D.C. Dotcom

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    Techtopia--as some local boosters call the new-economy belt around Washington--isn't just another one of those business incubators that seem to have taken root in nearly every large American city in the morning of the 21st century. If software center Seattle is the new economy's brain and chipmaking Silicon Valley is its heart, then Washington is its central nervous system. Spread along, around and mostly under Techtopia's main drag, the Dulles Toll Road, are the vital electronic pathways--wires, cables and fiber-optic lines--that carry more than half of all traffic on the Internet. The region is home to more telecom and satellite companies than any other place on earth. The Washington area boasts a higher concentration of people who use the Internet at home and at work than any other urban area in the world. That makes northern Virginia America's main IT node a strategic target as important as the Pentagon. It also explains why so many big companies, such as MCI Worldcom, Network Solutions and America Online (which hopes to own Time Warner by the end of the year), are happy to be in the neighborhood.

    At the core of the new Washington are some 5,000 firms involved in high tech that currently generate well over $100 billion in annual revenue and employ more than 500,000 people, easily outstripping the roughly 350,000 jobs filled locally for the Federal Government. In northern Virginia, the focus is more impressive: there are 2,600 firms with 237,000 workers singularly devoted to technology. The NVTC expects those numbers to double by 2010. The new firms have been followed by armies of lawyers, consultants, p.r. agencies and accountants.

    Washington's place at the center of the new economy is appropriate because, in a sense, Washington invented the Web. For much of the cold war, the Pentagon poured money into the supersecret National Security Agency and the Defense Advanced Research Projects Network to create the Arpanet, a highly exclusive communications grid designed to allow Pentagon-based researchers and engineers to stay in touch with their counterparts across the country. Over 40 years the Pentagon's need for so much information--the next big weapon, the next great spy satellite, the perfect battlefield walkie-talkie--also led to the creation of some very unusual companies around the Beltway. There were think tanks and consultancies, with people who tinkered and debugged and helped the Pentagon and other agencies make decisions. They had names like SAIC (Science Applications International Corp.), BDM (Braddock, Dunn & McDonald) and SRC (Systems Research Corp.) and worked on projects so highly classified that many people in Washington had never heard of them. Big manufacturers disdained them and called them "Beltway Bandits." And because they had the same government clients for decades, they did not set the business world afire. "Fifteen years ago, 'Washington entrepreneur' was an oxymoron," says Mario Morino, an early tech multimillionaire turned philanthropist.

    But then came Ronald Reagan and Bill Clinton, the end of the cold war and the advent of the balanced budget. Many federal contracts disappeared; some government services were privatized; and lots of inside-the-Beltway engineers and researchers took their expertise as sophisticated communications specialists, computer innovators and software designers out on the street. Those changes collided with the rise of the personal computer and the opening of the Pentagon's Arpanet to the private world. In effect, a huge talent pool of high-tech experts became free at the very instant that the private sector was taking custody of the engine of the new economy. Many stayed put where the big cold war consulting firms had been located, in the low-rent northern Virginia suburbs.

    Washington is home to the pipes of the emerging world of technology. Miles and miles of phone line and fiber-optic cable come together in the region. It has the largest single portion of vital Internet backbone and the biggest concentration of Internet-service providers in the country. The infrastructure of MCI, UUNet, Digex, PSINet and Sprint has for years helped speed the connections that have fed the Internet boom. As these companies have grown or morphed into bigger, broader ones, they have helped develop start-up firms. Small companies like fantasysports.com in Reston, Va., aren't bidding for contracts from the Federal Government; they're offering services to the local giant, AOL.

    The Old Vs. the New
    The old Washington has been watching all the ferment and doesn't know whether to laugh or cry--or try to get in on the action. There was never much private industry in D.C. For years the biggest private employer was the Washington Post. Because of the relative scarcity of large private fortunes, there were very few big locally owned banks. Power and influence were the currency. Elected officials, lobbyists, lawyers and consultants lived and worked in the same neighborhoods, schmoozing over lunches and dinners and cigars at watering holes like Duke Ziebert's and country clubs like Burning Tree. What mattered was whom you knew and how long you had known them.

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