The space launch services business began in the 1950s with national programs. Later in the 20th century commercial satellites became major customers, and international competition also became commercial. In the early 2010s, a new phase of space launch market competition emerged.
Video Space launch market competition
History
In the early decades of the Space Age--1950s-2000s--the government space agencies of the Soviet Union and United States pioneered space technology augmented by collaboration with affiliated design bureaus in the USSR and contracts with commercial companies in the US. All rocket designs were built explicitly for government purposes. The European Space Agency was formed in 1975, largely following the same model of space technology development, and other national space agencies--such as China's CNSA and India's ISRO-- also financed the indigenous development of their own national designs.
Communications satellites were the principal non-government market. Although launch competition in the early years after 2010 occurred only in and amongst global commercial launch providers, the US market for military launches began to experience multi-provider competition in 2015, as the US government moved away from their previous monopoly arrangement with United Launch Alliance for military launches. By mid-2017, the results of this multi-year competitive pressure on launch prices was being observed in the actual numbers of launches achieved. With frequent recovery of first-stage boosters by SpaceX, "expendable missions are now a rare occurrence" for them.
1970s and 1980s: Commercial satellites emerge
Non-military commercial satellites began to be launched in volume in the 1970s and 1980s, but launch services were supplied exclusively with launch vehicles that had been originally developed for the various Cold War military programs, with attendant cost structures.
SpaceNews journalist Peter B. De Selding has asserted that French government leadership, and the Arianespace consortium "all but invented the commercial launch business in the 1980s" principally "by ignoring U.S. government assurances that the reusable U.S. space shuttle would make expendable launch vehicles like Ariane obsolete."
Little market competition emerged inside any national market prior to approximately the late 2000s. Some global commercial competition arose between the national providers of various nation states for international commercial satellite launches. Within the US, as late as 2006, the high cost structures built in to government contractor's--Boeing's Delta IV and Lockheed Martin's Atlas V--launch vehicles left little commercial opportunity for US launch service providers but considerable opportunity for low-cost Russian boosters based on leftover Cold War military missile technology.
DARPA's Simon P. Worden and USAF's Jess Sponable analyzed the situation in 2006 and offered that "One bright point is the emerging private sector, which [was then] pursuing suborbital or small lift capabilities." They concluded "Although such vehicles support very limited US Department of Defense or National Aeronautics and Space Administration spaceflight needs, they do offer potential technology demonstration stepping stones to more capable systems needed in the future."; demonstrating capabilities that would grow in the next five years while supporting published list prices substantially below the rates on offer by the national providers.
2010s: Competition and pricing pressure
After approximately 2010, new private options for obtaining spaceflight services emerged, bringing substantial price pressure into the existing market.
In early December 2013, SpaceX flew its first launch to a geosynchronous orbit providing additional credibility to its low prices which had been published since at least 2009. The low launch prices offered by SpaceX, especially for communication satellites flying to geostationary (GTO) orbit, resulted in market pressure on its competitors to lower their own prices.
In years prior to 2013, the communications satellite launch market had been dominated by Europe's Arianespace, which flies the Ariane 5, and International Launch Services (ILS), which markets Russia's Proton vehicle. In November 2013 Arianespace announced new pricing flexibility for the "lighter satellites" it carries to orbits aboard its Ariane 5 in response to SpaceX's growing presence in the worldwide launch market, and followed in early 2014 with a request to European governments for additional subsidies to face the competition from SpaceX.
By late 2013, with a published price of US$56.5 million per launch to low Earth orbit, "Falcon 9 rockets [were] already the cheapest in the industry. Reusable Falcon 9s could drop the price by an order of magnitude, sparking more space-based enterprise, which in turn would drop the cost of access to space still further through economies of scale." Falcon 9 GTO missions 2014 pricing was approximately US$15 million less than a launch on a Chinese Long March 3B. Despite SpaceX prices being somewhat lower than Long March prices, the Chinese Government and the Great Wall Industry company--which markets the Long March for commsat missions--made a policy decision to maintain commsat launch prices at approximately US$70 million.
Continuing to face "stiff competition on price," seven European satellite operator companies--including the four largest in the world by annual revenue--requested in April 2014 that the ESA "find immediate ways to reduce Ariane 5 rocket launch costs and, in the longer term, make the next-generation Ariane 6 vehicle more attractive for smaller telecommunications satellites. ... [C]onsiderable efforts to restore competitiveness in price of the existing European launcher need to be undertaken if Europe is [to] maintain its market situation. In the short term, a more favorable pricing policy for the small satellites currently being targeted by SpaceX seems indispensable to keeping the Ariane launch manifest strong and well-populated." In competitive bids during 2013 and early 2014, SpaceX was winning many launch customers that formerly "would have been all-but-certain clients of Europe's Arianespace launch consortium, with prices that are $60 million or less."
