The U.S. government tends to say the right things on the subject of leveraging private-sector capabilities to get the most out of each dollar spent on space, but its actions often tell a different story. The latest case in point is U.S. Defense Department guidance for commercial satellites with so-called hosted payloads operating in military frequencies.
The guidance, issued in September by the Pentagon’s chief information officer, imposes restrictions that are antithetical to what hosted payload agreements are supposed to be: government-commercial partnerships. It would require, for example, satellite operators to obtain Pentagon permission to move their own satellites, or to lease — or even acknowledge the availability of — capacity in military frequencies to an allied government. Satellite owners also would be held financially accountable if a hosted payload experiences radio frequency interference — as many commercial and even government satellites do, from time to time — and in the event of bankruptcy they would effectively have to give the Pentagon final say in the disposition of their assets.
The guidance, which industry officials complain was developed without commercial-sector input, roughly coincides with news of Intelsat’s plan to sell UHF capacity aboard its planned IS-27 satellite to the government of Italy. Intelsat invested its own money in that payload in hopes of attracting U.S. military customers that have been facing a shortage of UHF capacity, but was forced to look elsewhere for business after being rebuffed by the Pentagon.
That in itself is unfortunate — Intelsat says it was encouraged by the Pentagon to invest in the UHF payload — but it also highlights the uncertainty created by the hosted payload guidance. Whether it will affect Intelsat’s backup arrangement with Italy is unclear — the capacity in question is licensed to the Italian government. But it could complicate backup planning for companies contemplating similar investments, adding a risk layer that might cause them to think twice.
Hosted payloads hold promise as an efficient, low-cost alternative for delivering space capabilities to government agencies precisely because the private sector is making the investment and assuming a big share of the risk. In traditional satellite procurements, these burdens fall more heavily on the government. If the government wants to take advantage, while reaping the benefits of industry’s proven ability to deploy satellites with more predictable — read lower — costs and schedules, it is going to have to accept a lesser degree of control over the assets.
The chief information officer’s guidance, to the contrary, is prescriptive to the point of dictatorial, both in tone and substance. Although the individual restrictions it contains represent genuine Pentagon concerns, the guidance imposes a one-size-fits-all solution that makes no allowance for the wide variety of possible hosted payload scenarios. The concerns are best addressed in individual contractual arrangements that give the providers the flexibility they need to maximize the potential return on their investment while mitigating risk. If the Pentagon is not comfortable with the terms it is free not to sign — that’s what being a buyer of commercial services is all about.
Senior policymakers at the Pentagon — or the White House, if need be — should step in and ask the chief information officer to take another crack at drafting guidance for hosted payload arrangements. Especially in the current budgetary environment, the government should be doing everything it can from a policy standpoint to encourage industry to make these kinds of opportunities available. The guidance in its current form does the opposite.
