No Rockets, No Fly: ULA’s Weird Predicament

NASA announced last week that it awarded the contract to launch NOAA’s Geostationary Operational Environmental Satellite-U (GOES-U) weather satellite to SpaceX for a grand total of $152.5 million (about $60 million more than what the company hints it costs for commercial companies to launch with the Falcon Heavy). SpaceX will launch GOES-U using a Falcon Heavy two and a half years from now, in April 2024.

GOES-U is not the biggest satellite, with a mass of ~5,200 kg, making it puzzling that Falcon Heavy is being used. On the other hand, it could be NASA was looking for direct injection into geostationary orbit instead of relying on the Falcon 9’s geosynchronous transfer orbit profile.

After a bit of math, we find that NASA is paying SpaceX ~$30,000 per kilogram (weirdly close to the per kg costs for smallsat launchers). All in all, while the contract certainly isn’t a subsidy, the much higher launch costs that NASA is willing to pay versus the significantly lower prices commercial operators pay certainly seem as if NASA is doing more than paying for a launch service. Maybe we should call it a “Not Quite a Duck (NQD)” contract? One must also wonder how much longer Congress will tolerate NASA’s willingness to pay more than the average commercial company for launches. It is clear (based on its record) that whether SpaceX gets $90 million or $152 million, the company’s probability of successfully launching satellites is quite high.

However, the fact that SpaceX received the contract award isn’t so surprising. What is, is the reason why SpaceX got it--ULA pulled out of the running. And the reason for ULA pulling out of the bid is even curiouser--the company does not have any Atlas 5 rockets left to launch GOES-U. It’s true! The company said so:

“All of the remaining 29 rockets have been sold to customers for future launches so we had to withdraw our bid for NASA’s GOES-U launch service…”

Shades of the health crisis and toilet paper

It’s a little strange for a business to walk away from any customer that’s willing to pay more than the market price for its service. After all, when ULA entered its bid earlier in the year, it surely knew how many Atlas 5’s it had available for customers. Not having enough rockets to serve customers, especially one of its two reliable, large, and lavish spenders, seems to be an undesirable position. The customers are looking at ULA’s shelves and walking away empty-handed, while SpaceX has ready inventory, primarily thanks to reusability.

One reason for ULA’s dearth of remaining Atlas 5’s is the block-buy contract with Amazon’s Project Kuiper satellite team. The block-buy announcement came a few weeks after the NASA request for launch services and it would make sense for ULA to have more than one iron in the fire.

In this case, the certainty of 9 launches for Kuiper satellites would definitely be preferable to the uncertainty of winning the GOES-U contract. It could be that Kuiper will launch earlier, which will result in more money in ULA’s pockets earlier than with GOES-U. Of course, it depends on how much ULA is charging Amazon for each launch, but ULA’s history shows that it prefers its creaming pricing strategy, getting those juicy premiums for its launch services. It’s unlikely that Amazon was immune to that strategy. But, of course, that only works if a company has a product or service available. ULA is currently indicating it has neither available for NASA, inferring it has neither available for the Department of Defense.

The Monopolized Launch Market?

Maybe not as strange is the fact that ULA didn’t appear to offer an alternative to NASA--the Vulcan. The unwillingness to offer the Vulcan as an alternative indicates an uncertainty surrounding just when it will begin launching. That uncertainty is likely tied to Blue Origin’s tortoise-paced engine development efforts.

An added complication is that NASA appears very aware of just how behind Blue Origin is in its engine development based on NASA’s comments for the Human Landing System kerfuffle. It could well be that NASA would just laugh at ULA’s Vulcan alternative and say “No thank you!” to the possibility of risking the launch schedule. So, ULA is in a tight spot, and, unfortunately for it, SpaceX is ready to pick up the slack.

This situation also raises the question about launch market maturity--at least for large rockets and large satellites. It is good that another U.S. launch provider could launch GOES-U, but the underlying reasons for going with SpaceX are concerning. ULA is retiring its Delta IV and Delta IV Heavy rockets in the next few years. It will continue launching over those years, but its inventory of the remaining Atlas 5 rockets is spoken for. The last Delta IV Heavy launch is anticipated to be in 2023.

The fact that ULA appears to be unable to compete for any contracts, government or military, gives SpaceX a de facto monopoly on U.S. launches of large masses to GEO. This appears to be an inconvenient truth at odds with the “thriving U.S. space launch” narrative many cheerleaders are expounding. Only one U.S. space launch company appears to be thriving, and even then, maybe not as much as most would like to think.

With ULA’s latest withdrawal, SpaceX won’t be competing against any U.S. launch service competitor for big government or military satellites anytime soon. It’s this specific situation the Department of Defense was trying to avoid (again) with its National Security Space Launch program. And, again, the DoD’s carefully thought out program is unsuccessful. But it will undoubtedly attempt to pick winners in another future misguided program because it can’t help itself.

How long SpaceX’s monopoly lasts is entirely dependent on when Blue Origin delivers engines to ULA. If Blue Origin can field its launch system, that might even increase the odds against this type of monopoly occurring again. Of course, it could be that ULA eventually chooses a different path, tired of waiting for Blue Origin. But, winged swine may glide through the air before any of that happens.

Sirius Thoughts

I’ve always wondered about Sirius/XM’s survival when services such as music and podcast streaming exist. It’s fantastic for traveling across Texas and South Dakota’s wireless wastelands where cellular coverage seems nonexistent. But even so, smartphones have storage capability, allowing people to listen to “Chaise Longue” over and over and over again, no matter where they are--without a subscription (that alone would make TX or SD somewhat bearable).

Worse, a special receiver for picking up Sirius/XM’s signals is required by users, who must also pay a monthly subscription. That subscription typically costs more than the tiers for Spotify or Apple Music. Sometimes, a special comes along where a person might pay less than either for a Sirius/XM subscription, but this sort of “discount” stinks of “cable operator” business shenanigans.

Sirius/XM is a nice service--it even offers its app for smartphones, which has other channels than those available on a regular SXM head unit. But Apple Carplay and Google’s Android Auto can be available on head units or inexpensive BlueTooth repeaters. The apps that use those platforms, such as Apple Music and Spotify, make going with SXM’s regular prices seem silly, and they offer so much more. So when the company’s CEO, Jennifer Witz, makes this kind of comment about those two competitors, it doesn’t seem well-informed:

Asked about concerns that the likes of Apple or Spotify could eventually enter the car segment aggressively, Witz said “we have been in the business” for 20 years, adding that the firm has faced various forms of competition, but has succeeded thanks to the ability to offer attractive content easily and be a good partner to car companies.

I may be wrong, but I think both Apple and Spotify are already aggressively in the car segment, and they’ve primarily been focusing on each other, not SXM. Both have significantly more subscribers than SXM, and they only require a device with an internet connection to work. Even a burner smartphone would work with their services (although they’d work just fine with SXM’s app, too). And, to be clear, smartphone users are paying monthly subscriptions for cell coverage and the service, but the smartphone is a Swiss Army Knife compared to SXM’s single-purpose devices.

But SXM seems to be doing fine. It’s managed to grow subscriber numbers, which indicates some interest in the service. It could be, though, that those growing numbers are mainly related to the “discount” pricing, which means that after that year’s discount period is up, there’ll be a subscriber drop. But that is just my guess, not a fact. However, I’m still puzzled that SXM is as relevant, considering the competition, availability, and lower subscription pricing tiers.