Earlier this month Defense News ran an interesting editorial penned by Robert “Tip” Osterthaler, formerly a U.S. Air Force general and currently CEO of SES Government Solutions. We were gratified to see another SATCOM executive breaking their silence and asking the military to reconsider the way it acquires commercial SATCOM.
Kay Sears, President of Intelsat General, has written extensively on the military’s reluctance to acknowledge their dependence on commercial SATCOM. This is especially acute now in a tough budgetary climate, with commercial SATCOM being significantly more economical than SATCOM from government owned satellites. Yet often government customers complain about commercial SATCOM being too “expensive.”
Osterthaler takes dead aim at that complaint in his editorial. He makes excellent points such as the fact that 80 percent of American military satellite broadband traffic travels on commercial SATCOM, not military. These satellites cost approximately $300 million to build, launch and support in geosynchronous orbit. Those costs must be covered by enough revenue to cover operating costs and compensate investors.
Further, government pays a higher price than necessary for commercial SATCOM due to their own practices. The agency that buys capacity is not the end user, and doesn’t have the authority to revise contract language to increase competition. Also, government agencies refuse to collaboratively plan for SATCOM needs long term. They prefer to purchase capacity on a short term or “spot” basis, forcing providers to charge a premium.
Finally, Osterthaler lays out why the government doesn’t even know how much their SATCOM costs:
“Another way to address the “it costs too much” argument is to ask, “as opposed to what?” Consider the Defense Department’s own constellation of communication satellites called the Wideband Global SATCOM System or WGS, which it continues to launch. A comparative cost study was not conducted years ago when the U.S. started buying these satellites, and it still has not been done. A cynic might say, “Having made the decision without doing the analysis, we don’t really want to know the answer.” A more likely explanation is that no one in the government knows what it costs to build, launch and operate things like WGS. To understand how that can be true, it’s necessary to think about a key difference between the government’s economic reality and the private sector’s.
For example, the cost of buying a government satellite rarely includes the cost of developing and fielding the terminals needed to talk to it, yet the satellite has little utility without those things. In addition, there are many other costs that are routinely picked up by other activities or agencies — factors such as requirements development, feasibility studies, acquisition support and even operating costs once the system is deployed.”
Osterthaler also cites the need for better communication between the commercial space industry and government. He cites the recently announced, dramatic cuts to the Enhanced View program as an example of how industry can’t depend on government to be a reliable partner. Kay talked about the same issue back in February, on how the government seemingly takes commercial SATCOM for granted and assumes it will always be available.
Osterthaler’s editorial makes clear that this is not the case. Commercial SATCOM will not always be available to government if we don’t make some important changes in the relationship between the government customer and commercial provider.
It’s heartening to see a former general and current industry colleague make these points so strongly. Fixing this problem isn’t just good for the commercial satellite industry — it’s good for the country.