Exploring Commercial Space – Interim Report

The present interim report is based on input gathered mainly through face to face interviews, informal discussion and attendance of several relevant events during the first half of my Fellowship (August 15th to October 15th) at the University of Colorado. For the sake of brevity, the interim report covers only the main issues emerging in those discussions, while others will be dealt with in the final report[1]. This report reflects the perceptions of numerous interlocutors, including leading personalities in the space sector. The final report will further elaborate on and seek to substantiate these perceptions.

 

Highlights
□   Governmental space exploration, science missions and defence programmes are the main drivers of commercial space development.
□   Federal government funding is essential to commercial space development; despite space market growth, there does not seem to be, as yet, sufficient market for most companies in this sector (with the exception of Satcom companies) to live exclusively off commercial activities.
□   Small satellites, small launchers and data analysis and interpretation including GNSS localization and timing services are perceived as areas of high growth potential.
□   Leading research universities are key pillars to space activities, commercial and non-commercial; this is reflected in the strong partnership between NASA and those universities as well as between them and industry.
□   There is growing concern about space situational awareness, which is perceived as an area of shared responsibility of government and industry.

 

1.    Introduction

 

The 2010 National Space Policy stated that “commercial,” for the purposes of this policy, refers to space goods, services, or activities provided by private sector enterprises that bear a reasonable portion of the investment risk and responsibility for the activity, operate in accordance with typical market-based incentives for controlling cost and optimizing return on investment, and have the legal capacity to offer these goods or services to existing or potential nongovernmental customers.

Beyond this definition, there are different interpretations as to the meaning of commercial space[2]. There are voices that consider this notion of “commercial space” too broad and not one that adequately conveys the evolution in space activities. As one of my interlocutors put it “commercial space” is a misnomer. U.S. space manufacturing companies are all commercial. However, most of these companies have traditionally done most of their work under federal government contracts. Therefore, to speak of commercial space does not necessarily convey a clear idea of what it is that the expression actually refers to[3].

For decades, space infrastructure has been manufactured by companies in a process that would fall within the above definition of “commercial”. Even if mission design and funding was primarily public, private capital has historically been present in the space sector and continues to co-exist alongside governmental funding.

If “commercial space” were to be equated with space activities that are non-dependent from public funding (or publicly owned infrastructure), then the remit of actual “commercial space” would be limited to Satcom companies and suborbital flight[4]. It would be perhaps more telling to look into what has changed in the way space business and activities are being conducted.

In recent years space activities have been characterised by an increasing recourse to off-the-shelf technology, serial production and changes in manufacturing processes that have lowered costs and make space generally more accessible, on one hand, to companies willing to develop activities in this sector and, on the other, to end customers for space-based products and services.

There is an ongoing change driven by improved manufacturing processes, improved material characteristics and more reliable and readily available triple E (Electric, Electronic and Electromagnetic) parts. Nowadays, the reproducibility and reliability of triple E components is such that, in many instances, it is no longer necessary to have components specifically made for space. Space is no longer a self-contained industrial sector and there is no longer a clear divide between space and non-space companies. Non-space companies are capable of delivering high precision design, high purity of materials and excellent production quality controls which are up to par with those of traditional space companies[5]. Some of these companies identified a need for spacecraft components and found that it was relatively easy or worthwhile to certify for space use products that they were already producing for terrestrial use, becoming suppliers for space systems[6]. Another aspect is that the space sector has entered a new phase where the private sector innovation cycle is faster than the government acquisition process.

Commercial space development has been linked to new approaches in federal government spending in space. NASA’s Milestones approach is a novel way of engaging with industry and is proving to be quite effective in both stimulating competition in the space sector and in containing costs[7].

When confronted with the need to work with limited budgets, private companies are clearly better at sticking to those budgets than governmental organisations. A view often repeated in U.S. space circles is that the U.S. is lagging behind in innovation because most technological challenges have been overcome by throwing unlimited government funds at them. NASA’s commercial space support schemes clearly seek to address that criticism.

For the purpose of this report the expressions commercial space and commercial space activities will be used in the broadest sense, i.e. including activities where a company sells goods or services to private consumers (even though the satellite infrastructure is owned by government) as well as activities where a company provides goods and services primarily to government customers.