In June 2014, Arianespace CEO Stephane Israel announced that European efforts to remain competitive in response to SpaceX' recent success have begun in earnest, including the creation of a new joint venture company from Arianespace's two largest shareholders: the launch-vehicle producer Airbus and engine-producer Safran. No specific details to become more competitive were released at the time. In 2015, the European multinational space agency--the European Space Agency (ESA)--is endeavoring to reorganize in order to reduce bureaucracy and decrease inefficiencies in launcher and satellite spending which have been historically tied to the amount of tax funds that each country has provided to the ESA.
In August 2014, Eutelsat, the third-largest fixed satellite services operator worldwide by revenue, indicated that it plans to spend approximately EUR100 million less each year in the next three years, due to lower prices for launch services and by transitioning their commsats to electric propulsion. They indicated that they are using the lower prices they can get from SpaceX against Arianespace in negotiation for launch contracts. By November 2014, SpaceX had "already begun to take market share" from Arianespace. Eutelsat CEO Michel de Rosen said, in reference to ESA's program to develop the Ariane 6, "Each year that passes will see SpaceX advance, gain market share and further reduce its costs through economies of scale." European government research ministers approved the development of the new European rocket--Ariane 6--in December 2014, projecting the rocket would be "cheaper to construct and to operate" and that "more modern methods of production and a streamlined assembly to try to reduce unit costs" plus "the rocket's modular design can be tailored to a wide range of satellite and mission types [so it] should gain further economies from frequent use." In early 2016, Arianespace was projecting a launch price of EUR90-100 million, about one-half of the 2015 Ariane 5 per launch price.
Facing direct market competition from SpaceX, the large US launch provider United Launch Alliance (ULA) announced strategic changes in 2014 to restructure its launch business--reducing two launch vehicles to one--while implementing an iterative and incremental development program to build a partially-reusable and much lower-cost launch system over the next decade. In October 2014, ULA announced a major restructuring of processes and workforce in order to decrease launch costs by half. One of the reasons given for the restructuring and new cost reduction goals was competition from SpaceX. ULA has had less "success landing contracts to launch private, commercial communications and earth observation satellites" than it has had with launch US military payloads, but CEO Tory Bruno believes the new lower-cost launcher can be competitive and succeed in the commercial satellite sector. The US GAO has calculated that the average cost of each ULA rocket launch for the US government has risen to approximately US$420 million. In May 2015, ULA stated that it would go out of business unless it won commercial and civil satellite launch orders to offset an expected slump in U.S. military and spy launches.
As of 2015, SpaceX had remained "the low-cost supplier in the industry." However, in the market for launch of US military payloads, ULA faced no competition for the launches for nearly a decade, since the formation of the ULA joint venture from Lockheed Martin and Boeing in 2006. But SpaceX is also upsetting the traditional military space launch arrangement in the US, which has been called a monopoly by space analyst Marco Caceres and criticized by some in the US Congress. As of May 2015, the SpaceX Falcon 9 v1.1 was certified by the USAF to compete to launch many of the expensive satellites which are considered essential to US national security.
University of Southampton researcher Clemens Rumpf argues that the global launch industry was developed in an "old world where space funding was provided by governments, resulting in a stable foundation for [global] space activities. The money for the space industry [had been] secure and did not encourage risk-taking in the development of new space technologies. ... the space landscape [had not changed much since the mid-1980s]." As a result, the emergence of SpaceX was a surprise to other launch providers "because the need to evolve launcher technology by a giant leap was not apparent to them. SpaceX shows that technology has advanced sufficiently in the last 30 years to enable new, game changing approaches to space access." The Washington Post has said that the changes occasioned from multiple competing service providers has resulted in a revolution in innovation.
By mid-2015, Arianespace was speaking publicly about job reductions as part of an attempt to remain competitive in the "European industry [which is being] restructured, consolidated, rationalised and streamlined" to respond to SpaceX price competition. Still, "Arianespace remained confident it could maintain its 50 per cent share of the space launch market despite SpaceX's slashing prices by building reliable rockets that are smaller and cheaper."
Following the first successful landing and recovery of a SpaceX Falcon 9 first stage in December 2015, equity analysts at investment bank Jefferies estimated that launch costs to satellite operators using Falcon 9 launch vehicles may decline by about 40 percent of SpaceX' typical US$61 million per launch, although SpaceX has only forecast an approximately 30 percent launch price reduction from the use of a reused first stage.
