The Second Space Race

Entrepreneurs are gearing up to challenge NASA's monopoly on space transportation. But they won't get off the ground unless the government makes some tough decisions soon.


On land, in the air, and over water, transportation service in our country is provided primarily by private entities. In the fourth and newest environment—space—transportation has been provided exclusively by the government. This service has been extremely costly, and the customers have found the service provider, NASA, difficult to work with. It need not be this way forever…if the right decisions are made.

What does space offer to individuals and firms? Today, indispensable communications relays, weather data, information about earth resources; tomorrow, new benefits such as solar power satellites, industrial and pharmaceutical processing activities, new and more sophisticated communication relays, nonterrestrial sources of raw materials—and, if our hindsight about other new vistas is any indication, possibilities we have not yet even envisioned.

Poised to make the most of the possibilities is an emerging private space industry. Nowadays, it is often feared that Americans have lost their ability to compete in new, risky, high-technology ventures. Yet there are plenty of space entrepreneurs champing at the bit to do just that. Whether or not they get their chance—and the potential benefits of space transportation and development come to be realized—depends on the course taken by the federal government.

Consider two scenarios. Both start in the present and diverge from decisions that are only slightly different in their initial reasonableness but are very different in their long-run consequences. Although both scenarios are projections, they are not fantasy—the actors, issues, and possibilities all have some basis in what has happened to date. Which one will be reality and which one will remain fiction?


In 1983 the Reagan administration wins a congressional vote on its plan to "privatize" NASA's Space Transportation System by 1987. United Airlines and Boeing announce a joint venture to form United Spacelines. They state their willingness to assume responsibility for many of NASA's existing commercial space contracts and obligations and to operate selected NASA facilities for profit.

A few years later, MATCO, a consortium of Fortune-500 manufacturing firms, contracts with the newly formed United Spacelines Corporation to purchase three shuttle external tanks, on orbit. United Spacelines has created a lucrative market for such tanks by deciding to lift them all the way to orbit rather than throwing them away as earlier NASA Shuttle launches had. MATCO announces it will use the external tanks as structures for a commercial, manned orbital research facility, intended to begin operations in 1988.

In 1990, with the space station ready for business, MATCO announces that the contract to transport personnel has been awarded to United Spacelines, as expected. However, it surprises many by awarding the contract to transport bulk cargo to a "dark horse" company, Space Truck, Inc. "Space Truck quoted us a lower price, and we think they can do the job," explains a MATCO executive.

In 1993, an independent contractor leasing space from MATCO at one of its orbital stations uses a zero-gravity, containerless processing technique to develop a significant advance in semiconductor technology. She sells her invention to a leading semiconductor firm…and retires for life at the age of 27.

Subsequently, National Telecom, the second-largest US telecommunications company, announces that its next communication satellites will be launched by Inter-Spatial Transport, Inc.'s "Heavy Lift" rocket. Representatives of Nippon Rocket, the other major contender, admit that ISTI's new cost-saving innovations have left them "surprised…and working hard to catch up."

By the year 2000, SpaceTruck-Boeing Corporation unveils its newest-model space launcher, promoting it as, "not just another breakthrough in reliable, low-cost space transportation, but the breakthrough." At the significantly lower cost of transport to orbit, solar power satellites will finally become profitable mechanisms for producing energy to suit Earth's needs. "Looking back," says an STB spokesman, "it's a good thing this industry has been lean and competitive for so many years. Otherwise space travel would still be an expensive luxury, not an everyday occurrence."

An enchanting vision! But just assume that the first decision had been made a little differently…


In 1983, the Reagan administration agrees to grant NASA regulatory authority over space operations, including private activities. "They are the space experts," says one administration spokesman. At NASA, a high-level official promises that private firms will not be treated as rivals but as allies in the opening of the space frontier. A few years later, backers of Space Truck, Inc., announce that they can no longer support their attempt to start a private launch service. "After waiting for three years to get certification for our vehicle, approval is still not even in sight. We can't afford to wait any longer." With the bankruptcy of Space Truck, serious efforts by private American firms to enter the space transportation business cease.

In 1987, federal budget cutters force NASA to shelve its space operations center project "because it is an immense burden on American taxpayers." Components already orbited are turned over to the Air Force for use at its restricted surveillance space station.

A few years later, a European-Japanese joint venture in semiconductor production announces its discovery of a remarkable technical advance at its research space station.

In 1995, in a major policy speech in San Jose, California, the president announces that no new follow-on to the Space Shuttle will be funded. "In hard times like these, we just cannot afford luxuries like advanced space transportation systems. Our first priority must be taking care of our unemployment problems in seriously depressed areas such as Detroit and, of course, Sunnyvale."

