While the U.S. government has been relying more on the commercial sector to supplement its seemingly insatiable appetite for satellite communications, the military was lucky that there were adequate resources that could be tapped for current military operations in the Middle East.

That’s one of the reasons the U.S. Department of Defense needs to change the way it procures commercial satellite services, said Kay Sears, senior vice president for sales & marketing for PanAmSat Corp.’s G2 Satellite Solutions unit.

“The military was really very lucky in Iraq and Afghanistan,” Sears sa id. “They were lucky that the commercial industry had the capacity available over that region. A lot of satellites weren’t even designed with the Middle East in mind. … If that conflict had happened someplace else or if it had happened five years earlier, the capacity situation would have been totally different.”

PanAmSat established G2 in March 2003, merging its U.S. government-related business operations with the assets from its acquisition of Hughes Global Services. G2’s revenues in 2003 were $73 million, and the unit expects to pull in between $90 million and $95 million in 2004, or about 12 percent of PanAmSat’s overall revenue, Sears said.

The figure could grow even more in the future if the Pentagon replaces its current system for procuring satellite services. At present three small businesses act as intermediaries between the Pentagon and major satellite operators.

“It’s not about those providers,” Sears said. “It’s simply about the intimate relationship that the satellite communications operators need to have now with [the Department of Defense] in order to be sure that we can provide in the future the right capacity at the right place.”

Sears discussed the commercial satellite communications industry with Space News editor Lon Rains and staff writer Jason Bates.

How did PanAmSat respond to the request for information issued by the U.S. Defense Information Systems Agency (DISA) for new ways to provide commercial communication services to the military?

All the operators came together on that. Prior to that request for information being released, there was a joint position paper that was submitted to DISA and others that really laid out the operators position on this procurement. Because commercial satellite communications has become so critical to the [U.S. Department of Defense] and to the warfighting effort, we need a direct relationship with DISA.

It’s not a hit on the current providers. They’ve done what they’ve been asked to do. It’s the shift of the landscape in terms of the reliance on commercial satellites. When the contract was originally envisioned, they did not envision wartime efforts and they did not envision relying 80 percent on commercial services going forward. As a result of those experiences and as a result of their reliance on commercial satellite communications, there has got to be a direct relationship because we need to understand as satellite operators where to deploy future capacity.

What about the contention that the current system keeps satellite operators from pushing their own spacecraft instead of looking for the best options for the military?

We at G2 are probably one of the only government groups that have 50 percent of their capacity on other satellite systems. So, we’re leasing capacity from other operators every day.

What is the advantage in the long-term contracts the operators are seeking from the government?

How do I take back to my board the proposal for a new satellite when I’ve only got a one-year commitment? It would be very hard to justify that. No long-term commitment on some of these things makes planning very hard for the operators. We’re going to need to talk about requirements that are two and three years out.

A lot of times the military certainly doesn’t know where the hot spots are in terms of where a specific conflict might break out. But the idea is that they would have buckets of capacity to use in those regions.

How will the deployment of planned U.S. military communications satellites affect future planning?

Well, it’s a big assumption to say that they’ll get all their programs. I think there’s a realization that they won’t get all their programs. The Wideband Gapfiller program is on track, but the first Gapfiller satellite is going up over the Pacific, and I believe all of their demand is in the Middle East. So the Gapfiller isn’t really going to help them very much.

Even more importantly, all these different applications continue to grow. The information needed for situational awareness and the imaging capability that’s possible now is just eating up a lot of bandwidth. The projections we have go out to 2012, and there’s still a large shortfall on the [Department of Defense] side in terms of capacity versus demand.

How long do you expect your business in Iraq to continue?

We’re seeing a shift from more command-and-control wartime communications to more sustained reconstruction-effort communications. The networks that were deployed for the wartime communications are being converted, and I think will end up staying in country and serving the different ministries and local communications efforts.

Are the contracts being switched from the U.S. government to the Iraqi government?

We’re seeing a little bit of that. In some cases we’re dealing with the different ministries. Sometimes there is still the military in the middle. But the end customer has changed. I think the military will continue to provide them contracting support and procurement support.

We’re also seeing a continued presence in Afghanistan. I would say for several years forward we will have a huge presence in that country doing all kinds of things. Programs that were started right after the Taliban was removed are continuing on for several years.

The warlords are still there, and there’s still a lot of interesting missions that are taking place on a continuing basis. We have not seen a decline in our business. We’ve seen more of a shift in terms of who the end user is. The communications efforts are still alive and kicking and in fact are growing from our perspective.

How much have you seen the business grow outside those two theatres?

North Africa’s picking up a little bit. There are some humanitarian efforts that will go on there and also some intelligence gathering that’s going to continue.

I think the homeland security market is going to pick up very soon. I think [the Department of Homeland Security] is starting to define their programs.

They’re starting to understand satellite communications, and they’re starting to put money into some [information technology] programs, and there will definitely be a satellite communications component there.

What are the estimates for what Homeland Security will spend in this area?

We’re estimating somewhere between $50 million and $100 million might be spent in 2005 across those four kind of satellite communications categories, and I think a lot in 2005 might be on the professional services side as they try to define programs. They’re spending a lot of money right now on design and network engineering.

There was $50 million given to the states, and I think you’ll see some of that money get spent on first responder kits which include some type of portable [very small aperture terminals] and wireless capability. But I think you’ll see some of the large dollars start to flow in these networks in the late 2005-2006 timeframe.