Barriers to Space Commerce

views updated

Barriers to Space Commerce

Space commerce exists in the early twenty-first century as a $100 billion industry. It consists primarily of firms providing commercial telecommunication and remote sensing services using satellites, as well as the manufacture and launch of those satellites. Space commerce also includes many organizations that provide products and services (including satellites, satellite services, launch, operations, and research) to government agencies in support of national civil and military space programs. Finally, a small number of firms provide other space services on a commercial basis, including space station access, on-orbit experimentation using a commercial module carried on space shuttles, and the launch of ashes for "burial" in space.

Efforts by space advocates, aerospace firms, and government agencies to further expand space commerce generally focus on extending the scope of commercial space activities beyond today's space telecommunications by fostering new space industries. Ongoing ventures propose expanding space services into new realms: high bandwidth Internet connectivity, on-orbit research and manufacturing, entertainment, education, power, and even routine space tourism. It is often asserted that the development of these industries is hindered by economic and policy barriers, and that these barriers can be overcome with appropriate government policy or industry initiatives.

Economic Barriers to Entry

There are three major economic barriers to the growth of space commerce: the cost of entry, the risk associated with space activities, and the cost of transportation. These factors are closely interrelated.

The Cost of Entry.

Space is an expensive business. The cost of manufacturing and launching a routine telecommunications satellite exceeds $150 million. The cost to establish a new capability, such as a reusable launch vehicle or an on-orbit manufacturing facility, is likely to be in the multi-billion dollar range. The need to acquire a very high level of start-up capital* creates a barrier to entry into the space industry, especially for small and/or start-up firms.

High Risk Factors.

The risks associated with space activities also increase the difficulty of entering the business. Risks arise from both technical factors and market factors. Technical risks exist because space systems are complex, often requiring new technology, and because space activities occur in a hazardous, challenging, and distant environment where maintenance and repair are expensive and may not be possible.

Market risks arise because in many cases the services being offered are new and it is difficult to predict what the customer response will be. In addition, complex systems and new technology make managing costs a challenge, which can negatively affect prices. Finally, for some space services, cheaper terrestrial alternatives may be developed. These risks are exacerbated by the timing and schedule associated with space projects. Major system expenditures have to be made years prior to the beginning of operations and, as a result, financing costs are high and the time frame for achieving a return on investment is fairly long.

The Cost of Transportation.

Many in the industry characterize the high cost of transportationtypically expressed as the price per pound or kilogram to orbitas the primary economic barrier, based on the premise that significantly reduced transportation costs to orbit would make new space business activities financially feasible. In theory, this would then lead to increased launch rates, which would further reduce launch costs, and this cycle would help reduce costs of entry. This basic logicreduce the cost of getting to space and space commerce will grow rapidlyunderlies many government and industry efforts to foster space commerce. The development of reusable commercial launch vehicles, for example, is generally supported by the contention that reusing vehicles (as opposed to using a vehicle only once, as is the case with today's commercial rockets) will ultimately provide lower costs to orbit. Reusable launch vehicles will, however, be expensive to develop. The costs and benefits of reusable launch vehicles will be a major issue for space commerce in the coming years.

Government Policy

Government policies affect space commerce and, in the minds of many industry observers, create the greatest barriers. Government barriers to commercial space come in two varieties: areas where government regulation and oversight are perceived as restrictive or inappropriately competitive (i.e., the government should do less in order to foster space commerce) and areas where government policies and actions are perceived as insufficiently supportive (i.e., the government should do more in order to foster space commerce).

Export/import restrictions, safety and licensing regulations, and launch range use policies are examples of areas that have been criticized as too restrictive. This has led to some reforms. For example, in 1984 a single licensing entity for commercial launch services was created in the U.S. Department of Transportation, so that commercial launch service providers were relieved of the requirement to interact with more than a dozen government agencies in order get permission to launch. However, other policy barriers still exist. In the United States, for instance, export/import controls aimed at limiting the transfer of valuable or sensitive technology to other countries affect U.S. commercial satellite and launch firms competing in international markets.

