The chance to be a part of a long-term, multi-billion dollar contract is bringing new competitors out of the woodwork as the U.S. military begins the process of reconsidering the way it acquires commercial satellite communications capacity.

Roughly 80 percent of the military’s satellite communications bandwidth comes from commercial satellites and much of that capacity
has been purchased on an as-needed basis since 2001 through a Defense Information Systems Agency (DISA) contracting vehicle known as the DISA Network Satellite Transmission Services-Global (DSTS-G) program. That contract will end in February 2011, and the deadline to submit responses to a request for information for a follow-on contract passed Feb. 25.

Rebecca Cowen-Hirsch, director of the DISA office responsible for DSTS-G, said in a Feb. 26 interview the agency spent roughly $350 million in 2007 on fixed satellite services through the DSTS-G contract
. The agency is now reviewing options for the next contract and has no set schedule for releasing a request for proposals or selecting contractors. She hopes to have the next contract in place a year or two before the current contract expires to allow for a gentle transition.

Players from various realms of the satellite industry converged at the Satellite 2008 conference here
, each making their case during a Feb. 26 panel discussion to be included in the next DSTS-G contract. The panelists included representatives from three companies hoping to compete for the next contract, two incumbents and a challenger.

There are three vendors on the current DSTS-G contract. They
 compete with each other to win specific military communications task orders. In some cases the vendors provide only bandwidth purchased from satellite operators; in other cases, they provide end-to-end communications networks and management services.

Tom Eaton, president of one of those three companies, Arrowhead Global Solutions of Fairfax, Va., said each of the three
has grown significantly in the capabilities they can provide to DISA since the contract’s inception. While DSTS-G remains the core of Arrowhead’s business, the company also
provides terrestrial services, professional services, and operations and maintenance services.

“There is value in working with a small set of optimized vendors,” Eaton said. “Those vendors know the customer, designed their organizations and missions around serving that customer, and frankly have made the investments. In the new version of this contract, it is our desire that [there are] a broader scope of capabilities that are requested.”

Abbas Yazdani, president of Reston, Va.-based Artel Inc., another incumbent vendor, said during
the panel that the DSTS-G contract has evolved into something much more complex than the simple vehicle for buying bandwidth that it started out as in 2001. It now requires the vendors to be extremely nimble and responsive, in many cases providing full solutions in a matter of hours.

He also emphasized the government needs to commit to the commercial communications satellite industry by budgeting for a certain baseline of commercial capacity it will purchase each year. This is the only way to ensure satellite operators will continue to have the capacity the
government needs
, he said.

Boeing Service Co. of Richardson, Texas, which was represented on the panel by Ed Laase, the firm’s communications services director, is one of the newcomers that wants
to be a part of the next contract. Laase said
Boeing’s history of managing communications networks with nearly perfect reliability for jets used by top military commanders and commercial passengers, gives it relevant experience. In a Feb. 28 Space News interview, he said the next DSTS-G contract would benefit the government most if it includes
network maintenance, terminal maintenance and situational awareness.

“Boeing is well-positioned the more sophisticated the contract is,” Laase said. “If it’s just reselling bandwidth, there may be companies that can do it cheaper.”

American subsidiaries of the two largest satellite fleet operators in the world, Intelsat and SES, also have made clear their intentions to compete for the next contract. They sold much of the bandwidth to the vendors that was re-sold to the government under the current contract, and they want to cut out the middleman and sell it directly.

Bethesda, Md.-based Intelsat General brought in roughly $90 million to $100 million in 2007 revenue through DSTS-G, Kay Sears, Intelsat General’s vice president of sales and marketing
said in a Feb. 26 interview. Sears said DISA’s request for information focused on security and responsiveness issues, two things that she said could be best addressed by the satellite operators.

“If you put someone between the operator and DISA, you increase the time it takes to solve problems and add security breaches. [The vendors are] doing a great job on price, but you can’t get levels of improvement in those areas without having a direct relationship with the satellite operators that your service is on.”

She also expressed doubt that the next contract would be used for much more than purchasing bandwidth.

“Ninety-five percent to 98 percent of the first contract has been [spent on] bandwidth,” Sears said. “I would challenge them in thinking this contract could be used for much more than bandwidth because all the other types of services have other contracts that [already exist] for terminals, managed network services, and for operations and maintenance.”

David Cavossa of Arrowhead Global Solutions disputes those numbers, saying only about 70 percent of the contract has been spent on bandwidth, with the other 30 percent going toward integrated solutions.

Americom Government Services, a McLean, Va.-based subsidiary of SES, also submitted a response to DISA. Company president Tip Osterthaler said in an e-mail that it still makes sense to buy bandwidth on the spot market for small or short-term purchases, but the government should have the option to go directly to the operators for large or long-term needs.

“We strongly believe that when it comes to the design and delivery of large global satellite networks, government customers will get the best results by dealing directly with the capacity providers rather than intermediaries,” Osterthaler wrote.