SpaceX or the end of the States in space?

The space is the privileged place where high technology activities take place, but also with high risks of failure. Only the States and their space agencies could assume them, or so it was believed. Until the day that one company, SpaceX (founded by the same Elon Musk as Tesla’s electric cars) broke this state monopoly that no one thought should challenge.

In 2017, it became the first space mission operator: 17 against 11 for Ariane Espace (which operates Ariane rockets). Space would thus become an economic and competitive space like any other, with the underlying question: do states have their place in it?

difficult to monetize

The lifespan of a satellite is limited to fifteen years. That’s not much for a big investment. You have to make it profitable right away. Unable to consider your test once released: cannot be fixed. If your mission does not meet the expected (economic) interest, it is a loss. Some will remember the constellation Iridium, which intended to offer a mobile satellite phone to everyone a few years before the GSM boom. Too late, the satellites were in orbit and no longer used for anything (except for the US military).

For a long time it was thought that the size of the investments justified the joint effort of the States, through a single operator, financed by them, that redistributes the industrial benefits to them. The typical example is the European Space Agency (ESA), living in self-sufficiency and comfort until SpaceX arrives. Since then, ESA has had to multiply subcontractors, launch tenders, reduce costs… a familiar refrain from competitive circles. But in space there are also many projects without industrial benefits, except for hypothetical and long-term ones. State intervention is therefore a necessity. It was the case with the Apollo program to conquer the Moon: a financial abyss, but we continue to highlight the consequences in our daily lives.

What limits for the state?

The State must stop where private operators can take over, under penalty of being placed in difficulty, both itself and its public money: field activities linked to space have been competitive for a long time. Galileo is a European project, but it leaves the exploitation of the GPS signal on the ground to the private sector. A state monopoly for space infrastructure and competition for (terrestrial) services seems like a good model. We hear this slogan in other sectors with risky, long-term investments and uncertain demand: fiber for the home (where the state finances its implementation, as in Australia), highways, built by the government (and concessions to the private sector) or the construction of nuclear power plants (no private actor risks this anymore unless they get a guaranteed sale price for government electricity).

The competition between actors in space, including the State, in all aspects, faces other obstacles. Space actors are very few, because they need a rare highly skilled workforce. They fight over it. However, the competition would like the innovation of one to lead by emulation to the innovation of the other: what can be done if the first one has all the brains? It is necessary to prioritize coordination between the actors in the sector, a trend present in semiconductors, so much so that the values ​​to invest (race with miniaturization, which flirts with the laws of physics, obliges) are colossal.

If a player cannot have the exclusivity of a spatial innovation, it would be unwise to invest. But in the space domain, it’s hard to go it alone. It is the debate between the fair reward for an invention that allows a technological leap and the need to make the accompanying patent available to everyone in the form of a standard. This is the FRAND concept (fair, reasonable and non-discriminatory – fair, reasonable and non-discriminatory: the patent becomes a standard (big sales as a result), but in return, its inventor claims only a low Royals and cannot deny anyone. All smartphones contain the same patents, and when there is a fight between manufacturers over a patent infringement, it is incidental.

Possible compromise?

How to understand SpaceX’s success? At some point, the costs of an entire part of the space industry fall, the technology becomes affordable: competition arrives. Elon Musk warned him about rockets. But there were precedents. Before SpaceX, the first telecommunications satellites were managed by Intelsat or Eutelsat, state-owned organizations. In the early 2000s, they had to transform into commercial players to deal with the arrival of private competitors (SES Astra).

But SpaceX intends to take the place of states in projects that should be reserved for them: the conquest of Mars, with uncertain direct consequences. The step too much? It would be better to combine the genius of Elon Musk with the ability of states to take industrial risks with no return.

To know more: “Moonshots and market failures: the economy of space”; Oxera, November 2017.

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