The turn of the century passes quietly in America. An American historian reads a paper at the annual meeting of the American Economic Association. His topic: "Private American Space Companies: Could They Ever Have Successfully Competed with State-Financed Corporations of Europe and Japan?" His talk is almost as well-received as the previous one, "Lessons from Lysander Spooner's Attempt to Compete with the US Post Office."


Is either of these scenarios anything other than pure fantasy? Is private space transportation just an entrepreneur's daydream? Has any serious person done real work on private rockets or privatization of the Shuttle? Doesn't everyone know and acknowledge that space is an extremely expensive proposition—so expensive that only a government can foot the bill?

In fact, there is a very real record of people and companies trying hard to get such enterprises under way. These efforts can be dated to 1967 and continue to this day (see sidebar). For some of the people and corporations involved, the journey to space may end before it begins. As in every other new field, the history of commercial space flight will be filled with tales of success and failure; of geniuses, dreamers, and con-men; of hopes too big to accomplish and of accomplishments exceeding hopes. But somewhere within this record—or just beyond the edges of it—may lie the seeds of success for private activity in space.

Yet the seeds of the negative scenario also exist. They exist in a series of heedless and short-sighted decisions that past administrations have already made, in a series of international agreements, in a confused regulatory policy, and in the gradual, unintentional transformation of a government research agency into a government transportation service. Through this haphazard series of events and decisions, part of the freedom essential to the growth of private space activity has already been frittered away.


Since the beginning of the Space Age, the Soviet Union and its allies have persistently attempted to outlaw the operation of all entities other than States in outer space. The US government, to its credit, has resisted these attempts, but the treaty process has not turned out entirely favorably for private space enterprise.

Over the last 14 years the government has signed international treaties that have set dangerous precedents for private space ventures. The 1967 Outer Space Treaty specifies that "the activities of non-governmental entities in outer space, including the moon and other celestial bodies, shall require authorization and continuing supervision by the appropriate State Party to the Treaty." This provides a ready-made excuse for government intervention in private space commerce.

The 1972 Liability Convention superseded normal American and British law, whereby the private operator of an aircraft, for example, is held liable for damages to foreign people or property. Instead, the state of registry of a private spacecraft was made fully liable—offering another rationale for government to have a say in private space operations.

In 1979, at the World Administrative Radio Conference (WARC), US delegates failed to block a motion to continue political allocation of the limited geostationary orbit—a resource that US taxpayers had largely paid the initial costs of reaching. Future WARCs may become hostile to further American use of geostationary orbit, particularly for domestic traffic. Without a commitment by US negotiators to widespread private use of the spectra, the development of competitive private telecommunications will be severely limited.

Issues left unresolved by the failure of the Moon Treaty and the growing commercial use of space will be reviewed at UNISPACE 82, a United Nations conference that will probably set the pace for space treaty negotiations throughout the 1980s. The US government's refusal to sign the Moon Treaty will most likely make the conference a tumultuous event. Only a strong US delegation firmly committed to private rights can save the day for space entrepreneurs.


A host of potential domestic problems flow from these international treaties. To date, the federal government has not taken a stance on the issue of private space activity, but a variety of federal agencies have begun to venture claims of jurisdiction. As a result, potential private operators cannot predict what regulatory future they might face, and this uncertainty is a source of difficulty in raising investment capital.

One agency that has both claimed and denied jurisdiction is NASA. In a 1975 internal memorandum that only recently became public knowledge, NASA stated that it had no authority over private activities, reasoning that "since NASA is not a regulatory agency, it could not promulgate rules prohibiting launches." Yet when the issue was forced this past summer by an attempted Spaces Services, Inc., rocket launch, NASA General Counsel S. Neil Hosenball put in a claim for jurisdiction: "It is my opinion that if a policy determination is made to regulate the private rocket launch from a private facility that NASA has jurisdiction to issue non-economic regulations dealing with, at the very least, peaceful purposes, safety, and operation of space vehicles whether for orbital or less than orbital flight" (emphasis added). Later, NASA backed off and made no attempt to act as a regulator in the SSI launch attempt.

Also putting in a bid for jurisdiction is the Federal Aviation Administration (FAA), the regulator of US continental airspace. The FAA's general authority would allow the agency to issue regulations to prevent interference between rockets traveling through the atmosphere and between rockets and aircraft. Yet when SSI's planned rocket launch came before the FAA, it construed its authority to include the issue of whether the rocket could enter what is legally considered outer space.

