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In Space, 2018 Already Beats 2017

In Space, 2018 Already Beats 2017
 Arthur Sauzay
Counsel, Allen & Overy

If 2017 was an exciting year in Space, 2018 has so far proved to be even more interesting. The coming months will determine key drivers for the years ahead. Space affairs cover an increasingly wide array of topics, so this post aims at providing an overview of some of the key events and trends since the beginning of the year. Arthur Sauzay, lawyer at the Paris bar and author of the note Space: Will Europe Strike Back?, shares his analysis on the past few months’ news.

While the US shows no sign of slowing down in its willingness to be the uncontested leader in Space, China has been a surprising contender with strong evidence that it does not intend to stay behind. These national ambitions are happening just as several technological innovations promise even more impressive results in the years ahead. This raises the question of Europe’s strategy whilst recent news indicate it could finally start to strike back. However, uncertainties remain about the near future for Space – especially in case of an economic downturn.

The US continues to accelerate with the aim of maintaining its space dominance

So far, NASA’s newly appointed administrator Jim Bridenstine appears successful in implementing President Trump’s three so-called “Space Policy Directives” (SPD), in particular with respect to increasing the role of the private sector and returning humans to the Moon with the goal of establishing a permanent human activity on Earth’s neighbour.

Building on the success of previous public-private partnerships (PPP), which have been instrumental in the rise of companies such as SpaceX, NASA has recently announced its goal of outsourcing its cargo transportation needs to the Moon to the private sector. To this end, NASA is preparing a new PPP program called “Commercial Lunar Payload Services” (CLPS). Further, Jim Bridenstine has officially stated – a big change in the space industry – that these goals will only be achievable if NASA makes the most of the reusability concept, i.e. being able to use hardware (launchers, capsules, satellites) as much as possible in order to lower the costs.

Before that, the next few months should see the return of American astronauts using US-built launchers and hardware to reach the International Space Station, with the selection of astronauts for missions conducted by SpaceX and Boeing recently announced. Jeff Bezos, founder of Amazon and Blue Origin, also continues his steady rise. He has publicly confirmed in May 2018 that he will eventually spend most of his personal wealth, about US$150 billion, on space ventures. This announcement drew a lot of criticism, including from former presidential candidate Bernie Sanders.

More than the ongoing debate about a separate “Space Force” (see below), the most far-reaching US Government’s effort currently aims at modernizing US space regulations. Under the authority of US Vice-President Mike Pence - head of the newly-revived National Space Council, or NSC -, the Federal administration has been instructed by SPD 2 and 3 to overhaul Space regulations:

  • First, by fostering even more “commercial” activity (which covers activities for launch, satellite operations, in-space services and telecommunications) through simplified licensing processes, under the sole authority of the Department of Commerce (“one-stop shop” principle)
  • Second, by designing more efficient regulations and tools for “space traffic management” through new rules for debris avoidance, satellites tracking, etc.

In line with President Trump’s strong unilateralism, the US is unwilling to establish new international treaties. This doctrine was clearly set out by Scott Pace NSC’s Executive Secretary, in December 2017. It remains to be seen if the basic principles established by the 1967 Outer Space Treaty will resist this trend. Those who believe, in particular in Europe, that Space should be treated as a “common good” (res communis) will thus need to be strong enough in Space for their vision to succeed.

Finally, the much-debated “Space Force” has attracted a lot of attention. It aims at creating a separate armed force within the United States Armed Forces in order to counter alleged increased weaponization of Space by countries like China and Russia. President Trump’s decision has so far been met with strong opposition and will need to be approved by the US Congress. In any case, it signals a turning point in Space affairs and is sure to be closely watched by other Space-faring nations. Interestingly enough, China and Russia seem to be trying to avoid a race in Space weaponization. China has recently restated its willingness (dating back to 2008) to “conclude a multilateral treaty on space arms control based on the draft proposed by China and Russia as early as possible, so as to effectively uphold peace and security in outer space”. It is indeed important to keep in mind that currently, in Earth orbit only “weapons of mass destruction” are expressly forbidden by international law. However, it appears unlikely that the US will engage in such negotiations anytime soon.

China is accelerating too, and in surprising ways

Perhaps the most surprising trend is the pace at which China is becoming a Space super power. This year, China is so far leading the world in the number of orbital launches, with already more than 20 launches (a national record).

