Newly Privatized: The Race for Space

NASA reported today that the final voyage of Space Shuttle Endeavour, originally planned for Friday, would be delayed by several more days due to technical problems.  The Space Shuttle was originally to be retired in late 2010, but has been extended until 2011, with the final launch of Atlantis scheduled to herald the end of a 30 year era in June 2011. This leaves the US Space Agency with a void in terms of next generation space passenger vehicles after last year’s cancellation of Project Constellation which was developing a new spacecraft to serve the International Space Station (ISS) as well as voyages beyond Earth’s orbit to the Moon and even Mars. The interim solution for the ISS will be for US astronauts to hitch a ride on Russia’s state-run Soyuz spacecraft.  As for homegrown options, the future looks commercial.  The privatization of space is starting – at least in the US, even as rapidly developing countries including China and India ramp up their space efforts under state banners.  As space becomes more commercial what will this mean for nations and businesses?

Under Obama’s new space policy, the transportation of crew and cargo to the International Space Station will be turned over to the commercial sector. The change came into effect with the signing by President Barack Obama of the NASA Authorization Act 2010 last October.  Obama has proposed to devote US$6 billion over the next five years towards commercial spaceflight.  In the last two weeks the first of this money has started to come through, with NASA offering US$270 million of funds to four firms to help them push forward designs for new orbiting vehicles. 

The four initial recipients of NASA funding are Blue Origin (set up by founder Jeff Bezos), Boeing, Sierra Nevada Corp and SpaceX (started by entrepreneur Elon Musk of Tesla Motors), each hoping to sell astronaut "taxi" services to NASA – and other agencies – within five years.  Interestingly, the current focus of funding is on the design passenger vehicle – no funds have yet been allocated to the producers of the rockets that would be required launch these vehicles.  Among the four award winners, only SpaceX has its own rocket, while the others will be dependent on a third party rocket partner.   

From a business perspective, the commercialization of space offers significant opportunities – as well as risks.  For companies such as those above, vast investments will be required in new technologies and designs, with no guarantee that their designs will actually win in a marketplace, the size and shape of which has many uncertainties in its own right.  How much space travel will future US budgets allow for, given the need to massively reign in national spending?  Will commercial designs be a cost-effective alternative to NASA-funded programs – and if not, will space be re-nationalized? How will competition work?  Will there be a market outside the US or will national interests prevail to ensure countries favour their own space enterprises?

On the positive side, space offers huge potential to create new markets. Those at the forefront of developments now will be in a leading position to capitalize on space-related opportunities such as servicing satellites, space tourism, new approaches to R&D in micro-gravity, the search for and capture of new resources – and many more opportunities yet to be discovered in this developing arena.  As we understand more about the potential of space to assist with man-made challenges on Earth, there will likely be many benefits for businesses beyond the immediate domain of space technologies, whether new energy sources (see my last blog post), new materials or new technologies with diverse applications.  Understandably, the space entrepreneurs are out in force – it’s no surprise to see two well-known entrepreneurs from different arenas involved in the four companies receiving NASA funds.

From a national perspective, the implications of commercializing space also raise some questions.  At the risk of a sweeping generalization, history suggests that entrepreneurs driven by profit motives are generally more efficient than governments in terms of productivity.  However, with massive infrastructure projects, which you could debate that the ability to regularly and effectively access of space is, often government funding is required to put the building blocks in place. Are there enough building blocks now to allow commercial operations to flourish?  Will commercial activity show the desired improvements in productivity?

Another question is around the strategic national importance of the space race – and race for dominance it has certainly been in the past, most notably between the US and Russia. While the US appears ready to try the private route, will other countries follow suit and open up the market further?  Or will they nurture and protect their own space ambitions and providers?  Former NASA astronaut Tom Henrick suggested, "I don't think any major effort in space will again be done by a single nation.”   Will this really be the case?  Space is (even after decades) such a novel and mammoth undertaking that it will require cooperation, partnerships and knowledge transfer between vast networks of organizations – will this happen (hopefully) or will national interests get in the way?

The biggest question for me over the privatization of space is what does this mean in terms of the search for resources? Let’s not be under any illusion, the world is short of resources and scarcity will increase.  Space, whether solar generators in orbit, the moon’s minerals or beyond, could be the proverbial candy store for companies and nations alike. UN Treaties in place state that the moon and its minerals are the common heritage of mankind, which means that nations and companies who explore space have an obligation to share any profits with the rest of the world.  Given international cooperation and agreements are not exactly easy to come by – think trade, climate change, financial markets reform – are we going to do better on space, particularly with eager entrepreneurs now part of the mix?  

While it would be easy to be cynical, perhaps the best thing is exactly that the eager entrepreneurs are involved – the best businesses are making progress on critical global issues faster than many governments, understand how to partner and collaborate, know how to innovate, understand their role and contribution in society and focus on the end customer/consumer.  Perhaps we need a UN Global Compact for space, but nonetheless, welcome the new private space pioneers and wish them success.