Northern Sky Research

Iran, North Korea and Military SATCOM

Jan 13th, 2012 by Jose Del Rosario   More from this Analyst | Profile

Reports indicate that Iran in the "near future" will start enriching uranium deep inside a mountain to conduct sensitive atomic activities at an underground site for better protection against enemy attacks. The U.S. and Israel are not ruling out strikes against Iran if diplomacy fails to resolve the dispute.

Meanwhile in the Asia Pacific, assessing North Korea's nuclear capability and potential threat under a new leader is causing serious concern around the region. Reports indicate that Pyongyang has enough plutonium to arm about a dozen weapons or may actually already have in its arsenal between six to twelve such weapons.

In its recent report, Government and Military Satellite Communications, 8th Edition, NSR outlined the potential impact of key hotspots in its demand analysis that include North Korea as well as continued developments in the Africa/Middle East.  These hotspots, depending on the level of deteriorating conditions, reflect NSR’s Baseline and Scenario 1 forecasts where a high number of in-service units and thus revenues will be demanded from the commercial satellite industry.

Budget Crunch Effects

The relevant issue that comes to mind is the overarching budget concern in the U.S. and across allied nations where cuts of at least $489 billion in the U.S. Defense Budget over the next 10 years will be implemented. Although minimal in NSR’s view given an annual base spending of close to $700 billion, these cuts may still hamper overall spending for key programs.

In NSR’s view, commercial SATCOM demand will increase throughout 2012 to better assess the nuclear capabilities and potential threat of Iran and North Korea while continuing to engage in Afghanistan and Iraq in order to preserve and build on the success of the past decade.  Given the planned cuts, how then will the U.S. and its allies financially handle four hotspots?

In January 2012, the Obama Administration released its new Strategic Defense Doctrine, which calls for a re-orientation of the DoD’s force structure and mission. In NSR’s view, future spending on commercial satellite services will have to increase as part of the Pentagon’s strategy that it will “augment investments in special operations forces, unmanned systems, ISR, space systems, and cyberspace.” As such, spending cuts will have to be accompanied by re-allocation of funds towards cost-effective space programs as one of the key strategies to fit requirements with spending limits.  And here, the commercial satellite industry should stand to benefit from the re-allocation of budgetary items due to cost savings as well as continue to take a large share of services and bandwidth traffic that enable militaries worldwide to achieve a number of concurrent goals.  

Part of the financial challenge is how to support military agencies that are already running 80-90% of traffic on commercial satellites as the escalating bandwidth crunch should lead to higher prices for bandwidth and specialized services. Purely as a function of market forces, i.e. supply and demand, higher cost structures should still be manageable from a military customer’s perspective compared to launching its own internal assets. 


Bottom Line

The North Korea and Iran flashpoints are likely to present increasing demand for key programs, including:

  • Drone missions
  • On-the-ground ISR
    • Handhelds
    • COTP Manpacks
  • BFT and COTM in preparation for supporting Special Forces operations
  • Bulk Leasing for Ku-band, Ka-band , HTS and X-band capacity
  • Private-Public Partnerships (PPP) for quick deployment of space assets to address higher bandwidth requirements

In the aggregate, increasing demand and tightening supply should lead to overall higher positive revenue impact for the commercial SATCOM industry.

Information for this article was extracted from NSR's report Government & Military Satellite Communications, 8th Edition