2.    Private and public funding in the development of commercial space activities

 

The development of commercial space activities is associated with the affluence of venture capital. The Start-Up Space report reveals that there has been an exponential increase in various types of private investment since 2000[8]. Although there are no precise figures that may give an indication of what private funding for space looks like at a global level, it seems plausible that as space activities expand, space will become increasingly attractive to private investors.

However, private investment in space is not a new phenomenon; there has been private investment in space for decades. Many companies, with a perhaps less flamboyant leadership than Space X, have been investing in space money made in areas that have little to do with aerospace. Ball is a case in point.

Private investment in space has not meant a decline in public funding. Governmental investment in space activities has not on average diminished in the last decade or so in any of the major space faring nations. On the contrary, it is on the rise. On a world scale, public funding for space activities is higher today than has ever been and the expectations are that investment will continue to grow[9].

The widespread view in the U.S. aerospace community is that government funding is essential for the development of commercial space. There is no question that U.S. space policy (and federal government funding) is the motor behind commercial space development. The drive to promote commercial space is closely linked to the need of containing cost for space developments, widening and strengthening the U.S. space industrial base and technological leadership and maintaining at least two major launch systems. Civil space missions are a means to contribute to maintaining space strategic capacities.

NASA’s support schemes for the development of commercial crew and cargo space transportation capacity[10] clearly seek to achieve those objectives: lower transportation cost and security of supply as regards transportation capacity. However, while emphasis is also on encouraging industry to be competitive in a commercial market, there is no evidence that actual market success is a criterion that NASA applies in determining which of the various projects continue to get funding.

As regards earth observation capacities, the tendency is for government agencies to have greater recourse to commercial remote sensing operators[11]. The widespread view is that the future of earth observation lays in a combination of public and private capacities. Public funding is likely to remain essential for the development of cutting edge new sensors. In turn, the private sector is likely to find ways to carry out earth observation activities better, cheaper and faster than government agencies. Weather data is a good example. However, it is reasonable to assume that there will not be sufficient market for unlimited numbers of commercial remote sensing operators.

Defence programmes are critically important to this sector. It is a matter of national priority to maintain the space industrial base. There is overt recognition that the usefulness of some space defence-related programs maybe questionable but they are funded because they keep people at work in areas that are considered strategically important from a defence standpoint. Contrary to what has happened in some defence areas, budgets for core space programs involving R&D have not been reduced. Preserving the space industrial base remains an overriding consideration. Another important consideration from a defence standpoint has been providing a line of funding to two large manufacturing primes: this leads to competition and cost reduction. Investing in space, keeping the main companies in the sector in operation saves the government money in the long run[12].

The key issue for industry is budget consistency. Industry can adapt to high or low level of funding; however it has greater difficulty with variable budgets. Government funding is the guarantor of a strong space sector. Twenty years ago there was in the U.S. a much longer list of big aerospace companies than today; this situation was not sustainable and there has been significant concentration in the sector, alongside the emergence of some new companies. Yet, the financial health of these companies is not necessarily guaranteed. Aerospace ecosystems need to be watered regularly with government funds. Government funding is fundamental for the development of space market[13].

Despite space market growth, there does not seem to be, as yet, sufficient market for companies in this sector to live exclusively off commercial activities. In most cases, a commercial-only business model is not enough. Arguably, if government did not provide funding, companies would shrink their activities to whatever they can sell to commercial customers. However, if only commercial considerations are applied to space activities a good portion of their societal value would be lost and it may result in serious prejudice to society. Government funding is not a subsidy; it is a response to essential needs that could not otherwise be satisfied. It is a reflection of the fact that space data is essential in many domains and nobody other than government is likely to pay for acquiring such data. Space research will remain fundamentally government funded. Ultimately government space investments in space generates economic value and make the space market grow; however it is not always possible to draw a straight line from one to the other[14].

Notwithstanding the importance of public funding and determined efforts to increase it, there is a general sentiment that it is necessary for the space sector to reduce the dependence on it. The key to less dependence from public funding is affordable technology and marketable products.

