WASHINGTON — The U.S. Department of Defense, long criticized for not fully using its market clout when purchasing commercial satellite capacity, in the past four years has sharpened its negotiating practices and now pays less for some of its capacity than the average commercial buyer, according to the Defense Information Systems Agency (DISA).

In a presentation here Feb. 21 during the Satellite 2007 conference organized by Access Intelligence, Rebecca Cowen-Hirsch, director of DISA’s satcom, teleport and services office, said DISA is paying about $1.1 million per transponder per year when it purchases through the Pentagon’s Defense Satellite Transmission Services-Global contracting vehicle, or DSTS-G.

Three U.S. companies compete to provide the Defense Department with capacity under DSTS-G by negotiating terms with whichever satellite-fleet operators have bandwidth available over the specified region where DoD needs service.

Cowen-Hirsch dismissed a common complaint by commercial satellite operators that the U.S. Defense Department’s purchasing regulations do not permit multi year leases, which are less expensive than spot-market contracts.

“We have inherent multi year authority today,” Cowen-Hirsch said. “For FSS [fixed satellite services] through DSTS-G, we are doing multi year tasking for a number of task orders, and we do this where it is advantageous for us. We have one vehicle that can commit to up to eight years.”

DSTG-S purchases have for years provided the Defense Department with better rates than the Pentagon gets when it makes similar purchases, often on the spot market, outside the DSTG-S framework.

Transponder prices have declined generally over the past three years because of excess satellite capacity in regions of interest to defense forces. As a result, defense customers across the board have benefited. But the price differential between DSTG-S purchases and contracts purchased by the Defense Department directly remains substantial. In 2005, while DSTG-S prices averaged $1.1 million annually per 36-megahertz equivalent transponder, other Defense Department contracts averaged more than $2 million.

By most estimates, the U.S. Department of Defense is the world’s most active buyer of commercial satellite capacity in any given year. For FSS capacity alone, the Pentagon has been spending between $300 million and $350 million annually since 2003.

These figures do not include the sizable purchase of mobile satellite communications services provided by Inmarsat, Iridium and others. The Defense Department contracted for 7 million minutes of Inmarsat use in 2005 — up from about 5 million minutes in 2004, according to DISA estimates. Defense use of government-dedicated Iridium services in 2005 totaled more than 6 million minutes, about the same as in 2004, according to DISA.

The spending volume on FSS capacity has remained relatively constant since 2003, but the amount of bandwidth purchased during the same period has increased, which explains the lower average price for capacity.

The Pentagon’s savvy in negotiating DSTS-G contracts has improved over the years. In 2002 the Defense Department was paying about the same, on average, as a typical commercial customer. Since 2003, the DSTS-G contract costs have been declining more quickly than the average commercial contract.

“We don’t anticipate this will last forever,” Cowen-Hirsch said.

Commercial satellite-fleet operators have been warning the Defense Department that it needs to revamp its procedures to permit more long-term contracts. These companies, including SES Global’s SES Americom division and Intelsat, say they would prefer the predictability of a long-term contract to the higher average prices they charge for short-term and spot-market contracts.

Commercial operators further argue that the glut of satellite capacity in some regions is about to end as satellite fleets are rationalized by a new generation of business-minded owners. U.S. Department of Defense demand, they warn, will surpass commercial supply sometime in the next decade even after accounting for the new, higher-capacity military satellites now being procured.

Not everyone accepts this scenario. DISA has assembled a consensus of market projections that forecast new commercial satellites being put into service in the coming years that, combined with existing capacity, will keep supply higher than demand.

Military satellite manufacturers, on the other hand, have argued that commercial prices are unstable, and commercial satellites unacceptable platforms for much of what the Defense Department needs.

Craig Cooning, deputy general manager of Boeing Space and Intelligence Systems, said the Wideband Global System — formerly called Wideband Gapfiller — that Boeing is building for the U.S. Defense Department will provide secure communications services at a cost of $300,000 per transponder equivalent.

Speaking at the same conference session as Cowen-Hirsch, Cooning did not detail whether the $300,000 figure represented an all-in cost of the Wideband Global System or only the cost of the satellites.

Cooning also said commercial satellites are vulnerable to interference, intentional or otherwise — a handicap he said could be mitigated if commercial satellite owners added nulling antennas to their spacecraft to cancel interfering signals.

“It’s inevitable that we’re going to see increased jamming in the future,” Cooning said. One Boeing commercial satellite customer, Thuraya Satellite Communications of the United Arab Emirates, suffered several months of intentional interference in 2006 that caused a substantial loss of revenues.

Peter B. de Selding was the Paris bureau chief for SpaceNews.