TSAT Delays and Budget Cuts Likely to Boost Commercial COTM Market
by Jose del Rosario, Senior Consultant, NSR
On February 4th, 2008, the U.S. Air Force requested $11.9 billion from Congress for military space programs and satellites for fiscal year 2009. This request represents a slight increase compared to the $11.3 billion appropriated by Congress for fiscal year 2008.
An Air Force official interviewed by Reuters indicated that one program that took a serious hit in FY2009 and beyond is the Transformational Communications Satellite System (TSAT). The official further told Reuters that the Air Force would apply its back-to-basics approach to the program, earmarking just $843 million in FY2009, and $6.6 billion over the next five years, which is about $4 billion less than initially planned.
The expected contract award, which has already suffered delays over the past two-years, is expected to transpire in May of this year. In addition, the U.S. Air Force, which in recent years had planned to launch the constellation of five TSAT spacecraft starting in 2013, is now looking at the earliest launch to take place in 2016, due to budgetary issues and other concerns.
Moreover, and more importantly, the end result of substantial budget cuts is not only launch delays of from two-to four-years, but also the scaling down of TSATs overall capabilities. TSAT, as foreseen by the U.S. Militarys network architects, enables the realization of all DoD and Joint Force visions of future network-centric operations. This includes the Armys Communications on the Move (COTM) and Future Combat System (FCS) concepts, as well as the Navys 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 percent program decrease, will certainly present significant challenges for achieving original program goals.
Part of the TSAT architecture includes a terminal segment consisting of tens of thousands of small transmitters/receivers on aircraft, ships, ground vehicles and even in backpacks for communicating with the satellites. As COTM becomes more important for future warfighting, peacekeeping, and civil missions, the U.S. Department of Defense (which has already set its future network architecture for substantial COTM capabilities) will have to once again continue to augment, or perhaps even rely more heavily on, commercial assets and commercial service providers to address the impending shortfall.
In its recent report, Government & Military Demand on Commercial Satellites, 4th Edition, NSR made its projections with the assumption that TSAT, a substantial future market restraint for commercial military demand due to its capabilities, would not be launched by 2013 as planned. NSR foresaw delays and budget cuts given the U.S. Congressional proceedings monitored in 2005 through 2007. In its market forecasts, NSR did not anticipate or account for TSAT as having any negative effects on commercial demand until the end of 2015. The recent announcement certainly validates the NSR projection.
The land mobile COTM sector is expected to account for the vast majority of in-service units as well as revenues within NSRs report forecast period. The other COTM sectors (maritime, aeronautical and UAVs), although accounting for a relatively small part of the market, are expected to exhibit healthy growth, as well. It is worth noting that the entire COTM sector is expected to be a large market segment. The small slices of market share for these other segments represent healthy and sustainable annual growth.
There are many links in the TSAT network that include optical and RF links. The vast majority of these links, as indicated in the figure above, are likely to be RF signals, which is where the commercial satellite industry can present its value proposition. Commercial assets in C-, Ku- Ka- and X-band (XTAR being owned by a commercial entity) can augment if not replace many of the RF links between TSAT and end user terminals. As military COTM demand grows while the TSAT budget declines, there is really nowhere else to turn except the commercial satellite industry.
A decreasing U.S. Military budget leads to a decrease in overall military-related demand. Nevertheless, in looking at TSAT alone and its effects on the commercial satellite industry, delays and perhaps a reduction in TSATs capabilities should once again boost the commercial satellite industry. Perhaps this impetus will continue even until 2020 for COTM in peacekeeping and anti-terrorism activities.
Information for this article was extracted, with permission, from this NSR report...
Mr. del Rosario covers the Asia Pacific region for NSR and is a senior member of the firms consulting team, where he focuses his research on quantitative modeling, data verification, and market forecasting for the wireless industry and satellite communications sector. He conducts ongoing research with specialization in policy analysis, regional economic indicators, regulatory initiatives, and end-user demand trends.