In March 2017, SpaceX reflew an orbital booster stage that had been previously launched, landed and recovered, stating that the cost to the company of doing so "was substantially less than half the cost" of a new first stage. COO Gwynne Shotwell said that the cost savings "came even though SpaceX did extensive work to examine and refurbish the stage. We did way more on this one than [is planned for future recovered stages]."
A 2017 industry-wide view by SpaceNews reported: By 5 July 2017, SpaceX had launched 10 payloads during a bit over 6 months--"outperform[ing] its cadence from earlier years"--and "is well on track to hit the target it set last year of 18 launches in a single year." By comparison, "France-based Arianespace, SpaceX's chief competitor for commercial telecommunications satellite launches, is launching 11 to 12 times a year using its fleet of three rockets -- the heavy-lift Ariane 5, medium-lift Soyuz and light-lift Vega. ... Russia has the ability to launch a dozen or more times with Proton doing both government and commercial missions, but has operated at a slower cadence the past few years due to launch failures and this year's discovery of an incorrect material used in some rocket engines. United Launch Alliance, SpaceX's chief competitor for defense missions, regularly conducts around a dozen or more launches per year, but the Boeing-Lockheed Martin joint venture has only performed four missions" through mid-year 2017.
Raising private capital
Private capital invested in the space launch industry prior to 2015 was modest. From 2000 through the end of 2015, a total of US$13.3 billion of investment finance has been invested in the space sector, with US$2.9 billion of that being venture capital financing. In 2015, venture capital firms invested US$1.8 billion in private spaceflight companies, more than they had in the previous 15 years combined.
For the space launch sector, this began to change with the January 2015 Google and Fidelity Investments investment of US$1 billion in SpaceX. While private satellite manufacturing companies had previously raised large capital rounds, that was the largest investment to date in a launch service provider.
SpaceX is currently developing both the Falcon Heavy and the ITS launch vehicle with private capital. No government financing is being provided for the development of either rocket.
After decades of reliance on government funding to develop the Atlas and Delta families of launch vehicles, the successor company--United Launch Alliance (ULA)--began, in October 2014, development of a rocket with private funds as one part of a solution for a problem of "skyrocketing launch costs" at ULA. However, by March 2016 it had become clear that the new Vulcan launch vehicle would be developed with funding via a public-private partnership with the US government. By early 2016, the US Air Force had committed US$201 million of funding for Vulcan development. ULA has not "put a firm price tag on [the total cost of Vulcan development but ULA CEO Tory Bruno has] said new rockets typically cost $2 billion, including $1 billion for the main engine," and ULA has asked the US government to provide a minimum of US$1.2 billion by 2020 to assist it in developing the new US launch vehicle. It is unclear how the change in development funding mechanisms might change ULA plans for pricing market-driven launch services. Vulcan is a large orbital launch vehicle with first flight planned no earlier than 2019. Since Vulcan development began in October 2014, the privately generated funding for Vulcan development has been approved only on a short term basis. The United Launch Alliance board of directors--composed entirely of executives from Boeing and Lockheed Martin--is approving development funding on a quarter-by-quarter basis.
Other launch service providers are developing new space launch systems with substantial government capital investment. For the new European Space Agency (ESA) launch vehicle--Ariane 6, aiming for flight in the 2020s--EUR400 million of development capital was requested to be "industry's share", ostensibly private capital, while EUR2.815 billion was slated to be provided by various European government sources at the time the early finance structure was made public in April 2015. In the event, France's Airbus Safran Launchers--the company building the Ariane 6--did agree to provide EUR400 million of development funding in June 2015, with expectation of formalizing the development contract in July 2015.
As of May 2015, the Japanese legislature was considering legislation to provide a legal framework for private company spaceflight initiatives in Japan. It was not clear whether the legislation would become law and, if so, whether significant private capital would subsequently enter the Japanese space launch industry as a result.In the event, the legislation appears to have not become law, and little change in the funding mechanism for Japanese space vehicles are anticipated.
Maps Space launch market competition
2019 and beyond
United Launch Alliance (ULA) entered into a partnership with Blue Origin in September 2014 in order to develop the BE-4 LOX/methane engine to replace the RD-180 on a new lower-cost first stage booster rocket. At the time, the engine was already in its third year of development by Blue Origin, and ULA indicated that they expect the new stage and engine to start flying no earlier than 2019 on a successor to the Atlas V. A month later, ULA announced a major restructuring of processes and workforce in order to decrease launch costs by half. One of the reasons given for the restructuring and new cost reduction goals was competition from SpaceX. ULA intends to have preliminary design ideas in place for a blending of the Atlas V and Delta IV technology by the end of 2014.