Eventually, other government agencies are destined to appear on the scene. The Department of State has an obligation to keep on top of the actions of private space operators because of possible interference with other nations' spacecraft; the Department of Defense has an obligation to inform US defense forces of the time, location, and course of private space launches so that a private rocket is not mistaken for a military missile launch. This involvement answers valid public concerns about the general safety of the populace and about potential military implications of the private operation of large rockets. The federal government performs analogous functions vis-à-vis maritime and aviation activity.

The big question is whether the government's treaty-mandated regulation of space flight will be characterized by bureaucratic incompetence, favoritism, and burdensome and inappropriate requirements, or by intelligence and moderation. The historical trend does not bode well for entrepreneurs.


Public policy concerning new technological industries tends to be set during their infancy. Then, simply because of bureaucratic inertia, the initial regulatory apparatus and governing principles do not grow with the industry. So regulation freezes around procedures that prevent innovation and raise the costs of competing.

Aviation, at the time a minor industry, came under government regulation in the late 1920s. Today, one of America's largest and most important industries is finally emerging from the protective cocoon of anticompetitive regulation. For years competitors, such as entrepreneur Ed Daly's World Airways, were kept from entering the air transport business. The costs of this regulatory pattern—artificially high fares, delays in application of new technology, and numerous other disservices—have been borne by the American consumer.

Since 1978, the considerable deregulation of the air transport industry has brought the benefits of slashed airfares and the entry of aggressive new companies. The fallout of regulation has also been displayed. Established airlines underwent considerable dislocation and often completely terminated air services to many locations. If not for industry-protective regulation, these areas would most likely have enjoyed long standing service by specialized carriers appropriate to that market niche.

Broadcasting, too, has been stymied by a pattern of early misregulation becoming entrenched. The regulation of space enterprises could follow the same well-worn path.

Within the next year and a half, the issue of whether space will remain a government preserve or be opened to the diversity and creativity of entrepreneurial activity will be decided, either intentionally or by default. The rush of events is forcing the issue.

One private group, Earth/Space Transport Systems, is demanding clarification of NASA's role. In 1982, after its third test flight, the Shuttle pilots will begin flying commercial cargo—communication satellites headed for orbit; and this, says William Good, founder of the group, amounts to offering regular commercial service, contrary to NASA's charter. Moreover, this service will at times be provided by military pilots on active duty, contrary to US law and policy.

Additional pressure is coming from a group of airline pilots led by David Koch of United Airlines' Professional Outlook Committee. They have formed an organization to offer commercial pilots ground school training in flying the Shuttle. Pilots, they intend to prove, are capable of flying Shuttles without the stiff NASA requirement of military jet experience.

Meanwhile, NASA, in order to operate the Shuttle as a commercial transport vehicle, is planning internal reorganization and management changes for July 1985. And the activity of private rocket companies is pushing the government toward a determination of who has jurisdiction over private space flight. Sooner, rather than later, the issue will be forced. Some sort of regulatory regime will be cobbled together, whether or not there is intent. By accident or by inattention, with the very best of intentions to achieve economy or through overzealous attempts to encourage the rapid development of an exciting new field, by bowing to the political pressures of friends and interest groups or by succumbing to inertia, the potential for making disastrous decisions abounds.


The government has at its command a variety of agencies, bureaus, and corporate entities through which it could remain the lead actor in commercial space activities. If this is the course taken, there will be a great temptation to protect its enormous investment by placing a heavy regulatory burden on lower-cost private competitors or even seeking to prohibit competition altogether in important markets. Notice how zealously the Postal Service works to prevent competition in delivering first-class mail. Notice how the government, protecting its friends through a stifling regulatory situation, was for 30 years capable of barring entrepreneurial competitors from the air transport industry. The net result would be inefficiencies and high transportation costs, greatly retarding the development of space enterprise—at least in America.

Ordinary political inertia might result in allowing NASA to retain the leading role in all areas of space activity. Yet as long as space activity remains primarily an extension of bureaucratic government, the scope of private space operations will be held back.

In a drive for economy or a quest for efficiency, a well-meaning government might hand all the reins to NASA on the mistaken perception that all "space" activities are essentially alike, part of a unified field of endeavor that should be "run" by a single entity. Nothing could be more wrong. "Sea activity" is not a single field, and we wouldn't dream of having a single entity function as navy, coast guard, merchant marine, fishing fleets, oceanographic research institute, yacht club, and Chris Craft squadron. Nor would we feel obliged to have a "national seacraft" to suit all these needs.

