The Dynamics of Growth in Worldwide Satellite Communications Capacity

The Department of Defense (DoD) cannot afford to own all the satellite communications capacity it might need in all areas of the world. DoD planners estimate that they will need to provide about 16 Gigabits per second of bandwidth by 2010 to effectively support a joint-service operation. However, given current procurement plans, the DoD will own only one-eighth of this projected desired capacity. Therefore, for the foreseeable future, the DoD will need to buy at least some of its communications capacity from commercial vendors. An ability to understand what drives growth in worldwide satellite capacity and to predict capacity would be useful to military communications planners in making decisions in advance to purchase and lease communications capacity in various parts of the world. The author shows that there is a strong relationship between growth in total satellite communications capacity and economic growth, as measured by Gross Domestic Product. Adjustment to change is quite rapid; if there is an imbalance in the long-run equilibrium between supply and demand, on average 25 percent of the adjustment is made within one year, although there is some regional variation. The analysis indicates that the market can adjust swiftly to a surge in demand, and thus there may be little need to buy satellite capacity in advance simply to ensure that capacity will be there if needed.