Despite a flat budget line forecast through 2003, departmentwide opportunities still abound.
Overall funding for programs in the U.S. military command, control, communications, computers and intelligence market is projected to remain relatively unchanged through fiscal year 2003, according to a new study. Spending is expected to only rise from $7.06 billion in fiscal year 1996 to $7.07 billion in fiscal year 2003. However, total funding for programs in the defensewide support systems market segment, comprising operational space systems and associated activities, is projected to rise strongly during this period.
Several trends shape the command, control, communications, computers and intelligence (C4I) market. Most significant among them is the Defense Department’s increasing use of commercial off-the-shelf (COTS) computer and telecommunication systems technologies, suitably modified to meet essential military requirements. This enables military systems to evolve in pace with commercial technologies while lowering costs, making it easier to meet requirements with available funding. In addition, the Defense Department is demanding that the computer systems it procures be compatible with an open system environment. All of this will mean, according to the study conducted by Frost & Sullivan, Mountain View, California, “that the slight upward trend in funding for some defense programs won’t necessarily translate [in]to greater business for C4I suppliers unless they learn to turn the movement toward commercial products to their advantage.”
The U.S. armed services are also adopting common standards, message formats and protocols. In part, this is because crisis management and tactical command of local and regional conflicts require tightly coordinated joint service action. In addition, acquisition reform is changing the way the Defense Department purchases C4I equipment by increasing flexibility to procure systems in a timely manner and at a lower cost. Meanwhile, each service will procure common commercial computer hardware and software in bulk purchases at competitive prices.
Also, downsizing the force structure has meant that tactical communications systems will continue to be procured in smaller quantities. These trends have brought a consolidation of the defense industry and have intensified pressure on many companies to merge. Finally, although overall spending in the C4I market will remain relatively flat, funding levels may rise for some programs and fall for others.
The study, titled “U.S. Military Command, Control, Communications, Computers and Intelligence,” defines the C4I market as consisting of elements of large systems, particularly those that cut across traditional service boundaries. It does not include related equipment and systems markets, such as sensors and control systems that are part of weapon systems, or local communications devices used by military aircraft, ships and ground combat forces.
Current C4I market characteristics are based on “the interdependence of service units, the speed and range of modern warfare operations, and the need for close coordination among separate service units,” according to Dick Whelan, the author of the study.
The study focuses on several market segments: continental ground-based surveillance systems, global command and control systems, defensewide communications systems, tactical reconnaissance and surveillance systems, tactical command and control systems, tactical communications systems and defensewide C4I support systems.
The defensewide C4I support systems market is the only segment that will grow significantly during the forecast period. Most of the funding in this area will be devoted to acquiring satellites for defense support, the defense meteorological satellite program and the global positioning system, which are all well-established and vital military systems.
Funding for continental ground-based surveillance is projected to increase slightly during the forecast period, as the Defense Department continues to use and upgrade existing systems. Most of the spending for global command and control systems will be funded by the U.S. Army and the U.S. Air Force and will increase slightly overall as the services move more toward joint systems. Servicewide communications systems spending will dip and then increase to slightly higher overall levels by the end of the forecast period, the study predicts.
On the downside, funding for tactical reconnaissance and surveillance systems will decline slightly as the services complete acquisitions and purchase fewer joint surveillance target attack radar systems (JointStars) than were originally planned. Funding for tactical command and control systems will also decline slightly as integration becomes more widespread, but there will be a great deal of activity in different service programs. Finally, spending on tactical communications systems will remain constant, though funding will be reallocated among its programs and services.
Among the seven most important C4I programs during the forecast period, the space-based infrared system (SBIRS) and the national polar-orbiting operational environment satellite system (NPOESS) will account for 44 percent and almost 20 percent, respectively, of the C4I support systems market by 2003. With NPOESS, the defense meteorological satellite and the National Oceanic and Atmospheric Administration weather satellite programs will be merged.
By 2003, the advanced military satellite communications (MILSATCOM) program will account for 51 percent of the defensewide communications systems market. Unmanned aerial vehicles will account for 26 percent, and the E-2C Hawkeye will account for 23 percent, respectively, of the tactical reconnaissance and surveillance systems market. The tactical command system will account for 24 percent of the tactical command and control market. Finally, spending on fleet communications will increase dramatically over the course of the forecast period, the report states.
The total C4I support systems market was $1.3 billion in fiscal year 1997. The study forecasts that this will decrease slightly to nearly $1.2 billion in fiscal year 2003.
The support systems market covers technologies that provide overall support for C4I functions and do not readily fit into the other strategic and tactical categories that are analyzed in the report. It largely consists of six programs: the defense support program, the space-based infrared system program, the nuclear detonation detection system, the defense meteorological satellite program/national polar-orbiting operational environmental satellite system (DMSP/NPOESS) program, the global positioning system program and the Air Force satellite control network.