We do not have an "air entity" to carry out the role of the FAA, the Air Force, the passenger and freight airlines, air express firms, crop-dusters, charter operators, helicopter operators, business aircraft fleet, aerobatics teams, pleasure aircraft, aerial photographers, aerial fire fighters, sailplane fleets, blimps, and balloons. Nor do we have a "sky shuttle" to meet all our diverse aviation needs. If we did, imagine how well each of them would be met. And imagine what the cost of crop-dusting a field might be. Yet this is exactly the situation we face with space development—a situation that occurred more by historical accident than by intent. The appointment of NASA as an operational entity would perpetuate those accidents by design.


How did the accident happen? How did people come to think that one vehicle, the Space Shuttle, could meet all transportation, research, and defense needs?

Back in the late 1960s, as NASA planners looked beyond the final Apollo missions, the Shuttle concept began as a solution to a problem and as a means to fulfill a mission. The next step, as then planned, was a space station in orbit around the Earth. The mission was to provide transportation to the station. The problem was the high cost of transportation to Earth orbit. The expensive large boosters then in use, such as the Saturn 5 moon rocket, were thrown away in the process of achieving orbit. But a reusable spaceship, figured NASA planners, would be cheaper.

Designs and plans for the cost-saving shuttle began. It was to be a sophisticated vehicle, but the demands on it were simple: it would haul passengers and freight from Earth to the space station. Although high-technology, it would reduce costs by being completely reusable: not only would the orbiter be reusable, but a "flyback first stage" would permit the boost stage to be completely reused.

Then President Nixon informed NASA that both a space station and a reusable shuttle could not be funded. NASA had to make a choice. Naturally, they chose to save the spaceship—with transportation guaranteed, they could surely think of something to do. Right away, NASA planners realized that some of the missions slated for the space station, such as on-orbit experiments, could be redesigned to be performed on the Shuttle. But to accommodate the experiments, certain features would have to be added to the Shuttle. The first changes in Shuttle design had begun.

Still, it was obvious that the Shuttle could only be justified if the Air Force were to state that the Shuttle's capacities were necessary for defense operations in space. The Air Force, although not putting any of its own budget on the line, agreed to support the project in return for two changes: it would have to be made considerably larger to accommodate defense payloads, and it would have to have a wider "cross-range capacity" to allow for a last-minute change of landing sites, should security needs so dictate.

These demands forced a change of wing shape and required NASA to seek an improved heat-shielding method—the Shuttle was now far too large to use more-conventional methods. The solution was thousands of small "thermal tiles" made from an extremely expensive high-tech ceramic, each uniquely shaped, each applied individually by a specialist. Both of these changes caused enormous cost increases and time delays.

Subsequent budget cuts forced NASA to economize, abandoning the original "flyback first stage" and adopting the compromise "stage-and-a-half plus boosters" solution. In the new design, the external fuel tank (at a cost of $9 million) is thrown away and the two solid boosters are fished from the ocean and refurbished at a cost of $14 million per shot. NASA realized that it could barely make this scenario work, but it went ahead, selecting Rockwell, the low bidder, as prime contractor. NASA knew that if any of these complex and untried technologies ran into development problems, Rockwell (and NASA) could go back to Congress to beg for more time and more money.

What are the lessons to be learned from this story? Is this a tale of bureaucratic incompetence at NASA? or of Rockwell and NASA conspiring to rob the Treasury? Could this have been prevented by having more competent administrators in charge of NASA or more alert watchdogs at the Office of Management and the Budget?

Not at all! At every point, NASA administrators probably made the best choices they could, given their mission and their constraints. The Rockwell engineers found the best technological solutions available, given the problem they were asked to solve.

A private space transportation firm would never have tried to build the Shuttle: it would have picked out one or two markets it could have met and developed a vehicle to meet those demands. It would have tried to convince the other markets to alter their requirements or would have resigned itself to seeing a competitor capture them.


NASA was never intended as the operator of a commercial space transport service and does not have the structure or orientation to be that successfully. Few companies place R&D scientists in charge of marketing or operational divisions, but NASA is a research agency.

Perpetuation of NASA's experiment-oriented approach to space transport design would continue the myth that space travel is inherently ultra-high-cost. But the sort of costs that typified NASA's political crash program to develop the Apollo in the 1960s and the Shuttle development program of the 1970s are not inevitable. Although it is always expensive to work on the cutting edge of technology and devise first-of-their-kind innovations, there are bigger reasons for NASA's being a high-cost operation. Most NASA suppliers and contractors work on a cost-plus-10-percent basis, creating incentives to increase costs in order to boost net revenue. In addition, NASA engineers, not working in a competitive environment, tend to choose a system for its technical efficiency rather than for a favorable cost-to-achievement ratio.

