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Copyright © 2010 by Donald F. Robertson


This article may be distributed at will, but only if it is not changed in any way, and only if the author's name, the copyright notice, the name of the journal it first appeared in, and this notice remain attached. In addition, this article may not be sold for money, or published for sale in any way, without the author's prior written permission.

This article originally appeared in Space News.




Donald F. Robertson

    An important part of 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 award of Iridium-Next on 2nd June 2010 to a heavily subsidized bid by Thales Alenia Space of France and Italy raises a question: is there much of a US commercial space industry left to support? With eighty-one 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 SpaceX 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 a thirty-eight 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 7th May 2009, Orbcomm awarded their second generation network of eighteen messaging micro-satellites, with options for up to thirty more, to the Sierra Nevada Corporation of Reno, Nevada, for just $117 million.

    At the more valuable end of the spectrum, Thales Alenia Space is building every mid-sized low- and medium-Earth orbiting commercial satellite network under contract. The French-Italian conglomerate recently won no less than three bids. The other two are Globalstar's second generation, awarded on 4th December 2006 for EURO 661 million, and Google's O3b network, 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 of Sunnyvale, California, near San Francisco. 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, in Boulder, Colorado, but this is only so Iridium can sell payload space to the US 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 United States companies and investors.

    The networked low-orbiting comsat industry was invented in the United States. With the original Iridium, US satellite builders had a commanding lead. How did that nation lose it?

    There were three key events, all of them self-inflicted wounds. If Mr. Obama and Congress wish to have a satellite manufacturing industry in the United States that employs the US aerospace workforce, the government and US companies must face up to the direct causes of the recent failures and not repeat them.

    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 United States investments; now the the nation builds less than half.

    In the face of ridicule by much of the space industry – who 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.

    Orbital, however, also plays the other side of the fence: much of the company's new Taurus-II 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 and Delta-II are fully retired, the main engines for two of the United States' four medium and large rockets the two EELVs, the SpaceX Falcon-9, and Orbital's Taurus-II – will be of Russian design and manufacture.

    To save money, the United States government repeated Loral's mistake by bartering with Europe to build Space Station modules of US design, in return for free launches and increased access to Station resources. In essence, US 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 their 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 US government contracts.

    Likewise, Boeing, and to a lesser extent Lockheed Martin, make little effort to amortize the taxpayers' investments in the Evolved Expendable Launch Vehicles, content to give the commercial launch market, which the US 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 US government.

    The European success is hardly based on the size of their investment in space, which is dwarfed by that of the United States. US taxpayers provide about half the total global funding for spaceflight, yet the nation earns little trade revenue and makes no net profit on its vast expenditures on space.

    If the Obama administration wants to employ US 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 the United States needs to set aside some of its comparatively radical “free market” ideology and match the subsidies. The nation also needs to match or eliminate the 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 to used to create jobs overseas. 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.” The sale price is not public, but undoubtedly far less than the technology cost Motorola to develop.

    Most important, commercial satellites need to return to the commercial regulatory regime where they belong.

    Until these things change, US 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

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