Nearly a year and a half ago, I wrote a research flash with Justin Cadman while at Quilty Analytics. The flash was a response to a notion that United Launch Alliance’s (ULA) CEO, Tory Bruno, had pushed forward around that time: the National Security Space Launch (NSSL) “market” could only support two launch providers. His view was both self-interested and rested on perspectives warped from focusing on U.S. national security needs.
I had fun drafting up that research flash. We ultimately used corn to demonstrate why Bruno’s vision of the “market” (and his refrain to limit it) didn’t hold a “kernel” of understanding how to grow the U.S. commercial launch market. The flash is still available to read, titled: “Is the U.S. National Security Space “Launch Market” only big enough for two launch providers?”
The Same Problem, Expanded
Why bring up that old article? Because Bruno mentioned the need to limit the growth of investment in new potential launch services again early this month. He expanded his contention from NSSL to all commercial investments in the sector. Bruno obviously never read that research flash. Which is too bad--but he seems like a nice fellow, anyway.
Breaking down Bruno’s stated problems and solutions to this “overheated launch market:”
Problem: Overheated launch “market.”
Too many launch companies
Too many new launch vehicles
Too much investment in risky launch businesses
No launch market growth
Falling launch prices
Static satellite demand
Solution: U.S. government
Re-directs private investment
Subsidizes technology useful to the U.S. military
Clarifies national security wants/needs and provides clear/responsive feedback
Pushes startups with promising national security technology, and no federal contracting experience, into the suffocating arms of the legacy primes.
The snarky interpretation of Bruno’s contention: Vulcan (and therefore, ULA) can only compete in a market without falling launch prices, few competitors, and U.S. government interference.
If You Can’t Beat ‘em, Coerce ‘em
This contention boils down to not having an open launch service market in the U.S. While that research flash provides the reasons why the U.S. national security apparatus as a single customer doesn’t make a “market,” the idea of the U.S. government stepping in is a terrible one. First, the actual U.S.(and global) launch market isn’t mature. I’ve provided an analysis of why it isn’t in “2020 Commercial Global Space Market, Part 2: Profitable, but Not Mature (Yet).” To have the U.S. government interfere in a sector where there is growing investing activity might kill that activity.
To have the government direct private investment into “flavor-of-the-day” ideas such as asteroid mining and in-space manufacturing sounds excellent. But what about those companies that have already invested in these areas and are profiting from their work? And is it a good idea for the U.S. government to direct investment into one idea--asteroid mining--where companies have already crashed and burned? Would investors flock to that idea (again)? Frankly, those “markets” (since they don’t exist yet) could use more government research and development investment.
The only statement I agree with is the suggested solution that the U.S. government work on its communications about what it needs and respond quickly and clearly. It will never do that.
No one should be surprised at Bruno’s lamentations about a market that might be changing too much for ULA and its newest rocket. Nor should they be surprised by Bruno’s suggestions of government “help.” ULA is a creature of U.S. government help, after all, and lately, totally dependent on U.S. government launches for its existence. That’s a lucrative niche the company has consciously pursued, and it’s likely dismaying to ULA whenever another launch company gets a U.S. government contract.
How does Bruno’s assertion that there are too many launch companies jibe with reality? Is there any such thing as too many launch companies? To answer the first question, let’s assume that Bruno is implying there are too many U.S. launch companies, as he’s provided the U.S. government as the solution.
Current and Upcoming U.S. Competitors
Focusing on U.S. companies with rockets that have deployed payloads into orbit successfully, there’s Northrop Grumman, Rocket Lab, SpaceX, ULA, and Virgin Orbit. Rocket Lab and Virgin Orbit (and its national security-focused Vox Space) launch only small satellites, leaving ULA to compete with SpaceX and Northrop Grumman (NG). From NG, its Antares rocket **might** be considered competitive for ULA (although it seems dedicated to ISS launches only). None of the smaller rockets in the company’s inventory comes close to ULA’s Delta and Atlas (and maybe, Vulcan) rockets.
