The Future of the Space Data Network: How the Pentagon Can Ensure a Competitive Marketplace

In 2006, demand for commercial launch services was collapsing, and there was concern about the viability of the launch businesses of the two major providers, Boeing’s Delta and Lockheed Martin’s Atlas. When those providers proposed to merge into a single entity, then, the Pentagon decided to support it, and—largely as a result of that support—the Federal Trade Commission cleared the transaction. The decision had a rationale: The Pentagon wanted to ensure it had reliable access to space when it needed to launch military satellites, and at that point it was not clear that the market could sustain two launch companies.

This trade-off, however, came with a predictable cost: By 2013, when the Air Force needed to procure its most challenging launches, it only had one certified provider. While the Pentagon achieved its short-term goal of assured access, it sacrificed long-term strategic optionality—ceding long-term acquisition leverage that it could have used to reduce prices and foster technological innovation.

Eventually, the United States was able to create more competition in the launch market, but it was a multipronged, multiyear effort involving lawsuits by a new entrant and deliberate market-building, including creating a viable certification path for new entrants and procuring launch services from more than one provider. (Further, it should be noted that the launch market is still very much a work-in-progress). Congressional pressure to ensure additional competition was also critical: By requiring the Pentagon to establish a plan for how it would foster competition and to allow competitive bids for launches except in instances where this would be impracticable.

As this example illustrates, policy is about trade-offs. Government procurement policy determines whether those trade-offs remain temporary or calcify into permanent market structures.

Both the Pentagon and Congress should keep this history in mind as the Space Force fields the Space Data Network (SDN). The SDN will serve as the backbone for the U.S. military’s space data links, operating “as an integrated network, providing robust, resilient, high-capacity, and low-latency data transport for the Joint Force.” While the technology in this case is orbital data transport rather than launch systems, the underlying acquisition challenge is similar. In this case, the trade-off the Pentagon faces is speed versus strategic optionality. Further, the implications of this decision will reverberate far beyond the SDN and the Pentagon: Because the Pentagon is effectively the anchor tenant for trusted space infrastructure, the decisions it makes will steer the commercial market, affecting the competitiveness of the market for trusted low Earth orbit (LEO) satellite services.

Thus, the fundamental question is if the Space Force can quickly develop an integrated backbone while preserving the architectural openness that will ensure future interoperability and provider diversity. The answer to this question should be yes.

Thus far, the Space Force has largely emphasized the need for speed: In May, it awarded a single provider a $2.29 billion award to deliver an SDN prototype by late 2027. As was the case with the launch market, there is a rationale for the trade-offs behind the Pentagon’s decision. Space Force wants to quickly field an integrated capability, and sometimes awarding a contract to a single entity allows the government to rapidly develop such a capability. At the same time, this creates a long-term risk: If a bespoke architectural design makes it difficult for other qualified providers to connect to the backbone or otherwise compete for future contracts, then this initial award— while a sensible short-term decision—will result in long-term strategic dependency.

It is clear that Space Force recognizes the risk and has taken initial steps to mitigate it, including a recent multi-vendor award to build standardized SDN interfaces and ensure that orbital nodes can connect disparate networks to the SDN. That work is central, not tangential, to the development of the SDN; it will determine whether the SDN becomes the fully interoperable network of networks that the Pentagon intends it to be. It is critical that the Pentagon executes that goal, which will require establishing government-controlled, transparent interfaces and standards that any provider can use, as well as a clear onboarding process for new entrants.

Congress also has an important role to play. Selecting firms to build the SDN should, of course, be left to the Space Force. However, Congress should ensure that the SDN remains open to multiple providers. For the Space Data Network to be successful, Congress must ensure that the Space Force as sustainable, dedicated funding that enables it to on-ramp new vendors, and it should require regular updates on how the Space Force will preserve interoperability and provider diversity as it develops the SDN. To be successful, the Space Force must ensure that qualified providers are actually able to connect to the core network and compete for SDN contracts.

The lesson that Congress and the Pentagon should learn from the launch market is not that the Pentagon should avoid making difficult decisions, but rather that it must ensure that short-term compromises are designed to be short-term. In the launch market, the Pentagon and Congress decided to prioritize access and waited to address competition until the market had become so calcified that it was difficult to fix. With the SDN, they have an opportunity to ensure a competitive market early in the process. The Space Force needs to develop this capability quickly. By ensuring standards are open and transparent and designing funding to ensure meaningful competition today, it can achieve that speed without sacrificing strategic optionality tomorrow. Further, creating a vibrant market for the SDN can help to build a broader market for competitive LEO services that the United States and its allies and partners can leverage in the long term.

Matt Pearl is director of the Strategic Technologies Program at the Center for Strategic and International Studies in Washington, D.C.