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Pentagon Weighs Satellite Needs

By Susan M.Menke
Special to The Washington Post
Monday, November 22, 2004; Page E04

The Defense Department's use of commercial communications satellites has soared with the wars in Afghanistan and Iraq. Now, the Pentagon is trying to decide whether it can save money by buying service directly from satellite carriers instead of through three Washington area resellers.

It will take years for the military to launch enough satellites to fulfill its own bandwidth needs. The amount of commercial bandwidth bought by the Defense Department to fill the gap has grown ten-fold since 2001, before the war in Afghanistan, said Pravin Jain, chief scientist of the Defense Information Systems Agency's Global Information Grid engineering directorate.

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The Pentagon needs commercial satellite services, for example, to support the operations of unmanned aerial vehicles and other intelligence, surveillance and reconnaissance sensors, as well as for voice communications.

The Defense Department relies on the Defense Satellite Transmission Services-Global contract. The contract with resellers, which began in 2001, could be worth as much as $2 billion if the Pentagon extends it for its full 10-year term. It is held by Arrowhead Global Solutions Inc. of Falls Church, Artel Inc. of Reston, and Spacelink International LLC of Dulles.

Together, the three companies have collected "$500 million to $600 million in revenue over the last three years," said Otto W. Hoernig III, chief operating officer of Spacelink.

The companies compete among themselves to provide satellite services to the military, and they make the satellite carriers compete to provide the communications bandwidth they need.

Now, the Office of the Secretary of Defense and the National Reconnaissance Office are debating whether to start buying commercial satellite service directly from carriers. Their report is due in April.

Carriers affiliated with the Satellite Industry Association of Alexandria -- EutelSat, IntelSat, Loral Space and Communications Ltd., New Skies Satellites, PanAmSat Corp., and SES Americom Government Services Division -- have lobbied the Pentagon to buy directly from them, arguing that this would be less expensive.

"Where it's bulk capacity with no added value from an intermediary, the carriers want to deal directly" with the Defense Department, said Leslie Blaker, a vice president at SES Americom.

But Arrowhead president and chief executive Mary Ann Elliott said the resellers' cost per megahertz is 40 percent lower than it was before their contract began.

"The department has procured more commercial satellite service than at any other point in history, at lower cost and with greater flexibility of terms and conditions," she said.

Susan M. Menke, an editor-at-large, wrote about this contract for Washington Technology. For more details on this and other technology contracts, go to www.washingtontechnology.com.

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