Breakthroughs in Commercial Satellite Communications (SATCOM)

For the last decade and a half, the US Department of Defense (DoD) and commercial satellite communications industry have been engaged in a dialogue about how they can work more closely together so that companies can better meet the future needs of their biggest single customer.

The Pentagon’s commercial SATCOM purchasing agent, the Defense Information Systems Agency (DISA), continues to buy commercial capacity as needed on the spot market, a practice industry officials say makes it difficult for them to plan and invest in military-oriented capabilities.

Pete Hoene, President and Chief Executive Officer of SES Space and Defense, argues that DISA should embrace the mindset that appears to be taking hold at US Air Force Space and Missile Systems Center (SMC), traditionally a buyer of military space hardware. Through its Pathfinder series of initiatives, SMC is experimenting with new ways to procure commercial SATCOM capacity and partner with industry.

The dialogue has taken on a higher urgency of late as the Air Force pursues an Analysis of Alternatives (AoA) for replacing the current military-owned Wideband Global SATCOM (WGS) communications system. WGS is the backbone of the US military SATCOM fleet, but many industry and government officials say the time has come to hand that mission to the private sector.

One of the latest discussion venues was the 2017 MilSatCom USA conference in Arlington, Va., sponsored by SMi Group. Among the featured speakers was US Army Maj. Gen. Peter Gallagher, director of architecture, operations, networks and space in the Office of the Army Chief Information Officer.

I had the opportunity to discuss these acquisition issues with Mr. Hoene following that conference. Here is what he had to say:

Warren Ferster: What were some of your biggest takeaways from the MilSatCom USA conference?

Mr. Hoene: One of the biggest takeaways for me was Gen. Gallagher’s comments, and his plea to industry to help provide more innovative solutions.  He said they uncovered a treasure trove of information while conducting operations overseas and they had no way of getting that information back to their exploitation centers in a timely manner.  So they reached out to industry, who came through with a high-throughput, low-latency capability that was able to backhaul vast amounts of information.  That ability to rapidly backhaul critical information (via our O3b MEO solution) was a breakthrough for deployed forces.  As a result of the increased capability, they were able to quickly process information and get it back to the theater of operations within hours, not weeks or months.

Warren Ferster: He clearly was talking about SES’s medium Earth orbit (MEO) O3b constellation.  Why is low-latency so important?

Mr. Hoene: A system that provides a round-trip signal turnaround time of about 200 milliseconds enables users to leverage cloud-based applications. At geostationary orbit (GEO), where you might have 500 milliseconds of round-trip time, it becomes very difficult to use cloud-based applications. What happens in a low-latency scenario is that this acknowledgement or non-acknowledgment of a transaction, or task, happens almost at fiber-like speeds. Therefore, with the O3b MEO solution, you don’t get timeouts or applications that drop out; the users stay connected. When you get to two times that amount of latency, you are susceptible to timeouts and potential problems. Don’t get me wrong: 90 percent of our customer base is GEO and we need to maintain the support we provide from GEO. But there’s a growing need that was unfilled until our proven MEO capabilities came along.

Warren Ferster: How has that growing need translated into contracts?

Mr. Hoene: We have been very fortunate to have several MEO contracts with the US government. Two of the contracts support COCOM efforts in theater and another supports NOAA’s National Weather Service Office out of American Samoa.   Yet another effort supports a new pilot program for a key US government customer overseas.

Warren Ferster: Were there any more important conference takeaways for you?

Mr. Hoene: I was there for the panel on the Wideband AoA. The problem I had with that panel is that they kept dancing around the AoA criteria and how they would accurately incorporate and represent commercial capabilities.  To me, it’s absolutely crystal clear.  Air Force Gen. John Hyten, commander of US Strategic Command, is probably the most informed warfighter on active duty on the topic.  I like what he said recently: “You also have to ask yourself on the wideband side, with the wideband commercial side, why are we even buying wideband satellites? Why don’t we have the commercial side that’s already built them in three years go ahead and buy them for us, and we’ll just lease it back or come up with some other arrangement in order to do that.” 

Warren Ferster: By industry, are you referring to satellite operators as opposed to manufacturers?