Arianespace has commenced development of the Ariane 6, as its new entrant into the commercial launch market, with operational flights beginning in 2020.
Blue Origin is also planning to begin flying its own orbital launch vehicle--the New Glenn--in 2020, a rocket that will also use the Blue BE-4 engine on the first stage, same as the ULA Vulcan. However, Blue does not currently plan to compete for the US military launch market, stating that the market is "a relatively small number of flights. It's very hard to do well and ULA is already great at it. I'm not sure where we would add any value." Bezos sees competition as a good thing, particularly as competition leads to his ultimate goal of getting "millions and millions of people living and working in space."
As of January 2015, the French space agency CNES is working with Germany and a few other governments to start a modest research effort with a hope to propose a LOX/methane reusable launch system, tentatively named Ariane Next, by mid-2015, with flight testing unlikely before approximately 2026. The design objective is to reduce both the cost and duration of reusable vehicle refurbishment, and is partially motivated by the pressure of lower-cost competitive options with newer technological capabilities not found in the Ariane 6.
SpaceX has publicly indicated that if they are successful with developing the reusable technology, launch prices in the US$5 to 7 million range for the reusable Falcon 9 are possible in the longer term.
Competition for the American heavy-lift market
As early as August 2014, media sources noted that the US launch market may have two competitive super-heavy launch vehicles available in the 2020s to launch payloads of 100 metric tons (220,000 lb) or more to low-Earth orbit. The US government is currently developing the Space Launch System (SLS), a heavy-lift launch vehicle for lifting very large payloads of 70 to 130 tonnes (150,000 to 290,000 lb) from Earth. On the commercial side, SpaceX is privately developing the BFR, which is being designed to lift a 150 tonnes (330,000 lb) payload to Earth orbit in reusable mode, or 250 tonnes (550,000 lb) in expendable mode. SpaceX has played down the competitive aspect with SLS. However, if SpaceX makes progress on its super-heavy launch vehicle in "the coming years, it is almost unavoidable that America's two HLVs will attract comparisons and a healthy debate, potentially at the political level."
Launch contract competitive results
Before 2014
Arianespace has dominated the commercial launch market for many years. "In 2004, for example, they held over 50% of the world market."
- 2010: 26 geostationary commercial satellites were ordered under long-term launch contracts.
- 2011: Only 17 geostationary commercial satellites went under contract during 2011 as an "historically large capital spending surge by the biggest satellite fleet operators" began to tail off, something that had been anticipated to follow the various satellite fleets being substantially upgraded.
- 2012: As of September 2012, the major launch providers globally were Arianespace (France), International Launch Services (United States) which markets the Russian Proton launch vehicle, and Sea Launch of Switzerland which markets the Russian-Ukrainian Zenit rocket. In late 2012, each of them had manifests that were "full or nearly so for both 2012 and 2013."
- 23 geostationary orbit communications satellites were placed under firm contract during 2013.
2014
A total of 20 launches were booked in 2014 for commercial launch service providers. 19 were for flights to geostationary orbit (GEO), one was for a low-Earth orbit (LEO) launch.
Arianespace and SpaceX each signed nine contracts for geostationary launches, while Mitsubishi Heavy Industries was awarded one. United Launch Alliance signed one commercial contract to launch an Orbital Sciences Corporation Cygnus spacecraft to the LEO-orbiting International Space Station following the destruction over the pad of an Orbital Antares vehicle in October 2014. This was the first year in some time that no commercial launches were booked on the Russian (Proton-M) and Russian-Ukrainian (Zenit) launch service providers.
For perspective, eight additional satellites in 2014 were booked "by national launch providers in deals for which no competitive bids were sought."
Overall in 2014 Arianespace took 60% of commercial launch market share.
2015
Overall in 2015, Arianespace signed 14 commercial-order launch contracts for geosynchronous-orbit commsats, while SpaceX received only 9, with International Launch Services (Proton) and United Launch Alliance signing one contract each. In addition, Arianespace signed their largest launch contract ever--for 21 LEO launches for OneWeb using the Europeanized Russian Soyuz launch vehicle launching from the ESA spaceport--and two Vega smallsat launches.
