Stratos Global Corp. already holds more than $100 million in U.S. government contracts from the U.S. Department of Defense, the Department of State, and the White House Communications Agency, among others. This is up from a paltry $400,000 of contracts in 1998. But Stratos wants more and has launched a new organization, Stratos Government Services Inc., to secure more U.S. government work.

Government Services, due to begin operations later this year out of a Washington, D.C., will target classified and higher-level government projects; many of them running on Mobile Satellite Service (MSS) platforms such as Inmarsat, Iridium and Globalstar.

"The U.S. government spends about $1 billion a year on commercial satellite technology and services, and our products address about a third of this market," Government Services president Bob Roe, formerly senior vice president of Stratos’ MSS division, said. "If we position ourselves properly, we can get a much larger piece of that $330 million. In fact, we hope to double our share by 2008."

Proper positioning is what Government Services is all about. By setting up a new entity that is entirely separate from other Stratos operations, Roe can shape the company to meet the U.S. government’s stringent security requirements. This covers everything from ensuring that all staff have the necessary security clearances to winning authorization to handle classified U.S. traffic and encryption technology. To enhance the unit’s allure, the company will have a technology demonstration center on site where government personnel can test their applications.

Roe believes ties to Stratos will allow the new company to provide the kind of one-stop-shopping that the Pentagon prefers. "The government does not like to have to go to one company for air time and another one for satellite equipment," he said. "They want to be able to buy a package that brings all of that together, and that’s exactly what [Government Services] can do for them."

Government Services also should be able to tap into Stratos’ portfolio of Fixed Satellite Services (FSS) and MSS services, including Inmarsat and its new Broadband Global Area Network (BGAN) high-speed satellite service. "We can still rely heavily on leveraging our parent company’s infrastructure, while creating the kind of separate, secure entity that meets Washington’s needs," Roe said.

Industry Observers: Smart Move

"Stratos’ approach is a sensible one, and a step that other satellite companies such as SES Americom, Intelsat and Panamsat have already taken," said Peter Nesgos; a space business attorney and partner at Milbank, Tweed, Hadley & McCloy LLP in New York. "Having a separate government unit is a necessity if you’re going to address the specific concerns and requirements of U.S. government export control and security clearances."

One thing is certain: There is money to be made in the market, especially on contracts that were previously sole-sourced to firms such as Haliburton. "A very small piece of the (Logistics Civil Augmentation Program) contract involves satellite services, and it is being opened up to competitive bidders," said Susan Irwin, president of Irwin Communications.

"Creating a specific division cuts out red tape in terms of clearances," said Jose del Rosario; senior analyst with Northern Sky Research. "But more importantly, a new division can engage in new services and applications in more targeted fashion specific to the needs of the [U.S. government]. … Iraq, the Middle East as a whole and Afghanistan are certainly mainstay markets in the recent past and for the foreseeable future. However, there are other opportunities in Homeland Security as well as disaster preparedness that justifies the creation of a standalone government services company."

The creation of an organization such as Government Services comes as no surprise to Tom Surface; Telenor‘s director of media and public relations. Along with Lockheed Martin, Telenor is one of the new division’s key competitors in the government MSS/FSS market.

"We actually view [Government Services] as a response to Telenor’s moves to improve our service to government clients last June," Surface said. "This is why we hired Steve Johnson, former New Skies sales director, as Telenor’s director of government sales. Washington is a very important client, and it’s vital to have someone like Johnson who knows how government works to serve them."

Still, there’s no guarantee that Pentagon spending on commercial satellite communications will remain steady, Irwin said. "In fact, there’s some indication that satellite spending is already declining as the Pentagon focuses on reconstruction and feeding the troops," she said. "Still, by creating [Government Services], Stratos has probably made a wise decision."

—James Careless