U.S. Military Allies Generally Agree WGS Is Cheaper than Commercial Alternatives

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LONDON — U.S. allied governments that have purchased shares in the U.S.-led Wideband Global Satcom constellation of military Ka-band communications satellites agreed generally — but not unanimously — with a U.S. Air Force assessment that WGS capacity was far less costly than equivalent bandwidth purchased on commercial satellites.

As one after another military service made the case that WGS is a better deal than commercial capacity at the Global Milsatcom conference organized by SMi Group Nov. 4-6, commercial satellite operators in the audience shook their heads and responded that military managers have little idea of what military satellite capacity actually costs.

Some military officials agreed that, as in the United States, the budgets for purchasing satellite hardware were separate from the budgets for operating satellite systems and buying the related ground infrastructure, making an all-in cost for military systems hard to assemble.

Several officials said the deepest examination of WGS cost was performed by Patrick Rayermann, former director of the Communications Functional Integration Office at the U.S. National Security Space Office.

Rayermann has since left government service and was senior strategy director at Orbital Sciences  Corp. of Dulles, Virginia, before becoming director of business development at Airbus Defence and Space.

Rayermann said his investigation into WGS costs covered 2010-2012 and assumed a 70-percent fill rate of the WGS constellation — an important factor in any cost comparison since most commercial buyers contract only for what they will use.

In a Nov. 7 interview, Rayermann said he assembled all the cost components used to make up a commercial contract — including satellite development, launch, insurance, operations, retirement plans for personnel and profit — and then set about locating the equivalent costs for WGS.

“What I concluded was that the difference is about 1.7:1 or 2:1 in favor of WGS,” meaning commercial bandwidth was 70-100 percent more costly than WGS, Rayermann said. “You could argue that satellite capacity or launches have become less expensive, but I believe these figures would hold up today.”

Rayermann said that while Air Force systems use generally higher-priced launchers and employ high-end technical oversight from the Aerospace Corp., a federally funded research and development center, they are freed of one element that is key to a commercial contract: supplier profit.

“Satellite operators have gross profit margins of around 80 percent,” Rayermann said. “If you take this profit away, WGS and commercial capacity are very close in price.”

Rayermann also said assuming a 70-percent fill rate for the entire WGS constellation, including those satellites over the North American arc, may have unfairly tilted the scales in favor of the WGS system. “The WGS satellites over CONUS [the continental United States] are mainly there to serve as backup in case a satellite elsewhere on the geostationary arc fails,” Rayermann said.

He also said that technology refresh is a regular advantage of commercial systems that is difficult to quantify. Satellite operators typically amortize their investments over 15 years. For the biggest operators such as Intelsat and SES, that means purchasing on average three satellites per year.

Boeing Space and Intelligence Systems of El Segundo, California, is prime contractor for the WGS system, of which six satellites are on orbit and four more under production. The Defense Department has registered sufficient spectrum for an 11th and 12th WGS satellite, but these satellites have not been contracted.

But Boeing is increasingly active in the commercial market and is providing Luxembourg-based Intelsat with Intelsat’s Epic high-throughput satellites in Ku-band, as well as London-based Inmarsat’s Ka-band Global Xpress satellites.

Boeing thus has a solid foot in both camps. Dan Hart, Boeing’s vice president for government space systems, nonetheless did not mince words, accusing some commercial operators of “flagrant misrepresentation” of the numbers in an effort to make the pro-commercial case.

“We agree with the CIO report,” Hart said, referring to the “Commercial Satellite Communications Strategy Report” written by the Defense Department’s chief information officer, which said commercial bandwidth is four times as costly as WGS capacity.

“Whether it’s three times or four times more can be debated,” Hart said, adding that the advantages of buying into a global system like WGS compared to the purchase of more-focused capacity on a commercial satellite will depend on the specific requirements of the purchasing nation. He also conceded that the cost advantage of WGS was highly dependent on the system being used to near capacity.

Capt. Ulrich Berrevoets, military satellite communication program manager at the Dutch Ministry of Defense, said his team evaluated commercial capacity before concluding that access to the global WGS constellation was preferable. By, committing over the long term — to 2031 — the ministry secured WGS prices that were less than one-third the cost of a commercial alternative, which would not have been global, Berrevoets said.

Peter Malberg, senior engineer for satellite systems at the Danish Defence Acquisition and Logistics Agency, which has also purchased a share in WGS, said his organization concluded that the costs were about the same, especially when you factor in the higher cost of military ground terminals versus commercial gear with the same performance.

Lt. Col. Abde Bellahnid, a manager in the Canadian Department of Defence’s Directorate of Joint Capability for Satcoms and SAR requirements, said Canada’s military canvassed the private sector to get some idea of costs of hosted military payloads on several geostationary-orbiting satellites and was presented with costs much higher than WGS.