Allied Investment in WGS Could Pinch Demand for Commercial Bandwidth

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PARIS — Commercial satellite fleet operators hoping future military demand will offset slowing growth in North America and Europe might have heard warning shots the week of Jan. 17 as five new nations joined the U.S. Defense Department’s Wideband Global Satcom (WGS) network as a way to reduce spending on commercial bandwidth.

The agreement of Canada, Denmark, Luxembourg, the Netherlands and New Zealand to invest a combined $620 million in a ninth WGS satellite over 20 years — the U.S. Air Force will finance the rest of the billion-dollar WGS-9 program — came less than a week before the successful Jan. 19 launch of WGS-4.

The U.S. Air Force Space and Missile Systems Center, located at Los Angeles Air Force Base, Calif., said WGS-4 was successfully placed into orbit by a United Launch Alliance Delta 4 rocket operated from Cape Canaveral Air Force Station, Fla.

Boeing Space and Intelligence Systems of El Segundo, Calif., which is building what is now expected to be 10 WGS satellites, will spend about two months testing WGS-4 before it is handed over to the Air Force for operations.

With Australia’s decision in 2007 to purchase the full WGS-6 satellite on its own, WGS now has six nations affiliated with the U.S. Defense Department in a constellation offering secure X- and Ka-band communications links around the world, with the exception of the poles.

The adhesion of the five nations to WGS-9 enabled the Air Force to contract with Boeing for WGS-9 on Jan. 12. The firm, fixed-price contract, which exercises an option in an existing Boeing contract, is valued at $376.5 million. WGS-9 is scheduled for launch in 2017.

In a Jan. 17 briefing at the Canadian embassy in Washington, U.S. Air Force officials said WGS-9’s other costs include slightly less than $300 million for the satellite’s launch, plus funds to operate the satellite for 14 years in orbit.

In statements made describing their investment, the affiliated nations almost all said WGS will give them the assurance of access to encrypted satellite bandwidth in just about any theater of operations.

These nations noted that while the satellites they are funding will not be launched for several years, their access to the WGS network begins immediately, with bandwidth made available to them in amounts proportional to their investment.

For WGS-9, Canada is by far the biggest investor, with an expected contribution of $396.5 million over 20 years. Denmark and New Zealand are each expected to contribute $62 million over the same period, with Luxembourg and the Netherlands paying $49.6 million each.

Denmark, New Zealand, Luxembourg and the Netherlands are not known as space powers, nor as nations with a regular military presence in far-flung corners of the world. But Luxembourg and the Netherlands are NATO members. Australia and New Zealand have been designated major non-NATO allies of the United States and are regularly alongside U.S. troops in military engagements.

New Zealand Defence Minister Jonathan Coleman said in a Jan. 18 statement that the WGS investment, which he estimated at $83.2 million over 20 years, compares with about 4.3 million New Zealand dollars ($3.4 million) now spent annually on commercial bandwidth, a figure he said was growing at 10 percent a year.

“The [New Zealand Defence Force] currently purchases bandwidth on commercial satellites at spot prices, which can involve a premium of up to 100 percent depending on demand, and which can also limit availability of bandwidth,” Coleman said. Helping finance WGS-9 “will increase our access to satellite bandwidth more than 20-fold, with guaranteed access at a fixed price, ensuring better value for money.”

Canadian officials used a similar cost-benefit language in defending their larger investment in WGS-9, with the additional argument that, under the agreement, Boeing is obliged to find offsetting work for Canadian industry equivalent to 100 percent of Canada’s portion of the Boeing contract.

In a Jan. 17 press briefing in Ottawa, Canadian Associate Defence Minister Julian Fantino said the satellite-only part of Canada’s WGS contribution is valued at 240 million Canadian dollars ($238 million). Boeing will need to give work in that amount, not necessarily space-related, to Canada’s industry, with 10 percent of the Canadian contracts to be set aside for small and mid-sized businesses, Fantino said.

The remaining WGS investment, totaling around 100 million Canadian dollars, will be spent on satellite servicing and operations charges, Fantino said.

Fantino and Canadian Defence Minister Peter MacKay said during the briefing that the “one-time, fixed payment” for WGS-9 provides Canada’s defense forces with secure, plentiful satellite bandwidth over the long term at less cost than what Canada would pay if it continued to purchase satellite communications capacity on the commercial market.

A senior Canadian defense official, explaining the appeal of WGS in a Nov. 30 presentation to a military satellite communications conference in London, said forecasts are that Canadian forces would be spending 100 million Canadian dollars per year on commercial satellite capacity by 2022. Even this figure assumed that the bandwidth would be available in the regions where it was needed, an assumption that may not be realistic.

The world’s biggest commercial satellite fleet operators already count the U.S. Department of Defense as a major customer and have viewed the defense market in general as a growth sector for the coming years.

These companies, including Intelsat of Washington and Luxembourg, SES of Luxembourg, Eutelsat of Paris and Telesat of Canada, have all taken steps to make their fleets more attractive to military users, especially since much of the U.S. military use has been through short-term leases that, as New Zealand’s Coleman said, are the most expensive.

Military demand has been among the strongest growth areas for Eutelsat. SES and Intelsat have both created separate divisions to handle military customers, and have said military use accounts for 10 percent of their revenue.

Telesat and Intelsat have both invested in satellite payloads on the assumption that a military customer will purchase the capacity. Telesat’s bet paid off when Astrium Services of Europe, which operates Britain’s Skynet military satellite fleet, purchased the X-band capacity on Telesat’s Anik G1 satellite, scheduled for launch late this year.

Intelsat has invested in UHF capacity on two satellites, one to be used by Australia, the other in anticipation of signing up a U.S. Defense Department customer.

The Telesat and Intelsat investment in X- and UHF-bands, respectively, are unusual. But these and other satellite operators are multiplying their investment in Ka-band, with the military seen as one of the customer sets.

The WGS network is thus a potential competitor. Each WGS spacecraft has a throughput of 2.1 to 3.6 gigabits per second. While this is relatively modest compared with the new generation of unencrypted, commercial Ka-band spacecraft being deployed, the prospect of 10 WGS satellites ringing the world may represent more than a mere nibbling at future commercial satellite leases by at least six governments.

 

Space News Editor Warren Ferster contributed to this story from Washington.