3.    Space exploration and science missions drive commercial space development

 

Federal government investment in space exploration is a powerhouse that enables space companies’ growth and maintains U.S. technological leadership. Federal government investment in the International Space Station (ISS) has been determinant for the emergence of companies like Space X and is critical to maintaining jobs in companies like Lockheed Martin or Boeing which have been traditional contractors for NASA.

In a recent conference[15], Dr Charles F. Bolden Jr., NASA Administrator, underlined the potential of ISS for commercial market, not just for human or cargo transportation but also as a testing ground to prepare future private space stations.  He pointed out that over one thousand companies contribute to the effort of opening up space transportation in low earth orbit to commercial ventures and that thousands of companies and research institutes are involved in different ways in research on board the ISS.

The growing international interest in human travel to Mars forebodes a world of opportunities for commercial space development through the technological and life support challenges that it will pose.

NASA’s investment in space exploration has been at the origin of much of the emerging commercial space activity in low Earth orbit, which over the next decade is expected to become self-sustaining. NASA will facilitate this transition following a path identical to that followed since early space missions: support for the design, development and testing of new technologies which are then turned to the private sector while NASA can turn to new ventures and deep space exploration[16].

Public funding is absolutely critical to cutting edge technologies. NASA’s funding for exploration and science missions and projects, including in novel areas such as asteroid mining (which may not seem to have immediate practical application) benefit big and small companies alike, often resulting in technologies that are now being marketed by those companies.

Government funding, in particular funding for small companies, present industry with technological challenges and allows them to push the technology boundary; the desire to stay in business once government funding is over is what drives companies’ search for marketable applications[17].  Space missions do not generate a great deal of recurrent business and, for some small companies, do not even have a big financial impact. However, short term space projects can be exciting for engineers; they often pose tough technical problems and help companies sharpen their technological capability which later result in better products that the company can market. When a company does contract work for space missions it is saving its own money on research[18].

4.    Commercial space development outlook

 

There is a widespread view in the space sector that there is a strong potential for commercial development in small satellites, CubeSats and flight formation. CubeSats, for example, will get prices down for satellites and will provide access to space activities to traditionally non-space private and public customers. CubeSats are already being used by private companies to do radio occultation work and sell data to government.

Small satellites could, in theory, pose a certain threat to the high resolution business model in the medium term but this is still to be seen. Clearly there is a growing interest in temporal resolution versus optical resolution; however, high resolution is still going strong[19]. More difficult seems to be predicting the true market capacity of a particular data stream.

The key to the future development of commercial space is the accessibility and availability of space data at increasingly lower prices. The proliferation of companies (generally small companies) that are capable of delivering, within short deadlines, relatively cheap, high-precision, high-performance pieces of engineering can contribute to lowering the price of spacecraft and launcher manufacturing, facilitating access to space and ultimately reducing the cost of acquiring space data. Advanced manufacturing technologies (such as additive manufacturing) will also help reduce costs. Space data at a lower price is likely to generate more demand for spacecraft and rocket manufacturers, creating a virtuous circle.

Data analysis and interpretation is clearly an area of potential growth. The same can be said about GNSS localization and timing services. There is a strong market potential for interpretative services which rely not only on earth observation but also on in situ sensors combined with positioning services. Natural synergies are emerging between traditional aerospace industry and non-aerospace advanced technology industry. Unmanned Air Vehicles are an example of this[20].

Value adding companies face the competition of data providers and always run the risk of being subsumed by them. Adding value to a particular set of data has limitations, whereas real time data is an area in which private sector (notably data providers) can easily make money. For value adding companies it is perhaps commercially interesting to add value to different types of data, from different sources including from GNSS and non-space sources (be it ground-based, ocean-based or airborne). It is not just adding value it is also about adding value to added data[21]. Easy access to big data volumes and enhanced processing capacities will be part of this.

For market to grow, it is necessary to widen the customer base. The difficulty lies in that downstream potential users do not necessarily know what is possible or what is on the horizon. It is necessary to bridge the gap between the end users’ needs and what space technology can provide; to achieve this, a more strategic approach will be necessary as well as some sort of institutional setting[22].

The emergence of a variety of ecosystems, where there are increasing interactions between data producers and providers, marketable application developers and users, will make commercial space activity grow. These ecosystems can be left to their own devices so that they grow out of natural synergies or, preferably, can be encouraged and supported through public policies which will likely accelerate growth[23].

