Lost in Space : Aerospace: The future of the U.S. commercial rocket launch industry is so uncertain that some believe we may lose yet another high-tech industry to foreign competitors.


One day last summer, in a government office in Brazil’s capital city, European business people taught McDonnell Douglas Space Systems Co. a painful lesson in the competitive realities of the new commercial rocket industry.

The Huntington Beach aerospace giant, which builds the Delta II rocket, was in a tough fight with Arianespace Inc. of France for a $100-million-plus contract to launch two Brazilian telecommunications satellites. Owned in part by the French government, Arianespace already launches about half of the world’s commercial satellites.

The Brazilians wanted more than just a good price; they also wanted help in developing their own rocket industry. Reckoning that the competing bids would be close, McDonnell Douglas offered what it considered a rock-bottom price, with a kicker: It would finance the graduate education of two Brazilian rocket engineers and share some of its work on the planned U.S. space station.

But when Arianespace unveiled its offer, McDonnell Douglas was stunned. With the apparent assent of the French government, the European company offered to give away its Viking rocket engine technology to Brazil, something the Americans viewed as a possible violation of international agreements on arms trafficking and the spread of missile technology. In addition, the French shaved the American bid by about $5 million.


Last month, Brazil selected Arianespace for final negotiations.

The apparent loss of the Brazilian launch contract underscores a growing concern within government and industry circles. Nearly a decade after the Ronald Reagan Administration took the first steps to spur development of commercial launch businesses, the nascent industry is struggling to survive. In the view of many experts, decisive government action is needed to keep it from crashing.

The problems that threaten commercial rocket builders are so many and the outlook so uncertain that some government officials talk openly of losing yet another high-tech industry to foreign competitors.

“We’re going to be taken out of the market if we don’t do something about it,” said Secretary of Transportation Samuel K. Skinner, whose department is responsible for the licensing and promotion of the U.S. commercial launch industry.

C. J. Waylan, whose Virginia-based GTE Spacenet Corp. owns and operates six telecommunications satellites launched into orbit by Arianespace, was even more blunt:

“We have lost our way in space,” Waylan said.

To ensure its position in the world launch market, experts suggest that the United States consider major policy changes, including improved government procurement practices, significantly increased public financing of rocket research and the possible creation of a multicompany consortium to promote and direct American commercial launches.

While America’s national space policy bars direct federal subsidies of U.S. rocket makers, foreign competitors often benefit from direct government assistance. Industry watchers say the most serious threat comes from the Soviet Union and China, which are signing up commercial customers for launches at cut-rate prices.


In the long run, experts contend, the most promising way to improve U.S. competitiveness in the field will be to develop new, more efficient rockets. But research costs are staggering--apparently too staggering for any one company to bear.

Meanwhile, long-term market prospects are far from assured. The backlog of worldwide satellite launches created by the 1986 explosion of the U.S. space shuttle Challenger will abate by 1992. After that, “the market we see is 15 to 20 (satellite launches) a year, worldwide,” said Alan M. Lovelace, who heads General Dynamics Space Systems Division.

“It’s so thin you can see through it.”

The stakes in the fight for dominance in the commercial space market are high, both for the nation and Southern California.


Two of the three major U.S. rocket builders are headquartered in Southern California--McDonnell Douglas Space Systems, which employs 8,200 people in its Orange County plant, and General Dynamics Space Systems Division, which builds Atlas rockets in San Diego. Martin Marietta Corp. builds the Titan family of rockets outside Denver.

Last August, McDonnell Douglas launched the first U.S. commercial rocket to carry a private payload into orbit.

In addition, Los Angeles County is home to Hughes Aircraft Co., a subsidiary of General Motors that builds about half of the world’s non-military satellites.

Policy Issues


Many experts believe that the federal government is largely to blame for problems facing the industry in its commercial ventures.

The most commonly cited sins are red tape in government procurement and uncertain, conflicting policies toward commercial space at the Department of Transportation, the National Aeronautics and Space Administration and the Department of Defense, particularly within the Air Force.

But the overriding issue the federal government must face, many experts say, is that the Reagan-era policy of barring federal subsidies to the industry has left it unable to compete with foreign launch concerns.