If NASA is ill-suited for the job, some will say, why not place all space transportation in the hands of an operational entity—say the Air Force? Air Force space planners are already talking about a concept referred to as the "all-blue Shuttle" (Air Force-owned and -operated). In one version, the military would offer "reimbursable flights" to commercial customers.

But the military is a poor contender for the role of operator of our nation's space transportation system. Throughout its history in space operations, the military has shown the same high-cost approach as has NASA. The military would perpetuate the problem of a single decision-point for choosing technology systems. And it is not a likely candidate for giving full consideration to private users' needs. Military operation of the nation's airmail system was tried in the pioneer days of aviation. It failed then, due to the general unsuitability of military organizations for solving commercial problems. Is it necessary to try the same experiment again in such an important field as space transportation?

Another alternative sure to be proposed is the convenient concept of an autonomous government agency, hiding under the name of a "corporation," to operate space transportation. This model is common in Britain and Canada (British Aerospace Corporation, the Canadian National Railroad). The closest American example is probably the US Postal Service, which was formed from the former US Post Office.

The problem with supposedly autonomous government agencies is that they are subject to the same bureaucratic abuses as are executive agencies. Government faces the same temptation to protect its creation by overregulating private competitors. And such agencies call for help often because they suffer from the same types of bureaucratic inefficiencies as do their parents.

Another prescription for trouble is to establish a government-sponsored monopoly in space. An example is the suggested use of the Communications Satellite Corporation as a model for "private" operation of the Space Shuttle. The Comsat model is an ironic choice, for although following it would not effect a privatization of space transportation, Comsat itself was the first step in the privatization of space operations.

Comsat was created in 1963 at the initiative of President Kennedy. He wanted a precedent for private operations in space before the conclusion of UN negotiations over an international treaty on the use of space; the Soviet Union was demanding that the treaty outlaw all private activity. So Comsat, a strange hermaphrodite, was born: a private corporation, created by act of Congress; an organization owned by a combination of large corporate and individual shareholders, but with three of its directors appointed by the president of the United States.

Comsat was a forward step for its time, creating a semiprivate entity where only government had tread before. As a permanent entity, however, it is both unnecessary and undesirable: unnecessary, because Comsat is entirely capable of operating profitably without government help or favor; and undesirable, because those favors give Comsat an advantage over its competitors, reducing competition and its benefits in the communications satellite field.

After Comsat, the government tried a similar set-up with Amtrak and Conrail. Yet the operational track records of these other public/private corporations suggest that Comsat's success stems from the basic profitability of the communications satellite field rather than from the merits of the hermaphrodite model.

If this model were applied to space development, advocates might be able to point to a "successful" private takeover of a government function, and indeed, a corporation would probably come into existence more quickly than if the competitive private road were to be followed. The pressures of a fully competitive market would not be operating, however. The corporation's essential monopoly on launches would guarantee steady profits without the need to take risks or try new approaches; newer technologies that increased efficiency and lowered costs to consumers would likely be delayed.

Today the use of this model is waning as field after field once assumed to be "natural" monopolies are deregulated and consumers benefit from new competition. Both AT&T and Comsat have lost much of their monopoly status in the past few years, and both they and their new competitors have benefited as a result. It would be not only ironic but tragic to impose this model on a new field.


Even if space transportation is privatized in a competitive environment, there is still a serious danger of misregulation and overregulation. A fairly likely scenario would be to name an existing agency, such as NASA, as the regulatory authority over space activities or to set up a new agency staffed with personnel from other agencies.

What happens when NASA administrators become technocratic regulators? Most space engineers employed by the government have grown up in one of two environments: NASA or the military. Both have an engineering mode in common: hang the expense; let's take the most exotic technique and make it work. This approach has certain merit if you are trying to implement a crash military program on an emergency basis or if you are working at the edge of a known technology. If a heavy-handed regulatory regime is allowed to impose NASA engineering standards for certification of private space vehicles, then the specialized service providers now emerging could soon be regulated out of business.

The Federal Aviation Administration is not likely to be much better than NASA as a regulator. Although the FAA does have a certain familiarity with commercial needs and standards, this must be traded off against unfamiliarity with the space field. Its partial credential is just strong enough to encourage it to apply aviation rules by extension—no matter how inappropriate. Moreover, the FAA's record in the regulation of commercial aviation is far from promising, what with costly delays and obstructionism in certifying new designs.

Beyond bureaucracy lies another form of government involvement that is equally perilous. Some well-meaning space enthusiasts have proposed government-sponsored investment funds or "space banks" to fund risky projects. Examined from a distance, this proposal is appealing; examined closely, it borders on the appalling.

