Five years ago, Cable & Wireless USA Inc. promised to link businesses through ribbons of fiber-optic cable connecting every major point on the globe. E.spire Communications Inc. vowed to build its own network from scratch to bypass the local phone giants. Corvis Corp. pledged its equipment would widen the Internet into a massive data superhighway.
All were launched in the Washington area in the 1990s. All are gone today. Now, a new generation of companies -- smaller, with more modest goals -- is surfacing to take their place.
William G. McGowan, shown here in 1979, moved MCI to 17th Street NW to better lobby the government to open long-distance calling to competition.
(Douglas Chevalier -- The Washington Post)
An Entire Industry Downsized Employment and venture capital funding is down sharply from the Washington area telecom industry's peak.
_____Venture Capital News_____
InPhonic Shares Debut, Gain (The Washington Post, Nov 17, 2004)
Contracting Pioneer at Ease (The Washington Post, Nov 1, 2004)
Venture Capital Picks Up From 7-Year Low (The Washington Post, Nov 1, 2004)
Ruckus Seeks to Raise a Digital Community (The Washington Post, Nov 1, 2004)
The Buyout Business Has Changed, and So Has Frederic Malek (The Washington Post, Oct 25, 2004)
Venture Capital Section
Frederick's Qovia Inc. is helping business clients install and manage voice-over-Internet phone systems. Bluefire Security Technologies of Baltimore designs software to protect wireless devices from hackers. Software from Fairfax-based Nexus Innovative Systems Co. audits companies' telecommunications bills.
After four years of painful decline, the area's telecommunications business is starting to come back. The newer telecom companies are largely focused on such growth areas as wireless communications and security software. Many are small. And most get by without the dollars that used to flow from venture capital funds or from going public.
Washington will continue to be a major center for telecommunications, analysts and investors say. The area is rich in technologists, lawyers, venture capitalists, skilled workers and the federal regulators of the telecommunications industry.
But the telecommunications industry won't be the local economic driver it was during the 1990s, analysts say. Local employment in the industry hit 50,200 in March 2001, and venture investments in local telecommunications topped $1 billion in 2000. At last report, 33,700 people were working in the local telecommunications sector as of September, according to the Bureau of Labor Statistics. The area's venture investment in telecommunications dropped to $81.7 million last year, according to data from the MoneyTree survey conducted by PricewaterhouseCoopers/Venture Economics/National Venture Capital Association.
"I see promising players, but if you're looking for the next Google, I don't know that we know what that is yet for this area," said Charlie Thomas, former chief executive of Net2000 Communications and founder of investment firm Claris Capital. But, he added, some companies clearly will be driving the next generation of work because they have developed strong expertise in niches that will be important in the communications industry. Thomas singled out Reston's Nextel Communications Inc., and the District's XM Satellite Radio Holdings Inc. -- the latter not a communications company, but one with expertise in the use of satellites.
It was satellite technology that launched Washington's telecommunications sector back in the 1960s, when Comsat Corp. and Intelsat Ltd. were created. Comsat was chartered in 1962 as the government's representative on Intelsat, an international satellite partnership. For decades Intelsat was the only U.S. satellite link to the rest of the world, and the effort spawned a rich pool of telecommunications experts in Washington, who went off to start or staff other companies.
In 1972, William G. McGowan relocated his company, MCI Inc., to 17th Street NW in Washington, realizing a key part of MCI's success would be lobbying Congress and regulators to open long-distance calling to competition. In 1984, a court-ordered breakup of AT&T Corp.'s phone monopoly took effect, allowing MCI and others to compete head-on.
The area continued to draw scrappy competitors in the 1990s. Nextel set up shop in Reston. Ciena Corp. started its business in Linthicum. But the region's true telecom boom came after the federal Telecommunications Act of 1996, which allowed new companies to compete against the regional Bell phone companies in the local phone market. The rich talent pool and proximity to the FCC attracted companies at the same time investors were willing to pour money into telecom and technology companies.