“The idea, which I think was flawed, was that you could turn this over to the private sector and they could survive without any further support,” said Steven D. Dorfman, vice president of Hughes Aircraft. “That’s true if the other nations are playing on the same type of field. But they aren’t.”


Already, industry watchers say, some of the major rocket builders appear to be losing their enthusiasm for the commercial market.

A Washington lobbyist for one of the Big Three companies told a congressional staff member recently that the company was concentrating on capturing a larger share of U.S. government contracts because of the difficulties of competing against foreign commercial launchers.

Another company, Martin Marietta, has become so disillusioned that it virtually has abandoned commercial customers, one consultant recently charged. While a company spokeswoman disputed that view, she acknowledged that Martin Marietta from now on will focus its attention on launching non-military government payloads for clients such as NASA.

General Dynamics and McDonnell Douglas, meanwhile, insist that they are in the commercial launch business to stay, although they concede that they will remain largely dependent on government launch contracts.


“Could the Delta line be kept open solely on commercial launches?” asked Thomas E. Williams, McDonnell Douglas Space Systems’ senior manager for communications. “Realistically, at this time, no it couldn’t.”

If the Big Three rocket makers are struggling, a host of small, new rocket-launching concerns literally are fighting for their lives.

Space Sciences Inc. of Houston, American Rocket Co. of Camarillo, and Orbital Sciences Inc. of Fairfax, Va., are three of the new companies seeking a share of the market for suborbital and light-payload launches, usually for scientific experiments. Space Sciences is headed by former astronaut Deke Slayton.

Space Shuttle Legacy


The newcomers are among the most vocal critics of the conflicts that sometimes arise within the government, particularly between the Air Force, which operates the major government launch facilities at Cape Canaveral in Florida and Vandenberg Air Force Base in California, and the Department of Transportation, which licenses their use by commercial launchers.

Most industry watchers say the crisis facing the commercial space launch industry can be traced to decisions the federal government made more than a decade ago.

When NASA began developing plans for the space shuttle in the early 1970s, the agency believed that its new, reusable “space truck” would render rockets--expendable launch vehicles, in NASA jargon--obsolete. The shuttle was to become the United States’ only means of launching large government and commercial satellites into space.

At the time, there was no commercial rocket industry. The U.S. government, usually NASA or the Department of Defense, bought rockets from McDonnell Douglas, Martin Marietta or General Dynamics, either for weapons systems or satellites. The contractor delivered the rocket, and the government took charge of the launch.


In the early 1980s, the Reagan Administration began to envision a role for privately launched rockets in the commercial development of space. In 1984, Congress passed the Commercial Space Launch Act, which set up a licensing system for commercial launches under the auspices of the Department of Transportation and outlined procedures for the use of government launch pads by private entrepreneurs.

But business lagged, largely because NASA offered cut-rate prices on the space shuttle to commercial customers who wanted to put satellites into orbit.

The business climate changed dramatically after January, 1986, when the Space Shuttle Challenger blew up. The accident halted shuttle operations for more than two years and created a tremendous backlog of unlaunched satellites, both government and commercial.

In August, 1986, Reagan made a sharp turnabout and banned all but a few commercial satellites from the shuttle, citing the risk of shuttle operations and the backlog of military payloads. Two years later, he unveiled a national space policy that put a heavy emphasis on the commercial development of space, and Congress put more muscle in the space launch act.


Foreign Competition

But the moves may have come too late. While the United States was slowly moving to create a domestic commercial launch industry, the Europeans were blasting ahead.

Arianespace, which bills itself as the “world’s first commercial space transportation company,” came into being in 1980, as the United States was making plans to phase out its fleet of Delta, Atlas and Titan rockets in favor of the space shuttle.

A third of Arianespace is owned by the French space agency. Arianespace launches its rockets from a facility in French Guiana built by the French government in the 1960s, and later expanded by the European Space Agency.


ESA, which is supported by 14 member governments, began developing the Ariane family of rockets as an alternative to the shuttle. It has turned over to Arianespace the plans, equipment and tooling needed to manufacture the launchers. ESA now is working on the Ariane 5, at a cost of about $5 billion, with the specific goal of creating a more efficient rocket that will reduce launch costs.

