Iridium Communications has announced that Orbital Sciences has signed an agreement with Iridium that reserves hosted payload capacity on Iridium's next-generation satellite constellation, Iridium NEXT.

Under the terms of the agreement, Orbital will make several non-refundable deposits totaling $10 million in 2011 for a right-of-first refusal on 20 percent of the network's capacity to host third-party payloads. The parties also have agreed to the basic terms of Orbital purchasing this hosted payload capacity on behalf of its customers.

Iridium believes the arrangement with Orbital has the potential to be worth more than $100 million, including hosting fees and recurring data service fees once in orbit.

Orbital was selected last week by Iridium's prime contractor for the system and the constellation, Thales Alenia Space, to serve as satellite integrator and test partner for Iridium NEXT.

Over the next five years, Orbital, at its facility in Gilbert, Ariz., will assemble and test 81 Iridium satellites (66 operational satellites, six in-orbit spares, and nine on-the-ground spares) being built by Thales Alenia Space.

"Orbital's far-sighted move validates the value and importance of commercially hosted payloads," said General Lance W. Lord (USAF-Ret.), who serves on Iridium's Government Advisory Board.

"Under President Obama's National Space Policy, it is clear that our government departments and agencies are directed to take advantage of private sector investments to lower the overall cost of space missions, and this new agreement is a great step forward."

Orbital and Iridium are working closely together to market this capacity to specific U.S. government customers to ensure the program can meet the Iridium NEXT deployment timelines and is consistent with other hosted payload programs.

Orbital, as the satellite integrator and test sub-contractor for Iridium NEXT, will also be responsible for the integration of hosted payload platforms with the Iridium NEXT satellites. Orbital's role as the satellite integrator is critical to ensuring that multiple hosted payloads, including Orbital's capacity, can be accommodated simultaneously on the Iridium NEXT constellation.

Iridium CEO Matt Desch said, "Commercially hosted payloads on Iridium NEXT offer a significant opportunity to government programs. To achieve the cost savings that commercial hosted payloads offer, it is imperative that companies, and government and research organizations, make plans and design systems now - in advance of our first launches, which are scheduled for 2015. With this agreement, Orbital has locked-in capacity today to ensure certain missions can meet our commercial timelines. While Iridium is working with a number of potential hosted payload customers, and expects to announce additional deals in the coming 12-18 months, it's wonderful to have taken this significant first step."

"Hosted payloads on the Iridium NEXT spacecraft offer a unique combination of performance and low cost, and can benefit a wide range of missions and customers," said Mr. Michael Hamel, Orbital's Senior Vice President of Corporate Strategy.

"We have considerable experience with hosted payloads, most recently with the Commercially Hosted Infrared Payload Flight Demonstration Program (CHIRP), and understand the importance of balancing host schedules with customer requirements. For many years, Orbital has been a trusted partner of the U.S. government and will play a critical role in implementing these important space-based missions."

At its Analyst Day in December 2010, Iridium described the various hosted payload programs that are being evaluated. The most likely program for Iridium NEXT would be the hosting of a combination of payloads for different customers on the same satellite, most likely not all 66. Based on Iridium's current opportunities, the company expects hosted payloads to provide between $200 million to $300 million in net cash contributions as well as additional service revenues in 2017 and beyond.