U.S. Military Remains Big Focus of Satellite Operators

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With U.S. government business providing their biggest growth opportunities, many commercial satellite operators are looking for every edge to capture as much of that demand as possible.

For example, many satellite companies are looking to bolster their flagging core business by acquiring their customers as SES Americom did when it bought Verestar, said Dean Olmstead, the president of government satellite services company Arrowhead Global Solutions of Falls Church, Va., a nd the former head of SES Americom.

Satellite companies that provide services to the U.S. government are attempting to fill their excess capacity with low-margin government business, Olmstead said.

But how long the big companies remain enthusiastic about U.S. government business may depend on how quickly the private-equity companies that have purchased satellite operators like PanAmSat and Intelsat can make those old-line companies more efficient, he added. “It will be interesting to see whether the current enthusiasm of the satellite companies for government business will wane once the [private-equity firms] have wrung out the excess capacity and press for improved profit margins.”

As the single largest customer for the satellite industry, the U.S. Department of Defense (DoD) generated roughly $500 million in commercial satellite communications revenues last year, and the demand is expected to double to roughly $1 billion during 2010, said David Cavossa, executive director of the Satellite Industry Association.

The Pentagon is increasingly turning to the commercial satellite industry to fulfill short-term, occasional-use needs for capacity, Cavossa said.

His association has responded to the DoD’s growing demand for satellite services, Cavossa said, by working with Congress to help the Pentagon become a “smarter” buyer and give the operators an enlarged revenue stream, he added.

When the DoD buys capacity on the “spot” market, it pays a premium, Cavossa said. The best situation for both the DoD and the satellite companies would be if the government leased transponder capacity long-term to ensure its availability when needed. That approach would allow operators to “book backlog” to justify the launch and construction of new and replacement satellites, he added.

Although broadcasters collectively spend billions of dollars a year on satellite services, the largest growth is expected to come from government users during the next five years, Cavossa said.

“That is the reason why virtually everyone in the industry is focused on that market,” Cavossa said. Satellite companies are working with the DoD, warfighters, U.S. Central Command, U.S. Strategic Command and the combatant commands from every branch of the military to meet their needs with commercial capacity, he added.

A two-page, Dec. 14 DoD memorandum and action plan indicated that the military would build commercial satellite communications into its long-term architecture.

In the past, Cavossa said, people in the DoD talked about using commercial satellite communications capabilities as a “necessary evil ” because traditionally they have envisioned building their own satellite communications systems.

“They have come to discover that there are limitations to growing so quickly and that commercial satellite services will always play an extremely important role,” Cavossa said. Commercial satellite systems are needed to supplement the DoD systems, he said .

One of the chief ways the Defense Department buys commercial satellite time is through a Defense Information Systems Agency contract known as the Defense Information Systems Network Satellite Transmission Services, or DSTS-G contracts.

The three companies that currently have DSTS-G contracts — Arrowhead, Artel and Spacelink, — act as brokers by obtaining satellite time from any satellite operator with excess capacity in a region where the DoD needs it.

While some of the largest satellite operators make full use of that opportunity, they also are increasingly working to bypass the DSTS-G mechanism by selling directly to the government.

Olmstead, who now heads Arrowhead, defended the current system and said the DSTS-G contract has provided the government with optimal technical solutions and the best pricing for bandwidth.

Other companies are coming up with unique offerings specifically designed to attract the DoD and other government users.

Denis Curtin, chief operating officer of Rockville, Md.-based Xtar LLC, said his company’s successful launch in February of its first satellite, Xtar-Eur, has been greeted with a positive reception from prospective government users of the service in the United States and overseas.

Using a bandwidth allocation from Spain, X-Tar is the first commercial company to launch a satellite that uses the X-band of the radio spectrum, a bandwidth reserved in the United States for government users only.

The company’s second satellite, Spainsat, is scheduled to be launched later this year to provide additional high-power transponders, global and fixed beams, and steerable spot beams that can be used with existing terminals and ground equipment operated by U.S. and allied governments within the spacecraft’s coverage area, Curtin said.

As part of its marketing efforts, Xtar conducted a demonstration during the week of April 10 with the U.S. Army’s 7th Signal Brigade in Manheim, Germany. The demonstration used the in-orbit Xtar-Eur satellite to communicate with both 2.4- and 4.8-meter antennas on the ground, as well as two sets of dual-pole feeds, Curtin said.

Both the Right Hand Circular Polarization and Left Hand Circular Polarization of the Xtar-Eur satellite were demonstrated with a ground terminal that had been in the field for more than 25 years, Curtin said.

All current X-band satellites used by the U.S. government and NATO use a technique known as Right Hand Circular Polarization , so Xtar-Eur’s use of both Right Hand Circular Polarization and Left Hand Circular Polarization effectively doubles the bandwidth available to the user, Curtin said.

As a result, all that is required to use the additional bandwidth is to have an antenna feed capable of handling both polarizations, Curtin said. It would be a relatively modest cost for an antenna system. In addition, the Xtar service would be able to take the normal 8-megabit capability of a 40 MHz bandwidth terminal and drive the throughput to more than 100 megabits, he added.

The demonstration was able to achieve 100 megabits per second using the terminal with a 4.8-meter antenna and 75 megabits per second using an 2.4-meter antenna.

“They proved they could take hardware developed in the ’70s and update it to current technology and performance at minimum cost,” Curtin said. “This is like taking an everyday sedan and making it a jet-powered sports car.”