Editorial: Inevitable Consolidation

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Orbimage’s planned acquisition of Space Imaging is a welcome and healthy development that will give the U.S. commercial satellite imaging industry its best chance of long-term success.

It has been clear for some time now that consolidation among the three U.S. operators of high-resolution imaging satellites was inevitable — the only question was which company would get swallowed up by a competitor. The answer came last September when Orbimage stunned Space Imaging to win the second and last NextView contract from the U.S. National Geospatial-Intelligence Agency.

With a third U.S. competitor out of the picture, Orbimage and fellow NextView contractor DigitalGlobe will be in a much better position to win enough international and private-sector business to go along with their steady government revenues to justify being labeled commercial. Orbimage will benefit from Space Imaging’s work over the years building up an international network of regional affiliates, and if Orbimage elects not to continue certain partnerships — as it has suggested — that could provide openings for DigitalGlobe to expand its international reach.

On the government side, things seem to be breaking the industry’s way, although not necessarily for the best of reasons. Continuing delays to the Future Imagery Architecture spy satellite program could increase the Defense Department’s reliance on commercial imaging satellites over the next several years. The fact that the National Reconnaissance Office recently canceled part of Boeing’s contract to build the system suggests that talk in the past few years of a gap in U.S. imaging capability could be turning into reality.

Meanwhile, events like the war in Iraq and Hurricane Katrina have helped put — and keep — the industry on the map.

Orbimage and DigitalGlobe probably are not yet where they want to be in terms of sales to customers other than the U.S. military and intelligence community. But Orbimage has said it will consider buying an upgraded version of Space Imaging’s Ikonos satellite because of that design’s appeal to certain international customers. If they follow through with such a purchase, that would be a very encouraging sign. DigitalGlobe’s newly disclosed plan to deploy two next-generation satellites is another.

While DigitalGlobe and Orbimage have NextView contracts in hand, they still have to deliver. The spate of satellite and launch failures that just about killed the commercial remote-sensing industry in its cradle not so long ago stands out as a stark reminder that there are no guarantees in the space business.

But once Orbimage’s acquisition of Space Imaging closes, the U.S. side of the industry will at least be sized properly for success. There will be nothing left to do at that point but execute.