Once again we would have a single decision point for passing judgment on technical ventures. It is true that a venture turned down by a Space Bank could go to the private capital market for funding. But any such a privately funded venture would be at a competitive disadvantage to Bank-subsidized rivals. In the light of past experience with public subsidy, there can be little doubt that the energy of space promoters would be diverted from cutting costs and expanding uses of space to selling their latest proposal to the Space Bank. Also very believable is that cronyism, favoritism, ideological fixation, and other genetic disorders of bureaucracy would sooner or later infect a Space Bank.


Space development stands at a crossroads. The administration and Congress will choose the direction and create the map that the future will follow.

They can perpetuate the errors of the past by patting NASA on the back and leaving it at the helm. They can choose one of the many routes by which to ensure the monopolization of space activity. Or they can opt for competitive privatization and open up space transportation to the best that entrepreneurs can offer.

For the benefit of consumers and the relief of taxpayers, the choice is clear: the US government should be doing all that it can, without active involvement, to further the establishment of a commercial, competitive merchant fleet in space. To achieve this goal, the government would have to take the initiative on several fronts:

• Because space is beyond the boundaries of the United States, space entrepreneurs cannot operate securely unless, during international negotiations, the government stands up for freedom of commerce and refuses to sign agreements that infringe upon basic freedoms and rights. To this end, the government must clearly oppose any attempts on the part of international bodies to allocate space resources or to otherwise hamper commercial space operations by US citizens.

• The government should review the liability and supervision clauses of the 1967 UN Space Treaty and the 1972 UN Liability convention. No US legislation currently addresses or implements the provisions of these treaties. To the greatest extent possible, they should be interpreted according to traditional liability principles, so that private companies can purchase the necessary liability insurance.

• Existing federal agencies should be prevented from killing private space entrepreneurship almost before it begins through burdensome regulation. A focal point of responsibility for private space operations should be designated within the federal government. The Department of Commerce would seem appropriate. This focal point would be a clearinghouse for communication of necessary information to the Department of State, the Department of Defense, and other agencies with legitimate interests.

• Privatization of the Shuttle is essential if space transportation is to come to enjoy the benefits of diverse, competitive approaches. Before the Shuttle's operational date of July 1985, there should be a firm commitment to privatize NASA's space transportation systems. A schedule should be established for turning over the systems to private operators. How this would be accomplished is no small matter, but it is possible even at this time to lay out a possible scenario containing in general terms the essential elements of a transition.

The scenario begins with the commitment to privatize the space transportation system. Subsequent to the establishment of a timetable, the turnover of facilities to private operators should commence. Contracts with NASA for launching private payloads should be given over to the new operators or renegotiated; government payloads should be sent out for competitive bidding.

Terminal facilities should be made private and available to all. To avoid monopolization, NASA facilities at Kennedy Space Center in Florida and part of Vandenberg Air Force Base in California could be turned over to competing private operators, taking another burden off of taxpayers' shoulders. New sites could also be considered, including a cost-saving equatorial space freeport, as suggested by the Earthport Project of the Washington-based Sabre Foundation.

The fate of the various space vehicles is not as significant as a decision to move government out of the business of commercial space transportation. The Columbia could be left in the hands of NASA to be used as a research and development vehicle. The Air Force might take over one or more of the remaining Shuttle fleet—the Challenger, the Atlantis—and fulfill their hope for an "all-blue" Shuttle fleet in a limited edition. Commercial operators would most likely decide to order newer and more efficient versions of the Space Shuttle rather than take over existing or under-construction vehicles.


The privatization scenario is very rosy: competition lowers space transportation costs; American private firms lead in space development; a burden is lifted from the taxpayers; and even NASA enjoys the relief of not having to answer to the ire of senators for cost overruns. How likely is this picture?

It depends on many things: the success of an almost unprecedented effort to privatize a major government activity; the likelihood of avoiding the many pitfalls on the road to privatization; and, in general, the degree to which Americans make themselves aware of the fact that an important policy question is being decided right now…mostly by default.

The temper of the times is with the forces of privatization. The Reagan administration is pledged to remove regulatory burdens and seek a cure for America's economic malaise through the unleashing of American entrepreneurial ingenuity. It remains to be seen how the administration will live up to its rhetoric in the little-watched field of space transportation.

For too long advocates of private enterprise have been torn between an admiration for the magnificent accomplishments of space explorers and an uneasiness at the domination of the field by a giant government bureaucracy. The time has come for policy decisions that will move the field of space development forward by getting the government out of humankind's newest arena of endeavor and replacing it with the creative, innovative approach of entrepreneurs.

James Bennett is a partner in a consulting firm that specializes in privately financed space ventures. He would like to acknowledge the assistance of Gayle Pergamit in preparing this article.