With a budget likely to have surpassed US$10 billion (China does not release official figures), China is already ahead of Europe and Russia in public spending on Space, but still far from the US (around US$50-60 billion annually). The country is however already catching up by building capabilities in all segments of the Space domain, where it aims at full national autonomy. China is deploying two Earth remote sensing constellations (called “Gaofen” for the civilian one and “Yaogan” for the military) and has acquired impressive capabilities in that field (see this video of a Chinese satellite capturing the launch of a Chinese private suborbital rocket this week). China is also deploying a GPS constellation (called “Beidou”) and is making steady progress for setting its own national “Chinese Space Station” (CSA) – a great tool for soft power since China is inviting all nations on-board whilst it was denied participation in the International Space Station by the US. The country is also leading the world in the promising field of ultra-secure space-based quantum telecommunications. In the coming months, China will launch a high-profile robotic mission (called “Chang’e-4”) to land on and explore the “dark side” of the moon.

But perhaps the most surprising aspects of China’s rapid rise are the role Space is playing in the Belt and Road Initiative (BRI) as well as the emergence of numerous Space startups. Space is indeed now a key instrument in the BRI with the Chinese Government proposing “packages” to a host of emerging countries comprising a telecommunication satellite, a rocket launch and technical operations. Using loans backed by the public “Export Import Bank”, it has already convinced countries ranging from Pakistan to Venezuela and Nigeria – thus steadily taking market shares away from European and American competitors.

Seen from afar, it would seem strange for an officially communist country to let private start-ups thrive in such a strategic sector – but China is seeing a boom in small companies striving to develop new launchers and small satellites. 2018 has already seen many announcements of venture capital investments in companies such as Onespace, Linkspace, iSpace, Landspace, etc. for amounts reaching a total of several hundred millions of dollars in the last 12 months. Some of these companies have already started testing small launchers on suborbital flights. This was made possible by the Chinese Government’s decision in 2014 to allow private companies to launch payloads into space. It can also be interpreted as a way for Chinese authorities to inject more dynamism and risk-taking attitudes in its historic Space State-owned enterprises (SOEs), knowing that such move will benefit its national industry and interests overall.

Key technological innovations continue to modify the landscape

The New Space movement - an increasing number of private entities entering the sector, supported by strong public but also private investment - continues to bear fruit, mainly in the US. Bryce, a US consulting firm, reported earlier this year that in 2017 almost 75% of the US$2 billion in seed and venture capital funds was invested in US-based start-ups.

Such investments are driven, in particular, by the economic and psychological impact of the revolution in the launcher industry, the most visible being reusability of key launcher components – a feat that received great publicity with the launch of SpaceX’s Falcon Heavy rocket and simultaneous recovery of two rocket boosters in February of this year (YouTube’s second biggest live stream ever). As the cost of access to space continues to decline, many Space ventures look increasingly feasible.

In that regard, two joint developments are unfolding quickly: the rise of the nanosatellites era combined with the development of new, smaller launchers able to place them in orbit. Paris-based Euroconsult consulting firm estimates - which seems optimistic - that 7,000 small satellites will be launched over the coming decade (with 73% of the global demand coming from North America and Asia).  A recent study by Bryce shows that for now the US has taken a strong lead with start-ups such as Planet and Spire playing a major role.

Another key event to watch in the next coming months will be the rivalry between several so-called “Internet constellations”. These titanic endeavours aim at providing high-speed internet everywhere on earth for any person or asset equipped with an antenna (similar to what global positioning systems do with positioning, such as Europe’s Galileo and the US’ GPS). They will use hundreds (if not thousands) of small orbiting satellites in Low Earth Orbit (LEO). The two biggest projects (SpaceX’ Starlink and Oneweb, a joint-venture supported by Japan’s Softbank, and Europe’s Airbus) are based in the US but there are several more specialised projects for B2B purposes, or for the Internet of Things. Although the potential profitability of such projects is at best unclear, the implications should not be underestimated since they could eventually result in connecting the entire planet to the Internet, from deserts to rural areas in emerging countries.

