With all the fears of a recession and a tightening financial market hanging over the satellite industry in 2008, one particular market that has provided a good revenue stream for the industry in recent years may remain constant or even continue to grow. That market is the military and government sector worldwide. The US government alone is estimated to spend nearly half a Billion dollars a years in commercial satellite prodicts and services, according to space consultant, Vice-Adm. Lyle Bien, USN (ret.)
Even with next-generation military satellite systems being developed by the U.S. military, estimated to be worth over US$ 100 Billion by the Teal Group, coming on board in the next 10 years, analysts are confident that even with these new satellite systems the military’s inceasing demand for bandwidth will not be met internally. “The government, in the near-term has the next generation satellite systems coming on board, but the amount of bandwidth requirements to support it’s global operations is just going to continue to grow—and there is only one place to go and that is the commercial satellite sector to fill the shortfall,” said Maj. Gen. James Armor, USAF (ret.), former Director of the National Security Space Office.
In fact, the next generation military satellite systems are not exactly proceeding without a hitch. For example, the highly-touted Transformational Communications Satellite System (TSAT), which has already suffered delays over the past two years, has had its budget cut drastically. The US Air Force has reduced funding for TSAT by about US4 4 Billion over the next five years, according to a recent report by research firm, NSR. “TSAT as foreseen by the U.S. Military’s network architects enables the realization of all DoD and Joint Force visions of future network-centric operations including the Army’s Communications on the Move (COTM) and Future Combat System (FCS) concepts as well as the Navy’s Sea Power 21 vision and fleet FORCEnet/FORCEview concepts. Throughput for the five-satellite constellation as originally planned is to reach between 10 and 40 Gbps and have a total worldwide capacity of 28.5 Gbps. However, a $4 billion cut from the original budget of over $10 billion or a 40% program decrease will certainly present significant challenges for achieving original program goals,” said NSR.
With military satellite programs experiencing delays and budget cuts, there will certainly be a shortfall in meeting the satellite capacity demands of the military. But apart from satellite capacity, the military will also be requiring ground equipment and other terrestrial infrastructure. “The thing that government users are seeking is essentially the same thing that you and I are seeking, which is the ability to stay connected and communicate with broadband communications wherever we happen to be. That’s why cell phones are very popular as you can take it with you anywhere. And that’s what warfighters need. So, if I were advising somebody who wants to enter the military market, I would suggest to do it with a service that is comparatively high-speed, and that can be accessed with a small terminal that you can carry around or at least put on a vehicle. If you can put broadband into a mobile platform, I think you are going to attract customers,” said Vice Adm. Lyle Bien.
One area where NSR sees potential growth is the Commmercial Off-the-Shelf (COTS) equipment--hardware developed for the commercial market that ca neasily be reconfigured to suit military needs.The land mobile COTS sector is expected to account for the vast majority of in-service units as well as revenues, according to NSR. The other COTS sectors (maritime, aeronautical and UAVs), although accounting for a relatively small part of the market, are expected to exhibit healthy growth as well.
However, there are still nagging issues that hinder the development of the military market for the commerical sector. The most persistent one is the inability of the Department of Defense (DoD) to enter into long-term contracts with commercial satellite service providers. According to Vice Adm. Bien, this is a disincentive for some satellite companies to make the necessary long-term investments in this market. There might just be a silver lining in that the Defense Information Systems Agency (DISA), the DoD agency responsible for procurement is soliciting suggestions on how they can surmount this. Already, companies are competing to win portions of the Defense Information Systems Network Satellite Transmission Services-Global (DSTS-G) contract administered by DISA which is scheduled to expire in 2011. The current contract focuses more on fixed satellite and teleport services. Companies are lobbying hard for a broader scope for DSTS-G contract tht wil include turnkey operations and integrated service-level agreements. With the military and government markets having to rely on 75-80 percent of its satellite requirments from the commercial sector, it’s hard to imagine this dminishing in any substantial manner in the mid- to long-term.
With military and government demand coming from other regions as well, there is no dearth of opportunities in this growing market segment.