1967: An aerospace engineer named Len Cormier founds TranSpace, in California. TranSpace's goal is to study the possibility of privately financing and operating a space transport vehicle for profit.

1971: Lutz Kayser, a German engineer and businessman, founds Orbital Transport und Raketen Aktiengesellschaft (OTRAG), a West German company. OTRAG announces its intention to design, produce, and operate low-cost satellite launch vehicles. Kurt Debus, one of Wernher von Braun's old team members, leaves his post as director of Kennedy Space Center to become chairman of the board of OTRAG.

1973: TranSpace, Inc., is incorporated in Nevada by Len Cormier. It attempts, without success, to gain government support for a study of low-cost space transportation methods. Cormier decides to persist in seeking purely private funding.

1974: Boeing Aerospace Corporation, the manufacturer of the Minuteman missile, studies the possibility of buying outdated Minutemen back from the Air Force and using them to launch satellites on a commercial basis. The project fails because of objections from the Department of State.

1976: Paul Seigler, editor of Earth/Space News, holds a small private gathering to discuss the possibility of privately financing and building a promising new space vehicle. Out of this meeting emerges Earth/ Space Corporation, a company seeking funding for the vehicle, and the Earthport Project, whose goal is to promote the establishment of an international launch site open to all peaceful government and private users.

1976: OTRAG, having secured $80 million in funding, establishes a test and launch site in Zaire and begins developing its rocket modules.

1977: Robert Truax, one of America's earliest rocket pioneers, founds Project Private Enterprise, Inc., and begins building a rocket from surplus military and NASA hardware. His objective: to open an era of "barnstorming" into space, shooting a human 50 miles up and back in less than 20 minutes round-trip. His proposed financing strategy: private lenders, to be repaid by sale of publicity rights to film the initial launch of the "Volksrocket."

1978: The Soviet Union, long an opponent of private operations in space, initiates a virulent propaganda campaign against OTRAG. Soviet-backed guerrillas from Angola invade Shaba province in Zaire, location of the OTRAG test site, and penetrate to within 50 miles of it. OTRAG conducts two successful and one unsuccessful test firing of its rocket modules but is forced by international political pressure to abandon operations in Zaire.

1978: William Good, a Braniff Airlines pilot, forms Earth Space Transport Systems, Inc., in New York (no connection with Paul Seigler's California company) to promote the idea of privatizing NASA's Space Shuttle. Earth Space Transport begins pushing legislative and administrative initiatives supporting this objective.

1978: The European Space Agency (ESA), a consortium of European governments, sponsors the formation of an international corporation to take over the operation of its launch vehicle, the Ariane. The new corporation, Arianespace, is owned partly by the governments sponsoring ESA and partly by European banks and aerospace corporations.

1980: Project Private Enterprise's Volksrocket undergoes successful engine firings in Fremont, California.

1980: OTRAG announces a new test and launch site location: Libya. A new series of successful test launches begins. However, an American TV news program suggests in a special report that OTRAG has stopped developing a satellite launcher and is instead developing missiles for sale to unreliable governments—such as Libya.

1980: Ariane's first flight is successful; its second flight, a failure.

1980: The Japanese government studies the possibility of forming a private "Nippon Rocket Co." to develop and build Japanese spacecraft.

1981: Space Services, Inc., a Texas company, announces its intent to offer space transportation on a commercial basis with its Percheron rocket. The Percheron is being designed and built by GCH. Inc., in California.

1981: NASA finally launches the Space Shuttle, three years behind schedule, having invested over $9 billion in research and development. The initial launch is a complete success.

1981: The Japanese national space agency, NASDA, announces it is studying designs for a small, shuttlelike vehicle.

1981: The third flight of the Ariane is a complete success, attaining geostationary orbit 22,000 miles above the equator. Total development cost to date: over $600 million.

1981: The first model of the Space Services, Inc./GCH Percheron rocket explodes during its initial engine tests. No one is injured. SSI spokesmen announce their intent to keep working to develop the Percheron. Total cost to date: $1.2 million.

1981: TranSpace, Inc., which has survived for 11 years as an engineering consulting firm, files with the Securities and Exchange Commission to sell stock in order to raise seed capital for TranSpace, Inc. The monies will be used to begin design work on a reusable space plane to be launched off the back of a 747. TranSpace hopes to raise $500 million to develop this "mini-shuttle."

1981: OTRAG continues testing rockets in Libya; after 10 years, it is still in business but has not yet set a date for launching a rocket into orbit.

1981: OTRAG is reported to be negotiating for a new launch site, not in an Arab or African country and perhaps in South America. New plans on the drawing board: to develop not only satellite-launching rockets but high-altitude research-gathering rockets.