For all these technologies to work, new regulations and standards will need to be invented. Being the country setting these standards will be a key geopolitical advantage. It is no surprise then that the US is already seeing a heated debate regarding for instance a potential obligation for the thousands of future nanosatellites to have their own propulsion systems, the goal being to simplify the orbit management and prevent increased risks of collisions and space debris. Electric propulsion for small satellites is currently seeing fierce competition between many start-ups in China, the US and Europe.

And Europe?

This topic has been discussed in detail in Institut Montaigne’s policy paper published in December of last year: Space: Will Europe strike back?. While there is little doubt that the US and China have taken an early lead in the New Space age, 2018 is also showing signs of Europe preparing to meet this challenge.

In June 2018, the EU Commission has proposed a significant evolution of the EU’s space policy as part of its so-called “2021-2027 multiannual framework agreement” (MFF). The EU currently oversees two major space assets: Galileo (the European GPS), which is still in the process of reaching full operational deployment but is already gaining traction (by being implemented in the most recent smartphones and with 200 million users worldwide); and Copernicus, an Earth Observation program aimed at providing free and easy-to-use access to large amounts of Space-based data for governments and companies. The Commission’s proposal is twofold: increasing the total budget (mainly for Galileo and Copernicus) over the next MFF and  simplifying the governance by merging existing regulations, under the supervision of a new “EU Agency for the Space Programme”.

It remains to be seen what Member States and the EU Parliament will think of the Commission’s proposal, but this already raises the key question of the overall European governance in Space, especially the role of ESA, an intergovernmental organisation which has been the backbone of Europe in Space. As France and Germany account for almost half of ESA’s budget, it is no surprise that these countries announced in June, as part of a joint declaration regarding Europe, that a working group had been tasked to “make proposals allowing the EU to find appropriate answers to new challenges in terms of space policy and economy (notably, “New Space”)”. Both the German and French Governments are currently discussing new initiatives, with the French defence minister recently announcing on-going efforts to design plans for Space defence, in light of suspected acts of espionage by a Russian satellite. And the impact of Brexit will also need to be addressed, once the on-going (and arguably inflated) battle between the British Government and the EU Commission regarding the UK’s participation Galileo finds a sensible, and necessary, agreement.

In the meantime, private European companies are taking initiatives to follow their international competitors. Indeed, Europe hosts a significant number of start-ups  such as Spain’s PLD Space in the small launcher business, ISIS in the Netherlands for small satellites, Germany’s ALCAN for satellite antennas and France’s Thrustme for satellite electric propulsion). Large established companies are also moving ahead, with Airbus and Thales participating in internet constellation projects. On the launcher side, Arianegroup (an Airbus-Safran joint-venture) continues to develop Ariane 6 and has recently announced progress on a key new-generation rocket engine, Prometheus, which could eventually allow Europe to master rocket reusability;  and Italy’s Avio has announced several contracts to launch small satellites using its medium-sized Vega launcher.

It would be a mistake however to think that European companies will retain a strong position without a significant overhaul of Europe’s Space policy, governance, ambitions… and budgets.

Uncertainties regarding the future of the New Space Race

There is little doubt that the US-China strategic competition in Space is here to stay. While Russia lacks the underlying economy to remain a leader, Europe is the big open question with it comes to its future Space ambitions. India and Japan, just to name a few, will also need to confirm their recent outspoken ambitions to play a major role.

Rather, the real uncertainties are on the economic side. The vast amounts of private investment in Space ventures rest on the promises of future profits. Could all this resist a potential economic downturn, with lower public space budgets and private investments? Some observers point to a potential bubble and Morgan Stanley recently acknowledged that attracting more private investment interest in Space is hard – even though it predicts that the Space economy will grow at least threefold in the next three decades (others say it could increase tenfold).

If recent economic history is a good guide, then it is prudent to say that the fundamentals of the growing interest for Space are solid. Indeed, even the “Dotcom” bubble and eventual crash in the early 2000s did not prevent companies like Google, Amazon and Apple from becoming the influential giants we see today. It is in fact no coincidence that Tech companies in the US (but also in China) are playing a key role in the New Space phenomenon: the integration of Space in the Big Data and Artificial Intelligence revolution is and will remain a key driver in the future. For Europe, which has failed to grow such Tech giants at home, this is an additional challenge, but Space is also a major opportunity to get back in the race. Much depends on the decisions taken in the next two years, after which catching up will be harder still.

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