Social demand will also be a driver for future demand of space-based services. One example is climate change. Climate change may have a geo political destabilising effect; countries suffering the consequences of phenomena such as severe drought will be under political stress. Global environment space systems can help better predictions and therefore potentially contribute to pre-empting instability through better policy making[24].

Small launchers, reusable launchers and suborbital vehicles are likely to see a significant growth in the next decade. The generalised use of CubeSats will generate demand for smaller, more frequent and less expensive launchers. Research activities may also benefit from cheaper launcher and suborbital flight opportunities.

Payload delivery will be perhaps commercially more important than tourism for suborbital flight business in the medium term[25]. Suborbital vehicles could, in a not so distant future, share airport runways with reusable spacecraft like Sierra Nevada’s Dream Chaser, for now the only space transportation system currently under development in the U.S. capable of runway landing. There will be mounting pressure on aviation authorities to establish regulations for these emerging activities.

5.    The role of leading research universities in space

 

University education plays a key role in the development of space activities in general and commercial space activities in particular. Leading research universities, notably those strong in engineering, physics, optics and computer science, have been key players in space and received, for decades, continued support from NASA and other government agencies.

In some of these universities, engineering departments have achieved a level of excellence which is high enough for NASA to entrust them with the design and operation of full space missions; that is the case for University of Arizona and the Osiris-Rex Mission[26] and the University of Colorado for the Maven mission[27]. Missions are the most visible part of NASA’s and other agencies’ massive funding to universities for space related education and research.

Research universities are also leading in both CubeSat technologies and in software development for spacecraft and data analytics (essential for downstream applications).

Aerospace industry is investing money into leading research universities because these universities can train for in-demand technologies but also carry out research essential for the space sector, particularly at low TRL, at a fraction of the cost of what it takes for that research to be carried out by industry itself[28]. Through their research projects, universities bring in creativity and innovation contributing to reinforcing the company’s leading position. In return, industry can concentrate in applied research of immediate use to its projects.

Universities feed talent into highly innovative companies and many are actively building bridges to attract such talent[29] through research projects and internship programmes. Funding university research promotes companies’ image as a potential employer amongst students and also gives companies the possibility to identify the brightest students[30].

It is generally accepted that the first, most important factor that attracts aerospace industry to states like Colorado is access to a well-educated workforce[31].

University of Colorado (CU) provides a perfect illustration of the important role that leading research universities play in the development of the space sector in the U.S.. University of Colorado ranks first in the U.S. in terms of funding received from NASA and leads in aerospace engineering nationwide. CU’s Laboratory for Atmospheric and Space Physics (LASP)[32] is unique in many ways and the largest of its kind in the U.S.. CU is also leading in the field of Earth Observation, with the Cooperative Institute for Research in Environmental Sciences (CIRES)[33] playing a leading role in this domain.

The university’s AeroSpace Ventures[34] provides a good example of the university’s own proactive approach to marketing its assets, coordinating interdepartmental efforts to attract funding for space projects and facilitating career opportunities in the space sector for students. University of Colorado efforts to promote commercial space career opportunities for students include a postgraduate course on Commercial Space Operations designed to better prepare students to deal with the business side of space activities[35].

6.    A concerted effort at state level to promote the space sector

 

States play a key role in the development of the space sector in the U.S.. Colorado provides a good illustration of this. The state boasts a strong and effective for-space alliance between academia, industry and government that reflects the importance that the sector has for the economic development of the state. The Colorado Space Coalition (CSC) [36] is a perfect illustration of how this alliance works in practice. The CSC is a group of stakeholders – including aerospace companies, military leaders, academic organizations, research centers, and economic development groups – that cooperate to advance the aerospace sector, market existing assets and carry out legislative advocacy. The CSC works closely with Colorado Senators and Congressional Delegation in seeking federal funds and influencing legislation that can be of benefit to the sector. Its role is to identify areas of potential interest for the aerospace sector and provide the rationale and precise data to support action at a political level. This is particularly important when existing jobs are at stake, but also with regard to key legislation (regarding which the main preoccupation is that regulations meet the standards needed to keep up with industry development and that industry has the necessary legal certainty to conduct their businesses)[37].