Dawn is breaking over the flat plains of Kansas, a glorious spring morning in 1982. The rising sun gilds a few clouds in an otherwise clear sky. In a backyard behind an old, weather-beaten Midwestern farmhouse is an incongruous scene: a cluster of modern trailers, with cables running in all directions, and a large crowd of doers and onlookers, engineers, reporters, and cameramen. One of the network reporters is conducting an interview with an older man, clearly by dress and demeanor a Senior Official.

REPORTER INTRO: Good morning, Americans. We are here in Owl's Eye, Kansas, to witness another chapter in the forward march of science and technology, the controversial and long-awaited "next step" in America's costly and exciting conquest of the air. Today, finally, if all goes well we will see the National Air Administration's controversial Sky Shuttle aircraft perform its first applications mission as part of NAA's "Skydust" program, in which the mammoth aircraft will swoop down over the fields of farmer Ed Shultz and spray them with pesticides. With us today is NAA's deputy director, Buzz Wingnut, who will be answering some of the tough questions which have come up about NAA and the Sky Shuttle.

Buzz, what are the chances of success of today's mission?

OFFICIAL: Well, Jules, all the indications are good. The weather is right, the aircraft, aside from a few minor problems, is in good condition, and the crew is in excellent spirits. It sure looks like we have a "go."

REPORTER: What about the rotor problems? Everybody knows that the rotors have been giving you trouble ever since the start of the Sky Shuttle program. Critics have charged that there is still a serious chance they'll fall off.

OFFICIAL: I can assure you that the rotors will not fall off this time. The rotor problem has definitely been solved.

REPORTER: Some critics have questioned the whole idea of having a set of rotors on an airplane, saying that the idea of an aircraft that can take off vertically and fly 10,000 miles at supersonic speeds is unnecessarily complicated. Could these missions be better performed by separate aircraft?

OFFICIAL: Jules, this kind of talk puts our entire technology development system in question. I might point out that each of those requirements you mentioned, as well as others—such as the ability to land on both land and water, the ability to perform aerobatic maneuvers, and the ability to fly at treetop level—were inputted to NAA by responsible sectors of the government. There is no doubt that each of these capabilities is needed by the nation's aviation-using sector.

As for the idea of developing a separate aircraft for passenger, cargo, defense, and scientific purposes, such talk is the height of irresponsibility. What with the cost overruns and time delays which were unavoidably encountered by the Sky Shuttle program, there is no chance of getting Congress to appropriate funds for development of a new aircraft in this decade.

REPORTER: Buzz, Senator Buttermore has been highly critical of both the Sky Shuttle program in general and the Skydust experimental program in particular. He has said, and I quote, "The Skydust program has been an enormous boondoggle from the beginning. It is merely an excuse by the NAA administrators to find new 'needs' for their services. Ask any farmer—the idea of spraying chemicals on crops from the air as a part of day-to-day agriculture is inherently absurd. Both as a Senator and a taxpayer, I say, 'Not a penny for this nutty fantasy!' " How do you respond to that, Buzz?

OFFICIAL: Well, all I can say is that I am glad Queen Isabella didn't take this attitude toward Christopher Columbus. "Crop-dusting," as our boys like to call it, is an extremely promising technique, and one which today's demonstration will prove technologically feasible. The Sky Shuttle will reduce the cost of aerial application from $500,000 per acre to only $100,000 per acre. I can confidently predict that, given Congress's continued support of development funding, hundreds, maybe even thousands, of American farmers will enjoy the benefits of "crop-dusting" by the year 2000.

REPORTER: There have been some voices, so far a distinct minority, who have called for private operation of the aircraft program in this country, saying that private operators could do the job more efficiently. Could you say a few words on that, Buzz?

OFFICIAL: Well, Jules, it's hardly worth my time to answer that one, don't you think? The Sky Shuttle has cost nearly $100 billion dollars to develop. Where could a private firm raise that kind of capital? We at NAA have always valued the contributions of private industry to the air program—we feel that the free-enterprise qualities of our contractors demonstrate exactly the kind of government-industry partnership it takes to maintain America's leadership in high technology. But romantic notions of competing "airlines" operating passenger and freight operations across the continent as if they were railroads—that belongs in the 19th century. Aviation in America has been in sound hands ever since Congress suppressed dangerous cranks like the Wright Brothers and created the predecessors of the NAA to give America wings, and let us pray to God it remains that way. Jules, I'm going to have to cut this short. The countdown is entering the final stage.

REPORTER: Well, thank you, Buzz, and Godspeed. It's a great day to be an American.