The only real competition for ULA today is the extraordinarily aggressive SpaceX. Even then, though, ULA has managed to use the NSSL contracting program to keep SpaceX from making too many inroads. Despite no test launch or NSSL certification of any kind for ULA’s new Vulcan, the company convinced DoD acquisitions enough of the vehicle’s capability to accept it for phase 2 of NSSL. But it may be that SpaceX’s recent inroads with the Space Development Agency are eating away at ULA’s national security dominance, too. That said, the current competition hasn’t changed for ULA during the past few years.
Of the upcoming U.S. launch companies, only one is building a rocket that might concern ULA--Blue Origin. IF Blue Origin manages to field an operational and reliable rocket, and IF that company’s services are cheaper than ULA’s Vulcan (and, how could they not), then maybe ULA has a valid concern. After all, the DoD is merely looking for two companies in the NSSL space based on its selection history. While Blue Origin might be a problem for ULA, even that possibility isn’t entirely clear. Is Bezos’ investment into Blue Origin a problem for ULA, or has there been “just enough” investment to build an engine for ULA’s Vulcan?
That single inter-relationship with Blue Origin shows the flaw in Bruno’s assertion. If Blue Origin hadn’t initially been founded and invested in, ULA would have had to rely on its “poor girl” option--Aerojet Rocketdyne--as an engine-provider for its Vulcan rocket. ULA prefers Blue Origin’s offering. Blue Origin’s engine resulted from “too much investment” in a risky U.S. launch business, and ULA benefited from it.
A total of $6.8 billion was invested in those “risky” launch businesses during 2020, globally, making up about 27% of worldwide private space investments that year. That total includes investments of $2 billion into SpaceX and $1 billion into Blue Origin (nearly half of 2020’s launch investing). While $6.8 billion is a lot of money, it’s a little over half of what ULA earned from government contracts between 2012 and 2019, which was $11.545 billion. That’s $11.545 billion for a single company’s launch services mind you, not rocket development among multiple companies.
No ULA representative has ever suggested there was so much investment in the company’s services that perhaps some of it should be re-directed to other space ventures.
Slow-to-No Satellite Growth?
The last lamentation I’ll address is about there being too many launch providers and not a large enough market. I’ve already provided some reasons why the large satellite market is not growing. In this analysis, I noted:
“What we might be seeing, then, is a commercial launch market problem...there doesn’t appear to be a healthy one in the United States...yet. Two of the three U.S. large rocket launch services are dependent on government-sponsored missions. SpaceX isn’t dependent (although it gladly takes government money when the opportunity arises) but appears to be a victim of its success. While the company moved quickly to market with an inexpensive and reusable launch vehicle, the potential commercial customers--especially in the U.S.--weren’t able to move as quickly. Some are unwilling to move quickly.”
“U.S. satellite manufacturing companies like Ball, Boeing, or Lockheed Martin design and build satellites in years. One of their biggest and most profitable customers, the U.S. government, appears very comfortable with that pace (and ULA and NG are happy to accommodate). Their commercial customers are also satisfied with the slow pacing, but whether this is because of low schedule expectations is unclear. This situation makes it pretty clear not to expect shifts to lower-cost and faster satellite manufacturing from the legacy companies, even though their interests are served in catering to a larger commercial market.”
When a company like SpaceX comes along and quickly launches as much as its contract wins allow, that might create an “inelastic”-appearing market because the current large satellite-manufacturing pipeline can’t keep up. If large satellite manufacturers have incentives, maybe that will change. It may be that SpaceX itself changes that by providing inexpensive satellites quickly.
Right now, the launch market, which was one of many narrow hoses for satellite operators to navigate, has become, primarily due to SpaceX, a large pipe. The trickle of water (satellites) flowing through that pipe remains a trickle because the narrow pipe preceding it, satellite manufacturing, has yet to be enlarged.
In a way, Bruno is right about this part. Investment does need to expand to other sectors. It has done so, with investors excited about nearly anything Earth observation (optical, SAR, RF, etc.), LEO broadband, and more. However, most of those tend to be prime customers for smallsat launchers.
Maybe a smallsat manufacturer decides to hop into large satellite manufacturing that will be fast, flexible, and inexpensive. It would be interesting to see how the large legacy satellite manufacturers respond. If that happens in the next few years, it will create a much larger, robust, and healthier market ready to use all sorts of launch services.
Maybe that’s a sight worth investing in.