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‘Concerns’ Raised About Commercial Spy Satellite Merger, But No Showstoppers: NGA Director Long

Posted by Colin Clark on

ORLANDO: (Story Delayed Due to Software Problems) A study by the intelligence community raised industrial base “concerns” about the merger between commercial spy satellite companies GeoEye and DigitalGlobe but found no showstoppers.

That’s the word from Letitia Long, director of the National Geospatial Intelligence Agency (NGA). I asked Long today if industrial base issues had been considered by the government as it mulls the merger of America’s only two companies that make and operate spy eyes in the sky. She said Michael Vickers, the Pentagon’s undersecretary for intelligence, and Jim Clapper, the Director of National Intelligence, had ordered a study. It raised “concerns” – but no showstoppers – about some of the subcontractors who serve the two companies. Several of them are single-source companies, meaning they are the only ones who provide certain services, software or parts.

Long said that she didn’t know how those subcontractors would be affected by a merger. Since NGA is the principal customer for GeoEye and for DigitalGlobe, Long’s views carry a great deal of weight. But it was DNI Clapper who ordered the cuts — said to be as much as 50 percent in 2013 — to the 10-year, $7.3 billion program known as EnhancedView. And it is those cuts that drove the two companies to exchange rival bids, with DigitalGlobe putting together the current deal to buy GeoEye.

But some of the rationale for the cuts seems hard to fathom. Long said this afternoon that “There has not been a change in demand for commercial imagery.” So, one is tempted to ask, if the demand remains robust why would deep cuts be in order. Long appeared to answer that when she repeated Clapper’s claim that they aren’t actually cutting the budget for commercial imagery; they are just “reducing the slope of the growth.” In fact, she said, “we are still growing what we are buying from the commercial providers.”

But the Pentagon and intelligence community clearly see benefits accruing from a merger, beyond simple cost cutting. Long said she could “imagine an integrated constellation” of satellites, one which NGA could order to produce an image once instead of twice. For those who think tasking a satellite is simple, bear in mind there is a highly classified committee that does nothing but decide who gets to use which government satellites when. Launches, she said, could be better phased to “benefit the government.” And Long said she looked forward to “access to their merged libraries” of digital imagery.

Beyond those merger comments Long would not go, saying simply that NGA is “supporting requests that we get from” the Department of Justice and DoD.

But the merger is the single greatest topic of debate, rumor and analysis here at the annual Geoint conference among the roughly 4,400 attendees.

Here are some of the data points we’ve gleaned today:

GeoEye is getting less business each week from the government than is DigitalGlobe, a process which one close observer said was being done “with aforethought.”

GeoEye received a three-month contract from NGA, versus a one-year deal for DigitalGlobe in early summer. This, say some observers, was what finally drove the two companies into each others arms. The merger was announced one month later.

Many observers of the merger are deeply troubled by the Justice Department’s Sept. 24 decision to engage in a second, deeper round of information gathering of the two companies. Some of our readers will remember this happened during the XM-Siriu merger talks. The case of the two satellite radio companies is not dissimilar . Both involve companies that are the only ones who do what they do in America. Both are, sort of, all about space companies. Of course, the commercial spy satellite companies provide a crucial national security function, one which Clapper and Long were both careful to support in their comments today. “There is no bigger fan of commercial imagery than I,” Clapper offered. “I was a fan of it before it became fashionable.” Along with sequestration, look for news about this around Christmas.

What do you think?