Meanwhile, the Soviet Union, long America’s arch rival in military space ventures, has been aggressively marketing satellite launches on its Proton rocket at cut-rate prices.

According to the Congressional Research Service, the Soviets are pricing a Proton launch for a medium-sized satellite at about $30 million. That is substantially less than the cost of a U.S. commercial launch, which is generally estimated at from $50 million to $70 million for a medium-sized payload, such as a communications satellite, excluding insurance.

So far, the Soviets have launched only one commercial satellite, for India, because the U.S. State Department in 1987 ruled that satellites containing high-tech components made in the United States cannot be launched on Soviet rockets.


But last November, Energetics Inc. of Englewood, Colo., signed a contract with the Soviets for up to eight launches of very small, inexpensive satellites that will track trucks or buses as they travel across the Earth.

On April 7, China inaugurated its commercial space program by launching into orbit on a Long March III rocket a telecommunications satellite manufactured in the United States by Hughes Aircraft. The launch price has been estimated at from $30 million to $40 million.

The launch provoked a storm of protest by U.S. launch concerns, who argued that the subsidized price offered by the Chinese unfairly undercut the competition.

The Japanese are developing their own commercial rocket, the H-2, and the Australians are considering an entry into the commercial launch business by building their own spaceport at Cape York with the help of several American firms.


Corrective Efforts

Faced with the mounting competition, Congress and the Administration are struggling to forge new commercial space initiatives to keep U.S. rocket companies in the running for international contracts.

Closely watched is work under way at the National Space Council, the agency that President Bush resurrected last year to sort out the nation’s goals in space. The council is chaired by the vice president.

In January, the Space Council began a review of the nation’s policy toward the commercial exploitation of space. Among the issues the council is expected to examine are the extent to which foreign governments subsidize foreign launch concerns, U.S. government procurement practices and the role of private firms in future U.S. space exploration, including the planned mission to Mars.


An attempt to reduce launch costs is at the heart of legislation introduced last year by Rep. Ron Packard (R-Carlsbad). Packard believes that NASA and the Department of Defense could help American rocket makers reduce the cost of their commercial launches if the government agencies would more closely tailor their procurement policies to the commercial model.

Another step the government could take to lower short-term launch costs is buying rockets in bulk, experts suggested. Bulk buying is a favorite idea of James Rose, the NASA official responsible for a wide-ranging program to develop the space industries that one day will expand the market for commercial launch services.

In the long run, however, many in the industry believe that the government needs to fundamentally revise its relationship with the commercial launch industry and rethink its prohibitions against federal subsidies and cooperative action among domestic rocket makers.

At the Department of Transportation, Skinner has formed a task force to study what role, if any, the federal government should take in the development of new launch complexes to exclusively serve commercial rockets.


Because there are no private U.S. launch facilities, commercial rocket builders must lease time on crowded government launch pads. Delays in government launches have a domino effect and can wreak havoc with commercial launch schedules.

One of the more radical proposals comes from Waylan, the president of GTE Spacenet, who suggests that the government allow domestic rocket builders to create a new company that would buy rockets from the manufacturers and then sell launch services to commercial customers throughout the world. The new company would be owned largely by the Big Three, but also by other investors.

Others have suggested a more traditional model analogous to the old National Advisory Committee on Aeronautics, the forerunner to NASA. Such an organization would sponsor basic research and development that ultimately could be used by the commercial industry, just as NACA did for the commercial aviation business.

NASA and the Air Force are spending some funds on development of a new, large rocket called the ALS, or Advanced Launch System. But critics say the level of commitment is low. For the 1991 fiscal year, the Bush Administration is asking only $114 million for work on ALS.


If the government does not do more to promote development of new, less expensive rockets and launch facilities, industry experts fear, the United States will be left in the dust in the race for commercial space.

For that reason, development of a new relationship between government and the rocket industry seems inevitable, said Dorfman, the Hughes Aircraft vice president.

“I’m not a big supporter of government handouts,” Dorfman said, but “I think that when people become aware of the reality, as opposed to the ideology, they’re going to see that it is important to the nation.”