling each other to control how we see Earth from space. LINK
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