OpEd: A Critical New Business Model Within Reach

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  Space News Business

OpEd: A Critical New Business Model Within Reach

By ELON MUSK

posted: 11 April 2007
03:13 pm ET


Shortly before his death in 2005, Adm. Arthur K. Cebrowski prophetically recognized that “… several ominous trends now compel a reassessment of the current business model for meeting the nation’s needs for military space capabilities. While the existing model has served the nation well, a new business model is at hand and can now be readily grasped to propel us into the future.”

The “new business model” envisioned by Adm. Cebrowski relies upon responsive spacecraft and responsive launch. For U.S. military planners focused on the safety of the nation’s critical space assets, one of these “ominous trends” became all too real when China tested its anti-satellite weapon earlier this year.

Since the attack, there has been much discussion about operationally responsive space (ORS) as a tool for protecting U.S. space assets, but mostly in the narrow context of quickly reconstituting satellites should they be attacked. This however misses the admiral’s real point: if we do not fundamentally change our approach to space, then our asymmetrical strength in space we heavily rely upon today could become a fatal weakness.

Fundamentally changing the business model for space to become more responsive requires a new approach to building, procuring and operating satellites and launch vehicles alike. Launching billion-plus dollar satellites on hundred-million-plus dollar rockets cannot persist in the new world of increasing budget pressures, especially when numerous adversaries have the ability to neutralize our assets.

Responsive space requires a new approach. We must supplement our reliance on today’s centralized giga-sats with rapid deployment of medium-sized and smaller satellites, just as a carrier battle group is supplemented by cruisers, destroyers and other smaller craft. Reducing the cost of payloads will allow planners to tolerate and even encourage risk-taking, which is so fundamental to innovation. A responsive business model reduces the burden on our complex national systems and the organizations operating them; enhances the persistence of our capabilities; and provides a means for the large satellite programs to gain confidence in new technologies without putting themselves at risk.

Responsive satellites alone are not enough, however. The development of inexpensive and responsive launch capabilities is equally critical. There is a direct impedance match between the cost of a satellite and the cost of a launch vehicle. When launches have a two-year lead time and cost well over a hundred-million dollars on a fully accounted basis, a satellite program will naturally spend hundreds of millions of dollars on redundancy, mass savings and packing in as many capabilities as possible.

This results in a vicious cycle of cost increases between the launch vehicle and the satellite. I have heard people say many times that even if the rocket cost was reduced, that wouldn’t affect their mission cost all that much, because the satellite represents a majority of the total mission cost. However, what is being overlooked is that the satellite is designed for a world with high-cost, infrequent and long lead-time launch vehicles.

The question to be asked is how much that same capability would cost if it were built for the ground and did not have to last unattended for a decade? How much does it really cost for a terrestrial telescope with an aperture of that size or a dish of that diameter? The reality is that the technology we have in space is orders of magnitude more expensive and astonishingly primitive in almost every respect compared to terrestrial systems. Some of that expense is justified by the high radiation environment and the need to operate in vacuum, but most of it is not.

As Adm. Cebrowski observed, this cycle must be broken. Apart from Falcon 1 and the upcoming Falcon 9, U.S. launch vehicles are barely price competitive in the commercial launch market, even with a several hundred-million dollar per year subsidy that covers the fixed costs for the Evolved Expendable Launch Vehicle. With limited domestic market pressure (for now), it should be no surprise that U.S. launch prices are at risk of going from sky high to exoatmospheric.

The only way to improve the situation is to transform the space transportation market, much as Southwest Airlines changed the face of the airline industry. New business models come from new entrants, rather than established players with entrenched business models and legacy costs. Space Exploration Technologies Corp. (SpaceX) has targeted and achieved an initial four-fold reduction in cost relative to other U.S. launch vehicle providers, assuming no reusability. If moderate reusability is shown to work, we believe that a ten-fold or greater reduction is possible.

While SpaceX has only just completed the test phase for the Falcon 1 launch vehicle, the progress to date should be cause for optimism that the business model for space will change. For the first time in more than a decade, the United States has a 100 percent domestically manufactured launch vehicle that is successfully competing and winning in the global market without taxpayer subsidies. With the TacSat-1 mission later this year, the SpaceX Falcon 1 will transition to its operational phase, carrying the satellite that is the original pathfinder for the ORS initiative started by Adm. Cebrowski, and beginning the restoration of American leadership in competitive orbital launch.

Elon
Musk is the chief executive
officer and chief technical officer of Space Exploration Technologies Corp. (SpaceX).