- The Washington Times - Tuesday, February 6, 2001

The District of Columbia's technology industry has grown almost 400 percent since 1994 but still remains small and overshadowed by Northern Virginia companies, according to the first report ever done of the city's tech businesses.

The report, done to measure the D.C. tech industry and released yesterday by the nonprofit civic group DC Agenda, shows the number of tech companies increased 374 percent from 70 businesses in 1994 to 332 in 1999.

The new report is significant partly because until now no group has measured the nascent industry, one that is expected to help fuel the District's economic growth, said Stephen Fuller, George Mason University professor of public policy and author of the new study.

"It's not the future of the economy, but it is a major source of potential growth," Mr. Fuller said. "The D.C. tech industry has expansion potential."

The snapshot indicates that most of the District's technology companies remain small: 62 percent had fewer than nine employees in 1999. But their presence and their growth helped offset the loss of federal jobs, which declined by 66,700 from mid-1993 to 1999.

D.C. tech companies employ about 7,200 workers an average of 21 persons each. Intelsat, the satellite-communications provider, is one of the District's few large technology employers with about 800 workers.

By contrast, Northern Virginia's estimated 5,902 tech companies employ about 237,000 workers, according to a study by Chmura Economics and Analytics done in August for the Virginia Center for Innovative Technology.

"The District is like an incubator. It's taking one- and two-person shops and growing them into 10-person and 20-person companies," Mr. Fuller said.

In 1999, the District's tech companies contributed $1.3 billion to the D.C. economy, about 3 percent of the gross city product, Mr. Fuller said.

Most of the District's tech companies provide technology services to other businesses and the federal government. Their specialties include everything from computer repair to setting up computer networks. That is different from the software and Internet niche of Northern Virginia's tech sector.

The study also is significant because the city long has coveted tech companies. The growth has occurred seemingly with little provocation from city officials. The report shows that the District appeals to business owners because they prefer the urban setting to suburban Virginia and like the shorter commutes.

"We're optimistic [that the growth of tech companies] will continue at the pace it has been growing," said Michael Vincent Hodge from the D.C. Office of Economic Development.

New legislation sponsored by D.C. Council member David A. Catania, at-large Republican, is expected to help attract tech companies by providing them with economic assistance, including a $7,500 tax credit for each city resident hired.

The bill, passed Dec. 5, should be able to bolster the number of tech companies in the city once it takes effect later this year, Mr. Catania said. Congress still must review the legislation.

"I can't claim that we've done much in the past to lure these companies into the District," he said. "My agenda is to create an industry that creates wealth."

Increasing the number of District tech companies is not expected to occur by luring those from Northern Virginia.

"The best thing we can do is nurture the companies that are here," Mr. Hodge said.

That will help the region by boosting the overall number of companies and workers, said Shabbir Safdar, co-founder of Mindshare Internet Campaigns and co-chairman of New E-conomy Advisory Group, a coalition of high-tech chief executive officers.

"This is not about taking companies from Virginia. That is a zero-sum game. D.C. should avoid being the hole in the doughnut by attracting companies here," Mr. Safdar said.

But the District's ability to attract companies or retain growing firms may be limited by the lack of space available for them to build large facilities, Mr. Hodge said.

Finding space for workers also will be important. Mr. Fuller said the District must find a way to provide more housing if it is to continue attracting tech and other companies.

Affordable housing was a concern of 300 leaders of city businesses across all sectors, according to a survey released last week. Mayor Anthony A. Williams promised to keep plugging away at improving affordable housing and the school system at a press conference announcing the D.C. Business Connections report Jan. 30.

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