Air Force in the Market for ‘Bargain Basement’ Satellite Communications

By Sandra I. Erwin

Military satellites have become extravagant luxuries. Commercial bandwidth leases also are entering the “too expensive” category as defense budgets shrink.

For the Defense Department's satellite communications buyers, the pressure is on to find lower cost alternatives.

“We need innovative approaches” for providing space-based services, said Lt. Gen. Ellen Pawlikowski, commander of the Air Force Space and Missile Systems Center, in Los Angeles.

Pawlikowski, who oversees a $10 billion military space portfolio, spent the past two years surveying the private sector for money-saving ideas. She found that there are lots of good deals to be had from commercial space vendors, but to take advantage of those deals, the Air Force needs to revamp its buying methods.

“A different strategy would be for us to go out and leverage the bargain basement aspects of the satcom business,” Pawlikowski told National Defense in a telephone interview from Los Angeles Air Force Base.

Over nearly two decades, the Air Force haspoured tens of billions of dollars into satellite constellations that are now finally moving into orbit and starting to deliver communications services. At the same time, demand for satcom has soared across the armed services as more weapon systems and drones depend on satellite guidance and military officials increase the use of satellite-based videoconferencing, voice and data communications. A shortage of military satcom has been filled by commercial bandwidth, which now provides up to 40 percent of the military’s space-based communication needs.   

The current approach to buying satcom is financially unsustainable, said Pawlikowski. “The money is just not there for a major new start,” she said. “What you will not see is some major, multibillion dollar contract to go build a next generation of X, Y or Z.” The military also is seeking a cheaper alternative to commercial satellite leases. “We are looking for opportunities to reduce the cost that the Defense Department spends on commercial satcom,” she said.

A transition to a new business model comes at an opportune time for the Defense Department because its communications satellites — the Advanced Extremely High Frequency (AEHF), the Mobile User Objective System Satellite (MUOS) and the Wideband Global Satcom (WGS) — are being deployed and are expected to stay in service for many years. “The current satellites get us through the middle of the next decade,” said Pawlikowski. The Air Force is under contract with Lockheed Martin Corp. to buy six AEHF spacecraft. Lockheed also is building the MUOS constellation. 

How to satisfy future satcom needs after these constellations run out of service life is the subject of much debate within the Air Force and the defense secretary’s space policy office.

Defense officials have called for a new “space architecture” that includes a mix of low-cost military satellites and commercial payloads. That approach, which the Air Force calls “disaggregation,” is a departure from the traditional route of building hugely complex satellites that can do it all.

“What we believe, based on where we are today, is that we can make some changes, introduce the ‘disaggregation’ concept to provide capability in a more affordable way and in a more agile way,” Pawlikowski said. “Can I leverage commercial satcom to provide protected tactical communications at lower prices, and save the cost of expensive satellites and terminals?”

The same thinking applies to the modernization of weather satellites, she said. The Defense Department spent a year studying options for how to tap commercial innovation. The Air Force, for instance, is considering placing environmental sensors on Iridium satellites through a small “hosting” agreement, Pawlikowski said. “Many of these ideas you will see play out in our strategy for meeting the Defense Department’s weather needs.”

Program managers at the Space and Missile Systems Center have reached out to the industry to “understand what is in the realm of the possible,” she said. Under a process called “broad area announcements,” the center awarded 27 contracts valued at $85 million to 17 contractors, which were asked to produce detailed studies on how they would provide lower cost, secure satcom. A similar arrangement for weather satellites resulted in $125 million worth of study contracts. More deals are expected in “wide field of view” space-based surveillance.

In the satellite communications arena, one of the options under consideration is to purchase transponders that currently sit idle on aging commercial satellites. Bargains might be found in existing transponders that commercial satcom providers no longer use, said Pawlikowski. The Air Force is now seeking bids for “on orbit” transponders for Ku-band communications for U.S. Africa Command.

In a Sept. 15 “sources sought” solicitation, the Space and Missile Systems Center asked interested vendors to show how the Defense Department could acquire transponders that operate the commercial Ku-band.

When military commanders request satcom, it typically falls on the Defense Information Systems Agency to shop for a commercial lease. The agency usually buys one-year leases and “spot market” purchases that command premium rates. Annual leases on average cost about $640 million per year.

The Defense Business Board, a Pentagon advisory panel, said this approach is costly and inefficient. “As the demand for service increases in the future, the cost of satellite communications purchased by DISA is projected to grow by $3 billion to $5 billion over the next 15 years,” a DBB report said. The panel suggested the Pentagon try other methods for buying satcom. “Existing contracting procedures and DoD’s culture make partnerships with the private sector difficult,” the report said. The Defense Department needs “better economical solutions.”

Buying on-orbit transponders might just be the answer, said Pawlikowski. This would allow the Pentagon to grab unused commercial capacity at little cost. “There are lots of older [geostationary orbit] satellites that are challenging for standard satcom users because they wobble a little bit.” Users who operate fixed-site antennas have trouble tracking these satellites, but the military has aerial vehicles than can more easily track less-than-stable spacecraft. “We are in discussions with industry to buy upfront a transponder that is on an older satellite,” said Pawlikowski. “Commercial providers don’t have the business base for selling [that service] because the quality is not good, but we don’t care because our antennas can track the satellite,” she said.

Buying a transponder on a commercial satellite, instead of leasing the service, she said, could cut the cost of communications by 50 percent. “That transponder is 100 percent dedicated to government use, the only thing we pay is some small operation costs,” she said. Another huge benefit for the Air Force is that it could purchase the transponder with “investment” funds — the account that pays for new equipment — whereas satcom leases are funded with “operations and maintenance” dollars. “Buying the hardware with investment dollars saves the Air Force precious O&M dollars that it needs for readiness.”

Pawlikowski insisted that there is no going back to the flush days when the military could devote a decade and a billion dollars to building one satellite. She is in fact telling the Air Force’s long time suppliers such as Lockheed Martin and Boeing to diversify their business so they are no longer dependent on just Defense Department work. Boeing has succeeded in commercializing its WGS constellation by signing up non-U.S. customers, she noted. That is helping lower the company’s overhead rates that it charges the U.S. government. “Lockheed is more of a challenge,” she said, because its business is focused on Defense Department work. Pawlikowski is happy to see commercial space firms such as SpaceX and Orbital Sciences Corp. compete for government contracts.

“I want to tell [traditional Defense Department vendors] they need to make sure they are leveraging opportunities to get into the commercial business,” Pawlikowski said. “I want to encourage them to examine the possibilities on the commercial side.”

Topics: Business Trends, Doing Business with the Government, C4ISR, Sensors, Tactical Communications, Procurement, Acquisition Reform, Space

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