Mr. Hoene: I’m actually referring to both.  Why not reach out to owner-operators and manufacturers? I wouldn’t exclude the manufacturers because I think WGS prime contractor Boeing has shown that they can do it. But the owner-operators in my mind are needed because they offer the ability to manage constellations of satellites very efficiently.   You have to ask the question, “do you really want to continue to manage a constellation of WGS satellites with a large military force, or do you want to turn it over to industry?”  At our satellite operations center we have eight to ten people that manage 53 satellites in GEO and 12 satellites in MEO.  Others in our industry do something very similar for their fleet, so you don’t really need to have a standing army to manage these.

Warren Ferster: DISA’s reluctance to enter into long-term satellite leases has long been a concern for owner-operators. DISA appears content with the status quo because it is getting attractive prices on the spot market. Your thoughts?

Mr. Hoene: I’ve had this discussion with leaders at DISA and cautioned them not to try to commoditize what many of us in the SATCOM industry consider vital infrastructure. DISA doesn’t buy SATCOM the way they buy fiber. They buy fiber in long-term contracts and they treat it as vital infrastructure. Buying SATCOM on the spot market and treating it as a commodity, not vital infrastructure, makes the owner-operators like us question if we should invest in future capabilities that the Department of Defense and US government might need in the long run, such as added security features. As a former Air Force senior leader I find that to be a very risky proposition.  Buying short-term spot market capacity may support peacetime needs but provides no guarantee that the additional capacity the DoD needs in a crisis will be available.  If we had a stronger mission partner – industry partner relationship, we could look at more innovative contracting strategies that could make reserve or pre-emptible capacity available for key regions of the world and be ready to support US Government users in a moment’s notice.  We encourage DISA to increase its interaction with industry and to reverse the spot market and commoditization trend.

Additionally, I was talking with a senior Defense Department leader who said he would like to see commercial SATCOM treated just like military SATCOM so that if a WGS satellite gets jammed they can turn to a commercial satellite in the same region and with similar features to get the resiliency needed to operate through that jamming scenario.  This type of support doesn’t happen through spot-market leases.

Warren Ferster: DISA says long-term leases are problematic because the money it uses to buy commercial satellite services is budgeted on an annual basis.

Mr. Hoene: The vast majority of their SATCOM contracts are a base year plus four option years. It’s based on existing capacity and on operations and maintenance dollars or overseas contingency operations dollars, so there really isn’t a partnership or long-term horizon. I would suggest that they change the way they procure commercial SATCOM along the lines of the Pathfinder initiatives. We’re the proud partner with US Africa Command and Space and Missile Center (SMC) on Pathfinder 1 and we’re working with the Air Force on the remainder of the Pathfinder initiatives.

We would like DISA to try to do things more like SMC is doing rather than try to be a transaction processor for spot market commercial SATCOM. That would really enable me to carry the message to our parent company and to our board and say, “we should invest in specific satellite capabilities, beam structures, power considerations and security features to meet US government requirements.”  This type of interaction will go a long way to provide industry with investment incentives.

The beauty and the innovation that comes from the Pathfinder efforts is that it’s funded by procurement dollars, so you’ve got the stability of the budget backing the investment. As Congress appropriates those funds, industry knows there’s a commitment there to fund those efforts over a several year period.

We’re thankful for the Air Force’s groundbreaking work with the Pathfinder initiatives.  These efforts are making a difference and reflect well on the leadership of former SMC commander Lt Gen Sam Greaves and current SMC commander Lt Gen John Thompson.

Finally, we’re also thankful for the leadership and vision Congress has shown by encouraging the DoD to find more innovative ways to procure commercial SATCOM for a number of years.   They have been consistent in trying to get the DoD to take some risks and find new ways to satisfy their SATCOM requirements.

SES Space and Defense is clearly excited about our differentiated MEO and GEO capabilities of our fleet and are poised and ready to usher in the breakthroughs we discussed.  We’re convinced commercial satellites are a critical component of a fully integrated, resilient national security space architecture and look forward to bringing advanced capabilities to our government partners in the near future.

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