Executives Hopeful for DoD Shift on Bandwidth Leasing

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WASHINGTON — Commercial satellite industry representatives reacted with cautious optimism to a pledge by the Pentagon’s top procurement official to study ways to buy bandwidth more efficiently.

Speaking to industry executives in March at a dinner held in conjunction with the Satellite 2013 conference here, Frank Kendall, U.S. undersecretary of defense for acquisition, logistics and technology, said the Pentagon was launching a 90-day review of its commercial bandwidth purchasing practices, attendees said. The study will be undertaken jointly by Kendall’s office and the Pentagon’s chief information officer, attendees said.

Industry executives, who have long pushed the Department of Defense (DoD) to change what they characterize as its inefficient bandwidth leasing practices, characterized Kendall’s initiative as a baby step forward. 

In a best case scenario, they envision the DoD sidestepping one-year transponder-leasing deals and instead signing contracts for capacity that span as many as eight years, a move that would save the government hundreds of millions of dollars.

Such a change would also give the industry greater clarity as to future Pentagon needs, which would allow operators to plan their fleets accordingly, officials said.

“We don’t have the incentive to invest” in new capacity without long-term commitments on the government’s part, said Tip Osterthaler, president and chief executive of SES Government Solutions of McLean, Va., a subsidiary of satellite operator SES of Luxembourg.

Industry executives said wholesale reforms are needed to prevent a situation in which theirs is a regional surge in military demand for capacity that commercial operators — who today provide some 90 percent of the Pentagon’s satellite bandwidth — are not positioned to meet. Such a situation could unfold in Asia, which is now a strategic focus for the U.S. military, Osterthaler said in an interview.

Osterthaler was one of five satellite industry executives who drafted a white paper in January that recommended ways for the DoD to become a better buyer of commercial satellite capacity. Kendall’s initiative appears to have been a response, at least in part, to the paper.

The 90-day study is aimed at “developing specific proposals for the DoD to acquire commercial communications satellite capacity more economically,” U.S. Air Force Lt. Col. Melinda Morgan, a Pentagon spokeswoman, wrote in a response to questions from SpaceNews. “This is likely to involve a legislative initiative that would permit more flexible, and less expensive, business arrangements between DoD and commercial satellite communications suppliers than those the DoD uses today.”

The move is being welcomed by the industry, at least in public statements.

“The satellite industry is eager to contribute to the Department’s assessment of how they can even more effectively utilize commercial satellite to support essential requirements with reliable capabilities and with constrained resources,” Patricia Cooper, president of the Satellite Industry Association here, said via email.

Privately, however, industry officials were more cautious. Many said they do not expect U.S. President Barack Obama to seek authority for the Pentagon to enter into long-term satellite leases as part of his 2014 federal budget request, now expected to be unveiled the week of April 8.

In optimistic scenarios, Congress could insert such an authorization later in the budget process. In a worst case scenario, they say, Kendall’s announcement is merely an idea du jour at the Pentagon that never gains traction.

Among the recommendations in the white paper were using hosted payloads, developing accurate comparisons of commercial and military satellite communications and establishing a baseline of how much commercial satellite bandwidth the Pentagon needs and addressing that requirement in multiyear contracts.

The white paper took issue with the way the Pentagon compares the cost of operating its own communications satellites versus procuring commercial bandwidth. “Often quoted military satellite costs do not even include the launch costs,” the letter says. “Quoted figures routinely omit the military ground infrastructure, which may account for 60-70% of the total military system cost.”

The letter also points out that the DoD could save as much as 30 percent on commercial satellite services by committing to long-term contracts.

In addition to Osterthaler, the white paper was signed by Ron Samuel, chief executive of Eutelsat America Corp. of Washington; Kay Sears, president of Intelsat General Corp. of Bethesda, Md.; Daniel Goldberg, president and chief executive of Telesat of Ottawa, Canada; and Philip Harlow, president and chief operating officer of Xtar LLC of Herndon, Va.

All of the executives who signed the white paper represent companies that operate satellites or are subsidiaries of companies that do. When it comes to government buying policies, satellite operators have not always been on the same page as companies known as integrators, which lease commercial capacity to provide managed solutions to government customers.

One of the largest integrators is Harris CapRock Government Solutions of Fairfax, Va. Its president, David Cavossa, welcomed Kendall’s initiative, saying it could lead to more business for operators and integrators alike. But he cautioned the DoD against locking into too many long-term contracts with a single operator and limiting its flexibility.