When the Constellation programme was shelved, pressure from Colorado Congressional Representatives was key to ensure the survival of Orion Multi-purpose Crew Vehicle, whose prime contractor is Lockheed Martin, a company with a strong presence in Colorado.

The Colorado Space Coalition is currently preparing a briefing for Senators and Congressional Delegation to be used during the new Administration transition with a view to, on one hand, enlist, at an early stage, the new Administration’s support for Colorado aerospace priorities; and, on the other hand, avert the danger that an Administration insufficiently aware of the significance of certain top projects may put them at risk when new policies and budget priorities are established[38].

For the most ambitious stakeholders of the Coalition, the ultimate objective is to create a more united front that help the sector not only take advantage of existing opportunities but rather create opportunities and shape the political agenda to its advantage.

It is worth noting that the influence and lobbying of individual states have contributed to the dispersion of space activities (including NASA and NOAA centers) throughout the country. Because of that influence, space in the US is rather “decentralised”, much in the same way that space is “decentralised” in the EU (where space remains largely a matter of national competence). Decentralisation, however, is not perceived as a disadvantage as it often induces healthy competition, new approaches and original ideas[39].

7.    Regulatory aspects linked to commercial space development

 

Security concerns, notably export control related, are omnipresent in the space sector in the U.S.. As a rule, companies in this sector do not hire foreign nationals and, as I experienced first-hand, do not easily open up to foreign interlocutors unless they have a good reason to do so.

Yet, the general perception among aerospace companies and authorities I came in contact with, is that, following to ITAR reform, export controls are no longer a matter of concern. Some voices point out that ITAR was never a problem for big companies, which could afford paying for all the paperwork involved in getting authorisations. They benefitted from the fact that ITAR prevented small companies from exporting due to the costs involved. Reform has made exporting easier and cheaper for small companies – mainly suppliers and support companies. Authorisations through the Department of Commerce cost generally a few thousand dollars, while authorisations through State would be tens of thousands. Another positive impact of ITAR reform is that foreign customers are now more confident about buying US components.

ITAR reform is credited to be the result of a strong bipartisan lobby in Washington from Colorado Senators and Congressmen.

Beyond ITAR, the consensus seems to be today that there are no serious obstacles for U.S. companies to export or engage in international collaboration.

U.S. businesses are in general regulation-averse; the space sector is no exception. The general sentiment is that given the changes in policy and regulatory framework for space activities in recent years, stability is necessary to allow the sector to adapt and grow within that framework.

There is a widespread view that good space situational awareness is essential for the safe and sustainable use of space. International partners have the obligation to monitor, track and share data of what they see in space. It is necessary to establish a space traffic management system, like it exists for air traffic. Industry has also the responsibility for developing norms for how it operates systems in space. Standards are necessary for industry to build and operate spacecraft in order to make, for example,  spacecraft more easily tracked, to determine orbits to be used so to as to reduce collision risk, and to ensure an adequate capacity for manoeuvring spacecraft once in space[40].

 

 

 

Augusto González

 

 

[1] This report does not cover, for example, the intense space networking activities taking place in Colorado.

[2] The spacepolicyonline.com provides a good overview of “commercial space” http://www.spacepolicyonline.com/commercial

[3] O’Neil, J. (October 17th 2016). Videoconference.

[4] Telecommunications is the one space subsector that is purely commercial and non-dependent from public funding support. Suborbital flight has not benefited from the same governmental funding that traditional launcher manufacturing companies have and are primarily commercial ventures. Remote sensing systems first emerged and developed to meet defence and scientific needs; there is an increasing number of privately-owned remote sensing satellites, but these rely heavily on government sales. Satellite navigation systems are still primarily the result of massive public investment and space transportation systems are all dependent on government funding to a lesser or greater extent.

[5] Miller, K. (August 31st 2016). Personal interview.

[6] Simpson, M. (August 10th 2016). Personal interview.

[7] O’Neil, J. (October 17th 2016). Videoconference.

[8] https://space.taurigroup.com/reports/Start_Up_Space.pdf

[9] http://www.euroconsult-ec.com/node/306

[10] https://www.nasa.gov/exploration/commercial/index.html

[11] http://spacenews.com/two-companies-win-first-noaa-commercial-weather-contracts/

[12] Lindell, J. (August 17th 2016). Personal interview.

