Commentary | Competition versus the American Way

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American lore has it that competition is the best way to create new technologies and to produce the best products at the lowest prices. Our behavior tells a different story.  

We claim to support competition while enabling, and even encouraging, monopolies. We fight to cut in half the relatively small amounts of government money used to support the emergence of a competitive commercial launch industry, in order to add the funds to a giant government-run rocket. While greatly delaying the commercial projects, the transferred funds are too small to make any meaningful difference to the NASA rocket’s schedule. 

This behavior is undermining everything we try to accomplish in space.

Letting the Evolved Expendable Launch Vehicle (EELV) contractors combine into the United Launch Alliance — a clear monopoly — was supposed to increase efficiency and cut costs. It did neither.

When Boeing’s Delta 4 and Lockheed Martin’s Atlas 5 were under separate management, competition was intense. It was so severe that Boeing, which was winning the most orders, allegedly cheated by stealing Lockheed Martin trade secrets. Shenanigans aside, prices were far lower.  

The industry’s excuse for the EELV program’s dramatic cost growth was the loss of the lucrative Space Shuttle Main Engine maintenance work. The shuttle’s retirement, we are told, resulted in too small a market, requiring industrial base costs for rocket engines to be born solely by the EELV program. This may explain why the U.S. Air Force is now trying to recreate a competitive environment it dismantled just six years ago, by “certifying” Space Exploration Technologies Corp. (SpaceX) and other new entrants to carry vital national security payloads. If there are enough payloads now to support two or more launch providers, at a time when both NASA and the Air Force have less money to spend building and launching spacecraft, why wasn’t there a big enough market for two providers when there was more money on the table? 

Some members of Congress, meanwhile, fight to cut in half funding for NASA’s Commercial Crew Integrated Capability (CCiCap) program to develop passenger transportation to the international space station. They specifically advocate removing competition, hoping to save money to spend on NASA’s Space Launch System (SLS). The SLS is nowhere near flight and consumes almost as much money in a single year as the Commercial Orbital Transportation Services (COTS) program to fly bulk cargo to the space station has spent since its inception in 2006. The SLS has no obvious payload that could not be carried in parts by three Delta 4 Heavies, which are operational today, or a single SpaceX Falcon Heavy, which is scheduled to fly later this year. The SLS is likely to fly too infrequently to have a meaningful impact on the industrial base.

In contrast, having spent far less money, COTS has one vehicle operational now, and another, from Orbital Sciences, just completed its first test flight to orbit. Admittedly, these are less-challenging rockets than the SLS, but SpaceX is well on the way to developing a reusable first stage, a longstanding and never-achieved “holy grail” of the space industry.  

COTS has neatly demonstrated the value of competition for both cost reduction and innovation. With three spacecraft under development, one a variation of a vehicle that is already flying, CCiCap is likely to result in a similar outcome. In combination with COTS, the commercial industry will fly much more frequently, doing more to support the industrial base than the SLS could ever do. If U.S. lawmakers succeed in starving the scrappy newcomers to prop up the SLS with unnecessary supplements, lower prices to deliver cargo and astronauts to any destination in space are unlikely to be among the outcomes.

In a related industry that has clear lessons for the future, the United States let Boeing buy McDonnell Douglas, combining the nation’s last two manufacturers of commercial airliners into one. Since customers do not like monopolies and balance their purchases accordingly, and since there was only one other manufacturer of large commercial airplanes, we effectively handed Europe’s Airbus half the airline industry. 

We have learned nothing from that experience. The United States just encouraged the two companies that provide high-resolution observation satellites and services to both civilian and intelligence customers — DigitalGlobe and GeoEye — to combine, leaving Europe’s Astrium Services as the only competition. Once again, we are told that creating a monopoly will result in less duplication and a more efficient use of capital.

The outcome is as predictable as it is unanticipated — at least in the United States. Our commercial competitors anticipate it all too well. In the March 25 issue of SpaceNews, Peter B. de Selding quoted Astrium Services Chief Executive Evert Dudok as saying: “We are the only alternative to DigitalGlobe now. … If a customer wants a competitor to DigitalGlobe, they have one in us” [“Astrium Poised To Partner with MDA Corp. on Earth Observation Satellites,” page 17].

Why do we keep doing this to ourselves? Why do we, as a nation, so regularly ignore our own advice? Some members of Congress go to political extremes to fight the Obama administration’s “socialist agenda,” in favor of “mom-and-pop” industries competing on “Main Street.” Then these same individuals turn around and actively oppose an industry of relatively small companies competing to develop orbital transportation partially at their own expense, in favor of the same giant corporations soaking the taxpayers with overpriced EELVs. As space analyst Tim Kyger put it: For some Republicans, the value of capitalism appears to end with the Earth’s atmosphere.

The Obama administration is hardly immune from similar hypocrisy. Where was the Democrats’ traditional opposition to monopolies when the administration financially encouraged DigitalGlobe to buy GeoEye, and then approved the deal? 

Far too much government money is involved to consider any of these truly “commercial” companies, but the competitive model clearly works even with government funding. In an environment where space budgets are guaranteed to decline, probably dramatically, we insist on running our space industries in the most inefficient and expensive manner possible. By artificially creating monopolies while limiting exports of commercial satellites and components, we routinely give away the export industries that might help pay for our space program. Worst of all, we do all this in the face of clear evidence that, at least in space transportation, competition works.