Optimal Commercial Satellite Leasing Strategies

The Department of Defense needs far more satellite communications capacity than it owns and thus must lease satellite communications services. Communications planners can use the "rule of thumb" set forth in this study to aid in making efficient satellite leasing decisions in the face of uncertain demand for satellite services. It is a simple, graphical technique. Extensions to the basic model show how price uncertainty and the ability to salvage unused capacity change the appropriate amount of capacity to lease. A multiple-period version of the basic model shows how planners can consider the tradeoffs between long- and short-term leases when demand grows over time.