[13] Abdalati, W. (September 6th 2016). Personal interview.

[14] Abdalati, W. (September 6th 2016). Personal interview.

[15] American Institute for Aeronautics and Astronautics Forum and Exposition, Long Beach, California, September 13th 2016

[16] Dr Charles F. Bolden Jr., NASA Administrator; American Institute for Aeronautics and Astronautics Forum and Exposition, Long Beach, California, September 13th 2016

[17] Cheetham, B. (August 25th 2016). Personal interview.

[18] Miller, K. (August 31st 2016). Personal interview.

[19] Hatford, S. Personal interview.

[20] UAVs will provide solutions which are complementary to those provided by earth observation satellites. The criteria to determine which solution would be the most appropriate are scale, accessibility and cost. Scale refers to the area to be covered, which in the case of UAVs can be very small to relatively large, though not as large as what a satellite could possibly cover. Accessibility has to do not only with the actual availability of UAV versus satellite when a particular job needs to get done, but also with the possible combination of sensors that a UAV can put together versus the need to obtain multiple satellite data streams for a particular survey. Accessibility includes the ability to access certain types of sites and coverage over determined precise periods of time; UAVs may be able take images at angles (such as vertical surfaces) that are virtually impossible for satellites and hover for long periods over a particular spot in a manner that satellites are not designed for. Cost is always an obvious factor. Satellite data may be used in a manner that is complementary to data gathered by UAVs. UAVs have their natural niche and fill a gap that exists between satellite and aerial data services. Oliver, J. (September 28th 2016). Unmanned Aircraft Systems Colorado Meeting.

[21] Busalacchi, A. (August 22nd 2016). Personal interview.

[22] In this respect the EU is one step ahead of the U.S.

[23] Gail, B. (October 5th 2016). Personal interview.

[24] Rayder, S. (August 22nd 2016). Personal interview.

[25] Ruppel, D. (October 4th 2016). Personal interview.

[26] http://www.asteroidmission.org/

[27] http://lasp.colorado.edu/home/maven/; MAVEN is designed to orbit Mars and explore the state of the Martian upper atmosphere, the processes that control it, and current atmospheric loss. The CU Laboratory for Atmospheric and Space Physics proposed, designed and leads the mission on behalf of NASA. NASA provided the $600 million necessary for the mission. Lockheed Martin built the spacecraft, LASP designed and manufactured the instrumentation, with University of California at Berkeley and ULA provided the rocket. All of the main players in this mission are based in Colorado.

[28] For example, Lockheed Martin will provide $3 million to University of Colorado for teaching and research on radio frequency systems: http://www.lockheedmartin.com/us/news/press-releases/2016/august/ssc-space-goesr1.html. The $3 million will be spread over 4 years and will establish new academic programs focused on radio frequency (RF) systems. RF fields address commercial, civil and military needs for communications, radar and photonics. Engineers in this field will develop innovative approaches for tracking, navigation and control of spacecraft as well as next-generation global navigation technologies.

 

 

[29] Space X and Ball Aerospace provide a good example of a good internship programme university students: http://www.spacex.com/internships ; http://www.ball.com/aerospace/about-ball-aerospace/careers/college-internships

[30] Hartford, S. (October 4th 2016). Personal interview.

[31] http://choosecolorado.com/wp-content/uploads/2016/06/CO-Aerospace-Profile.pdf

[32] LASP has impressive capacities and an equally impressive record of achievements. For further info see http://lasp.colorado.edu/home/ .

[33] CIRES predates the creation of NOAA by a few years. NOAA has nowadays 60 cooperating institutes of which CIRES is the largest. http://cires.colorado.edu/

[34] http://www.colorado.edu/aerospaceventures/

[35] The course is run by Brad Cheetham.

[36] http://www.spacecolorado.org/

[37] Lea, V. (September 9th 2016). Personal interview.

[38] Colorado Space Coalition meeting discussions (September 23rd 2016).

[39] Simpson, M. (August 10th 2016). Personal interview.

[40] Pulham, E. ( September 15th 2016). Personal interview.