What Commercial Space?
An important part of U.S. President Barack Obama’s new space strategy is predicated on using NASA contracts to seed the development of a larger and more competitive commercial space industry in the United States. Heretofore, aerospace was one of that nation’s few remaining export industries, generating badly needed jobs and income.
The June 2 award of’s second-generation satellite constellation to a heavily subsidized bid by of France and Italy raises a question: Is there much of a U.S. commercial space industry left to support? With 81 spacecraft for $2.1 billion, $1.8 billion of which will be covered by French Coface loan guarantees, Iridium Next is believed to be the largest commercial space contract ever signed. Handing some of the launches to Space Exploration Technologies ( ) of Hawthorne, Calif., provides a limited counterweight, but only to the tune of $492 million — less than a quarter of the construction contract’s value.
The Teal Group predicts 38 percent growth in the market for this class of satellite in the next five years — to a total of 416 spacecraft through 2014. So far, companies based in the United States are building only one system. On May 7, 2009, Orbcomm awarded its second-generation network of 18 messaging micro-satellites, with options for up to 30 more, to the Sierra Nevada Corp. of Sparks, Nev., for $117 million.
At the more valuable end of the spectrum, Thales Alenia Space is building every low and medium Earth orbiting commercial midsize satellite under contract. The French-Italian conglomerate recently won no less than three bids. The other two are’s second generation, awarded in December 2006, and Google-backed O3b Networks, awarded in December 2009.
The wins are at least partially a result of the French government’s willingness to guarantee loans for nearly all of the value of exported spacecraft, so long as they are majority built in France. The loser in the Iridium Next contest was Lockheed Martin Commercial Space Systems of Sunnyvale, Calif. Lockheed built the original Iridium fleet, but with no access to loan guarantees or other subsidies, the company had little chance to create a competitive bid.
It is true that the Iridium Next spacecraft will undergo final assembly at Ball Aerospace & Technologies Corp. in Boulder, Colo., but this is only so Iridium can sell space to the U.S. military for supplementary payloads. Most of the high-paying, highly skilled development and detailed assembly jobs for all three networks will be in Europe, even though all three systems are designed and financed primarily by U.S. companies and investors.
The networked low-orbiting comsat industry was invented in the United States. With the original Iridium, U.S. satellite builders had a commanding lead. How did the nation lose it?
There were four key policies or events, every one of them a self-inflicted wound. If President Obama and Congress wish to have a satellite manufacturing industry in the United States that employs the U.S. aerospace work force, the government and U.S. companies must face up to the direct causes of the recent failures and not repeat them.
- Loral Space, a company based in New York City with its principle factory south of San Francisco, created a manufacturing facility in Italy to build U.S.-designed spacecraft for the first-generation Globalstar network. This gave Europeans know-how and a “free” factory with which to bid on future contracts. That factory is now being used by Thales Alenia, not Loral, to build all three networks.
- Similarly, intellectual property is exported, often for far less than the technology cost to develop. According to a report in Space News, Motorola’s patents for Iridium were sold to Thales Alenia Space — without which they probably could not have produced a successful bid — by a “patent mining company” [“Patent Purchase Cleared Way for Iridium Next Satellite Contract,” June 28, page 1]. The sale price is not public, but undoubtedly is far less than the technology cost Motorola to develop. Often, part or all of the technology being sold was developed at taxpayer expense.
- Iridium tried to get support similar to the French loan guarantees from the U.S. government, but since they are building for a domestic market rather than exporting spacecraft, apparently they were refused guarantees to match the French-Italian bid.
- Most importantly, internal squabbles in the United States undercut the entire space industry. Following Chinese launch failures and the loss of U.S. spacecraft, two U.S. companies allegedly gave China information that likely improved the reliability of its rockets, an obvious national security risk. Congressional Republicans saw an opportunity to harm the administration of Bill Clinton, and the resulting overreaction classed commercial, civilian spacecraft for export as munitions, rather than banning the Chinese launch of specific spacecraft. The International Traffic in Arms Regulations paperwork required for exporting these “munitions” has cost the United States its once commanding lead in many space technologies. Overseas customers would rather pay more for lower-quality spacecraft, or pay to develop their own technology, than deal with U.S. export regulations.
These issues are hardly confined to low orbit networked comsats. The United States once built almost all of the commercial geostationary satellites, another industry created by U.S. investments; now the nation builds fewer than half, and only one of the major fixed service providers remains partially based there.
In the face of ridicule by much of the space industry — which foresaw ever-larger satellites — Orbital Sciences invested the company’s own money to create a small geostationary spacecraft affordable by risky business plans and by smaller nations. When the Star platform proved a commercial success, European and other governments immediately subsidized the development of several competitors. Likewise, European governments are developing a high-powered comsat bus called Alphasat to challenge Loral’s commercial 1300 Series platform and the 702 series marketed by a newly resurgent Boeing. Both of the U.S. platforms were largely developed with private money, although the government later bought spacecraft based on the commercial designs.
Orbital also plays the other side of the fence: Much of the company’s new Taurus 2 rocket, a co-winner of NASA’s competition to deliver cargo to the international space station, will be built overseas. The exported jobs are hardly low-end unskilled labor: The parts being outsourced include the first stage, the main engines and the cargo module. Once the space shuttle and2 are fully retired, the main engines for two of the United States’ four medium and large rockets — the two Evolved Expendable Launch Vehicles (EELVs), the SpaceX Falcon 9, and Orbital’s Taurus 2 — will be of Russian design and manufacture.
To save money, the United States government repeated Loral’s factory mistake by bartering with Europe to build space station modules of U.S. design, in return for free launches and increased access to station resources. In essence, U.S. taxpayers paid the Europeans to learn how to build space station modules. Now, when a private company such as Orbital Sciences needs a cargo module for its new rocket, it goes to the companies with the most experience building modules — in Europe. Meanwhile, the United States’ module contractor, Boeing, makes no effort to market its skills overseas, choosing to live off U.S. government contracts.
Likewise, Boeing, and to a lesser extent Lockheed Martin, make little effort to amortize the taxpayers’ investments in the EELVs, content to give the commercial launch market, which the United States once dominated, to European and Russian vehicles. The EELVs were designed to lower launch costs through high flight rates. By conceding the commercial market, Boeing and Lockheed Martin reduce their launch frequencies while their fixed costs increase, making their vehicles less competitive and dramatically increasing total launch costs for the U.S. government.
Europe’s success is hardly based on the size of its investment in space, which is dwarfed by that of the United States. U.S. taxpayers provide about half the total global funding for spaceflight, yet the nation earns remarkably little trade revenue and makes no net profit on its vast expenditures.
If the Obama administration and Congress want to employ U.S. workers building spacecraft and launch vehicles, these facts have to change. The federal government either needs to take other countries to court to stop the subsidies, or it needs to set aside some of its comparatively radical “free market” ideology and match the subsidies. The nation also needs to match or eliminate subsidies that encourage local companies to set up factories overseas. Royalty requirements should be attached to taxpayer-developed technology when that technology is sold and used to create jobs that do not employ those who paid for the technology.
Most important, commercial satellites need to return to the commercial regulatory regime where they belong.
Until these things change, U.S. commercial space, like so much of the rest of the United States’ once-great industrial prowess, has no future.
Donald F. Robertson is a freelance space industry journalist based in San Francisco. He is a small shareholder in Loral Space and Orbital Sciences, companies discussed in this article. For further examples of his work, see www.DonaldFRobertson.com.