Sometimes government agencies, in their conduct of space activities, are viewed as competing with industry. These concerns typically arise from government operation of systems or programs for which there is a commercial demand. For example, the space shuttle launched commercial satellites in the 1980s, but it no longer competes with expendable launch providers for these customers. Concerns may also emerge regarding systems or programs operated directly by government agencies, when they could be operated by industry. In the 1990s, the daily operation and management of the space shuttle were contracted out to an industry consortium.

Government policies generally express the intent to support commercial space. However, space advocates often criticize the implementation of this intent as inadequate. They seek government policies that will support commercial space, such as the government procuring commercial launch services rather than conducting government launches (an area in which the United States has made significant progress), undertaking technology development programs to reduce the risks to industry associated with advanced space concepts, serving as an anchor customer for new ventures, and providing loan guarantees, tax credits, and other financial incentives to space firms.

The impact of government policy and activities on space commerce should be viewed in a balanced way. All spacefaring nations have implemented some level of supportive government policy. While efforts to eliminate barriers to space commerce result in media attention and high-visibility policy discussion, it is important to note that many government policies have in fact been enabling space commerce. For example, government agencies have borne a significant proportion of the development costs of the major commercial launch vehicles worldwide. In the United States, Russia, and China, many vehicle families began as government launch systems that were eventually privatized; in Europe and Japan, commercial launchers were developed as government activities. Government agencies provide access to launch facilities and support new technology development and programs to reduce technology risks. Government acquisition of satellites and launch vehicles provides important economies of scale to manufacturing and launch firms. Intense international competition in space commerce has raised the issue of the fairness of different levels of government support for commercial space activities and given rise to international agreements* aimed at leveling the playing field.


Barriers to space commerce are both economic and policy-based. The costs and risks of space activities create barriers to entry and limit the viability of new space industries. Despite the increasing commercial focus of space activities, government expenditures and policies will continue to have a major impact on space commerce. The greatest potential impact of government policies will arise from expenditures to reduce the costs of access to space, most likely through the development of reusable launch vehicles. The magnitude of this impact, even if launch costs drop dramatically, is difficult to predict. This uncertainty about potential benefits may inhibit government and industry willingness to commit significant resources to fostering new space markets. Finally, decision-making in both government and industry regarding space commerce will be increasingly shaped by international competition.

see also Accessing Space (volume 1); Burial (volume 1); Launch Vehicles, Expendable (volume 1); Launch Vehicles, Reusuable (volume 1); Legislative Environment (volume 1); Remote Sensing Systems (volume 1); Reusable Launch Vehicles (volume 4); Space Tourism, Evolution of (volume 4); Tourism (volume 1).

Carissa Bryce Christensen and Deborah Pober


Christensen, Carissa Bryce, and S. Beard. "Iridium: Failures and Successes." Acta Astronautica: The Journal of the International Academy of Astronautics 48, nos. 5-12 (2001):817-825.

Mankins, John C. "Special Issue on Technology Transfer." Space Commerce 1, no. 4.New York: Harwood Academic, 1993.

U.S. Department of Commerce. Office of Space Commercialization. Trends in Space Commerce. Washington, DC, 2001.

Internet Resources

Boeing, General Dynamics, Lockheed, Martin Marietta, McDonnell Douglas, andRockwell. Commercial Space Transportation Study. <>.

U.S. Congress, 70101-70119, Associated Committee Reports. Commercial Space Launch Act of 1994: Commercial Space Transportation. <>.

*The high level of capital required to establish a new capability is needed to build facilities, develop and test hardware and software, staff up with a specialized engineering team, and ultimately get to orbit.

*For more information on these agreements, see the Volume 1 article "Careers in Space Law."

About this article

Barriers to Space Commerce

Updated About content Print Article