This is a very brief overview I wrote in preparation for a test a few years ago. The UND Space Studies alumni dinner I went to this past weekend made me look back at what little research I had done on the space industry and I found this. Just throwin’ it out there, comments are always appreciated.
The space industry can be thought of as consisting of four major elements: satellite manufacture, the launch industry, satellite services, and ground equipment manufacturing (United States Dept. of Commerce). In 2100, total world-wide revenue was approximately $168B (SIA, 2011) with private sector employment (2007) of approximately 729,000, including indirect employment (Krepon and Black, 2009).
The space industry is very tightly coupled to the defense industry, and shares many of the same challenges: Customer demands are unstable; the skills and facilities of most suppliers are highly specialized; many of the large contractors–known as the “primes”– produce defense-related products only. (Boezer, Gutmanis. 1997)
The post-Cold War period, starting in the early 1990s, has been a period of substatial changes in the space industry. The 1990s featured a reduction in demand due to reductions in military spending brought about by the end of the Cold War. This, in turn, caused a reduction in the industry workforce and consolidations among the major actors within the industry with over 50 major mergers or acquisitions taking place. One additional significant result was an increase in the already tight coupling between the aerospace and defense industries. (Cornell, 2011) Interestingly, this consolidation was encouraged by the government, which adopted a policy that attempted to balance anti-trust concerns with anticipated cost reductions. (Deutch, 2001)
The largest segment of the space industry are those companies and interests within what could be called the “Old Space” segment. These concerns primarily focus on government contracts and research [cititaion needed] and are predominately the “primes” mentioned above. Because of this reliance on government contracts, this segment underwent a series of consolidations and an overall contraction in the 1990s and early 2000s. US government spending for space systems dropped 46% between1993 and 2001, and the segment saw the number of companies reduced by 17%, leaving only a handful of large defense contractors in control of the industry (Cornell, 2011).
There is, however, another segment of the space industry that is ascendant – companies like Space X, Virgin Galactic, Bigelow Aerospace, and many others. The success of Space X in developing its Falcon series of launch vehicles and of Virgin Galactic in marketing its forthcoming sub-orbital tourism business has generated a considerable amount of excitement in this “New Space” segment (Mangu-Ward, 2007).
Both the traditional and New Space segments face some of the same challenges; policy changes, regulatory restrictions and engineering requirements for launch facilities, vehicles, and spacecraft. Additionally, due to a number of factors, such as the previously mentioned industry contraction and high level of regulation, there is a high barrier to entry in the industry. One result of this is that many of the New Space businesses started (or still are) vanity projects of several high-tech billionaires.
The traditional industry is heavily dependent on government grants and contracts and thus is subjected to a great deal of uncertainty in long-term planning. This uncertainty limits the risks that businesses within the Old Space segment will take. Similarly, the New Space businesses suffer from policy uncertainties – but of a slightly different type.
Whereas Old Space relies on a policy and political climate that increases – or at least maintains – Federal funding of programs, New Space relies on policies that maintain – or at least don’t increase – government intrusion into their markets or businesses. New Space faces the temptation of government funding which would restrict the very independence that their nascent industry is built upon (Mangu-Ward, 2007). In short, Old Space faces the risk of losing government interest, while New Space faces the risk of attracting government interest.
One example related to New Space is that of NASA’s “Commercial Orbital Transportation Services” (COTS) program. Under the National Aeronautics and Space Administration Authorization Act of 2010 (Public Law 111–267) NASA can apply funds to assist private companies in developing a “reliable means of launching cargo and supplies”.
From the regulatory standpoint, ITAR and other export controls regimes are perhaps the biggest challenges both segments face. Rick Tumlinson, co-founder of the Space Frontier Foundation has likened ITAR to the Iron Curtain (Mangu-Ward,2007), evoking images of the restrictions on international trade imposed by the Soviet bloc on its European satellite nations. While this is a slightly provocative comparison, the impact is in some ways similar – the trade restrictions place on sharing space technology also restrict the growth on the space industry. [Todo: Summary of trade restrictions from Damast]
Boezer, G., and I. Gutmanis. “The Defense Technology and Industrial Base: Key Component of National Power.” Parameters 27 (1997): 26–51.
Cornell, Ariane. “Five key turning points in the American space industry in the past 20 years: Structure, innovation, and globalization shifts in the space sector.” Acta Astronautica 69, no. 11-12 (December 2011): 1123-1131.
Damast, David. “Export control reform and the space industry.” Georgetown Journal of International Law, 2010.
Deutch, J. “Consolidation of the US defense industrial base.” Acquisition Review Quarterly 8, no. 3 (2001): 137–150.
Mangu-Ward, Katherine. “Space travel for fun and profit: the private space industry soars higher by lowering its sights.” Current (2007): 11+.
P.J., Blount. “Informed consent v. ITAR: Regulatory conflicts that could constrain commercial human space flight.” Acta Astronautica 66, no. 11-12 (June): 1608-1612.
“Space more than meets the eye: how big is space really? The industry is relatively small, but its economic and strategic importance may be as boundless as space itself.” OECD Observer (2007): 16+.
“Space tourism.” Science and Children, 2010.
“U.S. and Worldwide Commercial Space Industry Revenue, by Type”. US Census Bureau, 15 2010.