Satellite Executives See Silver Lining In DoD Report Citing Bandwidth Costs

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WASHINGTON — Executives with five U.S. government-focused satellite operators reacted with a mixture of skepticism and hope to a recent Defense Department report that said commercial satellite bandwidth typically costs military customers four times more than comparable bandwidth on the Air Force-owned Wideband Global Satcom system.

The executives, speaking at an industry roundtable on the future role of commercial satellite operators in support of the military, were reluctant to criticize their most important customer and stressed that they do not know how the Pentagon arrived at those numbers. But some were skeptical, and at least one suggested that the deck was stacked against the commercial operators. 

“Certainly the analysis seems to be the best possible case on one side being compared to the worst possible case on the other side,” Philip Harlow, president of commercial X-band satellite operator Xtar LLC of Herndon, Virginia, said during the luncheon event, hosted by the Washington Space Business Roundtable. “If DoD doesn’t become a smarter buyer, the costs are always going to be high,” he added, referring to a longstanding industry complaint that the Pentagon’s commercial bandwidth acquisition practices are outmoded and inefficient.

But the panelists also emphasized the positives they saw in the “Commercial Satellite Communications Strategy Report,” which was delivered to congressional defense oversight committees in September. Ordered up in the National Defense Authorization Act for Fiscal Year 2014 and prepared by the Pentagon’s chief information officer, the report lays out broad plans for commercial satellite bandwidth purchases over time horizons of five, 10 and 25 years.

Tip Osterthaler, president of SES Government Solutions of McLean, Virginia, noted that the report lends support for the industry-backed notion that a single entity at the Pentagon should be responsible for assessing the military’s satellite communications requirements as a whole. Currently there is no such entity: The Air Force buys communications satellites based on one overarching set of requirements, while the Defense Information Systems Agency doles out commercial bandwidth contracts — more than $500 million for a year’s worth, by some estimates — based largely on individual requests from the military services.

Osterthaler, who is retiring in March, also quipped that the cost figures in the report represent a dramatic improvement from previous discussions he has had with the Air Force dating back to 2007 in which service officials claimed WGS satellites were at least eight times cheaper than commercial bandwidth.

“It is kind of encouraging that there are things happening that weren’t happening before that are potentially pretty positive,” Osterthaler said of the report.

Nonetheless, the paper appears to illustrate the uphill challenge operators face in seeking to change the way the Pentagon meets its satellite communications needs. 

It says, for example, that the Pentagon paid about $14,200 per megahertz of WGS bandwidth in 2013, compared with $56,220 for comparable commercial bandwidth that year. In addition, the report said that since 2010, commercial bandwidth prices have risen more rapidly than WGS bandwidth — some 11.5 percent compared with 4.4 percent.

The WGS system should remain a top priority and the Defense Department should use commercial satellite bandwidth only when WGS capacity is not available, the study said. The Air Force has ordered 10 WGS satellites from Boeing Space and Intelligence Systems of El Segundo, California, and six of those are on orbit.

Nonetheless, the report also calls for a legal evaluation of multiyear leases, something commercial satellite operators have advocated for years as a way to bring down the cost of bandwidth and help them better tailor their fleets to the military’s needs. Some U.S. lawmakers, notably including Rep. Mike Rogers (R-Ala.), chairman of the House Armed Services strategic forces subcommittee, have spoken out in support of that idea.

Pentagon officials insist they are bound by procurement rules to limit bandwidth leases to one year, something Rogers says has resulted in “bad rates.” The industry panelists said longer-term leases are not a panacea but rather a first step toward creating a more integrated mix of services from commercial and military-owned satellites.

The panelists also were encouraged that the report singled out a series of Air Force-led “pathfinder” projects, in which the service is experimenting with alternative approaches to procuring commercial bandwidth, as a key to reform efforts over the next five years.  

Under the first pathfinder contract, awarded in June, SES is leasing the full capacity of an aging satellite covering Africa to a Pentagon customer. A request for information for a second pathfinder, under which the Air Force will purchase a transponder before its host satellite is launched, was issued later that same month.

Moreover, the Pentagon’s five-year strategy must include more funding for commercial satellite communications services, the report said. Currently, the Pentagon is using 10 times more bandwidth than in 2001, the report says, with most of the demand coming from the Middle East and Africa. 

“With future reduced levels of [overseas contingency operations] funding, the DOD will need to review options for increasing the funding levels for current COMSATCOM demand in the baseline budget,” the report says.

Over the past decade, commercial bandwidth typically has been procured through accounts for so-called overseas contingency operations, which are funded through supplemental appropriations that fall outside the normal budgeting process.

That said, the Pentagon still lacks a reliable means of measuring and predicting demand for commercial bandwidth in future years, according to the report. 

The panelists did not necessarily disagree, although Skot Butler, vice president of sales, marketing and business development for Intelsat General Corp. of Bethesda, Maryland, said the military has certain bandwidth needs throughout the world that will not change in the next 10 years. 

David Bair, president of Eutelsat America, noted that in many cases the Defense Department has to ask providers how much of their allotted bandwidth they have used. 

The Defense Department’s 10-year plan calls for evaluating the successes and failures of experimental funding and contracting methods. The 25-year plan is largely ignored in the report and likened to a “crystal ball” prediction.

 

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