The Air Force is by far the dominant military service in this market segment, with $987 million and nearly 88 percent of funding in fiscal year 1996. This is projected to rise 44 percent to $1.52 billion by fiscal year 2003, which would account for more than 91 percent of the total C4I support systems market. The projected rise will be due to increased funding for Air Force satellite programs.
The two most significant programs will be SBIRS and DMSP/NPOESS. SBIRS is the follow-on program to the defense support program, and its funding will rise from nearly 32 percent of the total support systems market in fiscal year 1996 to nearly 45 percent in fiscal year 2003, according to the report. The DMSP/NPOESS programs are projected to double from just less than 10 percent of the total support systems market in fiscal year 1997 to 19 percent of the market in fiscal year 2003.
The U.S. defensewide C4I communications market accounted for 17 percent of the total C4I market in fiscal year 1997. This segment includes the major military communications systems that serve U.S. forces around the world but does not include Defense Department expenditures for leased commercial telecommunications services. The study forecasts that spending will decline in this area during the next few years and then increase by the end of 2003, largely because of projected funding for the MILSATCOM program.
The Air Force dominates military communication systems because it funds most of the development and procurement of Defense Department military communications. In fiscal year 1997, it accounted for $946 million, or 75.4 percent of total funding in this area, and this number is projected to increase to $956 million by fiscal year 2003, or 81.7 percent of the total defensewide communications systems market.
The leading company in this arena in fiscal year 1997 was Lockheed Martin Missiles and Space, Sunnyvale, California. It had a market share of 51 percent, based on its Milstar work. A significant share of this program was subcontracted to TRW and Raytheon/Hughes Space & Communications.
The total U.S. tactical command and control systems market accounted for 12 percent of the total C4I market in fiscal year 1997, but is projected to decline to 10.8 percent by fiscal year 2003. This reduction will be due almost entirely to the projected drop in Air Force funding for major E-3 airborne warning and control systems improvements from $357 million in fiscal year 1997 to approximately $142 million in fiscal year 2003. The remaining funding activities in this market went to Defense Department in-house activities (18 percent) and federally funded research and development centers (3.3 percent).
The tactical communications systems market accounted for $1.32 billion in fiscal year 1997, which made up 17.9 percent of the total C4I market. It is projected to decline to approximately $986 million by fiscal year 1999 and then rise again to $1.25 billion in fiscal year 2003, bringing it to 17.7 percent of the total C4I market.
This market covers systems that provide communications links and networks to support C4I for tactical U.S. forces, but does not include stand-alone communications equipment such as individual soldier radios, standard aircraft radios and shipboard radios for intrafleet communications. Each of the armed services develops communications systems that are unique to their particular requirements, but C4I systems must support closely coordinated operations involving combat units from different services that are engaged in a wide range of military missions.
The major programs in this market segment are the joint tactical communications program; the Army ground mobile forces satellite communications program; the Army and Air Force tactical network radio systems, including the single channel ground and airborne radio system (SINCGARS); the joint tactical information distribution system; and the Navy’s fleet satellite communications systems that support fleet operations.
SINCGARS is the single largest program in this market, which is why the Army was by far the most dominant shareholder in fiscal year 1997, with 58.8 percent of the market. However, procurement of SINCGARS will be all but completed during the forecast period, and the Navy is projected to have the largest market share by fiscal year 1999, with 50.1 percent. It is expected to maintain its dominant share through 2003 because funding for Navy tactical communications is projected to increase significantly.
Four factors are primarily responsible for shaping the U.S. tactical communications systems market: an increased emphasis on using COTS products; changes in military requirements, including the need for more mobile communications serving ground forces that have to maneuver over wide areas, and the Navy’s immediate need for wideband communications to support closely coordinated land, sea and airborne operations; technological advances in communications, notably the emerging availability of extremely high frequency satellite communications; and finally, the completion of the Army’s procurement of SINCGARS.
National Guard and Reserve Continue Tactical Communications Acquisitions
The conclusion of U.S. procurement of SINCGARS radios during the Frost & Sullivan study’s forecast period actually applies only to the active forces. The fiscal year 1999 budget also contains $44 million to procure 5,000 units of the RT-17O2E SINCGARS plus associate equipment and spare parts for the National Guard. It is anticipated that future budgets will contain additional funding to complete equipping the 15 National Guard enhanced brigades with SINCGARS radios.
The RT-17O2E SINCGARS, which is manufactured by ITT Aerospace/Communications Division, is the advanced lightweight system improvement program version. It combines secure voice, situational awareness, command/control and data information across entire tactical echelons for use in the U.S. Army’s evolving Tactical Internet. Previous versions of SINCGARS, at twice the size and weight, could only broadcast voice messages up and down the chain of command.