In a 2015 US competition for a (no earlier than 2017 but possibly planned for 2018 as of November it costs 11 million US dollars 2015) US military launch to loft the first of the third-generation GPS III satellites into orbit, ULA--after having held a government-sanctioned monopoly on US military launches for the previous decade--declined to even submit a bid, thereby leaving the likely contract award winner to be SpaceX, the only other domestic US-provider of launch services to be certified as usable by the US military.
Launch industry response
In addition to price reductions for proffered launch service contracts, launch service providers are restructuring to meet increased competitive pressures within the industry.
ULA has begun a major restructuring of processes and workforce in order to decrease launch costs by half. In May 2015, ULA announced it would decrease its executive ranks by 30 percent in December 2015, with the layoff of 12 executives. The management layoffs are the "beginning of a major reorganization and redesign" as ULA endeavours to "slash costs and hunt out new customers to ensure continued growth despite the rise of [SpaceX]".
According to one Arianespace managing director, "'It's quite clear there's a very significant challenge coming from SpaceX,' he said. 'Therefore, things have to change ... and the whole European industry is being restructured, consolidated, rationalised and streamlined.' "
Jean Botti, Chief technology officer for Airbus (which makes the Ariane 5) warned that "those who don't take Elon Musk seriously will have a lot to worry about"
Airbus announced in 2015 that they would open a R&D center and venture capital fund in Silicon Valley. Airbus CEO Fabrice Bregier stated: "What is the weakness of a big group like Airbus when we talk about innovation? We believe that we have better ideas than the rest of the world. We believe that we know because we control the technologies and platforms. The world has shown us in the car industry, the space industry and the hi-tech industry that this is not true. And we need to be open to others' ideas and others' innovations,"
Airbus Group CEO Tom Enders stated that "The only way to do it for big companies is really to create spaces outside of the main business where we allow and where we incentivize experimentation...That is what we have started to do but there is no manual...It is a little bit of trial and error. We all feel challenged by what the Internet companies are doing."
Following a SpaceX launch vehicle failure in June 2015--due to the lower prices, increased flexibility for partial-payload launches of the Ariane heavy lifter, and decreased cost of operations of the ESA Guiana Space Center spaceport--Arianespace regained the competitive lead in commercial launch contracts signed in 2015. SpaceX successful recovery of a first stage rocket in December 2015 has not changed the Arianespace outlook. Arianespace CEO Israel stated that the "challenges of reusability ... have not disappeared. ... The stress on stage or engine structures of high-speed passage through the atmosphere, the performance penalty of reserving fuel for the return flight instead of maximizing rocket lift capacity, the need for many annual launches to make the economics work - all remain issues."
Despite ULA restructuring begun in 2014 to decrease launch costs by half, the cheapest ULA space launch in early 2018 remains the Atlas V 401 at a price of approximately US$109 million, more than US$40 million more than a SpaceX standard commercial launch, which the US military began to utilize for some US government missions flying in 2018.
By early 2018, two European space agencies--CNES and DLR--are to begin developing a new reusable engine aimed to be manufactured at one-tenth the cost of the Ariane 5's first-stage engine, Prometheus. Its first flight test (in a demonstration vehicle) is expected in 2020. The goal is to "establish a base of knowledge for future launch vehicles that could, maybe, be reusable".
Satellite design and manufacturing is beginning to take advantage of these lower-cost options for space launch services.
One such satellite system is the Boeing 702SP which can be launched as a pair on a lighter-weight dual-commsat stack--two satellites conjoined on a single launch--and which was specifically designed to take advantage of the lower-cost SpaceX Falcon 9 launch vehicle. The design was announced in 2012 and the first two commsats of this design were lofted in a paired launch in March 2015, for a record low launch price of approximately US$30 million per GSO commsat. Boeing CEO James McNerney has indicated that SpaceX's growing presence in the space industry is forcing Boeing "to be more competitive in some segments of the market."
Early information on a new constellation of 4000 satellites intended to provide global internet services, along with a new factory dedicated to manufacturing low-cost smallsat satellites, indicate that the satellite manufacturing industry may "experience a shock similar to what the launcher industry is experiencing" in the 2010s.
Venture capital investor Steve Jurvetson has indicated that it is not merely the lower launch prices, but the fact that the known prices act as a signal in conveying information to other entrepreneurs who then use that information to bring on new related ventures.
References
External links
- United Launch Alliance faces increased competition on space launches, Denver Post, 7 June 2015.
- Airbus unveils 'Adeline' re-usable rocket concept, BBC News, 5 June 2015.
See also
- Commercialization of space
- Billionaire space race
- NewSpace
- Space industry
Source of article : Wikipedia
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